• Hi Guest: Welcome to TRIBE, the online home of TRIBE MAGAZINE. If you'd like to post here, or reply to existing posts on TRIBE, you first have to register. Join us!

really good marco economic article/

judge wopner

TRIBE Member
i know its long but its well worth the read
-----------------------------------------


The High Cost of Inflation
by Jim Willie CB
Jim Willie CB is the editor of the "Hat Trick Letter"
March 30, 2006

For specific detailed analysis of the Gold, USDollar, Treasury bonds, and inter-market dynamics with the US Economy and Fed monetary policy, see instructions for subscription to my newsletter research reports, which include stock recommendations positioned to rise in the commodity bull market. Articles in this series are promotional.

A rant is due, on the eve of the latest screwball USFed rate hike. While the USEconomy boasts of being advanced, sophisticated, and developed, the last three decades have seen a crippling dependence upon inflation for the generation of wealth. The cost of this inflation has begun to show itself as extreme, widespread, and overbearing on the middle class. The natural backlash comes in the form of economic decay, lost jobs, and reduced standard of living. The undue reliance of the financial engineering has as its central core power pack the monetary inflation machinery, which has undermined our national sovereignty. The pathogenesis of inflation as a disease has been motivated since the 1970 decade by an insistence on a "guns & butter" agenda. It has required an ongoing justification based upon shifting chapters of economic mythology to sustain its dishonest foundation, new definitions on what prosperity means, and even the means of how wealth is generated.

The consequences of debt export has only recently revealed a highly explosive, reckless, and delicate situation whereby foreign entities have embarked on asset acquisition, typical in any master creditor demanding liquidation and seizure. We will have to stay on watch for national foreclosures (see Detroit). The entire landscape must be recognized for what it contains, money which is no longer constitutionally valid. That is right, the USDollar would be rejected as invalid before the Supreme Court if any legitimate body had the stones to challenge it. Why bother? Because the fallout and disastrous path we find ourselves on is a direct result. In physics, we acknowledge that every action invites an equal and opposite reaction. Tainted money and heavy reliance upon inflation invite erosion and degradation of the entire economy and financial system. That is the reaction.

MOTIVATION
War as birthplace of inflation: Lyndon Johnson insisted on a national agenda of "guns & butter" which is a colorful clever phrase which means both military emphasis and a network of social programs. Not one, but both. In the late 1960 decade the USGovt decided to embrace both, and to run large federal budget deficits for the first time. Monetary inflation was born in the modern era. It is difficult to pinpoint the original seed of inflation as a cancerous disease. Some in the gold community point to the abrogation of the Bretton Woods Accord, and the departure from honest money as the source. Not me. That was the heart attack response. When the system founded in integrity degraded sufficiently, the prescribed medicine was monetary inflation by the inept, corrupt, and ill-advised economic counselors who led Richard Nixon astray. The LBJ Great Society in conjunction with the Vietnam War was the birthplace of monetary inflation. The United States blew a cool $1 trillion in Vietnam.

No discipline: The seed for the 1971 gold divorce decision was the urge, motivation, and execution of a bad plan found in extending far beyond what the nation could afford. Whether urged by world power, or by arrogance, or by blindness, it does not matter since the outcome is the same. We have permanently altered the USEconomy and bled the middle class to the break point. The United States commands a military whose budget is gigantic, whose shadow extends around the globe. The United States has promissory obligations for Social Security, Medicare, and Pensions which would put any company into bankruptcy, like well, General Motors or Ford Motors. The lack of discipline motivates exacerbation of the problem with evermore monetary inflation to fix the perceived problems. In good times we inflate, rationalizing that payback will come from increased prosperity. In bad times we inflate, rationalizing its necessary to underwrite future progress and recovery. We consistently enlist the US Federal Reserve as the underwriter of last resort. The USFed is now the underwriter of first resort, and intermediate resort also. They have sadly morphed into a monetary drug dealer.

A big bad business: Meanwhile, military adventure, bound in spun packages of exporting democracy, fighting terrorism, and promoting capitalism, has become our national "raison d'être" it seems. We cling to the Great Society begun by LBJohnson, even expanding it to include broader promises which no bank would finance in the private sector amidst the current balance sheet red ink. The system has gone amok in a clear sense with fraud cases in the courts, one every season. The corporate contributions to the inflation system are clear, both on the fraud side but also in a masked manner through stock issuance. Increasingly, mergers & acquisitions are financed by printed corporate money, namely stock shares created by private printing presses.

JUSTIFICATION
Necessary dogma: The path of the Rambling Wreck from Financial Tech requires heretical counselors, pied piper cheerleaders, and the cast of a thousand erratic elves. The USEconomy policy makers have been driven by a sequence of nonsensical lunacy, one chapter more absurd than the previous, addressed in "Economic Mythology" in Sept2004. Giving infected policy its impetus, if not permission much like promulgated defective dogma, has been a full generation of badly trained economics professionals. My bio reads "unencumbered by the limitations of economics credentials" meant as humorous but at the same time a solid true advantage.

