Last Updated: Oct 22nd, 2010 - 15:35:08 Newsletters : 2009 Newsletters : 28 August 2009 Thought for the Day A recent inset of The Economist had this to say about - Agricultural Subsidies: "The OECD estimates that its member countries spent $265 billion on farm subsidies in 2008. This was slightly more than a fifth of their farmers' total earnings. Last year's increase in food prices ensured that such payments were at their lowest level since records began in the mid-1980s. But hand-outs still made up more than three-fifths of farmers' gross incomes in Norway and South Korea between 2006 and 2008. In contrast, they were less than 1% of farm incomes in New Zealand and under 10% in both Australia and America. But the size of America's farm sector meant that it spent $23.3 billion on subsidies last year. The European Union was by far the biggest subsidiser, forking out $150 billion." So New Zealand is set to lead the world again by loading up our farmers with a lot of extra "Greeny" costs because the world temperature might increase by two degrees Celcius in 100 years. Meanwhile our Northern hemisphere mates are excluding agriculture from Climate Change Taxes. We run unsubsidised farms and are proposing to impose new taxes on farmers while "they" run huge subsidies and refuse to countenance any taxes on farmers. Do the Greenies not know that we are dependent on our farmers for the wealth we enjoy in New Zealand? Have we all gone mad? Perhaps the farmers will have to just close right back to subsistence living for a season to re-educate us all! Aug 28, 2009, 10:20 Newsletters : 2009 Newsletters : 28 August 2009 Dress Rehearsal For The Last Contango Von Mises explained it and now Fekete describes it. We have been warned. [ Visit Website ] Aug 26, 2009, 10:13 Newsletters : 2009 Newsletters : 28 August 2009 The Troubling Side of Ben Bernanke It is getting harder and harder to argue against reality. Some investigative journalists are starting to ask the hard questions. In particular, "If Central Bankers and their supporting economists know so much how come they have got it so wrong?" REAL Economics is starting to be talked about in more places. The current computer models based on inappropriate mathematics have been shown to not work. Paul Krugman now says that macro-economics is junk. The world's finances are in deep trouble. This current bust may be the big one that forces reform on the world economy. If not, then the next one will be a real doozy! Aug 26, 2009, 09:47 Newsletters : 2009 Newsletters : 28 August 2009 What Soviet Medicine Teaches Us I well remember that Helen Clark solved New Zealand's hospital waiting list problem by refusing to put any more people on the waiting list when it reached the politically acceptable size. The perfect socialist solution. This article is by someone with first hand experience of socialist systems. Yuri N. Maltsev, senior fellow of the Mises Institute, worked as an economist on Mikhail Gorbachev's economic reform team before defecting to the United States. He is the editor of Requiem for Marx. He teaches economics at Carthage College. Hopefully we are moving towards more rational systems from the private sector. [ Visit Website ] Aug 25, 2009, 15:42 Newsletters : 2009 Newsletters : 28 August 2009 Don't Ease up Yet on MorganChase, CFTC A study of REAL Economics leads to an understanding of REAL Money and how paper money inevitably leads to Government run printing presses producing large amounts of currency which dilutes the value of existing currency. Do you remember that Germany hoped to destroy the British economy during the war by printing lots of paper pound notes and dropping them from the air. Gordon Brown is now completing this task. The big story is being played out in the gold and silver markets in the USA. Can the paper money printers win? I will give you a clue. They never have before in the history of the world. But they have certainly destroyed a few economies with their greed for "free" money. Aug 24, 2009, 10:18 Newsletters : 2009 Newsletters : 28 August 2009 China to Trim U.S. Treasury Holdings, Diversify Forex Reserves You will see that this article is from the Chinese press and written by a Chinese person. We must understand that any public pronouncements of this nature are certainly part of the Chinese propaganda machine. A bit like the words of wisdom from Central Bankers around the world! Russia failed in the Cold War. China may win in the money war - especially as they seem to understand the place of gold and silver in the scheme of things. Aug 21, 2009, 10:25 Newsletters : 2009 Newsletters : 28 August 2009 Millions, Billions, Trillions; Germany in the Era of Hyperinflation "On August 4, 1914, just three days after the Reich had declared war on Russia, parliament passed a series of currency acts that would have a fundamental impact on the country's money markets. The new legislation suspended the standard of backing cash with gold "until further notice," claiming that an "exceptional increase in unbacked paper notes" was an "economic necessity" in times of war. In other words, the Reich intended to pay for its war effort by printing more and more money." So says this German journalist. Hyperinflation is described here more clearly than I have read before. Obama is printing trillions of dollars right now. Are we destined for hyperinflation of the world reserve currency? What and when is the tipping point? Can economists who do not understand what is happening solve the problem? I have plenty of questions. [ Visit Website ] Aug 19, 2009, 11:33 Newsletters : 2009 Newsletters : 28 August 2009 There's no Quick Fix "There's no quick fix to the global economy's excess capacity. There is one overwhelming fact about the world economy that cannot be wished away. Excess capacity in industry is hovering at levels not seen since the Great Depression." So says Ambrose. It is interesting to read his analysis as he is a very intelligent reporter who hs a very good feel for this current "bust". However he has no training in Austrian Economics - REAL Economics - and so doesn't realise that the bust is inevitable after the boom and the bubble and that the bust is just the natural economy of people pursuing their own interests, which is to reduce their debts, that is causing the "surplus capacity". The more that governments fight this natural process the longer will be the recession (depression?). As Ambrose listens to the economists he is obviously becoming more confused with what they say. Isn't