iPath to iDoor to Hell: No Bonds, No James Bonds

February 15, 2008

Elaine Meinel Supkis

Sorry about the delay, I lost this story last night and just found it again today. Time to talk about bonds some more. The US government is once again preventing us from gaining information about our nation's financial condition. First, the central bankers got rid of the M3 data. Now, the government website I consult for information about trade and commerce is going to vanish, too! And everyone in the G7 nations are yapping about how we have to have more information, more daylight! It is getting ever darker in this cave, I would suggest. Also, state governments are shocked by the 20% interest being charge for fairly safe muni bonds. Spitzer of NY, my gov, wants to chop the muni bond market off from the other bond markets. He is furious about the last auction. I think Goldman Sachs is holding us up, being pirates and all that.

Bush Administration Hides More Data, Shuts Down Website Tracking U.S. Economic Indicators

The U.S. economy is faltering. Family debt is on the rise, benefits are disappearing, the deficit is skyrocketing, and the mortgage crisis has worsened. Conservatives have attempted to deflect attention from the crisis, by blaming the media’s negative coverage and insisting the United States is not headed toward a recession, despite what economists are predicting.

The Bush administration’s latest move is to simply hide the data. Forbes has awarded EconomicIndicators.gov one of its “Best of the Web” awards. As Forbes explains, the government site provides an invaluable service to the public for accessing U.S. economic data: Yet the Bush administration has decided to shut down this site because of “budgetary constraints,” effective March 1:

We are all furious about this. I remember when the Fed pulled a fast one, right before the banking collapse. Tartly telling us that 'no one' was interested in the M3 data, they said they would continue to figure out the M3 but were NOT GOING TO SHARE IT WITH US! So they get to see the M3 but we cannot! This sparked a huge row online which the Fed studiously ignored. This vital statistic that other central banks still provide is still occult here in the US. This confirmed to us bears that all hell was about to break loose and the Fed didn't want us to talk about inflation and the drop of M1 versus M3 and how this widening divide meant serious trouble looming.

Now that it is crystal clear to even idiots that we are in a massive banking/finance melt down, will the Fed still restore our M3 statistics? HAHAHA. No. Instead, Bush and his gang are shuttering yet more statistical systems. What's next? I lose the ability to see the annual Congressional reports? Congress is fighting like cats and dogs over the right of our government to spy on everyone, why the Republicans walked out of Congress over this! They want more and more and more prying and spying.

While shutting down PUBLIC parts that the citizens need to see what the hell is going on! And since government statements seem to have as much relation to truth as a cow has to a buzzard, we can't dispute them if they say, 'All is well' when we are falling to the bottom of a well. Unless we can see the data and talk about it.

Bin Laden's plan is for the US to go bankrupt. Well, these clowns cutting off our data stream seem to be terrorists working for bin Laden since their actions will cause us to go bankrupt! So spy on them! Arrest them!

Here is the doomed site:

Economic Indicators.gov is brought to you by the Economics and Statistics Administration at the U.S. Department of Commerce. Our mission is to provide timely access to the daily releases of key economic indicators from the Bureau of Economic Analysis and the U.S. Census Bureau.

You may link to the most recent release by clicking on the report name in the table below. You may also subscribe to our *free Subscription Service to have these files emailed or faxed directly to you as soon as they are released.

I love tables of numbers. I learn a lot from them. I play with the numbers and use my computer to outline parts of these things with colors so I can see pluses and minuses better and with this, I can see trends or sudden surges. Charts are fine but have their limitations. Seeing the raw numbers is most important. I often find hidden treasures this way. I suppose the government also realizes this. All of us 'bear' bloggers and commentators are hated by our rulers and the rich guys ripping us off. So they want us to be like in the Soviet Union: silenced. They grope for ways to discredit us. And one way is to leave us blind. We can't make our case if we have no data!

Treasury Yield Curve Is Steepest Since 2004 Before Bernanke

Treasury two-year notes yielded the least compared with 10-year debt since 2004 before Federal Reserve Chairman Ben S. Bernanke's economic testimony, in which he may signal the Fed is ready to cut interest rates further.

Ten-year note yields rose 8 basis points, or 0.08 percentage point, to 3.81 percent at 9:13 a.m. in New York, according to bond broker Cantor Fitzgerald LP. The price of the 3 1/2 percent security due in February 2018 fell 5/8, or $6.25 per $1,000 face amount, to 97 15/32.

Understatement of the year. One thing about these banking collapses: savers usually run for the hills. We call these 'bank runs'. In America, the 'run' on the banks has been for at least 5 years. When Greenspan began to drop rates like a rock while inflation in energy and housing shot through the roof, all of America ceased saving. So our savings rate which should be at least 10% if we want a banking system fell to -3% and has been dropping like a rock. We fell into this pit for the FIRST TIME SINCE 1933 just a year ago. And lo and behold, we see our banking system collapse.

Will cutting rates bring in savers? This is like throwing icecubes to people drowning when the Titanic sank.