Hordes of bad economists: Numerous personal conversations with economics degree holders over the years have revealed to me an absolutely shocking display of ignorance regarding risk from debt in commerce, risk from debt in currency, lost control from foreign debt ownership, wreckage from pursuit of low-cost foreign solutions, insane reliance upon consumption instead of investment, acceptance of the entire lexicon of FedSpeak, and benign dismay of economic statistics. These people have been co-workers in industry, colleagues of friends, and acquaintances socially. One sure path to acceptance of chronic bad policy is to have it blessed by badly educated economics counselors. In fact, a full generation of badly educated economics professionals litters the WashDC and academic landscape. In a sense, the United States has "re-invented" economic theory. The movement coincides with the advent and growth of financial engineering, which is just a nice glib catch phrase for inflation & leverage. We have degraded into a nation of people who prefer the sweat-free work in the paper pushing game to the hard work in factories. We call this progress and the result of evolution. No way! It is evidence of financial cancer.

Cheer leaders reassure: The USFed justifies and denies the sickness with regular routine pronouncements, usually in talk of the next Soft Landing, despite never having fostered one. They serve as cheer leaders much like a mad scientist reassures his or her backer, worried sick over the monster being created in the lab downstairs, complete with nightly groans and wails. It is all progress, evidence of our sophistication. Horse puckies! We are being led down a path replete with insurmountable challenge and ongoing crisis to the point where crisis is considered normal.

DISEASE PATHOGENESIS
This will read like a sequence of integrally connected symptoms, a medical review.

Birth of inflation: With the launch of monetary inflation in the 1960 and 1970 decades, more money has entered the system. Back then, the USEconomy was much more a closed system. So when more money circulated, prices rose, wages rose, costs rose, as a new age was born whereby citizens became accustomed and acclimated to inflation as part of life and landscape. The cost of living rose to the point whereby the middle class has endured a 30% to 35% decline in real wages since the 1968 date, according to George Paulos and his work from "An Alternative Inflation Index" two years ago. Unions enforced tighter guarantees for wage growth and job security packaged in pension programs which offered health care assurances. In doing so, they set up entire industries to fail with the advent of globalization, that perceived panacea chock full of pain. One must point to inflated wages for US workers and corporations, which were rendered uncompetitive because of chronic inflation. The pain of lost jobs to Asian outsourcing has as its roots inflation doled out for decades.

Cancer waves in each decade: The first cancer wave was for high tech industries in the 1980 decade sent "offshore" to Asia along the famed Pacific Rim with its Asian Tigers, namely Taiwan, Korea, Hong Kong, Singapore. We said goodbye to the manufacturing sector's prized core, technology for computers, some telecommunications, telephony, and consumer electronics. The second cancer wave centered upon China after it was granted in 1999 the Most Favored Nation status by Clinton. Not only did entire additional manufacturing industries relocate after significant business investment in China, but service sector businesses relocated in India where English is much more the spoken language. Few realize that the largest English speaking democracy in the world is India. China has capitalized on the industrial buildup. They have wrested almost the entire world mfg function, with case in point the 150 mfg sites owned by Wal-Mart inside China. From consumer electronics to housewares, they are made in China. Moreover, China has an impressive broad government sponsored plan executed to secure patents via consulting firms and shell corporations. Years back the Sandia Labs left themselves vulnerable to numerous weapons designs and schematics stolen via the internet, as the USGovt contractors dropped their guard. We watch in dismay as over $60 billion per year in intellectual property is not paid by China to the United States. We watch in consternation the next cancer wave as foreign entities attempt to acquire critically important primary assets. This is not the childlike shopping spree by the Japanese in the early 1980 decade, as they purchased the Rockefeller Center, the Pebbles Beach Golf Club, and numerous overpriced Los Angeles commercial properties, only to find themselves "bag holders" when their assets cratered in value. This wave involves attempts to grab energy assets, port assets, telecommunications and airline companies, even perhaps the entire car industry, all highly critical.

Dominant financial machinery: The financial sector takes slack up with heightened vigor, much like a slow galloping cancer. The US actually boasted in the 1990 decade of "financial engineering" as though it was a national advantage to possess protected tools for cancer spread. The lesson is quite simple, that if one chooses (individual, group, or nation) to produce wealth by means of financial alchemy, a horrendous natural response is invited. The same is true in the drug dependence world, as addicts need more drug supply, only to succumb to the ravaged body condition long after the house is destroyed. Rising prices reverse course, then crush not only value of income & assets, but also the downstream industries dependent upon such so-called production. See the mortgage industry, home building, real estate brokerage, property appraisal and title search. Notwithstanding, the financial carnage has spawned broad new businesses in bankruptcy, debt consolidation, debt counsel, and worker transition training. These might be regarded as the sewage effluent from financial engineering, much like the highly acidic and toxic sludge from a dirty industry. Which is better, toxic sludge or bankruptcy? The question is moot.

Housing dependence: Even as jobs are well along the path of being "dumbed down" for the last decade, as workers find jobs in retail and other low wage sectors like services, the population generally has come to rely upon their homes as their savings accounts. They send money into their stock accounts, save nothing, and pull money out of their home equity for spending purposes. Worse, on a national level one can make a highly credible argument that perhaps 50% to 60% of all consumer spending since the year 2001 has come from home equity extraction. If housing property values go into decline, or even stall, the entire USEconomy, fully dependent upon housing asset bubbles, will most assuredly go into decline and recession. The pathway thus has two signposts, one that wages are in decline (along with benefits), the other that in its place is wealth from the homestead asset, one's personal residence. This entire pathway is reckless, unprecedented in modern history, yet fully blessed by the economic counselors and other nitwits who have ushered in the Great Asset Economy paradigm, the latest in a long list of screwball business models endorsed by hacks and clowns working in WashDC and New York City. No longer is hard work, true talent, and diligence the potion for success, since opportunities are vanishing in the time-tested traditional sense. We have on a national level embraced the wonders of the housing boom and financial speculation. Even the name "housing boom" implies an astonishing ignorance that it extends from the monetary expansion (inflation) directed toward mortgage finance. Few seem to be aware that Fanny Mae is bankrupt, under liquidation and receivership. See a dedicated website on the subject of the Fanny Mae death spiral from a diligent subscriber.