everybody? Aug 19, 2009, 10:29 Newsletters : 2009 Newsletters : 28 August 2009 The Money Supply I have, from time to time over the last few years, referred to the money supply increasing by 10% and this is what leads to inflation of the price of goods and services. In November 1999 when Labour came to power our M3 money supply amounted to $97,494,000,000. In November 2008 M3 was $214,655,000,000 which is an increase of $117,161,000,000 or 120%. In nine years our supply of money had more than doubled. If we do the compound interest calculation we find that this is almost 10% increase in the money supply every year for the 9 years. This explains why your house has doubled in price. Basically your house has the same value now as then but since the government has increased the money supply by 120% your dollar is only worth half as much as it was at the turn of the century. Since the dollar is only half as valuable it takes twice as many to buy a house. Which explains why people should buy houses when the government provides 'easy to borrow' money. We think we are getting richer but we are really just preserving our wealth. The mortgage just gives us leverage on the way up but can be a death trap on the way down. Let us hope our money supply doesn't start decreasing. PS. The money supply was down to $210 billion at the end of June 2009. Just food for thought! Aug 18, 2009, 14:57 Newsletters : 2009 Newsletters : 28 August 2009 Presidential Candidate Ron Paul, on the U.S. Economy Ron Paul, one of the Presidential candidates for the last American election explains it all. And notice that the film clip was taken in January 2008. His knowledge of Austrian Economics enabled him to predict the future. If you follow this discussion carefully you will see how returning to REAL Money (gold or a gold standard) leads to a free and wealthier society. This will happen sooner or later. As Ron Paul says, "Paper money always becomes worthless." They do mention that the Chinese had paper money but they obviously didn't know that the Chinese started using paper money around 900AD and it lasted for around 100 years. Then the Chinese reverted to silver as money and this lasted until the Americans persuaded them to go back to paper money in the 1930s. [ Visit Website ] Aug 17, 2009, 14:39 Newsletters : 2009 Newsletters : 28 August 2009 Democracy, the Worst Form of Government Ever Tried To help get us out of our mental rut - or at least my mental rut I would suggest reading this. It is something different, a little difficult to read, but definitely, "food for thought". When our paper money system collapses we will be very lucky to escape world wide turmoil. Maybe our government institutions will need a revamp at the same time. [ Visit Website ] Aug 17, 2009, 10:49 Newsletters : 2009 Newsletters : 28 August 2009 The Y2K+8 Deflation Hoax GATA board member Adrian Douglas, editor of the Market Force Analysis letter, argues in his latest essay that the current deflation scare is as phony as the scare that enveloped the world at the changing of the millenium. Douglas' reference to the astounding buildup of derivatives is especially important to investors in real things - the price of which derivatives were invented to suppress. Douglas writes: "The derivatives market serves as a phantom offer of future supply of commodities and a phantom bid for U.S. Treasury debt. The fact that since the credit crisis the derivatives market has dropped in dramatic fashion means that as it unwinds the opposite effect should be observed: namely, higher commodity prices and higher interest rates. This is already becoming an obvious trend." This essay provides a very good explanation of how the paper money system works: [ Visit Website ] Aug 16, 2009, 12:06 Newsletters : 2009 Newsletters : 28 August 2009 The Magic Formula Politicians today, especially in the U.S, still think they can spend and tax and devalue their way, not to prosperity exactly, but to a continuation of the status quo. The status quo in which they are somewhere near the top. Macro-economics has just been proven not to work.* So that will not produce the answer. They will come to REAL Economics sooner or later. The longer it takes the worse off we will all be, so let us hope that the Magic Fairy dusts our leaders with a sprinkling of reality. * *In the question of soundly based theories, science is always testing existing and proposed theories. If scientist's experiments agree with the theory - that is not proof - merely another indication that the theory could well be correct. If an experiment shows the theory to be incorrect, ie it cannot predict what will happen then the theory is definitely wrong. It is not a question of opinion any longer. There is no value in argument or discussion. A new theory is needed - OR perhaps a previously discarded theory could be resurrected! I suspect we are in for many years of argument and diminishing wealth. Aug 16, 2009, 11:19 Newsletters : 2009 Newsletters : 28 August 2009 The Black Swan Squawks Nassim Taleb is the author of The Black Swan and Nouriel Roubini is a professor of economics who talks a lot of sense on various TV shows. They are trying to explain why Bernanke is wrong but sort of right. They do not seem to understand the inherent problem of trying to run economies on paper money. REAL Economics explains why it is not possible. Why is everyone so intent of arguing details of an impossibility. Paper money systems have always gone bust and the current ones will be no different. Our big problem is that all the Central Bankers are working together to keep the balls in the air and as time goes by they are becoming more and more synchronised. Will all paper currencies perish simultaneously? [ Visit Website ] Aug 15, 2009, 13:06 Newsletters : 2009 Newsletters : 28 August 2009 Quote for the Week America became the world production powerhouse because the founding fathers knew about banks and their paper money schemes. We have just forgotten. This quote demonstrates their knowledge: “The Central Bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution. I am an enemy to all banks discounting bills or notes for anything but coin. If the American people allow private banks to control the issuance of their currency, first by inflation, then by deflation the banks and corporations that grow up around them will deprive the people of all their property, until their children will wake up homeless on the continent their Fathers conquered.” Thomas Jefferson. Aug 10, 2009, 14:29