June 20, 2007

Steeper yield curve may signal improving economy

But some analysts point to subprime meltdown and foreign developments

Inversion can be a harbinger of economic slowing or of an outright recession. But economists caution that while inversion is a necessary condition for a recession, it, by itself, is not enough to cause one. Each inversion occurs in unique circumstances. To understand its portents, investors must analyze its magnitude, duration and unusual developments impacting the bond market. And in most cases there are multiple interpretations of the meaning of inversion.

Earlier in the year, when the yield curve was inverted, there was brisk debate as to whether it signaled a recession. While some economists warned that it did, Federal Reserve Chairman Ben Bernanke and others argued that it resulted from global liquidity that had led to unusually heavy purchasing of longer-term notes, depressing their yields. Prices and yields move in opposite directions.

The yield curve normalized during a recent global bond rout triggered by interest-rate and inflation fears that featured especially heavy selling of longer-term securities.

This story from just before the 7/17/7 collapse of the carry trade began shows how clueless everyone professed to be back then. When any of these things converge suddenly and massively, this is a sign of destabilization. And destabilized things can suddenly broil over in all sorts of sundry ways. Since everyone expects something they will often move to stop that something from happening. But the ENERGY of the collapse is so great, it simply shifts to another area and begins to broil over there. The more the controllers of the central banks circumvent or prevent a broiling over in one sector, it relentlessly moves to the next until it finds an outlet.

This is perfectly natural. All systems act this way. If, for example, you put up a dam to stop flooding, if you get bigger and bigger floods, either the dam will burst or the land behind the dam will be flooded. If you dam a river in a desert to service cities, the cities will grow until the water behind the dam is totally drained and then the cities die rapidly. We see this dynamic in all systems. This is why bankers liked to think of themselves, since the locomotive age began, as steam engines with the regulators that control the level of steam in the system so it doesn't blow up. Except they don't regulate the guys shoveling coal into the burner! Someone has to tell them to stop! No!

But the temptation to stoke the fires is tremendous. So the fires burn hotter, the train runs faster and the steam starts to shoot out of all the pipe fittings and then the water in the tank boils away and we get an explosion. I have witnessed exactly this in NYC. Across the street from where I was working. The steam boiler sounded like a bomb! I ran into the building and carried out a woman and her baby while my partner ran into the basement and shut off the gas, a true hero.

But here, we see the people who should be regulating the system making things worse and worse. It has already exploded. Instead of turning off the gas, they are flooding the building with gas and then, when someone lights a match, boom!

Auction-Bond Failures Roil Munis, Pushing Rates Up

What began three weeks ago with too few bidders for auction-rate debt backed by relatively small entities, such as Georgetown University and Nevada Power, has widened in recent days to include large issues of state governments, such as New York state's Dormitory Authority. The auction failures provide new indication of Wall Street's unwillingness to commit capital amid $133 billion in credit losses and asset writedowns.
*snip*
Auction bonds have interest rates that are determined by bidding that typically occurs every seven, 28 or 35 days. When there aren't enough buyers, the auction fails and bondholders who wanted to sell are left holding the securities. Rates at failed auctions are set at a level spelled out in official statements issued at the initial bond sale.

Some borrowers paid higher rates, even if their auctions didn't fail. Wisconsin's 28-day auction yesterday of taxable bonds was set at a 10 percent rate, up from 4.75 percent for identical securities Feb. 7.

Frank Hoadley, Wisconsin's director of capital finance, said he had no advance warning from bankers about the jump in rates. ``We are making decisions'' about converting the auction bonds to different kinds of debt, he said.

This is a repeat from yesterday. But I am including it so we understand what will happen next. NY is very upset about this auction. and I am upset to learn that Goldman Sachs pulled a fast one in order to up their profits, the stupid pirates. I keep saying, arrest all the Gollums in that organization. And Paulson, too.

The Monolines Are F#@%ed!

My opinion: Buffett never expected these guys to accept his terms. This was a clever, showboating tactic to show the state insurance regulators that Berkshire Hathaway (BRK) stood ready to step into the role of guaranteeing Muni bonds across the country. Call it a ploy, declare it a hollow gesture -- but recognize that it is a brilliant strategic move designed to checkmate the Monolines into giving up the high return, low risk business Buffett covets (and would do a much better job running anyway).

Second, the NYS Commissioner of Insurance has suggested splitting the Muni bond business off from the rest of the firm. What's left is can best be described as a poorly run, derivative hedge fund led by people who have no business running a hedge fund of any sort, much less one of the poorly run derivative variety. But the fact that the NYS insurance commissioner is suggesting this should tell you that this has reached a level of government involvement that cannot bode well for our friends at ABK, MBIA and FGIC

(Its almost an irrelevant afterthought that Moody's downgraded FGIC, pulling their triple-A credit rating today).
Now, the coup de grâce: The FT reported that Eliot Spitzer, former NYS Attorney General, now New York governor, gave the bond insurers three to five business days to find fresh capital, or face a potential break-up by state regulators who want to safeguard the municipal bond markets. Oh, and that was BEFORE Moody’s cut FGIC from to double AA -- effectively ending their ability to write muni bond business.