R&D heart & soul departures: The most alarming trends to catch my eye in the last year are two. The outsourcing of Research & Development functions to Asia, and the death spiral of General Motors (probably Ford too). If intellectual property is the last bastion for the USEconomy, we must see R&D preserved and protected like national family jewels and heirlooms. Where are US engineers to find work? Dell has dispatched its R&D to Taiwan. Will telecom firms send R&D to China, where their mfg operations reside? Will car R&D functions in China crop up, with jobs posted in Detroit newspapers for US engineers? Doubtful, since China and the rest of Asia produce six times as many science and engineering graduates from colleges and universities annually, versus the United States. Not only is the US rendered vulnerable to high wages brought by chronic inflation, but we cannot compete with the sheer numbers in the trained Asian work force. Sure, the nation possesses plenty of research facilities, spanning across academia and elite institutions to corporate branches. They must be protected, not permitted to wither.

Death of Detroit carmakers: The trend is clear. The USEconomy is shedding the rich jobs and replacing them with crappy jobs. A national tragedy is unfolding. The entire US carmaker industry is at risk. What saved Chrysler might have been its near death experience in 1980. Saved by restructuring and grand changes to its corporate culture toward greater innovation, Chrysler actually left Daimler Benz to be the bag holder. Talk about selling out at the top! Nice job, Lee Iacocca, much to the resentment and chagrin of Germany. At least Mercedes has more access to showrooms, a pathetic prize in the transaction. It is no wonder to me that BMW and Audi would have no part in such a disastrous deal. Not only General Motors and Ford Motors are on their death bed, a long conveyor belt from hospital chambers to mortuary court rooms, but their entire list of parts suppliers are undergoing an implosion. See Delphi and Dana, who share workers in the United Auto Worker union. We might be witnessing yet another in a long list of bankruptcies whose path was painted by union contracts. The impact of GM and Ford debt on the bond market is severe, mostly bullish for USTreasurys in a curious way. Given its forewarning, the destructive of capital from bond principal loss might be offset by credit default swap contract gains. The most painful and critical casualty in the chronic inflation pathogenesis is the death of the US carmaker industry. It will not downsize; it will die. It will not suffer and shutter in a crisp sudden episode; it will decline and drag down numerous associated niche industries with it.

Foreign held debt: One of the numerous planks in the inflation apologist heresy is the harmlessness of large scale foreign ownership of US debt. My neighbors can be my creditor, as long as those neighbors continue to extend deeper lines of credit, as long as they understand and share my mindset, as long as they honor contract law such as copyright and patent, as long as doing so does not collide with their own interests, as long as they don't call in the debt at the most inopportune time, as long as they don't coerce huge concessions, compromises, and surrenders. More importantly, as long as they don't conclude my business will ultimately fall into ruin. Heck, as long as they don't compete on the military battle field, or interfere with the critical passageways that send needed supplies to our nation. When talking to me as a child, my father taught me that the federal debt is not so important since "we owe it to ourselves" which is no longer true. That argument has vanished curiously. The great mythology heresy spin machine has now updated their profane doctrine, and attempts to shove down our throats the teaching that "foreign ownership of our national debt is ok since our allies own it." Check the status, behavior, and patterns from China and the Persian Gulf lately, even Russia. No way!

Foreign debt purchase: We as a nation cannot continue to avert the coiled spring of natural consequence from exporting our debt securities. We ransom our future. The new pattern evident since the 1990 decade is for magnificent growth in foreign USTreasury Bond holdings. Outsiders own 45% to 48% of our entire federal debt issuance. Outsiders used to buy over half of new federal debt issuance, except we cannot be certain anymore. Holdings recorded out of the United Kingdom have become a lethal brew of hedge funds, OPEC brokered purchases, and illicit USFed agency fronts. Our USGovt and financial leaders (more like alchemist insane professors) seem to prefer less transparency even while they spout words to the opposite effect. As we find harmless the export of inflation, we prefer to deny the risk associated with doing so.

Fraudulent accounting: The USFed enlists foreign central banks to buy into the wondrous US asset foundation of our debt securities. With a wand we deem such debts as assets, claim their value as valid, trade them for hard goods built overseas, and account for such debts in balance sheets on the asset column, incredibly. The birth of Enron accounting emerged from the USGovt bookkeeping labs, with analysts and accountants alike busily conjuring up deceptive practices. See the USFed open market operations, see the gold lease accounting, see the federal deficit calculation, see the cost of living adjustment (COLA) figures. Like a wayward career criminal parent who criticizes children for their lies and theft, the USGovt prosecutes Enron, WorldCom, Adelphia, Tyco, and a gaggle of others, with hypocrisy. Govt accounting methods were taught to Wall Street, then sanctioned as legitimate, forgiven since we stole from ourselves. No longer, now from foreigners. The inflation era requires lies to perpetuate the game. Much like a staff of doctors to convince the patient that the cancer is "no big deal" and rather common and innocuous, we have a corps of hack economists who spout garbage analysis and phony accounting to support the frail fractured fraudulent system founded upon inflation. We must deem debt as assets, so as to claim possessed wealth and to avoid few if any assets at all. This is alchemy on its face, and witchcraft among the supporting cast.

