|Last Updated: Mar 3rd, 2014 - 11:01:36
Thought for the Day
Welcome to 2009. It will be a very interesting year.
We have tried very hard for 5 years to explain how important economic growth is for a nation and how New Zealand's policies for the last 60 years have produced less wealth for us than other countries have been producing for their citizens and as a result we are getting to be a poor nation rather than one of the wealthiest. Labour paid us little attention.
Unfortunately the Labour led government produced a recession in 2005 which dropped us another two places down the OECD and created another recession from January 2008 which is still going - and it will get much worse as the rest of the world is now joining in.
Now that we have a change in government we can expect a change in attitude to wealth creation. The ACT party has developed 20 means of increasing our growth rate and if we can implement these we have a good chance of moving back up to be equal to our Aussie mates over the way.
Unfortunately the current big bust has created panic amongst governments around the world and as they all move to save their nation they create the very problems they are trying to solve. Borrowing and printing more paper money to lend to banks and industry is seen as the solution to the problems of borrowing and printing too much paper money in the past. All the main nations of the world have been expanding their money supply by 10% to 15% for a long time now. This has caused the current world wide crisis of confidence in money. Banks are, understandably, wary of other banks and are refusing to lend on the money that governments offer them. They are building up their reserves instead. Until all this uncertainty is solved we will find it difficult to concentrate on sensible growth plans.
So, in the meantime, the most sensible thing we can do is gain a better understanding of the forces that are causing all this financial devastation so that we can better preserve our wealth for our old age.
Our best wishes to John Key and his new team. The only solution for the current crisis is to let the markets find their own real level as fast as possible while helping as much as we can the people who are in trouble. Unfortunately the governments of the world believe what economists are telling them and they are insisting on prolonging the agony by printing TRILLIONS of extra dollars, pounds, francs etc to lend to the banks who caused the problems in the first place. Japan took this approach in 1990 and two decades later is still suffering from a clogged up economy.
Do not expect a quick solution!
Jan 29, 2009, 18:15
World Trade Collapsing - International Monetary Fund
World trade diminished by 45% on an annual basis for the last three months of last year.
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Jan 29, 2009, 17:37
Gold Gaining Investors as U.S. Prints Trillions
More and more journalists are starting to understand the place of gold in the world. They are seeing how people are reacting.
We have seen banks refuse to lend to other banks. How does that make people think about banks? Viewed with suspicion, I would say. As people turn to gold for safety the increasing demand raises the price. This makes owning gold more attractive, especially as interest earned on paper money instruments is tending towards zero.
Will gold fever strike the world? This could be the next boom - if its possible to have a boom in REAL Money. Maybe it will be silver. The pace seems to be hotting up.
Jan 29, 2009, 17:06
Merrill Lynch Says Rich Turning to Gold Bars For Safety
People are starting to figure it out - especially the ones with good information and advice!
Since time immemorial gold has been used as money. It has always performed this function and it still does though Bankers would like us to think otherwise.
If we look at the way that gold has related to different currencies this century we see that gold has risen against paper money consistently and markedly. For the 8 years from 2001 to 2009 gold has risen on average each year:
US Dollar gold is up 16.3%,
Swiss Francs 10.6%,
Aussie dollar 13.3%,
Chinese Yuan 13.5%,
Canadian Dollar 13.6%,
Japanese Yen 13.6%,
Indian Rupee 16.8%,
British Pound 17.1%.
So if we think of gold as the standard then paper money is losing value at around 13% per annum around the world. This makes sense when we consider that countries are printing more paper money each year and their money supply is increasing by a similar amount. They are doing this because it helps their exports (if they are the only one doing it!) and Keynesian economists tell us that a little bit of inflation is a good thing - oils the wheels of commerce, so to speak.
However, REAL Economists know that this causes a boom/bust cycle and as we go into the bust people are moving to REAL Money - the sort that retains its value!
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Jan 27, 2009, 13:17
Fred on the Economy
Some people just have a knack for telling the truth in such a beguiling way. This (nudge nudge) insider's view of the American economy will have you wondering about just who knows anything these days.
New Zealand is going to have trouble surviving the recessionary forces over the next few years. Listen carefully to our politicians and our economists and our bankers and guess how many of them understand the truth.
Can they really put Humpty Dumpty back together again?
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Jan 26, 2009, 12:13
Brown Brings Britain to Edge of Bankruptcy
For a few years now we have been talking about the problems of the future caused by excessive money supplied by our nice democratic governments.
That future has now arrived and we are at the beginning of the big bust. The numbers are frightening and most politicians seem to be struggling to cope.
Not Obama. He evinces complete faith and calm in his ability to find the right team to solve the problems of too much paper money. All he needs is sufficient money!
