Foundation for Economic Growth - Newsletter

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Last Updated: Mar 3rd, 2014 - 11:01:36


Newsletters : 2012 Newsletters : 14 May 2012
Thought for the Day

The way to get wealthy is to create wealth. Simple yet so elusive. New Zealanders once were wealthy. In 1900 we were the third wealthiest nation on Earth in terms of GDP per capita. (Not a very good measure but all that we have for comparisons.) In 1950 we were still at number three and we had a good life up until the 1970s. Now we are well down the list and the list itself is seemingly replete with basket cases.

When New Zealand started we had not much of anything. In 1800 it would be hard to say that we even had an economy. What made the difference was that England brought capital and labour to the new colony and the early settlers found a new lease of life with almost complete freedom to do what they wanted.

So they got together with the locals and worked. The capital went into farms and roads and houses and people worked and saved as much of their earnings as they could. These savings were the capital for the ongoing investments into farms and infrastructure plus of course loans from England.

In those days there was no welfare state and money was measured in gold and silver. Everyone worked and everyone saved. And the people became wealthier and the nation prospered.

The secret to building up wealth is no secret at all. We all should know it but it is lost in the current world where vast numbers of people around the western world think that wealth is provided by the government and that those who make the most noise get the biggest share.

But governments do not create wealth. Only work in the private sector where people are free to choose is wealth created. It is created when one person sells her time or a product at a profit and then saves some of that profit. Those savings become capital for building bigger and better enterprises to generate wealth.

Governments then dissipate that wealth. If the government takes more and tries to control more then the economy falters and stops producing so much wealth. Keep doing this and we get poverty. We see this happening now around the world.

If the government takes less and leaves more wealth in the hands of those who create it then usually the creators keep on creating more and more wealth because they just enjoy this creative process. This is the invisible hand of economics. This is no secret and was written about over 200 years ago.

In those 200 years the world has generated great wealth and unfortunately destroyed large chunks of it. Look at the disaster of Zimbabwe. Once the bread basket of Africa it is now the basket case of Africa. We must decide whether to vote for governments who understand these basic principles or to vote for the populist do-gooders who buy votes with promises of universal care and money for all.

We need to educate the population on simple economic principles - not confound them with the economics from Wonderland or beyond the rainbow. Smaller and smaller governments leaves more and more people in the private sector to work at creating wealth. Smaller government means that more of this freshly created wealth is left with those people who are able to use it to create even more wealth.

This is not rocket science. It is as simple as this.

Fortunately we have a responsible government who understand this but they only got voted in by the narrowest of margins last time. Will the other parties come to understand the simplicity and necessity of creating wealth by the time they take over power or will they flip the switch to tax and spend and create the next boom/bust cycle on the road to serfdom.

I am hoping that we can all learn these lessons by watching the rest of the world. The following articles may help.


May 14, 2012, 13:43

Newsletters : 2012 Newsletters : 14 May 2012
Are Central Bankers Intellectually Bankrupt?

James Turk is prepared to tell it like he sees it.

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May 14, 2012, 12:30

Newsletters : 2012 Newsletters : 14 May 2012
What Jamie Dimon Doesnít Know Is Plain Scary

Warren Buffett referred to the derivatives market as weapons of mass financial destruction. He may not know as much about gold as his father but he certainly knows about our paper money investment world.

Is J P Morgan Chase & Co. in a safe and sound position?

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May 14, 2012, 12:10

Newsletters : 2012 Newsletters : 14 May 2012
Europe's delusional search for growth

And now for a quick look at the UK. How has their experiment with Quantitative Easing worked out so far?

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May 14, 2012, 11:10

Newsletters : 2012 Newsletters : 14 May 2012
Europe's nuclear brinkmanship with Greece is a lethal game

The world's experiment with paper money is getting fizzier by the moment. Since the game changed in 1971 and gave us a world reserve currency not backed by gold the pace of fizz has quickened. The booms and busts are getting bigger and faster and mostly we see instability not stability.

People have got used to living beyond their means and borrowing the difference. So have governments until it has become standard practice. This will not change until we are forced back to using gold and silver as a stable form of money.

This process will be very character forming.

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May 14, 2012, 10:52

Newsletters : 2012 Newsletters : 14 May 2012
Greyerz - Investors Need To Be Positioned For More Chaos

"It was very clear fifteen years ago that the credit bubbles and the derivative bubbles were going to create a situation with either a hyperinflationary depression or a deflationary implosion and collapse. That was so clear and predictable."

Those of us who have read von Mises' Human Action will understand just what is going on in the world today. Unfortunately this is not taught in most Universities so the bulk of economists do not understand what is happening.

The REAL Investment advisers around the world do know and profit from this knowledge. You can too.