Collusion with foreign authorities: In no way can the USFed on its own execute on its plan, perpetrate its financial crime, and perpetuate the game without full complicity among foreign central bankers. This involves full cooperation, coordination, and intervention in policy and overnight actions. This involves clandestine deals, like the less than transparent merger between JPMorgan and Sumitomo, the giant Japanese bank. This involves the Bank of Japan doing the US bidding to intervene in overnight rescues so as to assist an ailing USDollar. This involves the Euro Central Bank pretense and nonsense about not hiking more than one time last Jan2006 (one additional hike since then). This involves the mutual embrace of inflation by Japan, but to a lesser extent by European Union finance ministers. This involves hidden limits on currency movement being enforced by the ECB and BOJ, made evident only after repeated defense. This involves shady deals with official gold sales from central bank vaults, which are probably in violation of most legal statutes for their contractor agreements. The victim in the process is democracy itself, and free markets in particular. The end result is cronyism and aristocracy deeply engrained in wealth accumulation by illegitimate economic means. With enough private sector collusion, we invite the spread of Italian Fascism, a dreaded condition which leads to suffocation and erosion of the middle class, if not vanished liberties.

Spread of monetary syndicate: In other words, the policy to rely upon inflationary apparatus, to set its gigantic machinery into motion, this requires partners in economic crime, a syndicate of sorts. The US Federal Reserve is not honoring its contract with the US Congress. It denies a full accounting and disclosure in the interest of national security. Whose security? It denies the sale of the national gold treasure, a travesty. A syndicate implies tight cooperation in illicit business. The world's major central banks clearly qualify in such accusations. If not for cozy relationships with the power elite, who benefit from "first in line" status, the USFed and other co-conspirators would be removed from the scene. The syndicate extends to Saudi Arabia, where Prince Alwaleed enjoyed no-risk investment in Citibank years ago, which profited in the billion$ for him. The claim can easily be defended that the practice of monetary collusion has spawned a veritable syndicate at work which operates outside Congressional checks & balances. Liberty and free markets are at grave risk.

NATIONAL PRIORITY & AUTONOMY
Lost sovereignty: To claim that having foreigners owning a majority of our federal debt does not impair our national condition, to me is lunacy. Asia and the Persian Gulf do not resemble shylocks and loan sharks, to be sure. However, one should not claim we remain strong, viable, and of an independent spirit in the process. Foreigners also own a substantial portion of our mortgage debt and corporate debt. They own a large slice of our stock market. In the math field, an effective technique is to exaggerate a condition to the extreme, thus to expose the impact. For instance, if every US firm outsourced to China, India, and Mexico, then nobody in the USEconomy would be employed with a job. Our spendable cash would be from home equity extraction, with nothing left for debt service. That would be an absurdity, untenable, and illustrates the insanity of low-cost solution pursuit at the macro level. If all US federal debt was owned by foreign central banks and large foreign institutions, then all marching orders, all directives, all priorities would tilt toward the master creditor. That would also be untenable. The United States is losing its foundation, not just with the manufacturing sector but also in the creditor hierarchy. Inevitably, USGovt leaders, USFed leaders will be coerced into placating foreign interests and demands. It is only natural. Try to lend $100 thousand to a neighbor to start a business, and then keep hands off, yielding total control and autonomy to the startup proprietor. Try lending another $10 thousand every month afterwards, behold a string of bad decisions (like Medicare obligations, like pork projects in Congressional bills, like a war overseas on questionable grounds), then stand aside with continued full freedom granted to the reckless borrower. Foreign interests will gradually creep into critical decisions and policy. National sovereignty might be sacrificed without the public knowledge, with gradual lost control, and increased vulnerability. In the process, our national security might be compromised. In fact, one might wonder how national security would not be compromised. A debtor is not in charge of his or her own fate and pathway. To maintain the pretense otherwise in an exercise in pure folly. The United States must next advance the interests of our creditor nations, or else risk losing that valuable credit supply and support.

Failing empire: The USEconomy lacks commodity supply, most visibly crude oil and natural gas. It lacks credit supply, since domestic savings is non-existent. It lacks independence therefore. It does not lack a powerful military. However, the military experienced a shortfall of bullets last summer, and had to turn to foreign suppliers. Key magnet parts for "smart bombs" are required from Chinese suppliers in order to make the laser GPS guidance functional. Should we as a nation reduce costs for rifles by having them built in Mexico or Taiwan or Turkey? The Moslem world made an historical error in outsourcing weapons systems over a century ago. The flip side to globalization for a nation whose economic system runs in gargantuan record setting deficits, is that the debtor (United States) must become more aggressive in order to secure supplies (tangible and financial) from our supplier nations, our partners, as well as those nations that lie on the fringe of partnership and adversary. Our chronic inflation has led to dependence upon outsiders, barbarians at the gate, and undue concern for foreign priorities. We are in the process of losing our perspective, losing control, and losing our power. We "Export Inflation, Import Deflation" and expect to get away with it. An empire beholden to external sources is not strong. It must compromise so readily that it risks becoming an engrained constant policy. It cannot be independent and remain sovereign with integrity.

