Tuesday, December 29, 2009

The true numbers. Shadowstats.com, and some Recap to round up the Year 2009

I have been very interested in subscribing to shadowstats.com, run by John Williams, but the fee is too high for me right now. Anyway, this guy seems to be a respectable economist/statistician in the Austrian economics circle. And from what I've seen and read so far from numerous sources, his numbers are definitely very different from the official numbers that the US government provides.

I've also read another book called the Dollar Crisis by Richard Duncan. It's a book full of such data as well, and the numbers from these 2 guys agree with each other. Those numbers are compelling, and using them, one can can explain past economic booms and recessions very very very well, and needless to say, predict the future.

And oh, one more guy: Gerald Celente from trendsresearch.com. I've already subscribed to his newsletter. Got a 50% discount from his website!

These people have been predicting economic activities for years, with great accuracies. If they've been wrong, they would have been out of business by now.

One wonders how the mainstream economists and analysts get to retain their jobs over all these years, considering how wrong they had been. You need not do more than to search for a few Youtube videos, and look at the wrong predictions that they've made over and over again over the years. One suggestion for your Youtube search engine: "Peter Schiff was right".

These great teachers of mine ( Jim Rogers, Gerald Celente, Peter Schiff, Ron Paul, Richard Duncan,  Tom Woods, Marc Faber) follow Austrian economics. Our current system of Keynesian economics is ultimately unsustainable, and highly damaging to society, as I've repeatedly explained in my earlier posts. Also, one has to keep in mind that our current monetary system is less than 40 years old. Already, there're way too many loopholes. Unprecedented number of bank failures, unpredictable business environment, huge fluctuations in FOREX, the too-big-to-fails, are just some of the results of this system. Austrian economics can explain these perfectly. Keynesian economics, on the other hand, will strive to explain that this is part of the process, not wanting to confess that Keynesianism was what created all these mess in the first place. One just needs to understand Austrian economics to realise how simple economics really are overall. As I've mentioned before, a good place to start will be: http://mises.org/money.asp 

I love quotes, and here's a nice one:

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion or a later as a final and total catastrophe of the currency system involved."
                                                                                 Ludwig von Mises – Austrian Economist (1881- 1973)

Happy New Year Everyone

Friday, December 25, 2009

US is at the mercy of China, and our current economic/financial system

This video just about sums it up. The US, being the largest debtor nation in the history of mankind, has no hope of financing its activities once the world stops buying up its treasury bonds, or in other words, stop lending money to them. The US owes $800 billion to China, and China being US' largest creditor can stop lending to the US any time. In fact, its US reserves holding have been flat since March 2009. There are so many people (on youtube for eg.) who still try to argue that China has no choice but to keep on buying US debts, because otherwise the USD will fall and China will lose all its money since it is holding on to so much USD. Well, if I were China, I will rather exit now, salvage whatever value I have left in the USD now, rather than keep on buying the USD and eventually let it fall to zero. It is really choosing between the 2 evils, and I believe China is smart enough to choose wisely. They have been making  a lot of noise about the USD recently, and are diversifying into gold.

It is unbecoming that the great empire of US has to get FED to buy its own treasury bonds. The govt issues debt and the govt buys up its own debt?? Anyway, it's not like the FED has the money to start with. The FED can only buy the bonds by printing more money out of thin air. In any case, the US is essentially funding its cash shortfall by printing money and therefore further eroding the value of the dollar. To attract foreign buyers of its debt, the US has to raise interest rates a lot. But in doing so, its short-term interest payments to creditors will also balloon. Talk about being in a quagmire.

The US is just like any other empire in the ebb of time. Great empires rise and fall. They achieve awe-inspiring technological, economic, social and military advances. And then they start to weaken. That has been the case for all the great empires of the past that I've studied. The great Roman, Maya, Aztec, Mongol, Ottoman, Byzantine, Greek, Persian, Chinese empires are just a few example. The 18th century belongs to France, 19th century belongs to Spain, 20th century belongs to the US, and now the 21st century will belong to China.

