Nostalgia

I started buying gold 3 years ago when it was still below $1000 an oz. Since then it has gone up to $1730 (today's price). I have most of my money in silver though. 3 years ago it was below $14, and now it is about $34.

Throughout the past 2 years, I have been trying to tell people about the history of monetary systems - not because I want to turn people into investors, but because I believe this is an essential knowledge that people need to have to protect their future generations' or their own savings and wealth. We are in a period of human history where there is massive inflation across the globe, and I expect such an episode to recur again in the future.

I have been trying to convince people that gold/silver is not a bubble. But the cries of a bubble is really big. One day, people are going to look back at $1000 (or $1730) gold and $14 (or $34) silver with nostalgia, and they will not believe that they could have been snapped up at these price levels.

In the interim, I expect prices to fluctuate up or down sharply as more and more short-term speculators come into the gold and silver market. Speculators don't create a trend; they jump onto a trend. This gold and silver bull trend has been going on for about 12 years now, and they will end one day at very high prices. That might be the time to sell then, unless maybe the world got back into some form of gold or silver standard. Till then, it'll be a veryyy patient wait.

The real statesman

watch this obama, if u really want to change america. here's a real statesman who educates people and changes their lives. 

How many people talk of a politician who changed their lives, made them study history, and read books on Mises, Haye

k, Rothbath, Austrian economics, and libertarianism, and voluntarily go to incredible lengths to spread his message? And inspired locals and foreigners alike to come in voluntarily to urge him to run for presidents, and raise funds and campaign for him?

Which politician warned about the real reasons behind terrorist attacks, and predicted the financial crises, and dares to take on the financial and military establishments?

A quick search of "Obama incredible" and "Ron Paul incredible" on youtube shows obvious results on whose supporters really believe in each politician's messages.

Boom and busts in US in the past 2 decades

Jin's report on the previous 2 bubble busts in the US. A good study for those who wants to understand where economic booms and busts come from, and that stimulus and bailouts WILL NOT work. The booms and busts in the past century (not the subject of this short report) show the same patterns which I am presenting below.

Refer to the link for the numbers: http://www.federalreserve.gov/monetarypolicy/openmarket.htm#2008

Here's a summary:

  

Alan Greenspan, the supposed 'great maestro' of the Federal Reserve, printed a bunch of money out of thin air, thereby lowering rates from 8% in july 1990 to as low as 3% in 1992. This started the housing and stock market boom. He tried to increase rates incrementally, up to 6.5% in May 2000. Of course, this pricks the stock market bubble. The stock market fizzled out and culminated in the big bust in 2000-2001. 

To save his buddies and help George Bush, he again printed a whole bunch of money out of thin air, thereby lowering the rate to 1% by June 2003. This whole new bunch of money went into speculations in real estate (although I think its roots can be traced as far back as 1992). The Americans went on a GIANT consumption binge - borrowing, importing and consuming foreign products much more than what the Americans themselves can pay with exports. We saw people buying multiple homes and renovating them, in the hope of selling them to someone else. This wild speculation was further fuelled by the moral hazards of Fannie and Freddie, entities created by the Federal government to encourage home-buying.

Alan greenspan tried to increase interest rates by 0.25% every 3 months, from around early 2004 onwards, reaching 5.25% by June 2006. This action starts to prick the housing bubble. 

After taking over from Greenspan in Feb 2006, and towards the end of 2006, Bernanke should have noticed the real estate bubble about to burst. So he promptly lowered rates. He appeared in the media numerous times to assure everyone that everything is alright. The real estate bubble burst in late 2007-early 2008, although AFTER the bubble had already started to burst, Ben Bernanke was still reassuring everyone that everything is alright. (a video here for your viewing pleasure: http://www.youtube.com/watch?v=9QpD64GUoXw)

To save his buddies and help Obama, Bernanke printed a crazy whole new bunch of money out of thin air, thereby lowering the interest rates to 0-0.25% by late 2008, and had remained at that level till TODAY! He tripled the Fed's balance sheet from $900 million to close to $3 trillion. Expect massive inflation as the magic money works its way into the economy.