Friction & war inevitable: The combination of foreign dependence for both commodity supply and credit supply makes for a truly lethal mixture. We drive foreign made cars with foreign supplied fuels to buy finished products made by foreign workers, using foreign supplied money. We wage war on a foreign supplied credit card. Worse still, we need it to maintain a gluttonous lifestyle pockmarked by excessive food intake, excessive debt abuse, excessive energy usage, excessively sized homes. We must somehow convince the world to continue to believe in our national priorities, in our national mandate for freedom, in our national consumption. They cannot, or else they will not soon. At the same time, the United States has begun to protect itself from external control and interference. See the nixed Unocal deal by Chinese interests. See the altered Dubai Ports World deal by Middle Eastern interests. Watch the Lucent deal by French Alcatel interests. Friction is on the rise. More visibly and with spilled blood, warfare is on the rise in Iraq. Domestic marches and demonstrations are also on the rise internationally. Much debate surrounds the real motives for the Iraqi War. For those who claim energy supply was not a top priority in Iraq, may a frontal lobotomy be suggested. Few see war as a delayed fuse to inflation.

CONCLUSION - WEIMAR BUZZ
Integrity to be challenged: It has long been a Von Mises belief that in the wake of tainted money comes lost integrity, honesty, and honored rules of the game. The entire statistical factory in WashDC has become a charade. This makes perfect sense when viewed against the "fallible mankind" backdrop. If a group of people can counterfeit with impunity, a few will eventually do so. If a government can counterfeit with temporary reprieve from consequences, it will do so from the outset. Nobody should trust the consumer price inflation, the GDP economic growth, the productivity level, the unemployment level, the savings rate, or any statistic which has been adjusted for inflation. An entire fallacious statistical system has been put in place, one which fortifies the national agenda of "wealth generation through inflation" and "economic progress through housing bubble," each a travesty in dogma. At the same time, an absurd emphasis of soft statistics like consumer confidence and business expectations has shifted into full practice. If time tested statistics all stink on ice, why not emphasize bogus statistics?

USFed as Weimar Politburo: We must perceive the US Federal Reserve as the modern day equivalent of the Soviet Union Politburo. Tactics complete with dominant bullying, threatened closure of our markets to foreign exporters, coercion for consistent inflationary accommodation abroad, such are typical within our central bank. It is given far more respect than it deserves. It has presided over the colossal decay of the USDollar value, and the unprecedented erosion of jobs through outsource. Their business experience is easily challenged. Their economics credentials are built upon faulty training in the field, since the slippery ground of debt serves as the accepted capstone of both our economy and currency. USFed governors are devoted to inflation as the engine for growth. The USFed Chairman is an avowed advocate of printing money at virtually no cost, of managing the Treasury yield curve, and even dumping money on household lawns. My label for the post is the Secretary of Inflation, complete with disrespect. Inflation is deeply engrained in our national DNA, our genetic code, our entire psyches. We are repeating the Weimar hyper-inflation with our own style, at our own pace, in a new era. We do so not in a closed system known to Germany eight decades ago. We do so amidst global trade and global interdependence. We lure the rest of the world to play our reckless game, led by crusty old farts in our US Politburo, misled by the delusion that we can control the USEconomy any better than the Soviet Union did. We do a much better job, but the outcome might actually be more devastating and messy on a global scale. We leave no room for error, led by "The Green Ben Bernanke" and a highly inexperienced pack. In fact, we actually invite error by relying upon concurrent data to signal an end to interest rate hikes, when competent decisions might be directed by forward indicators. These clowns actually admit it, with no pretense of statistical expertise from reliable indicators. Convenient indicators are forced to the forefront.

Trade friction & warfare: The battle for US assets, the bidding war, has only begun. Resistance will be fierce and joined from many corners. We taunt China into upgrading their yuan currency, claiming on the delay issue, "they do so at their own peril." What nonsense, to pressure an exporting nation to supply finished products at a higher cost, to pocket the increased revenue, so that we don't enact a tariff and pocket the gains ourselves. The result will be higher imported product prices, a mild surge in consumer prices, and an effect on long-term interest rates. Nobody in his or her right mind believes the US mfg sector will win market share from more competitive prices due to yuan exchange rate changes. We have no mfg sector left, the consequent effect of economic policy folly. Foreigners will next want to purchase US assets, like any creditor wishing to control the business operations on a wider basis. Friction has begun, and is highly likely to worsen. Waged war only adds a flammable fuel into the geopolitical cauldron. My view is that exported inflation invites foreign control of assets and steady sacrifice of the government policy priorities. We are gradually making clear that foreigners are welcome to accumulate our USTBonds as promissory notes, but they are not so welcome to use them as legal tender to purchase our prized assets. Then why purchase these dubious USTBonds? Given the path we are on, a wider spread of war is leaps & bounds more likely than the spread of democracy. Inflation is out of control. So is the friction in its wake, which has spawned growing chaos. Nobody likes war, except killers and war profiteers. The gold price likes war from the safe haven. The crude oil price likes war from interrupted and destroyed supply. War is but a symptom of chronic inflation gone amok from decades past. By the way, there is nothing to stop China from using its nearly $1 trillion in reserves to build a powerful modern military, complete with navy and air force.