Can Gordon Brown find enough money to solve Britain's problems? Only time will tell. And if he does we will have learned to do magic. We can solve the problem of too much paper money by providing more paper money.
Our booms are getting bigger and bigger and coming around faster and faster. We are now on a sort of super-charged merry-go-round. Whheeeee!
Jan 23, 2009, 12:00
Can Fiscal Stimulus Revive the US Economy?
We see that politicians all around the world have this desire to "do something" so that they can save their economies. This attitude sounds very good except that do-gooders always seem to make things worse.
Anyway, politicians, bankers and their economic advisers seem now to be determined to "do-good" and rescue our flagging economy. Their solution is to provide more money. This (they think) should get people spending again and thus keep suppliers working. They concentrate on the spending of money and have forgotten entirely about how wealth is created in the first place. They forget that this money that governments spend is either taken from those who are still earning, borrowed so that future workers can pay the cost or printed and thus diluting the value of money already in existence. These options create incentives that reduce the desire of REAL workers to keep working and to seek government benefits like everyone else.
The problem we are suffering from is that governments have created too much money already - thus giving us the excitement of the boom - and we are now in the bust phase. this is the free market reacting to balance the natural forces relating to buying and selling real products at realistic prices - what the buyers can afford. This bust phase means that many non-viable business enterprises will go bust and people will be thrown out of work and we will have hardship for many. The political solution which sounds eminently reasonable is to provide money to keep these people in work - even if it is somewhat artificial work - just as John Maynard Keynes proposed 80 years ago.
Doesn't this make us rather unthinking automatons trapped on a treadmill. Creating free paper money to make a boom which then always goes bust which requires even more paper money to start the boom up again which will lead to an inevitable bust which we solve by supplying even more "free" government money.
To learn how this will end we should search the annuls of history. The answer comes back that we will either sink into a depression or succumb to hyper-inflation of money. Both will give us rioting in the streets and lots of misery.
It is time for us to understand REAL Economics and stop being dummies on a treadmill. This article will help.
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Jan 23, 2009, 11:20
The Fed's Blueprint For Market Intervention
Having embarked on a study of money and banking one is led rather naturally to Central Banks. How do they work? What do they do? Why do they do what they do? . . . And so on.
Central Banks are hard to study because they release information slowly and selectively. Central Bankers seem to not want to talk about their work. So, in the interest of discovering the truth in all its forms and wherever it should take us we find ourselves studying a 48 year old document written from the inside of the Federal Reserve Bank of the USA describing and proposing an interesting course of action. Those of you who think that Central Bankers are motivated entirely by altruism and concern for the poor and down-trodden may be somewhat disillusioned but this happens when we search for the truth.
Remember that the Reserve Bank of the USA is a privately owned company!
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Jan 23, 2009, 10:53
Monetary Union Puts Half of Europe in Depression
Paper money is great when the boom is on but when the bust starts things can really start to get dangerous. Will Europe survive the current turmoil? What will happen to the paper Euro money when monetary union starts to disintegrate?
Economic growth produces great benefits for the common man. We are all living lives very much "richer" than the Kings and Queens of the past. We may not have such big diamonds but we live longer and our technology provides huge advantages that our ancestors could only dream about. And there is no reason to expect this to stop - unless we fall apart chasing unworkable paper money systems.
Without a gold standard enforcing truth in money and economics we are adrift at the whim of the bankers and politicians. Every previous experiment in paper money has failed. Will our current computer and economist controlled system be any different?
Nothing is certain.
Jan 20, 2009, 10:57
Nationalization of British Banks Advances
Things have indeed come to a pretty pass. What is Central Banking all about? The Bank of England lending money for consumers' car loans? Surely not!
Our Reserve Bank lends money against mortgages as security. Will it ever stoop to lending on cars?
Jan 20, 2009, 10:38
Global Imbalances and the Triffin Dilemma
Some journalists are starting to do some thinking!
John Kemp is just missing one vital element - Number 79.
Jan 20, 2009, 10:29
Bank of England Seen Preparing to Print Money
Bank of England Says Interest Rate Cuts Won't Be Enough
The journalists of the world are starting to catch on - printing money is what modern banks do!
Our money supply is increasing again and almost reached 10% for the 2008 year. As we predicted in the past we still expect to see plenty of inflation after this current recession is drowned in freshly printed bank notes.
When will the next boom occur? - and what will be booming?
Jan 11, 2009, 13:56
Quote for the Month
No one can find a safe way out for himself if society is sweeping towards destruction. Therefore everyone, in his own interests, must thrust himself vigorously into the intellectual battle. None can stand aside with unconcern; the interests of everyone hang on the result.
Ludwig von Mises
Jan 1, 2009, 13:45