World Financial Losses Over $5 to $7 Trillion

February 10, 2008

Elaine Meinel Supkis

Dear readers, sometimes reality intrudes and dreams die as the harsh desert sun vaporizes the dawn's dew. Humans are very addicted to illusions, tricks and group-thinking that prevents anyone from noticing obvious errors, flaws or understanding underlying causes and effects. The trick to these tricks is to ignore important incoming data. For example, if 'free trade' fanatics want to keep up the free trade no matter what, they will boast that the US trade export numbers are rising while not mentioning that import numbers are rising much faster. Harsh reality is forcing the G7 nations to confront some reality but they are still fighting off facing the full truth. They are obviously scared, though. They even are talking about 'downside risks.' But if we hope they will understand things, this is a false hope. They make money when they refuse to face facts. So what if the volume of money is less than before. They want to keep this mess going for as long as possible.

Global Economy Faces `Persisting' Risks, Paulson Says

U.S. Treasury Secretary Henry Paulson said the global economy faces ``downside risks'' from the rout of capital markets that is ``serious and persisting.''

``It will take time to work through the current financial turmoil,'' Paulson said in a statement after a meeting in Tokyo of finance ministers and central bankers from Group of Seven nations. ``As the financial markets recover from this period of stress, as of course they will, we should expect continued volatility as risk is repriced.''

Well, Rome was rebuilt and regained its pre-Dark Age collapse population of over 1,000,000 people at around 1930. This process of recovery and rebuilding took only 1,500 years! Real estate values finally caught up. Athens took even longer to regain value. But it finally happened. Much of this was thanks to tourists coming to gawk at the ruins of former imperial bubbles. This meeting in Tokyo with the imperialists who built a new empire after WWII is most interesting. They can't fix what is obviously wrong because they don't want to fix what is obviously wrong. So they are now pretending there is nothing really wrong and doesn't need fixing, so there! This childish view of reality is classic. Humans like to think this way. It makes life much easier. Working out real problems and then changing systems is hard work. And the older system seems OK, it makes a group of people very happy, all is well and if only it can continue forever, this would be marvelous.

When a marvelous system finally hits the wall of reality, the normal human reaction is to go into denial. Then, as things get worse and worse and the wall is looming overhead, the desire is to blast through as Hamas has done in Gaza. But some walls are insurmountable. The financial wall the US/UK/EU/Japan empire has hit is one that can't be blasted through with lots and lots of free money. The concept of 'horns of dilemma' or the concept of 'the more pressure, the more resistance' applies here. This mega-empire that is NATO and Japan cannot create or absorb more debt. They can CREATE more debt but they can't PAY BACK more debt. Not without killing the remains of their economies.

This paradoxical mess is obvious to anyone who is not making money off of this system. As the G7 frantically drop interest rates, world inflation rises. As they frantically drop interest rates, savings in the West flee the banking system to gold or to China. China is raising interest rates which is the diametric opposite of the imperial conglomeration's efforts. As all the G7 allies rush to imitate Japan, China is providing an alternative system. Capital needs to grow. In the West, it is vanishing faster than it is being created. Using debt to create capital only means real capital profits will flee to places where it can grow while waiting to be used: China. The G7 are not in competition with only each other, they are all in competition with China.

Since China is raising rates, they all must raise rates too or lose capital and savings which will flow to China. The FLOW of money and the SPEED OF FLOW matters more than volume. The movement of money makes money 'money'. If it is parked in a corner and doesn't get used in the form of savings in a bank that then gives a bank reserves so they can lend, if money ceases movement, it dies. And process of moving it around keeps it growing in various ways. A growth tool of ancient lineage is to offer 'interest' on any capital sitting in banks. This is how bankers 'share the wealth.'

If bankers refuse to share the wealth and offer no return on savings, savers look to other places to keep their money moving. I am against parking this in gold for the simple reason, this stops the merry-go-round of money movement since gold usually sits in caves with guards at the doors who prevent it from going anywhere or doing anything. Then, to keep this from being terminal, the guards then issue papers that are liens against the gold and this keeps the money moving. But there is no interest accrued by the savers who park their wealth in gold. They have to depend on selling the gold on the markets to gain any profits at all. And this hazardous system is dangerous since the price of gold in the markets varies wildly when there is financial instability. Not to mention, the volume of sales of gold varies a lot. So one can't park money there and then let it stay for long periods without a lot of risk.