So put into the perspective of history, I don't find the US really that special. The fact is that they've way over-extended themselves for several decades, and the time of reckoning is very very near. Please note that I have nothing against the US people. I care for the people of the US, but I feel that the politicians have really let them down.

The US' great experiment with socialism and Keynesian theories have failed.

You can't just steal wealth away from parts of the population and give benefits to the other parts of the population (eg. education, health, farming subsidies). Why would 300 million people pay money to subsidize  a few farmers?? Like Jim Rogers love to say, the US will be better off if those 300 million people guarantee the farmers a life-time of salary, a car, and a house, and in return, the farmers quit farming. Allow foreign crop produces to compete. The Americans will have lower prices and a much better life.

You can't just steal wealth away from the population and give them to the bankers, those people who don't produce real tangible goods. The stimulus package is just to save the jobs of a few people in Wall Street, that's all. Talks about saving jobs with the stimulus package is ludicrous. Obama said that without the package, unemployment will rise above 8%. Now it's 10%, and he's left scratching his head as to what went wrong.

You can't just keep on throwing money into the unproductive parts of the economy. For decades, people have been going to college, getting degrees that will get them into Wall Street. That is an unproductive sector of the economy, which produces no tangible goods. There's a real shortage in the productive parts of the economy, and one which stands out is agriculture. Producing and saving gets a nation out of trouble, not consumption and bad debt. Note that I used the word bad debt. Because that's what the US has in huge unpayable quantities. It borrows, and squanders all those money away. So little money went into improving its productive capacity. All those money went into unproductive sectors (eg. education, healthcare) and senseless projects designed to stimulate public consumption (eg. cash-for-clunkers, housing rebates), and of course, money went to the foreigners as well. The FED gave away money to foreign banks, foreign companies which are counter-parties to the US institutions in derivatives trading. The ultra-secretive FED won't even reveal to whom those money went to. It's public money, and they have the rights to know!

That's essentially what the US has been doing. No wonder there's no growth, no wonder there's high unemployment. Money is invested so wrongly.

Seriously, if people really understand the financial and banking system of the world, they'll see how unfair it is, and how morally wrong it is. Bankers can just create money out of thin air, they can inflate money at will, they can charge interest on those bogus money, and the most evil effect of all these is that they erode the public's wealth. They steal the public's wealth not by making you buy from or pay to them, but just simply by the act of creating money out of thin air. The full explanations can be found in my first 3 posts in this blog I believe. It doesn't take a rocket scientist to figure all these out.

Henry Ford, the founder of the Ford Motor Company, have a quote which I like:

"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."

Well, the reason why I focus so much on the US is because their downfall will really rock the world. There'll be a period of hardship.

Our current system is unsustainable. This system requires that we have a consumerism culture, that we have perpetual and increasing debt in the world, that the public's wealth be eroded over time, and that the earth's resources are used up at an exponential rate. In the end, all the earth's resources will be used up. There'll be no where to run to, and the system will finally implode on itself, if it hasn't already earlier. There needs to be a real fundamental change, which I can't see occuring in my life time. Perhaps a hundred years from now, things may be different.

Wednesday, December 23, 2009

Always Improve, Don't stay stagnant

This post is a bit personal. But I hope it gives you some insights too.

Am i still improving? The past 5 months had been a whirlwind of absorbing new knowledge, especially Austrian economics, politics, and history, and the investment opportunities that come along with the understanding of these topics. This blog has been one which I use to consolidate what I've learnt. While I still consider my knowledge in these areas basic at best, I am nevertheless steadfastly devoting time to study them.

However, I'm increasingly realising that I am actually being stagnant instead of progressing. I want an exponential learning curve, not one which is steep at the beginning and tapers off after that. This seems like the case to me now. Although I've been reading lots of news and watching documentaries/debates/discussions online, come to think of it, my learning curve is not going up as greatly as it was 4-5 months back.

If everything becomes easy to understand and doesn't induce me to think deeper or question, then I'm most probably just adding similar knowledge to what I already have. So I have to move on from here. It's so easy to fall into a comfort zone.

