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| Last Updated: Aug 15th, 2008 - 11:26:43 |
Newsletters
:
2007 Newsletters
:
6 July 2007
Thought for the Day
Aristotle correctly observed, in the 4th century BC, that good money must have five characteristics. It must be durable (which is why we don’t use, say, wheat, as money), divisible (which is why artwork isn’t practical), convenient (which is why lead isn’t very good), consistent (which rules out real estate), and must have value in itself (which is why paper doesn’t work). Gold, of the 92 naturally occurring elements, is particularly well suited for use as money. There’s no magic involved, no mysticism, no need for all kinds of laws; it’s really just common sense.
Jul 5, 2007, 10:48
Newsletters
:
2007 Newsletters
:
6 July 2007
What You Should Know About Inflation
Our government has called a parliamentary select committee to investigate the causes of inflation.
The terms of reference are wide ranging and include the role of government spending and taxation.
The web site we are pointing to is a book published in 1965 which provides a clear and precise discussion on all aspects of inflation - its causes and its cure.
The cause is easily explained but the cure is more difficult to understand and not easy to implement.
The challenge is for our politicinas to grasp the nettle.
[ Visit Website ]
Jul 1, 2007, 13:49
Newsletters
:
2007 Newsletters
:
6 July 2007
Does It All Add Up?
Austrian Economic theory predicts that countries running a fiat currency - that is one not backed by gold - will experience a continual succession of booms and busts. This is caused by entrepreneurs inventing new and fancier ways of producing profits that would not be otherwise possible.
We have here a classic case of "money men" producing new assets to sell off for a profit. In this case we have subprime mortgages which are mortgages provided by banks to borrowers who do not have to show their income or have a deposit on the house. Colloquially known as "Liar" mortgages. The pressure had been with banks having lots of cheap money from the Federal Reserve which they felt compelled to lend out on more and more risky property. Now that property prices are falling in America some of these mortgages may have much lower values than when first put together.
So the banks collected these "assets" and combined them in various ways to produce collateralised debt obligations (CDOs) which they then sold on to hedge funds and other asset buyers such as insurance companies and pension funds.
Unfortunately these "Assets" seem to be backed by the ability of individuals with little money being able and willing to keep paying the 100% mortgage when the value of the house is rapidly declining.
Already around 50 mortgage companies in the States have gone belly up and the rot continues. This report from the Financial Times explains the latest problem.
Eventually the boom turns to bust and this hurts a lot of ordinary people. In these circumstances our country is not going to just suffer the continual decline that low productivity growth produces but we will suffer a major financial dislocation.
Our government is aware that something is wrong and are conducting an enquiry into the causes of inflation. It will be interesting to see what transpires.
Jun 25, 2007, 10:31
Newsletters
:
2007 Newsletters
:
6 July 2007
Credit Crunch Will "Shred Investment Portfolios To Ribbons".
Since the big boom in the dot.coms in 2000 I have watched the market shift from that subsequent dot.com bust to a new boom in property in the USA. We have our own property boom as does Britain, Australia and many others but the USA boom is most important.
The reason is that the US dollar is the reserve currency of the world and if that inflates too fast it sets in motion serious reactions from other governments and their central banks.
But the Fed has continued with easy money so as not to have a bust, and the boom accelerates and looks like busting soon. It is inevitable that booms end in busts. The only question is - When?
Maybe the US bust is starting now.
Jun 4, 2007, 14:17
Newsletters
:
2007 Newsletters
:
6 July 2007
From Monty Python???
Joke for the week but you need to read the news articles above first.
Jun 3, 2007, 11:24
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