All of us NYers know that this sale will cost us all very dearly. And if this keeps up, we won't have any bonds sales. This is way beyond the true cost of holding NY bonds! And our default history, even when NYC nearly went bankrupt, we all take on many difficulties to keep afloat. I lived through that mess in the 1970's and was very, very active in politics and the community. I fought like a fiend to assist 'gentrification' which was one of the things that would drag our city out of possible bankruptcy. I fought to stop 'rent control' because it was killing landlords and causing the collapse of NYC housing stock. I knew that people didn't want to see rent hikes but turning landlords into mommy and daddy and forcing them to pay for all the inflation out of their own pockets was sheer insanity.

Spitzer is spitting mad about this auction and his plan to slice and dice these guys is a sensible thing to do since we have no other solution aside from the government guaranteeing itself. We can't have that or the government will run amok. But the cynicism here is astounding. Goldman Sachs recently boasted that they hedged against their own bonds they were selling shows us these guys have the dark hearts of cannibals.

During the 2000 election, Bush boasted that he could give us tax cuts while balancing the budget. I knew this was impossible but people fell for this. During the bubble years, everyone was happy with tremendous budget deficits and gargantuan trade deficits. On top of skyrocketing personal debts. I said, 'If times are good, the government must drop spending so they can raise spending in bad times.' This comes from the very ancient story that is over 5,000 years old.

The seven fat cows and the seven thin cows. The Pharaoh asked Joseph about this and he explained that in the fat years, the government holds grain and then releases this during droughts. This has been the bedrock of good governance since time immemorial. We must save in good times so we have something in bad times. How simple can this be?

From the Bloomberg story above:

Yesterday, $27.5 million of federally taxable student loan debt issued by Vermont's Student Assistance Corp. and insured by Ambac Financial Group Inc. reset at 18 percent, up from 5 percent as of Jan. 15. Ambac was the first bond insurer to lose its AAA credit rating.

Local governments are obliged to pay the high rates until either the auctions start attracting more buyers or they modify the bonds to some other kind of variable-rate debt or a fixed interest rate. Bankers and borrowers have been working on conversion plans for several weeks.

The 20 percent rate for the $100 million of Port Authority auction bonds will cost it $388,889 until the next weekly auction, up from $83,611 last week. Interest on the bonds is subject to federal income tax.

The declining stock market hammers NY revenues. When panic selling happens, the state makes more, not less, money on transactions. But once the dust settles and all the bulls are disemboweled by the bears and the bankruptcy hyenas are ripping apart the carcasses, the state sees a tremendous drop in finances. The long bear market in NY after the US devalued our dollar with Bretton Woods II hammered our finances. I knew stock brokers back then and the word 'broke' fit.

U.S. States' Credit Rating Outlook Turns Negative, Moody's Says

U.S. states' credit ratings may be lowered this year as slumping housing and the weakened economy constrain tax revenue, Moody's Investors Service said.

The rating company changed its credit outlook on states to negative from stable as sales, corporate and income taxes fall below forecasts. States will likely borrow more to fund programs, Moody's said. A downgrade can boost taxpayer borrowing costs as investors demand a higher return for increased risk.

Half of U.S. states, including New York, New Jersey and California, are projecting budget deficits next fiscal year amid the worst housing slump in 16 years. States that had robust residential real estate markets, such as Florida, Arizona and Nevada, have been particularly hard hit, the Center on Budget and Policy Priorities, a Washington-based research group, said in a Jan. 28 study.

And this is the other reason why interest payments on munis shot up: risk is rising. And of course, the Fed dropping rates while risk is rising won't fix things since the problem isn't too little money. As I keep saying, it is a lack of savings. People are told to park their money in gold in these sorts of times. I would love it if this worked but this only makes things worse and worse. Gold isn't muni bonds that puts money into motion as it is used to hire people and do things in the infrastructure or build important parts of our joint national or local interests. Gold is part of the more deadly sectors of the finance universe; it is dead center in the Cave of Death. Gold doesn't stop meltdowns of economies nor does it create wealth beyond its own natural beauty which is real, of course. But it is a deadly economic center. I keep saying, labor should be the center, not gold, not debts.

Labor is where the real wealth lies. Growing things, harvesting things, transporting things, fabricating things, mining things, melting things, hammering things, all this produces 'wealth'. Just as a field of corn with no harvesters is worthless so is a mine with no miners. And miners make nothing if there are no people smelting the metals and even here, it is useless unless there are people swinging hammers to make the metal into something useful. Wealth flowing from this system makes us richer and live better lives. But when all parts are starved of money due to people wanting easy profits with no labor, we get the present mess.

Mich. Suspends a College Loan Program

Michigan is temporarily suspending one of its college student loan programs, blaming an ongoing credit crunch that has made it tougher for borrowers to get money.
New applications are no longer being taken for the Michigan Alternative Student Loan Program.

"Due to the current and unprecedented capital markets disruption, there is not sufficient available capital to continue making MI-LOANs," the agency said on its Web page this week. "After considerable analysis and significant efforts to secure sufficient MI-LOAN capital to make new MI-LOANs, the difficult decision to temporarily suspend MI-LOANs had to be made."

