Foundation for Economic Growth - Newsletter

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Last Updated: Sep 11th, 2008 - 16:55:19

Newsletters : 2008 Newsletters : 1 August 2008
Thought for the Day

Since the beginning of the year almost all the stock markets of the world have gone down by around 20%, according to the latest issue of the Economist covering 48 major countries.

The Dow by 15%, Japan (Nikkei) by 15%, China 49%, Britain 20%, Euro 28%, France 27%, Australia 22% and on and on. Venezuela gained 3% in its own currency but lost 34% when measured in $US.

When we understand that all countries are also inflating their paper currencies by 10% to 15% or more thus reducing the value of their currency, we can see that the loss of wealth is truly impressive for the last six months.

As the Central Banks work more and more closely together to "solve" their inflation problems so they are beginning to synchronise their times of boom and bust.

We live in interesting times, indeed.


Jul 29, 2008, 10:37

 Newsletters : 2008 Newsletters : 1 August 2008
A View From The USA

Bill Bonner has written a few books now on our topic of how to get sound economic growth in the modern nation.

He is not particularly enamoured with the current crop of politicians running his country and predicts that the Day of Reckoning is getting closer.

Now New Zealand has an even bigger current account deficit than the USA but fortunately we do not have their debt. However our "Labour Led Government" is seeing to that small problem and we can expect to see a rising deficit in government finances as the economy screeches to a halt. Maybe the change of heart to reduce the tax load on the workers will help but then again maybe the bureaucratic overheads will prove to be too much for our small farmer dependent nation. We have dropped two places down the world wide wealth lists in 2006 and the only thing stopping us rocketing downwards is the similar state of the other nations. However, be prepared for another drop down the OECD in the near future.

Whoever is in power in 2009 will need to take a hard look at the economy. It is time to stop the slide down the slippery slope to third world status that looms ever closer.


Aug 1, 2008, 10:19

 Newsletters : 2008 Newsletters : 1 August 2008
Inflation In Europe Reported At 16-year High

When one understands that inflation is caused by Central Banks printing too much money (increasing debits and credits inside their computers) the results become very predictable. It is interesting to see how reporters and ordinary economists react to the inevitable price rises.


Aug 1, 2008, 09:59

 Newsletters : 2008 Newsletters : 1 August 2008
Inflation Or Deflation?

The Economist agrees with me!


Jul 30, 2008, 18:03

 Newsletters : 2008 Newsletters : 1 August 2008
IMF Sees No End To Credit Crisis

"Global financial markets continue to be fragile and indicators of systemic risk remain elevated. Credit quality across many loan classes has begun to deteriorate with declining house prices and slowing economic growth. Although banks have succeeded in raising additional capital, balance sheets are under renewed stress and bank equity prices have fallen sharply. This has made raising additional capital more difficult and increased the likelihood of a negative interaction between banking system adjustment and the real economy. At the same time, policy trade-offs between inflation, growth, and financial stability are becoming increasingly difficult. The resilience of emerging markets to the global turmoil is being tested as external financing conditions tighten and policymakers face rising inflation."

So says the International Monetary Fund in its latest Global Financial Stability Report - monthly update.

Things will get worse before they get better.

Read the report here:
 [ Visit Website ]
Jul 29, 2008, 11:50

 Newsletters : 2008 Newsletters : 1 August 2008
The Fed's Predecessors in American History

The most effective way to have a growing economy is with a small government - hence low taxes, and with sound and uncorrupted institutions for governance of police, justice and foreign affairs. We seem to be moving in the opposite direction and our economy is suffering.

The other essential ingredient is a system of sound money. This can only be achieved by using gold and/or silver as the money base. Every time states have allowed banks to use paper as a substitute for gold coins (described as specie in the article) the banks have issued more paper money than they have gold to back it and the resulting inflation caused business and banking failure.

Trask's essay is a brief history of the Second Bank of the United States, which functioned from 1817 to 1836. Trask shows how this central bank quickly resorted to market manipulation, deceit, patronage, and corruption to maintain its power and subvert democracy. Some of the methods cited by Trask are identical to those being used now by the successors of the Second Bank of the United States, the Federal Reserve and the Treasury Department.

Trask quotes the economic historian William M. Gouge as attributing the failures of the Second Bank of the United States to the very concept of central banking. "The fault is in the system," Gouge wrote. "Give the management of it to the wisest and best men in the country, and still it will produce evil."

Each day's news out of Washington and New York makes it harder to argue with those who think so.

You can find Trask's essay at the Mises Internet site here:
 [ Visit Website ]
Jul 28, 2008, 12:16

 Newsletters : 2008 Newsletters : 1 August 2008
More Than G7, G20 Now May Be Needed For Dollar Propping

The world is awash with paper money. All countries printing an additional 10% per annum and some of them printing much more.

The USA is spending its paper abroad like a drunken sailor in a foreign port. The citizens are struggling to cope and the government responds by sending every tax-payer a cheque for $600. But the government itself is heavily in debt. Never mind - the solution to money problems according to the present administration is simple - print more money.

But things are now starting to get a bit tricky. The Arabs and the BRICs seems to have all the dosh. What will George Soros do in this environment? Probably duck for cover!


Jul 24, 2008, 21:56

 Newsletters : 2008 Newsletters : 1 August 2008
Quote for the Week

Have we succumbed to fascism again:

“Economic initiative cannot be left to the arbitrary decisions of private, individual interest. Open competition, if not wisely directed and restricted, actually destroys wealth instead of creating it... The proper function of the State in the Fascist system is that of supervising, regulating and arbitrating the relationships of capital and labour, employers and employees, individuals and associations, private interests and national interests... More important than the production of wealth is its right distribution, distribution which must benefit in the best possible way all the classes of the nation, hence, the nation itself. Private wealth belongs not only to the individual, but, in a symbolic sense, to the State as well."

Mario Palmieri, The Philosophy of Fascism, 1936


Jun 29, 2008, 10:58

Can we fix it?