The risk of banks going bankrupt is great, too. This is why avoiding situations leading to bank collapses is very important. But the arrogance of the bankers is just as great as the dangers. This is why they conspired, globally, to change old banking rules so they could make more money faster by taking much greater risks. And the worst risk of all is to drive up asset values via massive, reckless, irresponsible lending of money. This collapses savings which move into speculative ventures as well as reducing returns on classic savings. And it creates inflation as well as altering the classic debt/income ratios.

G7 approves IMF gold sales - Italy econ minister

The Group of Seven rich nations on Saturday approved the sale of gold by the International Monetary Fund from April as part of a broad reform of its budget, Italian Economy Minister Tommaso Padoa-Schioppa said.

"There was an acceptance among the G7 that resources should be raised by selling gold," Padoa-Schioppa, who is also the head of the IMF's steering committee (IMFC), told reporters after a meeting of G7 finance ministers in Tokyo.

This news amuses me. The need to manipulate gold markets is very strong with the G7 imperialists. And they are really angry that both communistic Russia and very communist China are using gold as a form of currency base. Not directly but indirectly. This gold is part of their 'sovereign wealth' system. It isn't just the huge accumulations of euros, dollars and yen in their FOREX reserves but accumulating gold. Both Russia and China are big gold producers. Both have internal gold markets that have its own pricing systems. Both use their gold reserves to boost their FOREX holdings.

The horns of dilemma here are easy to spot: if the price of gold drops, of course, all the people trying to evade the 1% interest rate regime being enforced increasingly by the G7 will have no where to go and will be forced to play the G7 game. But Russia and China are not part of this conspiracy. So the gold will flow to them. If they buy up cheaper gold, eventually they will take it all in and the climb in gold will resume if the G7 have 1% interest rates! This dynamic can't be stopped.

If the G7 insist on this regime, the value of gold will climb after 2 years of this sell-off attempt. Meanwhile, gold buyers will have to hold their gold purchases. This buys the G7 time to play this super-low interest game. And time is what they want! Their plan is for this to force all wealth into the depression-style system we see in Japan. This means they can drop prices and 'inflation' will die due to money moving very sluggishly instead of fast, from country to country, bank to bank. Time is money! And low interest means money can sit and die for a long time! And during this time, the bankers can reorganize themselves and clean out their risks and dump it all on tax payers. And they are busy doing this right now! If Russia and China let them.

World bourses lost 5.2 trillion dlrs in January: credit rater

World stockmarkets lost 5.2 trillion dollars (3.6 trillion euros) in January thanks to the fallout from the US subprime crisis and fears of a global economic slowdown, Standard & Poor's said Saturday.

"If investors thought the market could only go up, January's wake-up call pulled them back into reality," the independent credit ratings' provider said.

Standard & Poor's said the world's equity markets lost a combined 5.2 trillion dollars as emerging markets fell 12.44 percent and developed markets lost 7.83 percent to register one of the worst starts to a new year.

"There were few safe havens in January as 50 of the 52 global equity markets ended the month in negative territory, with 25 of them posting double-digit losses," said Howard Silverblatt, senior index analyst at S&Ps.

One safe haven was gold. Now that is being evaporated. I get very irritated when I read articles that end with advice to buy gold. This isn't an all-purpose nostrum. There is NO all purpose nostrum. All I can advise is, we must become smarter when it comes to politics and the economy. Organizing people is the ONLY tool that really works. The struggle over banking rules has raged for hundreds of years. And will continue to rage. The tools we have are obvious: reading, writing, arguing, listening and then picking fights that are realistic and at the same time, inspiring. Most people want perfection and thus, won't unite on a single issue. Just as I supported both Ron Paul and Kucinich on one issue: war, so it is with other singular issues.

In this case, the need to be a conservative/MARXIST duality is important: follow our noses and see who is winning this game! The communist countries that are using 100 year old banking laws and 100 year old trade laws coupled with 100 year old worker's rights movements. This bizarre mix is a historic change of direction and it is hammering the 'liberal' West. The G7 are circling their wagons. This won't save them since they are clinging to the 'New World Order' system they set up. This involves having the US suck up all exports and run up huge bills! This dynamic is dying rapidly for obvious reasons. The US workers are very weak now thanks to this but getting very restive.

We see it in the elections this year. As soon as the media smugly gave the crown of victory to Hillary Clinton and John McCain, the voters all snatched this away and ran off, shouting. The fury that seethes below the surface is very great. The news about the latest election defiance by the People has the G7 conspirators frightened. In Japan, there has been similar moves to undo the powers of the ruling elites there. So the main tool we have is to give them a political headache. I can't emphasize this enough!

