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


Newsletters : 2012 Newsletters : 19 March 2012
Thought for the Day

In a natural economy each person acts to improve their lot in life. We do this not by stealing from others but by working and providing a service or goods to others for which they willing pay. This is the natural order of progress for man from the hunter-gatherer stage to the enlightened wealth creation stage.

The first impediment mankind meets is greed of leaders who use their power over the tribes to gain everything for themselves and leave the rest of the tribe to work for a living and to serve the leader for free. Slavery in other words.

So mankind develops through kings and emperors to the present stage of government. The democratic welfare state in the West and various forms of dictatorship elsewhere.

The natural economy which, if left alone, would provide plenty for all does not now really exist. It is a dream of "if only".

Even in our enlightenment after millions of our forebears have died to provide our freedom we find ourselves caught once more on the downward path to serfdom. We don't notice it because it is deliberately hidden from view and it is only now becoming visible due to the freedom of information available over the net.

The cause of our current downward path is Central Banking. We even have a term for the problem. It has happened before and continues to plague human society. It is called the "Moral Hazard of Central Banking".

As Mayer Amsched Rothschild said, "Permit me to issue and control the money of the nation and I care not who makes its laws."

The full story is explained in REAL Economics:

http://www.economicgrowth.org.nz/artman/publish/real-economics.shtml

Especially in the chapters about REAL Money and REAL Banking.

With Central Banking the Bankers who own the major banks can get fabulously wealthy with no downside risk and with the easy money available the politicians are able to buy votes and pay for them with fresh paper money. All this action is carefully disguised behind the cloak of modern economic theory which purports to show that an economy run with fiat currency can be controlled for the benefit of all.

As we are discovering the benefits are not evenly distributed and as we watch the disaster play out in Greece we can see the general population sink back into poverty and become slaves to the unelected bureaucrats.

The other point to note is that an economy run on fiat currency cannot be controlled. Human nature being what it is we are unable to stop printing up free money. The proof of this statement is being demonstrated around the world right now. It is also evident from all of history where every paper money system in the past has collapsed.

Our only solution is to move back to using gold and silver as money. If we can bring ourselves to do this now we may be able to save ourselves from total disaster. In any case at some stage as the paper money causes rampant inflation people are going to learn the hard way and we will naturally revert to using REAL Money that retains its value.

Today in Vietnam people will only sell REAL Estate for REAL Money. Thirteen states in America are changing laws to allow the move back to REAL Money. Mexico has proposals before parliament to use silver as money.

The good news is getting out. Time for our Reserve Bank to buy back into gold and put our economy on a more sound footing. The change is inevitable. Do it now and under control or wait until disaster strikes and we have to find our way out of serfdom once more.


Mar 13, 2012, 09:39

Newsletters : 2012 Newsletters : 19 March 2012
Gold Standard… In Extremis?

Here is a nice explanation by the editor of the Gold Standard showing how gold gets to be used in commerce again. It would not be difficult and the Americans are inadvertently driving the action.

Visit Website ]
Mar 16, 2012, 16:44

Newsletters : 2012 Newsletters : 19 March 2012
Warren Buffett And Coca-Cola Investors Have Been Humiliated By Gold

Investment advisers who understand REAL Economics will "get it right".

The facts speak for themselves.

Visit Website ]
Mar 16, 2012, 12:27

Newsletters : 2012 Newsletters : 19 March 2012
Why I Am Leaving Goldman Sachs

Greg Smith is resigning today as a Goldman Sachs executive director and head of the firm’s United States equity derivatives business in Europe, the Middle East and Africa.

Read his letter to the New York Times, and understand something more of the moral hazard of Central Banking and fiat currency manipulations.

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Mar 15, 2012, 13:41

Newsletters : 2012 Newsletters : 19 March 2012
Global liquidity peak spells trouble for late 2012

The big question which I cannot answer is, "How ready are we in New Zealand for the coming world wide Great Recession?"

Visit Website ]
Mar 14, 2012, 12:07

Newsletters : 2012 Newsletters : 19 March 2012
Forget 'economic spring' - Greek outlook is stormy

While last week's debt swap was obviously important, there is still a very real danger of Greece needing yet another bail-out quite soon and eventually leaving the euro.