Goldsilver.com has been a big source of my reading materials. Now I'll treat it as a site for news updating instead of one which gives me new, unfamiliar knowledge. So my focus should shift a lot to reading books at a faster rate. Been a tad-bit slow in reading books recently.


Keep on improving! And an early Merry Christmas to you.

Thursday, December 17, 2009

Investment Biker, and some personal thoughts

It's time for another book review. I've just finished reading Jim Roger's Investment Biker, about a week ago.

In around 1990, Jim set out with his then-girlfriend Tabitha to travel around the world on motorbikes. The first leg of the journey started in Dunquin (Ireland), through to Vienna, Istanbul, Ankara, Tashkent, Beijing, and finally to Tokyo. The second leg took them through the Siberian wilderness, all the to Moscow, through Warsaw, Berlin, London, and back to Dunquin again. The third leg took them to Amsterdam, Tunis, Algiers, Tamanraset, Kano, Bangui, Kinshasa, Harare, Johannesburg, all the way to Capetown in South Africa. From Africa, they flew to Perth in Australia, and started the fourth leg of their journey which took them from Perth to Darwin to Hobart to Sydney, and finally to Auckland in New Zealand. From there, they flew to Cape Horn in the southern tip of South America, and started the fifth and final leg of the journey to Buenos Aires, Punta del Este, Santiago, Lima, Cuzco, La Paz, Bogota, through the nations in Central America, to Mexico, New York, Alaska, and finally back to San Francisco. If I remember correctly, it took them about 2 years to complete the journey, covering a total of 60,000 miles on their bikes.

The book detailed the various forms of governments that Jim saw around the world, the various economic policies that these governments had in place, and the various investment opportunities that had presented themselves to him. I'll try to recall some notable things that he mentioned. Note that all these were in the context of the year 1990.

Russia: A statist government. State-controlled economy. Businessmen were given quotas to fulfill. Eg. You have to produce a certain amount of oil in a given year. The result: these people just strive to fulfill their quotas. They do not plan for the long term. Oil fields were not maintained properly. After all the easy oil near the surface has been extracted, and after these people have fulfilled their quotas, the oil fields were stripped of whatever they can get their hands on to sell. There're still more oil deeper underground but the oil fields were no longer working. Compare this to a capitalist: A capitalist will strive to squeeze every single penny that he can from the oilfield. The oil field would have been maintained properly, and he would have planned long-term and extracted oil till the last drop.

China: The Chinese has great work ethics. The government is loosening economic policies. Compared to the Russians, the Chinese are far more efficient. Farmers plant crops right to the last centimeter of their farms. Everything was economical. However, Western China was far underdeveloped compared to Eastern China. Jim also had dealings in the black market. One good way to judge a country is through the black market. Eg. If you can exchange your dollar for more renminbi in the black market than  in a bank, it means that the government has artificially kept the renminbi low. This is not good for the economy in the long run.

Siberia: Jim and Tabitha went from town to town across this vast land of emptiness. The towns were like ghost-towns. The local people had nothing to do. Their favourite past-times were drinking and sex. Shops were open but no goods were found inside. Why? Because of the statist government. Prices of goods have been kept artificially low for years and years. They did not change at all! The result was that entrepreneurs found no incentive at all to start businesses. What's the use, when you can't make a profit? Again, Jim turned to the trusted black market. The townspeople figured that people travelling across Siberia would need gas, and Jim were able to buy from them. Jim had arrived in a town where he witnessed a great scene. The locals had swarmed a shop which has a new stock of a gold jewelry. Gold is such an honest money, Jim wrote. Nobody wanted the rubles. Paper money based on nothing. All paper money loses its value over time because of the government. Gold doesn't, because governments can't print gold.

Poland: Poland used to have a statist government too, but the country had since embraced capitalism, and it is prospering. There is free trade, and capital flowed into the country.