Creators of Credit Crisis Revel in Las Vegas

“In my 38 years this has been the worst capital destruction and the worst rating decline in history,” Robert L. Rodriguez, the chief executive of First Pacific Advisors, a mutual fund company based in Los Angeles, said to a panel of four executives from ratings firms. “All of you should be ashamed of yourself.”

The lashing elicited scattered applause. The panelists listened, their lips pursed. Some then admitted making some mistakes but said most investors in top-rated triple-A securities would get their money back.

“We all have heard a lot of criticism over the last several months, and some of that criticism is certainly justified,” said Glenn Costello, co-head of the residential mortgage-backed securities group at Fitch Ratings. But he added that a frequent criticism of ratings firms — that they are beholden to the investment banks and mortgage companies whose securities they rate — reflected “a real lack of understanding of how we as ratings agencies go about doing what we do.”

They want their profits to flow back. These pirates and hell hounds know this process is all about bribing politicians and warping elections so they can continue their merry ways. They want to boost the value of their holdings and to do this they must kill off all rival systems. The chief of which is traditional banking. There is little easy money via that system! If we could all just park our savings in savings accounts and be happy, this means the mega-bucks and the 20% processing charges these geniuses get will be pennies since it takes only a simple bookkeeper to track things and make the money give a return! These guys must make us dance their jig. We must be forced to put our life savings in their hot little hands so they can get their 20% fees. These fees are ridiculous. And we can see from the scandal at the Societie Generale, the traders who are making these investments for us are often crass young apprentices who should not be allowed on tricycles in traffic.

As for the ratings rant by Mr. Costello: we understand perfectly well how they operate. They should all be arrested. For fraud. Of course, their 'arcane' methods disregard basic economic reality. To rate a company and its 'products' all they had to do was go to the web pages and read their ads. I did. '4 out of 5 applications for loans accepted!' was a classic indication the loans being generated were crummy. I knew this in 2005 and complained about this. But the guys rating these loan products didn't understand what that boast really meant. This means the rating companies are filled with idiots who can't think or clueless idiots who refuse to examine the products they were rating or criminals conspiring to lie about the value of these obviously stupid, fraudulent products. Take your choice.

Security Capital's Bond Insurer Loses Aaa at Moody's

XL Capital Assurance Inc. and XL Financial Assurance Ltd. were cut six levels to A3, New York-based Moody's said today in a statement. The outlook for both is negative, Moody's said. All securities guaranteed by the insurers will be downgraded to A3 unless they have higher underlying ratings, Moody's said.

The units of Hamilton, Bermuda-based SCA were stripped of their top rankings at Fitch Ratings last month after SCA decided against raising money to cover losses on subprime securities the businesses guaranteed. The downgrades throw into doubt ratings on as much as $154.2 billion of debt.

Now Moody's is dropping rates. A tad slow. We are witnessing a reverse dynamic here. Loans can 'grow' only if the base is increasing in value. If it decreases, the ability to generate loans collapses which is why banks have traditionally switched to attracting more savings to keep the ratios going. The G7 solved this in the last 7 years by dropping the ratios banks must hold. From the classic 10% to 8% and now to 4%. At this rate, it will reach 0% ratio reserves giving out 1% loans! And they will be 'making money' just like Japan: via dropping inflation. Except Japan's inflation is actually going up, not down. And restiveness in the working classes is rising, not falling. A classic Marxian trap. Karl Marx based some of his thinking on his reports as a reporter for the news, concerning the cycle of the great 1848 banking collapse in London, after all.

UK puts Rock on government books

Northern Rock was officially classed a public sector company on Thursday morning, bringing its debts onto the government's books and blowing apart one of the Treasury's cherished budgetary rules.

The Office for National Statistics announced that the government has had so much control over the stricken mortgage lender since October that it should be classified in just the same way as nationalised entities such as Royal Mail.

While the ONS said the issue of control over the company was different from "nationalisation", many will conclude that since the ONS view the bank as so similar to other nationalised companies, the term should apply to Northern Rock.

The UK is taking on the debts of this stupid offshore pirate organization that paid hardly any taxes on profits. They profited by offering '4 out of 5 applicants get our loans'. Now the taxpayers get to fix this. The guys at the Vegas party all pray that the corrupt politicians will rescue them. They will claim, this will rescue the economy. But of course, these rescues extract a price in the future: the empires doing this all the time go bankrupt. Look at England. Their profound bankruptcy during most of the 20th Century put them in grave danger, repeatedly. Not only did they lose there empire, the home base of London was repeatedly openly attacked and England nearly went down in flames, totally. So we must try to avoid these sorts of things, I dare say.