Jim Willie/ 30March2006
 

judge wopner

TRIBE Member
swilly said:
I always loved marco economics.
"shake harder boy!!!!"

ohhhhhhh!!!!!!!!

i just got htis joke now, im thinking "hey i love MACRO econmomics too... wait...hes mocking me for something...i just cant figure out whut/....."
 
tribe cannabis goldsmith - gold cannabis accessories

2canplay

TRIBE Member
I love these doomsday articles. Yeah, go ahead buddy, buy gold, the world is crumbling...:rolleyes:

Last I checked profits at the S&P 500 companies are soaring, prodcutivity is solidly advancing, forecasts call for more of the same. Also, last I checked, this 10 trillion dollars in stock is largely owned by yanks. 10 will turn into 12 next year, then 14 the yera after, etc, etc, etc. Also, the Yanks own a good chunk of the Euro stock market, and the Canadian. Their $10 Trillion in corporate assets dwarf this so called "debt" problem.

Its laughable. No the world is not coming to an end. There will be no war. There will be more trade, more profits, more wealth.
 

judge wopner

TRIBE Member
2canplay said:
I love these doomsday articles. Yeah, go ahead buddy, buy gold, the world is crumbling...:rolleyes:

Last I checked profits at the S&P 500 companies are soaring, prodcutivity is solidly advancing, forecasts call for more of the same. Also, last I checked, this 10 trillion dollars in stock is largely owned by yanks. 10 will turn into 12 next year, then 14 the yera after, etc, etc, etc. Also, the Yanks own a good chunk of the Euro stock market, and the Canadian. Their $10 Trillion in corporate assets dwarf this so called "debt" problem.

Its laughable. No the world is not coming to an end. There will be no war. There will be more trade, more profits, more wealth.
im hoping youre being sacrcastic.
the world didnt need to end fro there to be the great depression.

heres a nice chart of the past 5 years for the S&P500 in blue which has only in the past month reached back where it was 5 years ago, and in the red is the HUI, the main gold index in the US, notice the difference.

spot gold has almost doubled in price in the past few years and is currently sitting at record highs since the 80's i believe.

good money is to be made on gold and other hedges against inflation.
dont bleieve the happy go lucky "buy mutual" funds crowd that will pump stocks no matter what and call any impending financial crisis a "soft landing"

http://finance.yahoo.com/q/ta?s=^GSPC&t=5y&l=on&z=m&q=l&p=&a=&c=^hui
 

atbell

TRIBE Member
Ok, so US Reserves are in question. According to the economist Japan has 8.38 billion US$, China has 8.19, Taiwan has 2.4, South Korea has 2.2, Rusia has 1.9, EU has 1.8, India has 1.4 ... just to get an idea of how much debt is out there.

I didn't really like that article, it struck me as poorly structured which made his major arguments difficult to determine. A lot of dramatic words with questionable meaning too.

It struck me as odd that he used some random birth of inflation date in the 60s/70s, especially when he pointed his own flaw later in the article by referencing the German problem in the 30's (which was instrumental in Hitlers rise). Inflation has been around as long as markets have been, play with that statement all you want ;)

I liked his mention of corporate share printing but don't have many thoughts about it. I also liked his not about Fanny Mae although it would have been good if he had mentioned similar problems with Freddy Mac, the other mortgage bank in the US, to emphasis the point.

You can tell he doesn't have credentials because he seems to stay away from some of the driving issues of inflation mainly money supply and interest rates. In fact I didn't notice him mention interest rates at all which is suspect because of his very critical stance on the Fed and their engineering.

He also makes good notes on the CPI and consumer confidence as being poor economic indicators. The standard measures for inflation don't account for fluctuations in food or energy prices which, imo, are some of the major drivers of the current inflation. As for consumer confidence, I really don't feel it can be accurately measured and therefore shouldn't be reported.

Citing Von Mises is a bit odd as he is a fringe economist. I don't know much about him other then that and that I have two mammoth books of his in my possession (unread gifts from an old US navy man who moved in next door to my parents, old people give the oddest gifts)

I also find it curious that he criticizes the Fed without really stating any specific complaints. It makes me think that he either has not read anything published by them or he didn't understand what it was he was reading. In my experience the fed releases some very good, very readable papers. Greenspan was particularly good and REPEATEDLY commented on things such as creeping protectionism, social security and Medicare problems in the making, and a need for US educational reform in the last years of his job. None of these comments have been acted upon by the US administration. I would suggest that anyone who is reading this swing by the fed site and look for some of their releases, it's easier reading then my writing.

Inflation: a situation that occurs when money supply is higher then money demand.

Having commented on points in the article I should try to address the whole spirit of the article, the fear (misunderstanding) of inflation. It's happening, the problem is that the US response to inflation is to rise interest rates. The rise in interest rates is used to stimulate demand for the US dollar. The increased demand is due to the increased returns on US dollar investments. Fortunately the US economy as a whole appears to be strong enough to be able to deal with the rises in interest rates.

The problem is in the housing and debt sector. As the rates get higher so does the burden of debt on the public. The first problem will be with owners of a second house who will sell to cut costs (housing supply up, housing prices down). Also owners who bough houses that they could barely afford with variable rates will want to sell. Unfortunately they will likely incur a loss due to the dropping housing prices.

I personally think that what is happening is a decrease in American standards of living. Inflation and a declining US$ on a world scale are how these things are going to work out. My concern is the social tension that is going to result. How are people going to be told that they will never be able to live as well as their parents, that they might never be able to attain the lifestyle they had when they were kids? And I have noticed a trend in older generations of simply not understanding why the youth have any difficulties. There seems to be a real generational divide.