Africa: Diseases, corruption, famine, wars, statist governments. Super rich elites, super poor ordinary people (America is going in this direction at neck-breaking speed). Jim travelled through the Sahara desert, where dozens of adventurers perish every year, war zones, ghost towns, etc. He saw first hand the fight between capitalism and statism side by side. There was a nice tourist attraction shared by 2 countries, Zambia (statist) and Zimbabwe (capitalistic). The capitalistic side of the tourist attraction has many resorts, hotels, and lots of tourists. On the Zambia side, there was only one hotel (why waste money and build more? They all serve the same function) and very few tourists. I know what you're thinking. Zimbabwe?? But hey, it's not capitalism that has caused hyperinflation in Zimbabwe today. It's the government's foolish printing of money out of thin air. Anyway, capitalism clearly brings wealth. Government-controlled economies are just failures. Unfortunately, just as Africa is learning from this and starting to emerge out of statism, America is falling right into statism in our world today. It was not all gloom and doom in Africa. Botswana and South Africa were the jewels in this continent. The government did not control the economy, and allowed capitalism to work to its full glory. Jim started a stock trading account in Botswana and bought all (if i remember correctly) the shares.

South America: Similar to Africa, in that it has tried to be statists, but failed. Now they're also slowly converting to a free market-based capitalism. A great potential in this continent. Chile was the crown jewel here. A vibrant economy! Peru, on the other hand, was embroiled in a bloody civil war. The opposing faction to the incumbent party had resorted to violence, in an attempt to cause disorder. They're called the Shining Path. These extremists had shot down all tourists that visited Peru. As a result, tourists were a rare sight in this country, Jim and Tabitha being one of them. Despite the turmoil, Jim felt that a fundamental change was imminent, and proceeded to set up a stock trading account here.

The Darien Gap: No road had connected South and North America. Jim reasoned that anyone who can build such a road will be fabulously rich. This will be something like the Silk Road which revolutionalised travel between 2 parts of the world.

North America: Mexico has also learned its lesson, and is embracing free-market capitalism. The USA, unfortunately is going in the opposite direction, as you would have noticed from my consistent rants in my previous posts.

From the reading, here're the few things about Jim's investment philosophies which I picked out:

1. Look for something which is very depressed (yeah, a no-brainer, you say). On Youtube, Jim often says that he doesn't like to jump on something that has started moving upwards in price. Jim invested in wool in New Zealand, because years of government-controlled prices had kept supplies low, insufficient to satisfy demand. He invested in Botswana as well, and one South American country which I can't recall. Right now, silver is still very depressed, 70% below its all-time high. Some agricultural products are even more depressed.

2. Do not lose money! What I've been taught in school is that it's okay to lose money, just make sure that you earn more than you lose. I found this kinda weird, and it definitely is a no-no strategy for Jim. If you don't lose money, and can invest at 10% returns per year, you'll be rich. Compounding is the magic of investment. The mistake that most investors makes is that once they had gained some returns from an investment, they immediately look for another investment to dump their money into. For Jim, it is wiser to let the money sit in the bank and do nothing first, and only invest those money when you're very sure that you will not lose them.

3. It all boils down to supply and demand. Government intervention in the economy distorts this delicate balance. As a result, there'll be years of under-supply and years of oversupply of commodities. This equates to fabulous profits, if you can figure out demand and supply.

4. In an emerging market with a new stock exchange, and where a fundamental change is imminent (eg. change from a statist to a capitalistic govt), it is often safe enough to buy stocks of the big companies. They are much more stable, and their stock prices are still depressed anyway. This was why Jim bought all the stocks in Botswana (7 of them if I remember correctly!!)

Jim also wrote that no borders between 2 nations stay constant for over a 100 years. They are always changing. Economic conditions will be the dominant determinant of the constant re-drawings of borders across the world. Civil wars and people's revolts will keep occurring, as they have since the dawn of history. Over the past few days, I've watched tons of documentaries on previous empires. The empires of France, Rome, Byzantine, Ottoman Turks, Persia, Mongol, Chinese, Greece, Aztecs, Maya, Franks, Huns, and the Goths. It seems like there're revolts in each of them! When people are oppressed long enough, and pushed to their limits, they will revolt. It is already happening in America like I have mentioned in my preceding blog post, just that nobody is noticing it. No one wants to. Note: America had civil wars and revolts before. Its currency has failed twice before. These will happen again. Maybe not the civil war part but there'll definitely be more violence. Gun sales has increased a lot over the past year.