China is buying up the remains of British industry. China also has invaded the British home markets to an astonishing degree. China is not playing the same banking game as London. They are raising rates, not dropping them. Now, back to the G7:

G-7 Says Growth May Weaken, Market Turmoil to Persist

Group of Seven policy makers said the U.S. economy may slow further, eroding global growth, and forecast no end to financial-market turmoil.

``Downside risks still persist, which include further deterioration of the U.S. residential housing markets'' and tighter credit conditions, G-7 finance ministers and central bankers said in a statement in Tokyo today. U.S. Treasury Secretary Henry Paulson said ``we should expect continued volatility'' in markets as risk is repriced.

The G-7 is trying to limit the damage from a housing slump that is pushing the U.S. into a recession and may consign the world economy to its worst year since 2003. European Central Bank President Jean-Claude Trichet said officials will do what's necessary to protect global growth from ``an ongoing, significant market correction.''

More than $6.7 trillion has been wiped from world stock markets since the beginning of the year as concern mounts about the scale of a U.S. slowdown and the losses faced by financial institutions exposed to the subprime mortgage slump.

The rout, which started in August when credit markets seized up, forced central banks in December to move in concert to inject cash into financial markets in the biggest act of international cooperation since the Sept. 11 terrorist attacks.

I am putting in this story since it has a different number from the more recent story from today. $6.7 trillion is a lot more than the $5.2 trillion in the Google story above. The uncertainty of the size of the mess is why this mess is not done. Until there is a full accounting and all the books are closed, can we claim it is all over. The guys who made this mess are very anxious to NOT have an accounting. They want to hide the truth as long as possible. They don't want to have anyone look at these books. The huge profits they gave themselves will vanish. And a lot of criminal activity and fraud will be revealed. So instead of pushing this process to a final conclusion, they are colluding in keeping it under wraps. If they can move all this onto the backs of world tax payers, this is the ideal solution. They do NOT want to lose their personal wealth. This is one reason why banking collapses trigger revolutions and wars. This is often the only way to resolve things. Go on looting expeditions against neighbors or distant lands or heads being chopped off at home.

How the Potato Can Relieve World Hunger

The U.N. promotes the root vegetable to feed the hungry and spur economic growth.

The United Nations has declared 2008 the International Year of the Potato in an effort to raise worldwide awareness of the lowly tuber. The vegetable has come a long way from its original cultivation in the Peruvian Andes several thousand years ago. Now, about 350 million tons are grown each year, making potatoes the fourth-largest source of food on the planet behind rice, wheat, and corn.

With the world population expected to grow by some 100 million in the next two decades and with most of that growth in the developing world, the need for a nutritious and fast-growing food is more critical than ever. A good source of nutrients like vitamin C and potassium and virtually fat free, the potato is also smart: "It's one of the most efficient ways to convert seed, land, and water into nutrients for human consumption," says Lee Frankel, president of the United Potato Growers of America.

Funny, isn't it? Nothing new under the sun at all! The boom/panic/depression of 1848 featured the starvation deaths of 1/3 of Ireland's people and 1/3 being sent overseas, fleeing the mess there. Potato crop failure led to starvation and political failure to save the people led to population collapse so great, it is characterized as genocide. The various ugly pogroms that swept through Jewish communities in Russia all coincided with economic downturns. The people proposing to use potatoes as a major food source know perfectly well that this will encourage overpopulation of poor-production areas and the attendant population collapses. Right now, we are not short on wheat or corn. The prices are rising due to speculation and the new use for these other forms of food: gasoline. Potatoes are a wonderful food source. But they are no better than yams, a major source of nutrients for islands in the Pacific and South America.

Warren Buffett says U.S. dollar 'worthless' if account deficit persists

Billionaire Warren Buffett said Wednesday that the U.S. dollar will be "worth less" if the country keeps sending more money abroad than it brings in.

"If our current account deficit keeps running at present levels, the dollar I think is almost certain to be worth less five to ten years from now compared to other major currencies," the Berkshire Hathaway Inc. (BRKA, BRKB) chief executive said, speaking at the opening of Business Wire Canada.

The US dollar has lost buying power in direct proportion to the growth of our empire. The greater our imperial pretensions, the more wars we fight, the bigger the military, the weaker the dollar. Our military budget grows but the REAL growth in facilities and obligations are purely exo-American. Namely, overseas. So this is one big, gaping hole in our pockets. And debasing the currency is how ALL empires pay for their growth and power! Throughout history, this is a very old story and this is why I talk about imperialism all the time.