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May 11, 2012, 10:43

Newsletters : 2012 Newsletters : 14 May 2012
Eric Sprott on CNBC

The truth is leaking out into the main-stream news.

Very interesting.

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May 10, 2012, 17:48

Newsletters : 2012 Newsletters : 14 May 2012
MEP Nigel Farage Tells it Like it is

This is reality once more in Nigel's inimitable style. The European Union is doomed.

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May 10, 2012, 12:12

Newsletters : 2012 Newsletters : 14 May 2012
Knowing the Game

For those of you who are interested in the great game of fiat currency versus REAL Money this article is something of a watershed. This is just one more illustration of the "Moral Hazard" that infects our paper money system.

It is interesting that the Chinese understand all this and they are taking steps to protect themselves. This indicates that the theft that is underway will eventually be stopped.

Then the change will be dramatic.

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May 10, 2012, 11:00

Newsletters : 2012 Newsletters : 14 May 2012
Currency Debasement and Social Collapse

Ludwig von Mises shows how currency debasement brought the Roman Empire to its knees.

We are witnessing the beginning of that process 2000 years later!

I think Einstein was right - stupidity is more common than hydrogen.

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May 8, 2012, 15:02

Newsletters : 2012 Newsletters : 14 May 2012
Is RBC the New Business Cycle?

Some people are proposing that something called the real business cycle which involves many factors including global warming is the cause of our boom/bust society.

All just more gobble-de-gook. The Austrian Business Cycle - as simple as ABC - explains the boom/bust syndrome precisely. We humans just cannot be trusted with a money printing press. We always end up printing more than we should. Partly because we have no means of knowing how much we should print and partly because of political pressure to provide more benefits for the population.

The only solution is to go back to using gold and silver as money and then the free market will dictate prices.

This is the "Invisible Hand" of REAL Economics.

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May 8, 2012, 09:51

Newsletters : 2012 Newsletters : 14 May 2012
Mish Shedlock on the Rise of Money Metals, the Fall of the West ... and Why Credit Matters

The reason I call "Austrian Economics" REAL Economics is because it reflects reality and thus enables those who understand it to predict how the future will play out. It cannot predict a time-frame - just the most likely events.

Remember the Universe is a collection of random events and our world is part of this randomness. Economics events of people buying and selling or choosing not to buy or sell are each individually random in nature. They are also different in many other respects such as size or borrowings and this diversity and uncertainty explains why it is not possible to use Calculus as the mathematical tool to model an economy.

Thus Econometrics fails in its predictions and leaves economists floundering and in a panic when a large random event strikes. More such events are indeed coming in the near future (time unknowable) and many still have no idea of the extent of the problems.

This interview will perhaps help us to understand more.

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May 7, 2012, 12:19

Newsletters : 2012 Newsletters : 14 May 2012
In Southern Italy, Fake Euros That Even the Police Admire

What is the difference between bankers printing up extra money and counterfeiters doing the same thing?

Different people get the free money.

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May 3, 2012, 17:00

Newsletters : 2012 Newsletters : 14 May 2012
Embry - This is What Iím Doing with My Own Money Right Now

I remember when the Zimbabwe Stock Market was the best performing stock exchange in the world. Massive gains. The only place to invest in Zimbabwe.

I also remember mentioning the President's Plunge Control team more than once.

Major investment advisers are well aware of this of course and John Embry sees the hot finger of the President's Plunge Control team holding up the DOW during these times of stress.

Here are his comments:

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May 2, 2012, 10:16

Newsletters : 2012 Newsletters : 14 May 2012
Citibank Analyst Extraordinarily Bullish Gold, Oil & US Dollar

From a scientific perspective chartists seem to believe what is not proven to be true. Beliefs such as graphs showing "head and shoulders" give meaningful information about the future.

This is not likely to be true.

However, when I see a graph (as in this article) drawn on a log scale showing that the price of gold is moving upwards in a straight line over a ten year period (give or take a few perturbations) then that shows me that the price of gold is increasing exponentially in US dollars.

That is, the price of gold is increasing at a faster rate as time goes by. This is the classic sign of a mania.

This phenomenon is caused by bankers and politicians expanding the money supply. They are finding that they need to expand faster as time goes by and this is showing up in the price of gold and other REAL Assets.

The obvious reaction to observing this phenomenon is to change my dollars into gold - or silver because it is going up in the same way.

Truth is very much more useful than belief!

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May 1, 2012, 10:49

Newsletters : 2012 Newsletters : 14 May 2012
Quote for the Week

I believe that it is better to tell the truth than a lie. I believe it is better to be free than to be a slave. And I believe it is better to know than to be ignorant.

H.L. Mencken


"Gold is Money. Everything else is credit." - J.P. Morgan, Financier, 1912


Apr 29, 2012, 17:07

Can we fix it?