This is terrible, terrible news! As autoworkers and everyone attached to them lose jobs, all other systems fail. And we are supposed to 'educate' ourselves into new, better jobs? How? I saw this in the 1970's. We can't move forwards if we are destroying the systems that help us move forwards! After WWII, our government did the smartest thing on earth: the GI Bill. It sent everyone to school who wanted this. After that flood of brave heroes finished and improved America with their new skills, our nation decided to continue this. But it is eroding. As college debts climb, the load grows on our young. My own children feel its weight. It angers me a lot. We spend more on killing people, by far, by bloating our military while our educational system continues into a totally unnecessary crisis.

Is the greenback's grip slipping?

A UBS “survey of our global equity analysts indicates that the dollar is not universally accepted as an international invoice currency.” The report listed global lodging and leisure as one sector where the dollar will play a declining role.

While most central banks have maintained their U.S. dollar holdings, the rise of sovereign wealth funds also points to a rising interest in portfolio diversification. “This diversification will place less emphasis on liquidity and more emphasis on returns, and thus could lead to a permanent reallocation away from the dollar,” the UBS report said.

The weakening of the U.S. dollar is comparable to the decline of sterling in the 1920s and 1930s. “Like sterling 90 years ago, the dollar is the most important reserve currency in the world, but it is no longer the only reserve currency - nor even the overwhelmingly dominant choice as a reserve currency,” Mr. Donovan said

Although the euro has generally been touted as the greenback's replacement, the benefits “of reserve status are likely to be shared with a wider range of alternative currencies,” he said.

Whoever is the world ruler gets to run the world's currency. Once, it was the Spanish coin. Then Dutch. Then the French franc. Then, the British pound. And now, the dollar. All collapsed when these empires debased their currency and then went bankrupt. All, due to wars coupled with destructive speculative bubbles.

Depression risk might force U.S. to buy assets

Fear that a hobbled banking sector may set off another Great Depression could force the U.S. government and Federal Reserve to take the unprecedented step of buying a broad range of assets, including stocks, according to one of the most bearish market analysts.

That extreme scenario, which would aim to stave off deflation and stabilize the economy, is evolving as the base case for Bernard Connolly, global strategist at Banque AIG in London.

In the late 1980s and early 1990's Connolly worked for the European Commission analyzing the European monetary system in the run up to the introduction of the euro currency.

"Avoiding a depression is, unfortunately, going to have to involve either a large, quasi-permanent increase in the budget deficit -- preferably tax cuts -- or restoring overvaluation of equity prices," Connolly said on Monday.

This man should be set to work shoveling out ox stalls. I have the shovel and the shit for him. The US is going into a depression exactly because it has a permanent budget deficit! The more we do this budget deficit, the deeper this depression will be! Gads! Does this clown imagine we can run up $50 trillion in debt? Or does he know about the shadow derivative mess that is 10X this in size? Should we avoid a depression by making that bloat up to $5,000 trillion? What is that number? $5 quadrillion? YIKES. We can't ask for the impossible. We can't avoid financial ruin by ruining our finances further. Simple, no?

Standard of living will fall, warns Mervyn King

Britons have enjoyed a decade of high spending on luxury goods, holidays and second homes, fuelled by low interest rates, easy credit and near-record lows in living costs.

But Mervyn King, the Governor of the Bank of England, issued a stark warning that this period had come to an end.

In an uncharacteristically blunt statement, he said rising inflation and the fallout from global economic turmoil would take its toll on the spending power of British households.

The US/UK empire rode on the top of the world's masses. Now, we fall. We can't stop this by deficit spending. Japan has rung up huge public debts but this is a cover. Japan has plenty of money, they sit on it like a hen on a yen egg. It exists in order to give the Japanese leverage to keep the dollar more valuable than the yen while running big trade surpluses with us. But we have no reserves! We are broke.

Vanguard Battles Barclays Over `Derivatives for the Masses'

Barclays Plc introduced a new product that put a scare into Vanguard Group Inc. and the rest of the $13 trillion U.S. mutual-fund industry. Now Congress and the Treasury Department are coming to the funds' aid.

The security, called an exchange-traded note, allows individual investors to buy a type of forward contract linked to commodities and assets ranging from oil to currencies to foreign stock indexes. It has lower fees than mutual funds, is less regulated and, for now, lets holders defer taxable income indefinitely.

While less than $10 billion of the notes have been issued so far, mutual-fund companies see the potential for the new instruments to catch on in a big way with investors. The notes are ``derivatives for the masses,'' said Alex Gelinas, a tax lawyer at Sidley Austin LLP in New York. For the mutual funds, reining them in is ``the issue of the year.''

The funds argue that the way the notes are handled for tax purposes puts their products at a disadvantage. The industry's trade group wants the government to either scrap the notes' favorable tax treatment or extend it to them too.

``This is just, from a mutual fund's perspective, the calm before the storm,'' said Robert Willens, who recently left Lehman Brothers Inc. to found a tax and accounting advisory firm in New York. ``They believe that if the IRS does not take steps to interdict the purported tax benefits,'' the notes will become ``much more than a viable alternative to mutual funds.''