A reader sent me this email:

Hi Elaine,
Did you know the penny we grew up with was changed in 1982 from 95% Copper 5% Zinc to 97.5% Zinc 2.5% Copper?
Great fun to hold one of these zinc core pennys over a gas flame with a pair of forceps and watch the zinc core plop out of it onto the stove like water leaving an extremely thin copper exoskeleton.

It has taken a long time to get those pre 1982 copper pennys out of circulation but the Chinese were a big help with that. They used barges or large cargo ships to transport them to the home land I supect. What a great way to mine base metals.

Jim

All our coins were 'pure' when I was born. Our new empire was just taking off. We were at war in Korea. The coin would have to be debased if that war wasn't done and the voters chose the great US general, Eisenhower, to end that war which he did. He then struggled to balance the budget and pay off the WWII debts. After President Kennedy was assassinated, we went right into an imperial war that basically bankrupted us. Starting in 1965, the mint [NOT the Fed] began to clip the coinage. Debasing the currency is one of those seigniorage facts of life which is why I talked about that this last week. The Treasury [NOT the Fed] debased our once proud and pure coins with copper and then, zinc. Back in 1968, I thought European coins were pathetic because they were all fake, virtually no mineral wealth. This was because they were still recovering from WWI and WWII.

But our coins were heavy with metal! But as time passes, our coins resemble post-WWII European money. Now, even the zinc is more valuable than the pennies made of this stuff! The mint needs to make a profit off of the coins they make. As they debase it, they have to find new forms of money to replace the metals. In this case, they want to do away with pennies. But people resist this, of course. For good reason. This removes one of the digits on the currency. Next will be elimination of the quarter, etc. Replaced by paper.

I have a 25¢ paper bill from 1848. Yes, we can see this again. Paper is very cheap! But the bills made in higher denominations must be made with expensive papers and other things due to the counterfeiters.

Treasury Won't Take on Monoline Crisis

A top U.S. Treasury Department official said Thursday he expects a first-quarter release of a plan to modernize U.S. financial services regulation.

In remarks to Wall Street securities analysts, Robert Steel, undersecretary for domestic finance, said the Treasury Department is putting together "a blueprint" to give both consumers and large investors appropriate protections.

"As we in the Treasury Department develop a blueprint for a more optimal regulatory structure, we must balance policies that allow for efficient movement of capital while also promoting a safe and stable environment," he said. "A regulatory structure that meets all of these conditions will invite capital by inspiring confidence among market participants."

Steel said, "While our work is still ongoing and no final decisions have been made, we expect to release our regulatory blueprint within the first quarter of this year."

Steel said parts of the new plan "will be unsettling to some people who are invested in the current (regulatory) scheme."

Note the mention of 'MOVEMENT' of money...a most important thing. And Steel [who is probably genetically related to me] wants to change things! Hahaha. A family of perpetual revolutionaries, we are. As for 'modernization' of the financial sector: actually, he is proposing to RETURN to the past. As we must. We have no choice now. We have to rediscover the value of our coins, our currency and ourselves. We have to look to the past to see what worked before this. Nothing very new has to be launched.

Just Put It on My 401(k) Debit Card

A growing number of companies now offer employees the option of being issued a debit card that taps a 401(k) loan. The card, called ReservePlus, allows workers to withdraw funds from their 401(k)s.

The immediate concern for consumers is that impulse spending desires could trump their long-term savings needs.

We just saw on TV ads from the credit card guys. They will 'round off' purchases to the nearest dollars and then deposit the change in your bank account! HAHAHA. Then you can collect interest on it! Of course, Bernanke makes this around 2%. And the same pennies will add on 22%+ to the debit accounts of the person playing this game with them. So debts will rise, the interest due will rise but you will get a fist full of shiny new zinc pennies! That don't cover costs.

Look at how desperate these frauds are! They have to pinch pennies from the pockets of the poor. They have to make a crummy deal that increases debts while doing nothing good at all for the people who fall for this scam. And it is a scam! And should be made illegal!

This news that 401ks are being turned into credit cards is a sign that our ability to save any money is collapsing due to inflation and the debasing of the currency. These accounts can't 'grow' if people are withdrawing their funds. There are no savings if there are no savings, after all. And this translates into future poverty, too.

Monolines rescue efforts might be in vain

The uncertainty hanging over the fate of bond insurers such as MBIA, Ambac, FGIC and others has incr eased in the past week.

Assumptions for losses related to mortgages originated as recently as last year or the year before have escalated.

Still, it is not clear whether the high levels of foreclosures could rise further.

Just over a week ago, Moody's Investors Service said losses on loans made in 2006 backing residential mortgage-backed securities had been revised upwards and could reach 14 to 18 per cent.