We see a pattern of booms and busts here, which is really the creation of the Central Bank. This 0-0.25% rate is ushering in the FINAL and BIGGEST bubble of them all --> the US government bond bubble/the USD currency bubble. Just like how the magic money flowed into the stock market in the 1990s, and how the magic money flowed into the real estate market in the 2000s, this new magic money is flowing into US government bond at a massive amount. The government is borrowing like never before. In 2013 and 2014, they have more than $5 trillion in debt repayment. We should see a big crisis, with investors dumping bonds and the USD. Some other events may happen in the interim which may take people's attention away from the US, but the end result will not change.

When we hear central bankers talk about exit strategies from the stimulus, they are lying. There's no exit strategy without a big collapse. Of course, maybe Bernanke's exit strategy is to exit and flee when his term is up for renewal in jan 2014.

Basel III and gold

Gold to be rated as the so-called tier I capital in Basel III in Jan 2013. Conspiracy theory ??

http://www.meridianca.com/fileadmin/PDFs/TheSecretReturntotheGoldStandard_BrianHicks.pdf

The road system

Insofar as govt wants to monopolize and manage the road systems, will it be better if they build double/triple layers of roads on top of each other and increase road tax, instead of simply charging COE? This way, at least they will be providing more services in return for road users' money, just like how a free-market will do. Or how about layers of cable-car-like structures, with people owning their small personal cable cars (modify them to look nicer)? 

How about opening up the road systems to private enterprises to manage and compete with each other? After all, some countries have this system of private ownership of roads. And back then during the industrial revolution, american private enterprises built water canals that criss-crossed the US for steam-ships, using private funds. The free-market works in transportation too, just like how it works wonderfully in the tech sector, where there's minimal govt intrusion.

Why education costs keep going up

classic. the answer to why education costs keep going up.

Prof says gold is a bubble

nice.. guy secretly recorded prof's and TA's responses to his question. The TA claimed that gold is in a bubble (the wrong part), but yet said that there is not enough gold to go around because the price is too low (the correct part).

It's

 not that there is insufficient gold for world trade. It's that the price is too low for trade. The same is true back then towards the end of the gold standard, when ppl claimed that there isn't enough gold. Unknown to them, it's because the central banks refused to allow their currencies to depreciate vs gold (and hence let gold prices go up) as a result of money-printing, so that there will be 'enough' gold for world trade.

Social Welfare

One of the unintended consequences of the government's interference in the market.

http://www.dailymail.co.uk/news/article-2233221/Dennys-charge-5-Obamacare-surcharge-cut-employee-hours-deal-cost-legislation.html

Ron Paul's farewell speech to Congress

if only obama (and most other politicians) have even 10% the integrity and wisdom of this good statesman on liberty and economics, the world will be a far, far better place.

He's one of the greatest presidents America and the world never had.

The ONLY reason a nation exports, is to import.

Many people today have forgotten what world trade is all about. These are the people who say or write things like "export-driven economy" and "devalue the currency to drive export". They think that you can build a wealthy society using an export model. Well, they're partially right.

You see, export is essentially the same as import. To export is to import. This is what TRADE is about: You send your goods abroad, and get foreign goods in return. When you throw currencies into the mix, it confuses things very very easily.

People think that you can cheapen your currency and therefore sell/export more to the world. They forget the other side of the equation: Your cheaper currency will make imports more costly. They also forget that the other nations can just as easily cheapen their currencies. They also ignore the fact that there is practically no historical evidence that a cheaper currency drives exports.

People think that it is great to build up gigantic trade surpluses by exporting. They forget the fact that you are just merely sending your goods overseas in exchange for PAPER money. It is okay if the paper money doesn't lose value overtime, but in the current central-banking era of human economic history, don't place your hopes on that happening.

You are sending your goods/services/productivity abroad, and what do you get in return? If you spend your export 'money' immediately to import, then that's okay - because the 'money' has not lost value. If you save up your export 'money' for later use, you will get lesser in return. Because the currencies lose value and buy less goods over time.

People also forget that by cheapening your currency (by printing money), you create inflation at home. True, those export companies that you try to help will have more sales overseas. But at what cost? Your people LOSE purchasing power. Prices of goods at home rise. Costs of imports rise. So, when people want to devalue the currency to increase export, this is nothing more than a transfer of wealth from the citizens to those few exporting companies.