They keep cooking up new schemes. All the old ones used to work but didn't give great opportunities for the fund managers to rip off everyone and give themselves giant bonuses of billions of dollars. So they keep making new schemes. I went to their new webpage to take a peek. YIKES. HAHAHA. They won't attract me. What a folly it is.

What are iPath Exchange Traded Notes?

iPath Exchange Traded Notes (ETNs) are senior, unsecured, unsubordinated debt securities issued by Barclays Bank PLC. They are designed to provide investors with a new way to access the returns of market benchmarks or strategies. ETNs are not equities or index funds, but they do share several characteristics. For example, like equities, they trade on an exchange and can be shorted¹. Like an index fund, they are linked to the return of a benchmark index.

Do the iPath ETNs currently available make interest payments?

No.

Do the iPath ETNs currently available make dividend distributions?

No.

Do the iPath ETNs currently available offer principal protection?

No. Investors will receive the performance of the index to which the iPath ETN is linked, less investor fees. The index may go up or down. Even if the index goes up, investors may not recover their principal once investor fees are deducted.

Do iPath ETNs have voting rights?

No. The iPath ETNs are debt securities and have no voting rights.

What are the advantages of iPath ETNs?

iPath ETNs provide investors with convenient access to the returns of market benchmarks, minus investor fees, with easy transferability and an exchange listing. The ETN structure allows investors to achieve cost-effective investment in previously expensive or difficult-to-reach market sectors or strategies.

How are the returns of iPath ETNs calculated?

iPath ETNs are designed to provide investors a return that is linked to the performance of a market index, minus investor fees.

HAHAHA. All risks and no pays! They get their fees and you get stuck with all the dangers. And with risk rising, who wants this? The masses? I don't think anyone sane will beat iPath to their iDoor!

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Comments

[Jim Smith]

Elaine,
You offer many sound and penetrating economic insights and much of your work can be characterized as no less than brilliant. Indeed, at this juncture in history much of your writing is mesmerizing. Therefore, it may seem a quibble to say it appears you wear blinders to some extent when it comes to "gold". Beyond dispute, throughout history gold has been the supreme medium of exchange and store of value. You correctly analyse the decline of the US $dollar's role as the reserve currency and the fact that no other currency is nearly ready to supplant it. So a gold-based currency may yet again fill that essential need. "Labour" per se is not a touchstone. There is productive labour, "busy work" labour and completely useless, indeed harmful labour. Included in productive labour, I venture to say is that employed in the massive effort required to locate, develop, mine, refine, etc etc gold itself. We can't eat gold and would be great fools to worship it, but sell it short at our peril. I am only trying to shed a bit of light on this issue because I respect enormously the mamoth goals you have undertaken and feel that somewhat of a revision to your outlook on gold could serve your ends better.

[Disgruntled Patriot]

And what "sanity" have the masses shown thus far? It may be argued that the blind faith bestowed to our corrupt leadership is beyond insane! Should your ambitions be entirely selfish, you may consider investing in a gold ETF...be sure to sell before the next Great Depression precipitates.

[norcalkid]

Ah, but when you need to buy food or toilet paper, how will owning gold help? Especially if it is on paper and not in coins buried in your backyard. (Well, the paper might be useful, if it flushes well. Might be a little rough, though.)

"Hey mister, trade you 10 cans of the pork-n-beans for this here gold coin!"

Shopkeeper: "What good does that do me? I can't pay the stockclerks with it, unless I saw it up. Just use the regular paper money."

I am investing in tin and lead. Tin cans (containing food), and lead...you guess.

[OC]

Norcalkid,

The future economy would be dictated by the muzzies and commies - they love gold so gold is the most likely medium of exchange/trade...I be bank gets to decide what is money...

[Elaine Meinel Supkis]

Mao: power grows out of the barrel of the local thugs. Gold has NOT been a great source of stability. Otherwise the Spanish Empire would not have sunk off the shores of England. Gold didn't stop any of the Great Panics or Great Depressions [there were several of these in the last 250 years]. England didn't lose power because of lack of gold, it was WAR that destroyed England.

Germany didn't surpass England by collecting gold. England fought some Dutch and German farmers in South America for gold that was found near their farms. This war ran on and on and on with terrible effect. England got the gold and less than two years later, nearly collapsed in WWI. Was bankrupt at the end of WWI.

Germany, on the other hand, didn't have a navy to sail around the wrold, picking up gold from the Chinese, South Americans or Africans. They had INDUSTRY. And INDUSTRIAL strength is where power lies. NOT GOLD. Period.

I know there is an online fascination with gold as a nostrum. I don't blame people for thinking this way. We clutch at straws.

But any historian will agree with me on this topic. By the way, a flood of gold via theft or mining always causes trouble. Great trouble. Here is another example: no nation in Europe had more gold than France in 1914. By 1940, France was being ruled by the Germans.

Gold does not equal security. The US beat the Germans and Japanese without using gold. We used our vast industrial base. Which is now going missing, more and more.

[OC]

E,

Gold is for refugees - and those in power. It is the means to buy safe passage. Anyone with gold is a target unless he has big guns backing him - like Mao or police or military.