This is not the worst case scenario, though. Further declines in house prices could raise losses to more than 30 per cent, Moody's said.

Standard & Poor's revised its loss assumptions to 19 per cent from 14 per cent. Fitch Ratings said losses from subprime mortgage originated in 2006 and 2007 were expected to reach 21 per cent and 26 per cent respectively.

"With the rating agencies moving the mark further out with the passing of each month, we believe there is still the risk that MBIA could be downgraded by one or more rating agencies," says Tamara Kravec, analyst at Bank of America.

Falling house prices are hammering the banking system. This always happens when bubbles pop. We have plenty of historical record showing how this works. If bankers want to avoid this it is very simple: don't give out loans to four out of five applicants. See? And the money down should be real, not another loan from another source. If a home seller and buyer conspire to pretend there is 10% down, they can be charged with fraud. Send a few real estate agents and customers in the brig for a week and see that practice dry up! Instead, everyone winked at this. It was in the news and nothing was done to stop it. In some papers, the process of cheating regulations were openly discussed as good strategies for buying houses in the sub-prime community.

Now for the long view from the grumpy guys writing for the Economist, that paper for the dying US/UK empire:

The future of Asia
Eastern approaches

WHEN you have spent your long diplomatic career listening to lectures by arrogant Americans and Europeans about how others should run their countries and that the West is best, it must be tempting to try to get your own back. That is what Kishore Mahbubani, who in the 1980s and 1990s was Singapore's and probably Asia's best-known diplomat, is doing in his new book, “The New Asian Hemisphere”.

Mr Mahbubani is now dean of the Lee Kuan Yew School of Public Policy at the National University of Singapore, and prefers the title of professor to ambassador, but this is no dry scholarly tome. It is an anti-Western polemic, designed to wake up Americans and Europeans by making them angry. In that goal, it will certainly be successful.

Interestingly, the author ascribes the success of Asian economies to their adoption of “seven pillars of Western wisdom”, so he does give some credit to the West. These are free-market economics; science and technology; meritocracy; pragmatism; a culture of peace; the rule of law; and education. Japan led the way in the late 19th century in realising the need to learn from the West if it was to avoid being colonised by it. South Korea and Taiwan followed in the 1960s and 1970s, along with Hong Kong and Singapore. Finally China and India saw the light in, respectively, the 1980s and 1990s. Since Asia has succeeded by emulating the West, why, asks Mr Mahbubani, is the West not celebrating?

The review is full of scorn and grump against Asians. The poor Brit writer even gets angry at the Asians laughing at us. HAHAHA. There, I laughed, too. At him. We better pay attention here. The people who are surging ahead of us are using classic, old-fashioned economic rules and systems! The very things we ditched when we decided to go all-debt-all-the-way. And they will win. We better stop doing the dumb things we are doing if we wish to win this contest of systems and will power. Or the G7 can dump all this onto their own taxpayers. That, I am certain, will lead to total failure.

Email this post

Culture of Life News Main Page

Comments

[D. F. Facti]

This is completely and totally a sidebar, but someone just sent me a notice that the Toledo, Ohio, Mayor declined to allow the US Marines to train in the downtown area of the City.

Rightwingers are flipping out, and the so-called liberals are considering apologizing to the Marines.

My uncle was a Marine in WWII. This ain't about the Marines, of course.

The voting in a web poll (link below) is 90% against the naughty Mayor for saying, "no."

So if you can, Please go to the site and vote Yes.

Apparently the rightwing from Elsewhere is stuffing the ballot box, so gotta fight fire with fire.

Toledo Poll re Marine Training Exercises

[John East]

Elaine,
This is the third post in a week that you have had a dig at gold. I must leap to its defense.

Whilst I cannot disagree with you that gold is not very liquid and pays no interest, with the current bear climate it offers at least an alternative to the fiat paper based scam that threatens us all. No asset or investment is a good bet at all times, including gold, but if ever there was a time to at least have some money invested in gold it has to be now.

Current downside is probably around $500-$600/oz because production will grind to a halt at lower prices, and as the financial crisis progresses over the next few years $2000/oz is not an unreasonable target.

I was nearly wiped out with my dotcom investments, and by taking profits along the way I have made it all back plus some since 2001 with gold, so I make no apologies for leaping to golds defense today.

[Elaine Supkis]

Since there are hundreds of posters out there saying 'buy gold' in a chorus I have to point out obvious hazards. Gold is very much a risky investment. It went up due to many factors [one being it was underpriced and had to catch up to 20 years of depressed prices!] but now it is in a danger zone: the Indians are selling!