I would sight what was above noted as the start of inflation (in the 60s) as being a prime example of a living standard adjustment. After the war US prosperity over shot and people lived better then they should have, it had to readjust somehow.

Just my two cents.

I hope that makes sense, it's late, sorry.

Oh, and try thinking of gold as staying the same value, it's the US$ that is droping.
 

judge wopner

TRIBE Member
atbell said:
Ok, so US Reserves are in question. According to the economist Japan has 8.38 billion US$, China has 8.19, Taiwan has 2.4, South Korea has 2.2, Rusia has 1.9, EU has 1.8, India has 1.4 ... just to get an idea of how much debt is out there.

I didn't really like that article, it struck me as poorly structured which made his major arguments difficult to determine. A lot of dramatic words with questionable meaning too.

It struck me as odd that he used some random birth of inflation date in the 60s/70s, especially when he pointed his own flaw later in the article by referencing the German problem in the 30's (which was instrumental in Hitlers rise). Inflation has been around as long as markets have been, play with that statement all you want ;)

I liked his mention of corporate share printing but don't have many thoughts about it. I also liked his not about Fanny Mae although it would have been good if he had mentioned similar problems with Freddy Mac, the other mortgage bank in the US, to emphasis the point.

You can tell he doesn't have credentials because he seems to stay away from some of the driving issues of inflation mainly money supply and interest rates. In fact I didn't notice him mention interest rates at all which is suspect because of his very critical stance on the Fed and their engineering.

He also makes good notes on the CPI and consumer confidence as being poor economic indicators. The standard measures for inflation don't account for fluctuations in food or energy prices which, imo, are some of the major drivers of the current inflation. As for consumer confidence, I really don't feel it can be accurately measured and therefore shouldn't be reported.

Citing Von Mises is a bit odd as he is a fringe economist. I don't know much about him other then that and that I have two mammoth books of his in my possession (unread gifts from an old US navy man who moved in next door to my parents, old people give the oddest gifts)

I also find it curious that he criticizes the Fed without really stating any specific complaints. It makes me think that he either has not read anything published by them or he didn't understand what it was he was reading. In my experience the fed releases some very good, very readable papers. Greenspan was particularly good and REPEATEDLY commented on things such as creeping protectionism, social security and Medicare problems in the making, and a need for US educational reform in the last years of his job. None of these comments have been acted upon by the US administration. I would suggest that anyone who is reading this swing by the fed site and look for some of their releases, it's easier reading then my writing.

Inflation: a situation that occurs when money supply is higher then money demand.

Having commented on points in the article I should try to address the whole spirit of the article, the fear (misunderstanding) of inflation. It's happening, the problem is that the US response to inflation is to rise interest rates. The rise in interest rates is used to stimulate demand for the US dollar. The increased demand is due to the increased returns on US dollar investments. Fortunately the US economy as a whole appears to be strong enough to be able to deal with the rises in interest rates.

The problem is in the housing and debt sector. As the rates get higher so does the burden of debt on the public. The first problem will be with owners of a second house who will sell to cut costs (housing supply up, housing prices down). Also owners who bough houses that they could barely afford with variable rates will want to sell. Unfortunately they will likely incur a loss due to the dropping housing prices.

I personally think that what is happening is a decrease in American standards of living. Inflation and a declining US$ on a world scale are how these things are going to work out. My concern is the social tension that is going to result. How are people going to be told that they will never be able to live as well as their parents, that they might never be able to attain the lifestyle they had when they were kids? And I have noticed a trend in older generations of simply not understanding why the youth have any difficulties. There seems to be a real generational divide.

I would sight what was above noted as the start of inflation (in the 60s) as being a prime example of a living standard adjustment. After the war US prosperity over shot and people lived better then they should have, it had to readjust somehow.

Just my two cents.

I hope that makes sense, it's late, sorry.

Oh, and try thinking of gold as staying the same value, it's the US$ that is droping.
ah some very good points.

i didnt formally study economics so it takes me a while to pick up the more technical elements of the theories.

w/ respect to inflation i come to realize the utter absurdity in measuring the costs of good, the money supply and any changes to the kind of exactness that the goverments claim they can. i feel like stats are being abused in subtle ways, they report month over month changes in different data and any negatives seem to be atributed to weather varience w/ respect to oil and gas, even though crude oil averaged about 55-60 a bareell through this one of the warmest winters int he north east. last year $50 a barrell oil was seen as the spark for a reccession and astronomically high....

often stats will be reported as "this months gdp was better than expectations, registering %0.2 better than the %5 decline analysts were expecting" kind of junk, it spins the actual decline of a set of data against "expectations' giving the false impressio the drop was in some way good because a bunch of people felt it would have been worse.

inflation: there so much varying opinion on what infliation is exactly, how to record it and how much it exists in north america.

oil and comodities and gold at record highs, despite inventories of oil being also at record highs, could this be another form of inflation finding its way out from all the excess liquidity?

low interest rates, making debt easy for everybody, banks are throwing money at people, considerations are now given to 30 + mortagages. alot of otherwise illqualified people or people on hte fringe may be getting into massive amounts of debt. this is disconcerting, especially when looks at a chart of fannie mae/freddie mack's stock.

i think the decline in lifestyle is under studied, people may own homes in record numbers but how big are these homes, and how much is levelraged as a share of their debt load compared to the last genration.

consumer spending is the biggest bunch of shit as so much spending now occurs via credit instruments, giving a poor gauge of a persons actual ability to buy goods vs. their ability to finance and hold the debt load on goods they purchase via credit.

this is an interesting topic.
 