Land is not a safe haven as u can be forced out by someone with bigger guns than yours. Skills and labor is almost worthless during depressions or wars unless it is for war making as the main purpose of war is to reduce human population.

Gold is the means to pay for all this and that is why gold hoarders will be fleeced. What choice do we have as it probably the main medium of exchange as kindly pointed out in the Vietnam War article.

[Jim Smith]

Elaine,
In the vast sweep of history, examples can be found pro and con for any position. You are correct, gold is not a panacea. But in terms of the fields of currency and exchange, gold is paramount. To denigrate it across the board in an economic discussion is to hobble oneself.

[Elaine Meinel Supkis]

When it was part of the money system, perhaps. BUT it is no longer, it is a simple commodity. It is no different from buying oil or wheat. Indeed, buying art works by Great Masters make more sense if you want to store wealth. This is what rich people do. They buy Matisse or Picasso paintings. I KID YOU NOT.

[Elaine Meinel Supkis]

I once bought, after WWII before Europe was fully recovered, I found this lovely flask made in Venice around 1600. It was intertwined red glass rod and gold thread in blown glass. Fit in the palm of the hand. Was for perfumes.

I bought it for only $150 US. It was appraised when my parents gave it to the Corning Glass museum at over $200,000. See? The rise in value of antiques and such far outstrip any commodity which is why the rich go to auctions and spend literally millions on things. They feel this is the best place to park money that is 'inert' and not being used in a capitalist way.

Not gold. In art and antiques. Go visit the homes of former wealthy that are now museums like the Frick Museum in NYC, just to get an idea how this works.

[Elaine Meinel Supkis]

Another example: a gold headress from the Troy diggings in Turkey done 100 years ago are worth at least $6-20 million depending on if it ever were auctioned. The Vatican has art worth around...argh.

How about several hundred billion dollars? At least. The gold in the domes and decorations could be melted down but the worth would be a tiny fraction of its worth as part of the Vatican.

Then there are Byzantine mosaics. These often have gold-mosaic pieces that make these huge things glow. The value of the gold is insignificant to near zero compared to the value of the artwork which is uninmaginably valuable.

An Ice Age carving is worth far more than a box filled with gold. Yet only 200 years ago, it had near zero worth. And this is how things work: relative value shifts like the sands! Greek statues that are tremendously valuable today were hauled to Britain to be used as garden ornaments. That is, the Parthenon!

Imagine that. And during the Dark Ages, these things were considered not just worthless but dangerous.

[Disgruntled Patriot]

Conventional wisdom is that the Fed is left with a single option (enacted through myriad measures) of debasing the currency and greatly inflating the economy. Owning gold (or shares of a gold fund) should prove rather lucrative during a period of emerging stagflation; particularly true from the relative perspective of an anemic currency, competing against those of ever improving industrial rivals. Then, just before the spiral has spun its last turn, trade down to the most primal of currencies – ammunition and canned goods.

[pete]

OC talks about industrial but you cant compare apples and oranges. Industrial strength may win wars and bring prosperity but how you manage your currency is by fixing it to gold and silver. A clueless post by OC because gold has been money since bible time until this century when the banksters took gold off fiat money backing

[Jim Smith]

Amen, Pete. Good Night!

[blues]

This "God given" value of gold thing drives me nuts. Sometimes I'm 90%, or 99% sure of something (WTC?), but on this one, my meter pegs right on the 100% mark. Why is gold valuable? People talk about how it's always "historically" been valuable. Think about that. I would begin with the assumption that your average peasant never came near a sliver of gold. But the Dukes, and Kings, etc. would have it. So this made them wealthy. If you are to make a claim of being "wealthy," then you have to own lots of stuff. Let's see, like land, palaces, horses, slaves, and gold.

Understand now, maintaining the illusion of wealth (everything is an illusion) involves rituals. One of the best rituals is to own lots of this shiny stuff, have expensive guards (loyalty costs) to "protect" it, and have the "right" to own it in the first place. The whole operation is a frickin' RITUAL. Nothing about it is real!

Having a productive system is relatively real. With that, you can get the peasants to produce things like, um, guns. Or buggies, etc. Note that gold does not produce guns or buggies or ANYTHING! So there you have it.

Also, for most of my life, I have watched the value of real estate shoot up and up like bamboo on a spring day. Just up, up, up. It reached the point where friends who had crummy jobs (they studied to be artists, wouldn'tcha know?) went out and bought houses for no other reason than to escape "the horrible stigma of peasanthood." Plus the government might give them a "tax break" (loophole), even as the local government would take it all back. (I just do not believe in tax write-offs; they always encourage people to do foolish things. Like give to "charities" that are really rip-offs, etc.)

I knew the (supposed) value of real estate could never shoot up and up far faster than the value of everything else forever. I've been saying for twenty years that this simply could not fail to end badly. Everybody thought I had somehow become a bit deranged on this issue, and they wouldn't even argue with me. Now they know: The crazy bastard was right!