So a pause in the rise is obvious. If one wants to play the gold markets, go right ahead. But don't think this is a cure-all for inflation. It isn't.

[MCC]

Times are definitely chaotic. And without question, the little guys in the world (like me) are going to suffer the most pain for the sins of the rich and powerful. Since I don't have a crystal ball to know if there is ANY safe place to keep my hard earned wages, all I can do is try to focus on what I have control over... instead of speculating too heavily about what I don't have any control over. For me, this means living within my means... having zero credit balance... and trying to maintain sufficient savings to cover large expenses as they happen. This is my meager strategy for getting through the hard times. It seems like all I can do given that I have to work for a living, and I want to get through life with a clean conscience.

[OC]

Just be careful of fake Reminbi - might be safer to stash Hong Kong dollars as the PRC will support Hong Kong due to 'face'

[stevo]

Gold!

... as an internal monetary system:

Is inflexible. Causes unavoidable inflations and deflations. The whole thing breaks down during the deflationary part of the cycle when common folk have their homes foreclosed and are starving in the streets. Politicians sooner than later abandon the system or are destroyed by hordes of rabble with torches, pitchforks, and nooses. Gold hoarders are branded traitors to the nation and are fined and jailed as they were in the US in the 1930s; or are executed as in Hungary in the 1950s; etc, etc, etc.

... as an international monetary system:

With the huge level of sovereign debt and the massively unfavorable balance of trade currently confronting the US, conversion to a gold standard would result in the immediate inability of the US to service its debt. The US would instantly fall victim to receivership by those wonderful folks at the IMF, and eventual confiscation of assets by our Chinese, Japanese, British, and Dutch landlords. A wise person would pray that the present dollar scheme would last at least for the rest of his or her life.

... as a personal investment:

It is not likely prudent to have more than 5-10% of one's investment portfolio in precious metals. Diversification amongst varied asset classes has long served as an effective buffer to the vagaries of specific sector performance. The fact that gold has had a dramatic, multi-year price increase should suggest that this asset may be closer to a top than bottom. In case one hasn't noticed, lots and lots of folks are forecasting a continuing moon-shot for gold. To me, there are just too many people on board that shuttle!

[stevo]

Gold!

... as an internal monetary system:

Is inflexible. Causes unavoidable inflations and deflations. The whole thing breaks down during the deflationary part of the cycle when common folk have their homes foreclosed and are starving in the streets. Politicians sooner than later abandon the system or are destroyed by hordes of rabble with torches, pitchforks, and nooses. Gold hoarders are branded traitors to the nation and are fined and jailed as they were in the US in the 1930s; or are executed as in Hungary in the 1950s; etc, etc, etc.

... as an international monetary system:

With the huge level of sovereign debt and the massively unfavorable balance of trade currently confronting the US, conversion to a gold standard would result in the immediate inability of the US to service its debt. The US would instantly fall victim to receivership by those wonderful folks at the IMF, and eventual confiscation of assets by our Chinese, Japanese, British, and Dutch landlords. A wise person would pray that the present dollar scheme would last at least for the rest of his or her life.

... as a personal investment:

It is not likely prudent to have more than 5-10% of one's investment portfolio in precious metals. Diversification amongst varied asset classes has long served as an effective buffer to the vagaries of specific sector performance. The fact that gold has had a dramatic, multi-year price increase should suggest that this asset may be closer to a top than bottom. In case one hasn't noticed, lots and lots of folks are forecasting a continuing moon-shot for gold. To me, there are just too many people on board that shuttle!

[Elaine Supkis]

Stevo, all over the web there are communities. They build up around a singular idea here or there. Once these communities are formed, they become very, very rigid. People who bring in contrary information are called 'trolls' or other names and banned. Many communities are very harsh about even the slightest deviations from the group's agendas.

Both the right and the left do this. In the money fields, there are fans of various schemes and they peddle whatever it is as the only scheme. Right now, the real estate guys are running for cover.

Gold is up and up so they are happy and imagine they have found a simplistic answer to very hard questions.

I am glad when readers bring in a variety of data and information. And then are willing to defend or talk about these things. Gold really troubles me for many reasons.

It certainly doesn't protect from all dangers at all. And of course, raging mobs are a grave danger and lest we forget, invading armies, too.

I believe in building communities. Not based on beliefs but based on a common ground. For example, in NYC in the seventies, I helped organize and run a fuel co-op. For landlords. We did this to protect ourselves from rampant oil hikes. We are in a similar inflationary spiral and we better start organizing such things yet again.

Also, a side problem with gold is, people aren't buying it, they are buying shares in some gold stash. This is still 'paper' and is very prone to vanishing if the gold vanishes via fraud, for example.