Recently, I had a sudden realisation too. It seems like the number of billionaires in our world today are increasing, and this gives people the illusion that we are having unprecedented wealth and prosperity, that money is everywhere! I think caution needs to be thrown into the wind here. What have increased may not be the wealth of the population as a whole, just that purchasing power has been transferred from the population to this elite group of people. If you had lived 1000 years ago and you had, say, $10,000 (not a big sum of money to a lot of Singaporeans today?) you may be a millionaire or a billionaire by today's term. There are many millionaire- and billionaire- equivalents in the ancient world. There are many million- and billion-dollar building/megastructure equivalents in the ancient world. So don't be fooled into thinking that this billionaire trend is a new phenomenon, that money is everywhere and everyone can be rich. The fact is, given our current economic and financial system in place, this is IMPOSSIBLE. The middle class will continue to lose wealth as the elites suck them dry. Today we see billionaires in the world because our paper money supply has exploded exponentially over the past few decades. The purchasing power of these billionaires may be similar to the purchasing power of the elites who had lived in the ancient world hundreds or thousands of years ago. Well, this looks like a reasonable guess to me.

Anyway, back to the book: I've learned a great deal of things from this book. An understanding of history, politics, economics (Austrian!!), and philosophy will go a long way in making one wealthy. I've also learned how one should tackle border-crossing problems, corrupt officials, bribery, and all the little details that will make such a trip around the world possible. It is definitely a very difficult challenge, which I may attempt in the future!

The next book I'm reading would be Adventure Capitalist, another book by Jim Rogers on his 2nd attempt to travel around the world (around the year 2000) in a custom-made Mercedes, with his then-girlfriend and current wife Paige Parker.

Saturday, December 12, 2009

Austrian Economics vs Keynesian Economics

Here's a great video of Peter Schiff vs some Professor. Austrian Economics vs Keynesian Economics. Naturally, Peter steam-rolled the Prof. The prof was reduced to small, pitiful comments (Don't get me wrong, I have great respect for profs. One of my great teachers, Jim Rogers, is a prof too). I've been watching such long videos a lot, and although I've absorbed and understood much of the stuff in these videos, there're still new things to learn each time!

I would venture to say that > 99% of the population somehow believe in or support Keynesian Economics. That's what the media, politicians, and schools (refer to the video above) have taught us for the past few decades. Every time I go to a bookshop, I'll take a look at the econs textbooks, and I will not find any mention of Austrian Economics in the glossary pages, only Keynesian Economics. 

Of course the politicians love it. It gave them control over the nation's money, over people's money. They can create money out of thin air to fund their agenda, and it gives them good GDP figures. But there's no such thing as a free lunch, the public will have to pay for it in the form of taxes or inflation (devaluation of the currency). Short-term phony gain, long-term real pain.

Austrian Economics will eventually triumph, as history has shown repeatedly. Keynesian Economics will most likely lead politicians to print money and cause hyperinflation. They are too afraid to sit by idly and let deflation set in (this will be healthy for the economy in the long run). Hyperinflation around the globe in the recent past: Argentina, Mexico, Taiwan, Germany, Zimbabwe, Zaire, Ukraine, Iceland, Austria, Bolivia, China, Brazil, France, Japan, Vietnam, Yugoslavia, England, Greece, Angola, and many, many, many more.

I've recently studied some history. I've watched documentaries on the French Revolution, the Roman Empire, the Byzantine Empire, the Persian Empire, the Mongol Empire. All of them have hyperinflationary periods where the rulers debase their currencies. 

History will repeat itself. No nation is exempt from this universal economic law. That's why it's a LAW. In the next few years, we can expect a very tough economic time, equal and very likely worse in magnitude to that of the Great Depression in 1930.

Unless the US creates some kind of a miracle during this Obama's term, equal in magnitude to the phenomenon of the internet revolution, it has no bullet left in its armoury to fight the inevitable doomsday.  It needs a real big boom in productive capacity. The internet revolution back then created real jobs, real products that are demanded by the whole world. The US may try to push their luck in green energy, but it has to be something really revolutionary, it has to be something more than wind power, solar power, nuclear power.

