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| Last Updated: Aug 15th, 2008 - 11:26:43 |
Newsletters
:
2008 Newsletters
:
6 June 2008
Thought for the Day
Five years ago we were so concerned about Labour's economic policies that we determined to start a Foundation for Economic Growth to explain to anyone who was interested just what would happen and why it would happen and what we should all be doing about it.
Last year we spent more time showing how the "boom - bust" cycle works and why it occurs. We could see quite clearly that the bust was upon us - 17 financial lending companies going belly up was a good clue.
This morning's paper tells us that it is a good thing that the currency is going down - mainly for our exporters. Those of you who are about to sell up and go to Australia just lost $5000 last night on your $500,000 home thanks to a 1% drop in our currency rate with Australia. Our houses will drop in price in New Zealand dollars about 10% to 20% next year (one apartment was sold in Auckland last week for less than half what the owner had paid two years previously) and the exchange rate for your money when you go to OZ will drop maybe by the same amount. Labours policies are making us very poor.
This morning's DomPost quotes the BNZ economists, "the country faces a major, prolonged economic downturn."
Now that we are six months into the recession the economists of New Zealand are "predicting" hard times ahead. Well done!
Jun 6, 2008, 10:16
Newsletters
:
2008 Newsletters
:
6 June 2008
Contracts As Good As Gold
Some journalists are starting to think!
"Modern" economists regard gold as "the barbarous relic". However a true gold standard is the only thing that saves us from this pernicious inflation - the continual printing of paper money that governments now regard as the solution to the problem of hard times instead of understanding that it is the cause.
The hard times have now arrived according to Dr. Bollard. I can hear the printing press cranking up now!
Jun 6, 2008, 09:59
Newsletters
:
2008 Newsletters
:
6 June 2008
Dollar Crisis Looms as China Ponders Reforms, Mundell Says
Talk of a world currency by the IMF? With all the world politicians inflating their currencies by 10% to 15% (and some by much more) how would this world currency work?
If the IMF, the UN and Central bankers have their way - BADLY. Imagine the problems with one world wide paper money system controlled by those with a vested interest in printing more and more of it.
Perhaps the Chinese will discover that we already have a world wide money - GOLD.
I suspect that unless the ordinary person in the street comes to distrust paper dollars and insists on payments in gold or silver that we are doomed to a continuance of inflation, stagflation and booms and busts.
We need to develop a survival strategy!
Jun 5, 2008, 11:27
Newsletters
:
2008 Newsletters
:
6 June 2008
Beware the Moral Hazard Trivializers
The current financial crisis is the result of longstanding political interventionism. In what follows we argue that our monetary system creates incentives for irresponsible behavior (moral hazard) and is therefore an important cause of recurrent crises. Then we discuss two recent articles purporting to downplay the significance of this fact.
[ Visit Website ]
Jun 4, 2008, 11:33
Newsletters
:
2008 Newsletters
:
6 June 2008
Bubble Mania?
Dr.Greenspan, the last USA Federal Reserve Bank chairman, famously said that it was not possible to tell whether one was in a bubble or not and he would only know after the bubble had burst. He watched while excess paper money went into "tech" stocks and after the NASDAQ crash in 2000 applied the remedy for a bubble crash of supplying cheap money. The FED provided the banking system with cash at 1% for three years and set the scene for another bubble which happened in the housing market and lured banks into lending this cheap FED paper money to people with no income, no job and no assets (ninja loans) providing 100% finance for overpriced houses. They thought they could successfully "securitise" this mortgage money and with the help of the ratings agencies and their fancy "Maths" boys they sliced and diced these mortgages into various parts and on sold these as AAA rated investments to other banks and institutions around the world. A behaviour carefully described by REAL economics of the Austrian variety.
This generated the housing bubble which is now bursting.
The Credit Crunch is the process of the buyers of these AAA rated securities demanding their money back or else collapsing under the weight of debt when they had to show these securities at their market value (as near as they could guess since no-one would buy them).
We are now going through this process as the paper money disappears back from whence it came. Banks require borrowers to repay their mortgages when they fail to make the interest payments and we see in Auckland recently that an apartment was sold at mortgagee sale for $200,000 when it was bought for $435,000 a couple of years earlier.
The FED solution, adopted by other Central Banks around the world, is to create even more paper money and lend it out to the needy banks to stop them going bust. Too late for Bear Stearns but they are hopeful of stopping the rot. And the security for this paper money? The same dodgy pile of securitised mortgages that is causing the banks such problems at the moment. Isn't our Reserve Bank doing this as well?
All this extra money washing into the world must go somewhere and it is evident in the recent rash of price rises.
But of course when governments print more and more paper money its value declines - hence the rising prices. As people discover this they look for assets to buy to preserve the purchasing power of their money. The only things left in the world that are currently cheaper than the free market would suggest are gold and silver - the very things that compete with government paper money for retaining value. There is considerable evidence that governments are working to keep the price of gold and silver down because if they were allowed to rise without restraint they would indicate more clearly how gold and silver keep their value while paper money loses its value.
But the word is getting out. Western governments may be able to contain the genie in the bottle but what about one billion Indians who insist on giving lots of gold to newly married couples. What about the Chinese who used silver for their money since a disastrous experience with paper money in 900AD - they referred to paper money as "fly away money", a very good description. The Americans talked them out of silver cash in the 1930s.
There are many movements around the world to introduce silver coins into usage. If the idea gets popular things could get interesting.
REAL economics would predict that all this new paper money has to go somewhere. Governments are setting up sovereign funds with their tax loot and buying assets around the world. China is buying up resource companies where it can. Dr Cullen has set up the Cullen Fund to buy shares overseas but that may not become a bubble at any time soon - Dr Cullen has just lost $860,000,000 of our money from this fund, not something he talks about much.
The race for security by individuals will put pressure on gold and silver as the last assets left at a reasonable price. In the 1930s the USA government made holding gold illegal and confiscated everybody's gold at $25 per ounce then immediately repriced it at $35 per ounce. Nice to be a government. But now it is the whole world involved.
I remember that old Chinese curse - "May you live in interesting times!" Yes, indeed. Especially if we move into the mania phase of a gold and silver boom. Then watch for the bust!
Jun 4, 2008, 10:21
Newsletters
:
2008 Newsletters
:
6 June 2008
False Theory, Green Politics, Bad Outcomes
Green politics has morphed into Green Religion. "Believe and you will be saved."
Unfortunately the Greenies will have to destroy our economy in the process.
What an absolute crock this global warming is. It is simply a grab at political power by frightening the population with impending doom and then promising to save them.
Dr. Ball is one of the leading climatologists in the world and his message is very clear. Thanks to Muriel Newman you can read his article at this web site.
Virides delendi sunt.
[ Visit Website ]
Jun 3, 2008, 11:35
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