I expect the next bubble to be "education." If you go to some college, your professors will be making about $100,000 a year. And each professor is backed up by "1.7" "administrators" who make $120,000 a year. This can't last for long. Especially when you could visit my linguistics sites and learn how your brain processes speech communications, AND PAY NOTHING! At a university, you will be $100,000 in debt for the privilege of learning a bunch of overwrought nonsense that fails to explain anything at all.

[blues]

I should be working on my linguistics sites, but I am so full of new social/ political ideas, I keep coming back here with them. Here's one:

INFORMATION INEQUITY! I'm in Massachusetts, and we now have a law that says it's illegal to surreptitiously record people without their knowledge. As an example of the true effect of this, we had a "poster boy" cautionary story in the local paper about this guy who was pulled over by the cops in his car, and he left a microcasset recorder on which recorded unprofessional conduct on the part of the cop who pulled him. When he later tried to use the recording to vindicate himself in traffic court, he was promptly arrested for making that recording, and found himself subject to a more serious charge. In another case, police raided the wrong address of a family who simply had a video system continuously on to catch burglars, and the family found themselves subject to a similar charge. But, it's fine for the police to record everything you say in their presence, and if you tell them anything that could be interpreted as inaccurate, their secret recording can be used to nail you. If they blatantly lie to you, that's just fine, on the other hand. If you shop at any Wallmart, you will see hundreds of cameras watching your every move. This is information inequity.

People say things like "if you're not doing anything wrong, why, you have nothing to worry about." But there's a huge fly in that ointment. Informational inequity has the automatic effect of creating an informational divide: There must be watcher, and there must be watchees! And you had would do well to be on the "watcher side" of that particular equation! You really think you can trust your watchers? Just go to the parlor at the entrance to any courtroom; see how "justice" really "works!" I keep asking people to do this. It will quickly dawn on you that the entire process is a sham, which exists almost solely for the purpose of funneling cash into the pockets of the lawyers and judges (your watchers). The whole process is tawdry beyond belief! ("Justice" is merely an excuse for insatiable greed.) You will not feel very sanguine about being a watchee after witnessing such a fiasco. See:

Victims on Trial: The Everyday Business of Courts
By Jeffrey A. Tucker
Posted on 12/17/2007

http://www.mises.org/story/2817

This refusal of the government to continue to inform the public regarding the M3 numbers, even while the government begins tracking your bank transactions, and listening in on everything you do, is just another manifestation of information inequity. It is quite obvious to me that no society can be free, or even decent, if information inequity exceeds some tipping point. I believe this is a matter that Americans need to begin addressing with great vigor.

[Elaine Meinel Supkis]

Yes, we can't simply record things, if we have any conversations or confrontations, one must ALWAYS say, 'I am recording this.' Or, 'I am having a witness watch this.'

I have done this all my life. These simple words legalize things. Just as identifying oneself correctly is part of all legal cases concerning the public. 'I am [fill in the blank] and I intend to take this to court' is all one needs to do. People don't realize this and they THEY ARE NOT WARNED ABOUT THIS.

It is so simple. But then, we are losing our civil rights left and right and now simple things are much, much harder and much more dangerous. Due to bin Laden. HAHAHA. And note that he wanted this to happen. He wants us to become the effing Soviet Union. He thinks, the Soviet Union could be destroyed so if the US imitates the SU, we will be destroyed.

He is correct.

And our rulers should all be arrested and put in prison and water boarded.

[Elaine Meinel Supkis]

And thanks for the comments, Blues. You are right about much of what you said.

[DeVaul]

I agree with blues about education possibly being the next bubble. It is an absolutely worthless undertaking at this point in time and the cost does not justify the results by any stretch of the imagination.

These future diploma mills will simply grind out out debt slaves.

[blues]

In probably most states, it is still perfectly legal to have a candid camera, or tape recorder, in your home or car. The telephone is covered by federal laws that require you to tell people at the other end that you are recording them. By the way, in a business situation, I always assumed that people would record conversations, and then make transcripts "from memory." How else to compete with those who do likewise?

The information inequity concept means that there must some balance in the direction of flow of information. For example, if the executive branch is allowed to steal private information from congresspeople, and then refuse to tell Congress anything, for various "reasons," that is a problem. This is the same for the relationship between government officials and the people. Absolute information inequity is the red flag of tyranny.

[Blake]

Re: If you go to some college, your professors will be making about $100,000 a year. And each professor is backed up by "1.7" "administrators" who make $120,000 a year. This can't last for long.
------------------
I know I went to college AGES ago (91-94), but it wasn't like that then. This was the most successful, well-funded state U. in my Western state. My lib arts professors were making more like 35K ... which rendered them almost homeless. The real money circulated in a shadowy way around the hugely successful football team, and cozy alliances between corporations and the engineering department. If profs (who aren't actually working for Amgen, Dow Chem etc.) are making 100K plus now, things have changed.

Still, I feel that college for the sake of higher education is worthless, and financially crippling.

[DeVaul]

I went to college in the early eighties and my mentor made 17k a year as an associate professor. He was the only person on campus who taught me anything about the real world and I was EXTREMELY lucky to have had him as a mentor and friend. He was a French and German teacher and my major was German. 50% of the students at my private liberal arts college were "econ" majors and their goal in life was to "make money" and become millionaires. That was it.