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Mar 14, 2012, 11:53

Newsletters : 2012 Newsletters : 19 March 2012
Yes, Germany & Switzerland Want Their Gold Back

Some politicians are able to see the truth and are then unafraid to speak the truth. Nigel Farage is one such.

The truth is that many economists and politicians do not understand money. They really do not understand that gold is money. Eventually they will discover the truth and it may be a very hard lesson indeed.

Check out what Nigel has to say and if you wish to learn about REAL Money then have a look here.

http://www.economicgrowth.org.nz/artman/publish/real-money.shtml

Visit Website ]
Mar 14, 2012, 10:50

Newsletters : 2012 Newsletters : 19 March 2012
Rubin Says He Has Too Many Dollars

The wealthy bankers use the system to become even more fabulously wealthy and still don't know how to control the beast they have unleashed.

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Mar 13, 2012, 10:18

Newsletters : 2012 Newsletters : 19 March 2012
Zimbabwe - last to leave, Never Mind Turning Off the Lights - They're Already Off

Zimbabwe is never mentioned in the press or TV these days. Mugabe has presided over a spectacular failure as this article explains.

REAL Wealth cannot be printed.

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Mar 12, 2012, 13:59

Newsletters : 2012 Newsletters : 19 March 2012
The Higher-Education Bubble Has Popped

And now it is the time for the Higher Education bubble to burst. Is there no end to the mischief caused by Central banks and their paper money?

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Mar 11, 2012, 13:44

Newsletters : 2012 Newsletters : 19 March 2012
Capitalism Is An Alternative For What We Have Now

I think that people in general and economists in particular have lost sight of the truth. We have pretty much lost the understanding of what capitalism is and why it is the path to WEALTH Creation.

Interesting that main-steam TV should be discussing it.

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Mar 11, 2012, 12:40

Newsletters : 2012 Newsletters : 19 March 2012
35 Shocking Statistics

The problem with our main stream media is that it is controlled by the very people who want us to hear only good news. They know that once the people discover that their paper money system is just a giant ponzi scheme it will cease to exist.

The internet is however, able to point out the truth.

Visit Website ]
Mar 11, 2012, 12:21

Newsletters : 2012 Newsletters : 19 March 2012
Why David Stockman isn't buying it

He was an architect of one of the biggest tax cuts in U.S. history. He spent much of his career after politics using borrowed money to take over companies. He targeted the riskiest ones that most investors shunned - car-parts makers, textile mills.

That is one image of David Stockman, the former White House budget director who, after resigning in protest over deficit spending, made a fortune in corporate buyouts.

But spend time with him and you discover this former wunderkind of the Reagan revolution is many other things now - an advocate for higher taxes, a critic of the work that made him rich and a scared investor who doesn't own a single stock for fear of another financial crisis.

This guy should know what's what!

Visit Website ]
Mar 8, 2012, 17:45

Newsletters : 2012 Newsletters : 19 March 2012
Unintended Consequences

Here is an interesting article that flashed across my screen today courtesy of The Daily Reckoning:

*** *** ***

Unintended Consequences
By Eric Sprott and David Baker

2012 is proving to be the ‘Year of the Central Bank’. It is an exciting celebration of all the wonderful maneuvers central banks can employ to keep the system from falling apart. Western central banks have gone into complete overdrive since last November, convening, colluding and printing their way out of the mess that is the Eurozone. The scale and frequency of their maneuvering seems to increase with every passing week, and speaks to the desperate fragility that continues to define much of the financial system today.

The first major maneuver took place on November 30, 2011, when the world’s G6 central banks (the Federal Reserve, the Bank of England, the Bank of Japan, the European Central Bank [ECB], the Swiss National Bank, and the Bank of Canada) announced “coordinated actions to enhance their capacity to provide liquidity support to the global financial system”. Long story short, in an effort to avert a total collapse in the European banking system, the US Fed agreed to offer unlimited US dollar swap agreements with the other central banks. These US dollar swaps allow the other central banks, most notably the ECB, to borrow US dollars from the Federal Reserve and lend them to their respective national banks to meet withdrawals and make debt payments. The best part about these swaps is that they are limitless in scope — meaning that until February 1, 2013, the Federal Reserve is, and will be, prepared to lend as many US dollars as it takes to keep the financial system from imploding. It sounds absolutely great, and the Europeans should be nothing but thankful, except for the tiny little fact that to supply these unlimited US dollars, the Federal Reserve will have to print them out of thin air.