Unfortunately, the current administration are only interested in making people spend. and taxing them more. Cash-for-clunkers, housing rebates, the Health Bill, the likes! It's common sense that if we're in debt, we should start saving, and produce more. Instead, the govt is encouraging people to spend more, take on more debts, and consume more. The US people are up to their eyes in debt, and their revolt is only going to intensify. The govt has taxed the people through various channels. In fact a few months back, 700 demonstrations erupted nationwide against taxation without representation. The media simply dismiss this ominous sign as just some group of dissidents creating trouble. But be warned! The American revolution has already started!

The world has become police states. The govt try to control everything that people do, from drugs to flu vaccinations to money. They do this with the pretext of looking out for terrorists and ensuring public safety. There is no more liberty now. Fascism is beginning to spread.

Anyway, here's a good place to start understanding Austrian Economics: http://mises.org/money.asp
Start with understanding the Austrian Economics. In the past 3-4 months, I've been studying this, clarifying my doubts and questions. I've learned much more during these months than what I've learned in the 4 years in university x 100. The revelation is nothing short of phenomenal. It's like attaining Nirvana :)

What's the use of all this knowledge? It will translate to $$$, and protection of wealth, of course!

Jin ~ We live for the joy of learning

Thursday, December 10, 2009

Gold correction, US Unemployment Data

Gold has been hitting record highs day after day. In fact, in the past month, I can count on 2 hands the number of days that gold has fallen. The rest of the days, gold has been rising! Because of that, we're bound for some sort of corrections as investors pile in for profit-taking. Nothing goes up in straight all the way. As I've mentioned before, this will just be a temporary dip in a bull market. And gold is not just rising in USD, but also in other major world currencies. The whole world has printed currencies like mad. Cheap paper money, backed by nothing, producing nothing. If this is a way to wealth, it would have been discovered eons ago.

Anyway, recently we've been hearing from the mainstream media about the improving situation in the US. Unemployment is 10%, down from 10.2% (This is what they call the U3 measure of unemployment). Well guess what, the U6 measurement of unemployment - which includes discouraged workers, and people holding part-time jobs but are looking for perm jobs) is still above 17%. And here's a link to some real numbers:

During Obama's election campaign, he warned that unemployment will rise above 8% if there's no stimulus package. Sadly, even with the Obama stimulus, unemployment rate rose straight up above 10%.  The govt is still left scratching their heads as to why the stimulus is not working. If you look deeper into the recently published govt figure, you'll realize that most of the jobs created were in the healthcare and education sectors. These are services sectors, sectors that drain a country's coffers. On the other hand, the US has lost 45,000 (if I remember correctly) manufacturing jobs! You don't get out of debt by consuming more and producing less (common sense!). This certainly is not a recovery. It's a cover-up.

Well, one may argue that this is a jobless recovery. Seriously I wonder who coined this term to fool the public. It's like saying 'almost pregnant' (Gerald Celente's favourite phrase). There is no such thing! Speaking of Celente, I recently subscribed to his trends journal. This guy has been correct in predicting so many major trends, including the start of the gold bull run around 2000, the terrorist attack in the US in 2001, housing bubbles, the dot-com bubble, economic and financial crisis, etc. Proof: http://trendsresearch.com/forecast.html

This is not fear-mongering or alarmism. It's better to prepare oneself than to take it for granted that things will be rosy and alright. Anyway it doesn't take a genius to really figure out that things are really not alright in our world today. When the greatest depression - which is bound to hit the world - happens, we can expect worldwide trade to drop 30% or even more. There'll be untold hardship around the world. I've read a few newsletters that he has sent to me, and they're really great information that the public will never see (until it's too late). It only cost US$99 for 1-year's subscription. I managed to get it for $50 with a good reason (Yes you can get a discount if you write to him). I will be eagerly awaiting for his Trends 2010 report, which is due to arrive in early January 2010. Among his major forecast for 2010 is the US commercial real estate collapse, which I mentioned in earlier posts, and a high probability of a terrorist attack of 9/11 magnitude.