[John East]

"The fact that gold has had a dramatic, multi-year price increase should suggest that this asset may be closer to a top than bottom."

I have seen this statement at $500/$600/$700/$800 and $900, and I will see it again at $1000 before the end of this year.

I agree with Elaine that there is a strong internet community of devout gold bugs, but don't let this fool you. In the wider world, on CNBC, on Wall St, in the newspapers etc. there is barely a trace of gold mania.

If you are happy keeping 90-95% of your investments in conventional assets, i.e. those which appreciate with property, industry, and GDP growth then you are betting on there being no recession, on China and the rest of the world continuing to feed and pamper US consumers for free.

Along with everyone else, I'm clueless as to how this will all pan out, but sub 8000 dow, and minus 30% real estate seems a real possibility. It's then that you will see a general gold mania, and a blow off top in gold. The greedy gold bugs, and dumb newcomers will probably lose a lot then when the bubble pops. I hope to be back in mainstream investments.

I think its a mistake to pick on gold as a bad investment because there is no such thing as a bad investment, only bad timing. Everything has its day, even poisonous junk like CDO's and SIV's were a great investment once.

[Karmaisking]

Elaine, enlightening as always, but your anti-gold stance breaks my little heart. I note you predicted a top in gold a few weeks ago - it didn't happen. Whoops.

My last comment on gold: If I was a Martian and I was looking down at the stupid Earthlings I'd probably suggest a paper fiat currency with a non-corrupt government and a strongly regulated banking system (probably under total government ownership and control - if you're going to do a "Northern Rock" and socialize the losses, why not just get it over with and do it at the very start?).

Sadly, I'm not a Martian (I wish I was). I'm in the middle of this dog fight on planet Earth, with stocks and house prices plummeting, the government killing my savings, the Fed out to annihilate the middle class, industry collapsing and being shipped overseas, food prices going through the roof, and hard and soft commodity prices going up, up, up.

In the middle of this fight, I hoard gold like greedy madman. It may not be the socially responsible thing to do. But everyone else has abdicated their responsibility to be socially responsible (if you know what I mean).

So it's selfish, selfish, destructive gold, all the way for me, me, me.

[Elaine Supkis]

Hoarding gold means total collective economic destruction. As we see today. The price of gold is rising due to people parking money there. Money ceases circulating and sits there in this dead space.

This is why fiat currency came into being. Gold hoarders can cause terrific depressions. All previous gold-caused depressions were fixed by prospectors finding gold and flooding the markets, thus freeing up the currency to circulate again.

It is no coincidence that the gold strikes of 1849 and 1894 were exactly one year after financial collapses.

Since depressions are ugly things and millions die in them, I would hope we avoid them as much as possible. Ergo: I can't say gold is a good thing.

I am not a person who wants to live well while millions suffer and die. So I can't recommend gold hoarding as a great way to run an economy. The collapse of the middle class isn't due to lack of gold, it is due to WAR SPENDING which drives up our TAXES or drives us into DEBT. We stop the war spending and our problems will vanish.

We do not need gold to do this. We just have to stop our own war machine.

[Gary W]

Another interesting article. Elaine, why can't you be President?

Australia isn't usually thought of as part of Asia (more an Anglo-Western-deputy-sheriff-kid-brother), but nonetheless, rates are going up:
http://www.abc.net.au/news/stories/2008/02/12/2160347.htm?section=justin

Australia's economy is in fairly good shape, based on digging holes and shipping dirt (coal and ores to China, even some gold). A nasty housing boom based on mountains of debt, but not too much of that subprime poison.

For thousands of years, people have admired and coveted gold. I don't see that changing, especially when the things we use to acquire gold, paper money (we use plastic in Australia), grows increasingly worthless by the day. People will almost always want gold, unlike other junk that people covet like stocks, stamps or speedboats.

The Mogambo Guru had an interesting post about fractional reserves recently: "reserves are literally zero against new deposits, and thus the fractional-reserve multiplier is infinite! "
http://www.atimes.com/atimes/Global_Economy/IL21Dj01.html

All I can say is, we're freaking doomed.

[Mayer Moore]

Are you looking at different loans and finances for your new home?, your personal use (Personal Loans)? Do you have questions about the different services that are on offer? We are here to answer any of your queries.
We offer all purpose loans to clients
Get Loans from a legit source.
Apply Today.

Note:Only serious persons are to contact us.
iconmortgages@gmail.com

[Elaine Meinel Supkis]

Yes, a fractional base of $0 means infinity. Infinity is death. Wealth comes from the Cave of Death but so does death!