Don’t worry, it gets better. Since unlimited US swap lines weren’t enough to solve the problem, roughly three weeks later, on December 21, 2011, the European Central Bank launched the first tranche of its lauded Long Term Refinancing Operation (LTRO). This is the program where the ECB flooded 523 separate European banks with 489 billion euros worth of 3-year loans to keep them going through Christmas. A second tranche of LTRO loans is planned to launch at the end of February, with expectations for size ranging from 300 billion to more than 1 trillion euros of uptake. The good news is that Italian, Portuguese and Spanish bond yields have dropped since the first LTRO went through, which suggests that at least some of the initial LTRO funds have been reinvested back into sovereign debt auctions. The bad news is that the Eurozone banks may now be hooked on what is clearly a back-door quantitative easing (QE) program, and as the warning goes for addictive drugs — once you start, it can be very hard to stop.

Britain is definitely hooked. On February 9, 2012, the Bank of England announced another QE extension for 50 billion pounds, raising their total QE print to £325 billion since March 2009. Japan’s hooked as well. On February 14, 2012, the Bank of Japan announced a ¥10 trillion ($129 billion) expansion to its own QE program, raising its total QE program to ¥65 trillion ($825 billion). Not to be outdone, in the most recent Fed news conference, US Fed Chairman Bernanke signaled that the Fed will keep interest rates near zero until late 2014, which is 18 months later than he had promised in Fed meetings last year. If Bernanke keeps his word, by the end of 2014 the US government will have enjoyed near zero interest rates for six years in a row. Granted, extended zero percent interest rates is not nearly as satisfying as a proper QE program, but who needs traditional QE when the Fed already buys 91 percent of all 20-30 year maturity US Treasury bonds? Perhaps they’re saving traditional QE for the upcoming election.

All of this pervasive intervention most likely explains more than 90 percent of the market’s positive performance this past January. Had the G6 NOT convened on swaps, had the ECB NOT launched the LTRO programs, and had Bernanke NOT expressed a continuation of zero interest rates, one wonders where the equity indices would trade today. One also wonders if the European banking system would have made it through December. Thank goodness for “coordinated action”. It does work in the short-term.

But what about the long-term? What are the unintended consequences of repeatedly juicing the system? What are the repercussions of all this money printing? We can think of a few.

First and foremost, without continued central bank support, interbank liquidity may cease to function entirely in the coming year. Consider the implications of the ECB’s LTRO program: when you create a loan program to save the EU banks and make its participation voluntary, every one of those 523 banks that participates is essentially admitting that they have a problem. How will they ever lend money to each other again? If you’re a bank that participated in the LTRO program because you were on the verge of bankruptcy, how can you possibly trust other banks that took advantage of the same program? The ECB’s LTRO program has the potential to be very dangerous, because if the EU banks start to rely on the loans too heavily, the ECB may find itself inadvertently attached to the broken EU banking system forever.

The second unintended consequence is the impact that interventions have had on the non-G6 countries’ perception of western solvency. If you’re a foreign lender to the United States, Britain, Europe or Japan today, how comfortable can you possibly be in lending them money? How do you lend to countries whose sole basis as a going concern rests in their ability to wrangle cash injections printed by their respective central banks? Going further, what happens when the rest of the world, the non-G6 world, starts to question the G6 Central Banks themselves? What entity exists to bailout the financial system if the market moves against the Fed or the ECB?

The fact remains that there are few rungs left in the financial confidence chain in 2012, and central banks may end up pushing their printing schemes too far. In 2008-2009, it was the banks that lost credibility and required massive bailouts by their respective sovereign states. In 2010-2011, it was the sovereigns, most notably those in Europe, that lost credibility and required massive bailouts by their respective central banks. But there is no lender of last resort for the central banks themselves. That the IMF is now trying to raise another $600 billion as a security buffer doesn’t go unnoticed, but do they honestly think that’s going to make any difference?

