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| Last Updated: Nov 14th, 2008 - 10:12:29 |
Newsletters
:
2008 Newsletters
:
3 October 2008
Thought for the Day
When I was about 12 years old, I asked my parents, "Why do they call houses and sections Real Estate?" They told me because they were real things that we could see and touch and held their value. They also talked about farmers walking off the land during the depression. This seemed to me to be silly thing to do as they could eat the sheep and eat vegetables out of the garden. Ignorant lad! I had never heard of The Mortgage.
When some of my friends and I started up The Foundation for Economic Growth I was still quite ignorant of economics but it was quite clear to us all that Helen was emulating Muldoon and reverting to a big government controlling all facets of our life and this did not seem like a good thing.
I studied economic growth and all its aspects and read about GDP and supply/demand curves and understood the things that are necessary to have a growing economy. Increasing productivity, less regulation, lower taxes and so on and so forth. If we boiled it all down the basic requirement was for less government not more. 84% of Kiwis were right when they voted for the number of politicians to be reduced to 99. That would indeed be a very good thing!
And as I read more and more about economics I came to the realisation that the Austrian Economists understood what was going on and were the only group who could provide real explanations of what was happening and why and could say what would happen when ordinary economists were totally lost. Remember that the Reserve Bank in December 2007 predicted economic growth of over 1% for 2008 and the very next month in January 2008 we were in recession. So much for the clever mathematics and the computer models.
If they knew what they were doing how did they get it so wrong?
And so I discovered REAL Economics, to go with my REAL Estate.
Then I discovered how money works and started banging on about this for the past two years or more. One of my readers wrote and asked me to write about something else as he was getting sick of all this money talk. I obliged for a while but it became obvious to me that without a sound money system economies were doomed to a continual boom/bust scenario and that this was caused by governments printing too much cheap (free!) paper money in a bid to rev-up the economy and keep the population happy. Ordinary economists seemed to think that this was OK because they knew what was happening and they could control things. "Every time we have a bust then we will just print some more money and hand it out". Bernanke's helicopter theory. This was alright for a while but suddenly it doesn't seem to be working too well. It failed the Japanese for the last 15 years as well - but they didn't mention that. We can now see that the ordinary economists are wrong and that they do not understand what is happening.
Paper money backed only by the promises of politicians will not work for long. At some point, after a few of the boom/bust cycles that it generates, the people will suddenly lose confidence and they will start to search for REAL Money.
Central banks are holding the price of REAL Money down so we find gold and silver (although rising in price) is cheaper than it should be. How do I know? Because we are now getting a shortage of gold and silver coins. The people are trying to buy them and the minters are running out. If you don't believe me then ring up Kiwi Mint and ask to buy some bullion coins. These used to be available at 7% over spot price and they will sell you some now for 18% over spot price - BUT they cannot supply them for a few months. There is a silver shortage. In a free market how can we have a shortage? Normally if the price starts to rise then the miners and manufacturers make more. Only when the price is held down will a shortage appear. Ergo we have price control keeping the price down.
All very interesting.
Now I have REAL Money to go with REAL Estate and REAL Economics. All this has been revealed over the last few years in the newsletters.
It is fascinating to know why economists cannot make correct predictions.
Oct 1, 2008, 10:44
Newsletters
:
2008 Newsletters
:
3 October 2008
Investors Start Fresh Gold Rush
Maybe the people are starting to wake up to the implications of paper money distributed to friends and banks by politicians!
This morning's DomPost had an article on the front page discussing the Reserve Bank's "big profit". Towards the end of the article James Weir said, "The other main way the Reserve Bank makes money is by printing and issuing money to other banks and investing the proceeds in government securities". Well, almost right!
If I had the licence to print money, I would make BIG profits too!
Oct 2, 2008, 10:37
Newsletters
:
2008 Newsletters
:
3 October 2008
Moral Markets
Capitalism needs free markets and certainty of property rights and that is about all. Then exchanges are made between willing buyers and sellers using REAL Money as the medium of exchange. This is important for then people know that the money they are using has value in its own right and will retain that value into the future.
The capitalism we have now is very much distorted by government. They do this in a number of ways:
Taxes. This places a burden on those who work for a living and reduces the incentive to produce more goods and services.
Paper money. Governments proclaim that their paper money is "legal tender to the value of $20" . . . or whatever but we know that as time goes by the value of the $20 paper gets less and less as the government pushes more of it into the economy. This distorts the market - again to the detriment of the worker and the saver.
Degrading property rights. When the government regulates to reduce your ability to dispose of your property as you see fit it is a cost against you. When they declare that your building is "a heritage" and insist on you spending money in ways that they decree they are usurping your property rights. The result is less freedom and loss to individuals.
Governments in a democratic society buy votes at each election and so sections of the population become beholden to those particular politicians who gain power. This changes behaviour away from a normal market place and distorts capitalism. We get pork barrel politics and crony capitalism.
Capitalism assumes willing buyers and sellers freely exchanging goods and services for money. When government enter and force people to act differently they produce a distorted form of capitalism - a much less beneficial one.
Roger Kerr explains more about the morality involved in the market place. We don't really need the government at all, do we??
Oct 1, 2008, 18:29
Newsletters
:
2008 Newsletters
:
3 October 2008
The Great Bank Robbery of 2008
And speaking of REAL Economists, have a read of what Robert Murphy has to say about Hank Paulson and gang.