My education (such as it was) cost $16,000, of which I received $8,000 in aid and the other $8,000 in loans. I was considered very poor and not allowed to have a car my first year there. I also had to clean dishes and do other work on campus. It took me many, many years to pay off that $8,000, but I finally did it at the end of 1991.

Today, students come out with 100 grand in loans or even more and I have no clue as to how they expect to pay back such a ridiculous sum of money in a declining wage society that offers only decent wages to doctors and lawyers.

Only doctors can pay back that kind of money in a reasonable time period, and ONLY if they choose to live frugally for three to four years after 8 years of school and 3 years of residency where they make about 6 dollars an hour (like my ex-wife did).

Most cannot fathom doing this and so they go berserk after they land that $150,000 starting job as a physician (like my ex-wife did). Big houses, big cars, etc. are the order of the day, and student loans come dead last.

[blues]

I looked this up at UMass some years ago. Most professors make less than $100K, and it seems to vary hugely, with some getting $70K, and some getting $120K, but it's weird. Because there was no even faintly obvious rime nor reason to the discrepancies. Some of the techie areas did seem to be associated with (somewhat) higher pay. The shocking thing is that, utterly unlike previous generations, a giant army of "administrators," mostly administering to the most arcane things, has sprung up. So if the university does, say, animal research, there is some administrator there to give the operation a "blessing," and that administrator gets something like $160,000 a year to do basically nothing.

This has redefined the whole institution in a way that turns students into debt slaves. Years ago, the government decided that it was unfair that students could graduate and then just go bankrupt, but keep their diplomas, so, no more bankruptcy for students. But that just made it easier for the university to extract money as debt from the students, and has led to debt slavery.

I actually did the math once. Say each classroom has 30 students (seems high, but some "classrooms" had 300 students) If each professor gets $70,000 a year, plus $5,000 for administration, and each classroom costs $12,000 a year, then overall (of course this is prorated in the sense that each students visits several professors and classrooms each day) that comes to $87,000/30 per student per year. Which is basically $2,900 per student per year. If food and board are added at $10,000 a year, that becomes $12,900 per year. At four and a half years (average actual time) it comes to $58,050 per student (with no financial aid considered). But that is not what people are paying these days!

[Elaine Meinel Supkis]

Heads of departments who are in demand make good money. My dad was the head of several departments on top of extra money from the government for his many services in both light and dark diplomacy [super-secret/super-dangerous stuff.

Guess what?

HE ISN'T ALONE. The professors like my dad who go around the planet every several months, got to meetings in Davos, etc, go to DC, go to London, hobnob with Kings and dictators, these guys have big houses, several cars and brats like me. I was super-brat when I was a teen. Arg.

Disgustingly bratty. And we brats of the CIA knew each other via various signs and obvious things. Dad head of department/dad disappears to strange places that end up in the news/dad has lots of money/university president bows to daddy and says, 'Yes SIR' when daddy tells him to jump.

The rest: they are semi slaves if associate professors or full slaves if graduate students. Thus, the third world exploitation is in SPADES at Universities.

[blues]

Yeah, heads of departments always got more. But there was a surprising inconsistency about the pay. Incidentally, I should have said "rhyme nor reason." Seems Shakespeare used it a lot. (No one to this day seems to know who this Shakespeare really was.)

[Elaine Meinel Supkis]

The penetration of the CIA in our University system is systematic, deep and very powerful. And it pays great. Trust me on this.

[archer]

Late to this, but quick comments: Elaine is right re gold. It has no intrinsic value. The Mayans used a particular type of feather as their currency. Diamonds are actually a better form of flight capital. Jews would sew them into the lining of their clothing. You can't do that easily with gold.

In fact, one reason it took the Bolsehviks firing squad so long to kill the Romanovs was that the women, preparing to escape, had pinned all their jewels, which had a lot of diamonds, inside their bodices.

Trivia: in New York, it is legal to record your own conversations, thus you aren't obligated to inform the other party. But that works only if you might use the recording in a matter that would be heard in state court, like a contract dispute, since contracts are governed by state law. Intellectual property, by contrast, is a Federal law matter, so there you'd need to notify the other participants.

[Elaine Meinel Supkis]

Archer, you are sort of right about the recordings. If you use them ONLY for court cases, you can do it but under very strict limits. I have done this so I had to be very aware of the rules. Especially when I was tangling with high up politicians. They are an ornery lot, by the way.

In general, if someone leaves you a message, it is not private by definition. And if someone calls you and starts threatening to kill you...this has happened to me more than once, by the way...you don't need permission to record threats.

If you call THEM and they threaten you, you can't record them unless you warn them. It is the principal of 'you are bothering THEM by contacting them,' principal. At least, 20 years ago when I used to do politics, this was the general guidlines we used.

[Elaine Meinel Supkis]

Also, Archer is correct about diamonds. And yes, the Romanovs had hidden diamonds on themselves which were impervious to gunfire. That sad family, it is such a tragedy they were all murdered. And like the similar French Revolution, it simply grew and grew until millions were murdered by the State.