When reviewing today’s macro environment, we keep coming back to the same conclusion. The non-G6 world isn’t blind to the efforts of the Fed and the ECB. When the Fed openly targets a 2 percent inflation rate, foreign lenders know that means they will lose, at a minimum, at least 2 percent of purchasing power on their US loans in 2012. It therefore shouldn’t surprise anyone to see those lenders piling into alternative assets that have a better chance at protecting their wealth, long-term.

This is likely why China reduced its US Treasury exposure by $32 billion in the month of December (See Figure 1). This is also why China, which produced 360 tonnes of gold internally last year, also imported an additional 428 tonnes in 2011, up from 119 tonnes in 2010. This may also be why China’s copper imports hit a record high of 508,942 tonnes in December 2011, up 47.7 percent from the previous year, despite the fact that their GDP declined at year-end. Same goes for their crude oil imports, which hit a record high of 23.41 million metric tons this past January, up 7.4 percent year- over-year. The so-called experts have a habit of downplaying these numbers, but it seems pretty clear to us: China isn’t waiting around for next QE program. They are accelerating their move away from paper currencies and into hard assets.

China is not alone in this trend either. Russia has reportedly cut its US Treasury exposure by half since October 2010. Not surprisingly, Russia was also a big buyer of gold in 2011, adding approximately 95 tonnes to its gold reserves, with 33 tonnes added in the fourth quarter alone. It’s not hard to envision higher gold prices if the rest of the non-G6 countries follow-suit.

The problem with central bank intervention is that it never works out as planned. The unintended consequences end up cancelling out the short-term benefits. Back in 2008, when the Fed introduced zero percent interest rates, everyone thought it was a great policy. Four years later, however, and we’re finally beginning to appreciate the complete destruction it has wreaked on savers. Just look at the horror show that is the pension industry today: According to Credit Suisse, of the 341 companies in the S&P 500 index with defined benefit pension plans, 97 percent are underfunded today. According to a recent pension study by Seattle-based Milliman Inc., the combined deficit of the 100 largest defined-benefit plans in the US increased by $236.4 billion in 2011 alone. The main culprit for the increase? Depressed interest rates on government bonds.

Let’s also not forget the public sector pension shortfalls, which are outright frightening. In Europe, unfunded state pension obligations are estimated to total $39 trillion dollars, which is approximately five times higher than Europe’s combined gross debt. In the United States, unfunded pension obligations increased by $2.9 trillion in 2011. If the US actually acknowledged these costs in their deficit calculations, their official 2011 fiscal deficit would have risen from the reported $1.3 trillion to $4.2 trillion. Written the long way, that’s a deficit of $4,200,000,000,000,... in one year.

There is unfortunately no economic textbook to guide us through these strange times, but common sense suggests we should be extremely wary of the continued maneuvering by central banks. The more central banks print to save the system, the more the system will rely on their printing to stay solvent — and you cannot solve a debt problem with more debt, and you cannot print money without serious repercussions. The central banks are fueling a growing distrust among the creditor nations that is forcing them to take pre-emptive actions with their currency reserves. Individual investors should take note and follow-suit, because it will be a lot easier to enjoy the “Year of the Central Bank” if you own things that can actually benefit from all their printing, as opposed to things that can only be destroyed by it.


Eric Sprott and David Baker
for The Daily Reckoning



Mar 8, 2012, 10:59

Newsletters : 2012 Newsletters : 19 March 2012
It's Not Really about the Debt

For the thinking person.

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Mar 2, 2012, 16:58

Newsletters : 2012 Newsletters : 19 March 2012
Quote for the Week

The gold standard would keep you from printing money and destroying the middle class. Every country where you have runaway inflation, there's no middle class. Mexico, there's no middle class, you have a huge poor class, and a lot of wealthy people. Today we have a growing poor class, and we have more billionaires than ever before. So we're moving into third world status.

Ron Paul




Mar 1, 2012, 12:19

Can we fix it?