Look him up on youtube, he's really great to listen to!

Wednesday, December 2, 2009

Gold Record High, Silver Breakout, Bad investment adviser, UK Debt

(Picture from Goldsilver.com)

As expected, gold surpassed $1,200. It has gone up $250 in the past 3-4 months, an impressive run! Peter Schiff says that in the future we'll see much larger daily price fluctuations as gold become more popular as an investment asset. The technical bugs out there say that $1,200 is the next level for gold (sort of a support level, a floor on which gold can stand on and shoot for higher prices).

Silver looks set to break through $20. It has already risen by about $6 in the past 3-4 months, outperforming gold by a long way. Even so, it is still more than 60% below its record high set in 1980. If you adjust this record high for inflation, the number will be several times higher.

Today I came across an article in the Malaysian papers on commodities investment. Well, all I can say is that if people blindly follows this investment adviser's advice, they won't make much money. His article is just scratching the surface on this asset class, and he made simplistic arguments, the kind of arguments that I was also taught to in NUS. It just goes to show how bad our education system is in preparing people to play the game of money. Anyway, he ended by saying the upside potential for gold investing may be limited, given that the world economy is showing signs of recovery. I have to applaud his careful wordings, the use of the words "may be" and "showing signs". But if you were to invest, shouldn't you be more sure?

Anyway, I will argue that there's still a good upside potential for gold. Inflated adjusted high for gold is more than $2,000. It'll be more than $6,000 if you use the older (and more accurate) way of measuring inflation. Moreover, central banks around the world have become net buyers of gold for the first time in decades. India may yet again buy 200 tonnes of gold from IMF, China is still stealthily buying, Brazil and Chile should be joining in -given that they have a minute % of their reserves in gold - and there are reports that Germany and Russia are also set to join in on the gold rush. I'm mindful of a gold bubble, but the fundamentals are just too strong for gold.

What about the US? It is staring at a real prospect of its commercial real estate and bonds bubbles bursting. When the time comes, the govt will do what it does best: print more money. There will be another rocking of the economic boat, and the whole world will pump in even more money into the system. Already, the US government had allocated $11 trillion to weather the recent financial crisis. Take this number and divide it by all the gold in the world, and that works out to around a rise of $2,200 per ounce of gold. What about inflation of this $11 trillion through the fractional reserve banking system? Yesterday, under pressure to fight deflation, the Bank of Japan pumped in another 10 trillion yen into its system, and it is still keeping interest rates at  the ridiculously low level of 0.1%. When will politicians learn their lessons? They have been doing the same thing for years, with no result to show. Like Albert Einstein said, doing the same thing over and over again and expecting different results is insanity.

Yesterday, Morgan Stanley said that Britain faces a full-blown debt crisis over the coming months. Will it be next after Dubai? It is increasingly becoming a question of when this will happen, not if.

To round this up, I came across a simple phrase "Gold is such an honest money" in a book I'm currently reading. It's called Investment Biker, written by Jim Rogers. He used that phrase when describing how some Russian folks in a remote village in the former Soviet Union rushed to buy a gold jewelry that had just arrived at their village. The Soviet Union were in shambles then, and nobody wants the rubles. This scene was documented in his trip around the world on a bike in 1990. It is an exciting book, full of adventure, historical,  political, social and economic education. All these translate to investment education.

"Gold is such an honest money" explains why people have been piling money into gold in the past 9 years. It is not just another commodity. We have to understand that it is the oldest, most stable and reliable form of money. Why do people still invest in this 'ancient metal' till today?

As I finish up this post, a glance across to my TV screen shows gold at $1,214.70  :)

Gold futures hit $1,200, Gold Spot hitting same level any time soon

For the Dollar Bugs out there, it is still not time to join the Gold Bugs yet?  I'm not a gold bug, but at least it's a far better place to be than the dollar. The rise of gold prices is a reflection of a rapidly weakening dollar (which will continue for years, until the dollar's eventual collapse).

Relentless march of gold bugs. Be warned!

(Picture from extremescience.com)
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