[ Visit Website ]
Oct 1, 2008, 13:02
Newsletters
:
2008 Newsletters
:
3 October 2008
The Rescue Package Will Delay Recovery
So the Paulson rescue plan is failing and the banks and their buddies are having major problems.
The Fed created the problem by interfering in the market in the first place, and the problem would solve itself if they could just restrain themselves from interfering again.
[ Visit Website ]
Sep 30, 2008, 17:40
Newsletters
:
2008 Newsletters
:
3 October 2008
Private Banks Rethinking Gold, Could Be Next Big Buyers
The future for paper money backed by the promises of politicians is a puff of smoke and ashes. Those bankers who professed belief in the reliability of our modern fiat system of computer based money and the Keynesian claim that gold was "that barbarous relic" may be changing their minds.
This next year or two should be very interesting!
Sep 30, 2008, 10:50
Newsletters
:
2008 Newsletters
:
3 October 2008
Rescuing AIG, Saved Goldman Sachs $20 Billion
The "paper money men" in full flight. What a disturbing story and after reading this how can we ever trust them again?
Sep 29, 2008, 17:05
Newsletters
:
2008 Newsletters
:
3 October 2008
How to Avoid Another Depression
Is the USA about to enter another "Great Depression"? Will the rest of the world follow?
[ Visit Website ]
Sep 11, 2008, 13:27
Newsletters
:
2008 Newsletters
:
3 October 2008
U.S. Poised to Grab More Financial Reins
Further and further into the real world of private enterprise go the forces of The State.
The distortions are accumulating faster and faster. When will it end?
Sep 8, 2008, 13:36
Newsletters
:
2008 Newsletters
:
3 October 2008
Joke of the Week
After the recent teetering-on-the-edge-of-total-economic-and-financial-meltdown couple of weeks it seems economic systems and their workings have pushed their way into the need-to-know-category.
Well thanks to a friend from rural Ireland we can now simplify this all down to what makes sense and explain 21 economic models with cows. It is remarkable how much sense it all makes from this real world perspective ;-)
SOCIALISM
You have 2 cows.
You give one to your neighbour.
COMMUNISM
You have 2 cows.
The State takes both and gives you some milk.
FASCISM
You have 2 cows.
The State takes both and sells you some milk.
NAZISM
You have 2 cows.
The State takes both and shoots you.
BUREAUCRATISM
You have 2 cows.
The State takes both, shoots one, milks the other, and then throws the milk away...
TRADITIONAL CAPITALISM
You have two cows.
You sell one and buy a bull.
Your herd multiplies, and the economy grows.
You sell them and retire on the income.
SURREALISM
You have two giraffes.
The government requires you to take harmonica lessons.
AN AMERICAN CORPORATION
You have two cows.
You sell one, and force the other to produce the milk of four cows.
Later, you hire a consultant to analyse why the cow has dropped dead.
ENRON VENTURE CAPITALISM
You have two cows.
You sell three of them to your publicly listed company, using letters of credit opened by your brother-in-law at the bank, then execute a debt/equity swap with an associated general offer so that you get all four cows back, with a tax exemption for five cows. The milk rights of the six cows are transferred via an intermediary to a Cayman Island Company secretly owned by the majority shareholder who sells the rights to all seven cows back to your listed company. The annual report says the company owns eight cows, with an option on one more. You sell one cow to buy a new president of the United States, leaving you with nine cows. No balance sheet provided with the release. The public then buys your bull.
A FRENCH CORPORATION
You have two cows.
You go on strike, organise a riot, and block the roads, because you want three cows.
A JAPANESE CORPORATION
You have two cows.
You redesign them so they are one-tenth the size of an ordinary cow and produce twenty times the milk. You then create a clever cow cartoon image called 'Cowkimon' and market it worldwide.
A GERMAN CORPORATION
You have two cows.
You re-engineer them so they live for 100 years, eat once a month, and milk themselves.
AN ITALIAN CORPORATION
You have two cows, but you don't know where they are.
You decide to have lunch.
A RUSSIAN CORPORATION
You have two cows.
You count them and learn you have five cows.
You count them again and learn you have 42 cows.
You count them again and learn you have 2 cows.
You stop counting cows and open another bottle of vodka.
A SWISS CORPORATION
You have 5000 cows. None of them belong to you.
You charge the owners for storing them.
A CHINESE CORPORATION
You have two cows.
You have 300 people milking them.
You claim that you have full employment, and high bovine productivity.
You arrest the newsman who reported the real situation.
AN INDIAN CORPORATION
You have two cows.
You worship them.
A BRITISH CORPORATION
You have two cows.
Both are mad.
AN IRAQI CORPORATION
Everyone thinks you have lots of cows.
You tell them that you have none.
No-one believes you, so they bomb the sh#t out of you and invade your country.
You still have no cows, but at least now you are part of a Democracy...
AN AUSTRALIAN CORPORATION
You have two cows.
Business seems pretty good.
You close the office and go for a few beers to celebrate.
A NEW ZEALAND CORPORATION
You have two cows.
Carbon Tax makes them uneconomic. You shift to Oz.
It seems that ordinary beneficial capitalism is hard to find!
Aug 3, 2008, 09:34
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