2canplay

TRIBE Member
Fannie Mae???

Shit, that's one of my biggest investments!!!!! A great company - it just prints money. If I see $43 again, I'm adding. (Also, I bought SallieMae (Student Loan Marketing) in the late 90's after a similar "crisis" - blah blah blah, theirs toooo much debt - the thing has quintupled and keeps going up)

Anyways,

JW, re gold versus stocks. Are you kidding me? I agree with you about mutual funds (why give them 3% a year?), but investing in quality stocks is a no brainer. You can look at a chart of gold all you want, but an investment in CIBC 15 years ago is worth 10 times today what it was back then ($10,000 turns into $100,000). Simliarily for GE, AIG, Citigroup, RBC, etc. (and FannieMae) Gold? Its flat. And no dividends.

It is important to remember that with stocks, the money earned per share (csah flow minus capital expenditures) is yours - it might not come out in dividends, but it comes to you eventually - either through share buybacks, debt repayment, accretive aqcuisitions, cash buildup or an outright sale. FannieMae might languish at $50 per share for two years, but the company makes $6.00 per share this year, $6.50 next year, $7.00 the following year, etc. That money is yours - sometimes it takes a while for the market to catch up. But, one day, a few years from now, you wake up and the market catches up and you have a $100 stock. It's not rocket science. It's inevitable.

Good companies, with good management and in a good business, know how to make money. Gold should be a part of your portfolio, but a very small part. Commodities are fine, but they are just commodities. Companies won't pay extra for them. Royal Bank, they can raise prices. Barrick, they can't.

Gold's had a good run, and it might still go to $1000, but who cares? If it goes to $1000 in 2 years, what does that mean? Rampant inflation? Who cares? Last I checked, GE can raise prices to cover supplier inflation. At the same time, their assets inflate and their liabilities "deflate." And, you keep getting your dividend cheque.

Don't believe the hype, man.
 
tribe cannabis goldsmith - gold cannabis accessories

judge wopner

TRIBE Member
2canplay said:
Fannie Mae???

Shit, that's one of my biggest investments!!!!! A great company - it just prints money. If I see $43 again, I'm adding. (Also, I bought SallieMae (Student Loan Marketing) in the late 90's after a similar "crisis" - blah blah blah, theirs toooo much debt - the thing has quintupled and keeps going up)

Anyways,

JW, re gold versus stocks. Are you kidding me? I agree with you about mutual funds (why give them 3% a year?), but investing in quality stocks is a no brainer. You can look at a chart of gold all you want, but an investment in CIBC 15 years ago is worth 10 times today what it was back then ($10,000 turns into $100,000). Simliarily for GE, AIG, Citigroup, RBC, etc. (and FannieMae) Gold? Its flat. And no dividends.

It is important to remember that with stocks, the money earned per share (csah flow minus capital expenditures) is yours - it might not come out in dividends, but it comes to you eventually - either through share buybacks, debt repayment, accretive aqcuisitions, cash buildup or an outright sale. FannieMae might languish at $50 per share for two years, but the company makes $6.00 per share this year, $6.50 next year, $7.00 the following year, etc. That money is yours - sometimes it takes a while for the market to catch up. But, one day, a few years from now, you wake up and the market catches up and you have a $100 stock. It's not rocket science. It's inevitable.

Good companies, with good management and in a good business, know how to make money. Gold should be a part of your portfolio, but a very small part. Commodities are fine, but they are just commodities. Companies won't pay extra for them. Royal Bank, they can raise prices. Barrick, they can't.

Gold's had a good run, and it might still go to $1000, but who cares? If it goes to $1000 in 2 years, what does that mean? Rampant inflation? Who cares? Last I checked, GE can raise prices to cover supplier inflation. At the same time, their assets inflate and their liabilities "deflate." And, you keep getting your dividend cheque.

Don't believe the hype, man.
ha!! fair enough.

im not suggesting banks or stocks are automatcially bad, i do think the weak performance of the S&P 500 ove rthe past 5 years as per my chart is relevant.

its easy to show CIBC and say an investment 10 years ago would be worht lots, its equally easy to show how an investment in Nortel in 1993 held until 2000 would have seen you buy in at $1.50 and sell at $100 per share. its misleading.

yes dividends are the cornerstone of buiding a portfolio, but many gold and precious metal companies offer porfolio's, so owning gold doesnt have to be the physical metal. and gold is not flat by any strecht. but yes it voltile and shouldnt be your entire portfolio, im just a bit cautious about large cap stocks at the moment from a technical standopint, inflation and the nearly inverted yeild curve we have in the US.

banks have done great, but being interest rate sensitive animals i think id be taking profits as they have done so well for us in canada. but there are many ways to skin a cat,

for a 1 year outlook this is my golden goose:
all tsx:

NPG- 1.70
ELD- 5.75
TNX- 8.25
IAU- 1.40
RFM- 2.20
 

judge wopner

TRIBE Member
2canplay said:
Gold >$600.

Wow. My old man was such a perpetual gold bug - he'd be kicking me for not going long.

www.jsmineset.com

updated each day, read it for 2 weeks, and you will become a gold bug.
(and youll make some money too hopefully!!)

TNX
ELD

the best of the best!!!
 
tribe cannabis goldsmith - gold cannabis accessories
Top