I have a hard time explaining to people that you don't want to export just for the sake of exporting or accumulating paper money. You have to import too, either now, or later in the future. But you have to import eventually. Otherwise you are just sending your goods overseas in exchange for NOTHING (ok, you have some pieces of paper money). There's no such thing as perpetual export and no import. That's SELF-IMPOSED slavery. Or that's like sending TRIBUTES to a foreign power. :)

So, in closing, the ONLY reason a nation exports, is to import.

P.S. China is a manufacturing-driven nation, not an export-driven nation. So don't lose sleep over the fact that their exports will go down. They can easily consume what they produce, instead of sending their goods overseas in exchange for paper.

Secession

Jim Rogers once wrote that there is no country in history that has lasted for more than 200 years with the same borders or the same government. 

Will US go down the same road?

"All 50 States Have Active Petitions To Secede From The United States"

http://www.youtube.com/watch?v=LVO6G4fvgiI&feature=g-u-u


"Ron Paul: Secession Is an American Principle"
http://www.youtube.com/watch?v=nhQ31b_dbnM&feature=g-subs-u

"700,000 Americans petition the White House to secede from the US"

http://rt.com/usa/news/petition-white-house-secede-688/

US long-term Bond Bubble

http://www.bloomberg.com/news/2012-11-13/treasuries-see-u-s-over-cliff-as-yields-converge-correct-.html

This is what you call a bubble. Investors think US is in trouble, yet they still do the knee-jerk reaction of fleeing into US bonds, just like in 2008. 

"bond investors are seeking safety from a possible downturn next year."

Well ok, maybe some expect the Fed to ease further and push bond prices up, so they speculate. They know that bonds are not worthy to hold for the long term. In this case, it is clear that they just want to 'flip' bonds, just like how they flip houses prior to the housing bust in 2007/2008.

it's coming

The US has been bankrupt for a few years now, although the general market has not recognised it. Spain, Greece, Portugal, Italy, Ireland have been bankrupt for the few years leading up to their current crisis. The general market was late to recognise it too. These nations are as indebted now (in fact, more) as they were a few years ago. But they were able to buy some time due to the low interest rates in the past. Once rates start to rise, the party is really over. The same calamity will befall the US too.

I doubt that the US can postpone the pain for much longer. The budget numbers are just too horrendous.  Although I don't like to make predictions with regards to timings, if I have to,  we should see a huge crisis hit the US in the next few years. Some other things might happen which will delay the day of reckoning (eg. the world turning its attention to Japanese debt). I think things will ultimately become really bad, and here, I attempt to list down some of the things that will happen in the US:

• A currency crisis
• A government debt crisis
• Rising interest rates
• Fed and government will do "whatever it takes" to support the dollar
• Fed or govt announcing Operation "Who's your Daddy" to support the economy
• A panel of seasoned 'economists' are formed to 'study' the crisis
• Co-ordinated effort by the Fed and financial institutions to purchase US bonds
• Banks lose big on government bonds
• Major bank bankruptcies
• Bailed out financial and auto companies in 2007/2008 fail again
• More money-printing
• More taxes
• More bailouts
• Student loan bubble burst
• Problems in the major and old colleges
• Bankrupt states, municipalities, cities
• Big rise in food and energy prices
• Government imposing price controls
• Price controls result in shortages of goods
• Riots in the streets
• More regulations and laws passed by the government
• More civil liberty lost as the government passes more laws in the name of tackling the crisis
• Gold, silver, platinum, oil, commodities prices soaring
• Wild swings in precious metal prices as speculators get on board
• Dealerships announcing a shortage of gold/silver bullions
• Even more people on food stamps and unemployment benefits
• More immigrations out of the US
• More people renouncing their US citizenship
• Politicians blaming the US crisis on the Chinese "currency manipulation" and the Eurozone crisis
• More capital controls
• More protectionist trade policies
• Possible ban on short-selling as traders get blamed
• Politicians trying to assure the market that things are under control
• World leaders announcing a 'concerted effort' to tackle the crisis
• China and Russia, and more countries hoarding more gold
• US hostilities with Iran deteriorate
• More countries trading using their own currencies, bypassing the USD
• Stock market may go up, down or sideways in terms of USD - but it will plunge in terms of gold/silver
• Stock exchanges closed to cool the market down
• More calls to use the SDR

And maybe further down the road,

• A ban on gold exports
• Issuance of a new US dollar