Unfortunately, the Fed Chairman doesn't know history, economics and currencies. Or maybe he does and is doing this on purpose. If this is the case, then he will be the biggest criminal in the world.
Saturday, November 6, 2010
Monday, October 25, 2010
Saturday, October 2, 2010
Gold at record highs, even more gains for silver
Gold has been hitting record highs recently, breaking the $1,300 level. Its sister metal silver has hit the highest level in nominal terms in 30 years. Silver has gone up 17% in the month of September. Nice numbers indeed, but this is just a prelude to a greater show that is to come a few years down the road.
So Bernanke and Geithner said that the US needs a second QE. Quantitative easing, what a nice euphemism for inflation, which in turn is a nice euphemism for wealth-stealing.
If printing money makes a nation rich, Zimbabwe will be the richest nation on earth by now. Printing money does not increase real wealth. It merely re-distributes wealth in the population from the man on the streets to the money printer. Here's a simple example to illustrate my point:
Say there're only you and me on this island, and an apple seller with 2 apples to sell. You have $10, I have $0. So 2 apples will cost $10, or $5 per apple. Now I magically create $10 out of thin air. The total money supply in the system jumps to $20. By the law of supply and demand, I will compete with you for the apples, and each apple will now cost $10. Your $10 can only buy you an apple. You have lost half your wealth to me. I have stolen wealth away from you by printing money. But the collective wealth of the island certainly hasn't increased! Lots of paper money gives the illusion of wealth.
Real wealth comes from being more productive. I highly recommend the book "How an Economy Grows and Why it Crashes" by Peter Schiff. I will do a short book review on it soon. It's a great book for economics novice and experts alike. Tremendously easy and fun to read, I finished it in a matter of hours. In terms of impact on my knowledge, I will rank it on par with Mike Maloney's Guide to Investing in Gold and Silver. Mike's book introduced me to Austrian Economics. Schiff's book really hammers in the super basic concepts of economics.
After studying Austrian Economics and listening to Schiff, you will understand how easy economics is. And how ridiculous politicians are in trying to micromange it. The US is debasing its currency like no tomorrow. And the world is also in the race to devalue their currencies against the USD. The countries are in a race with each other to the bottom. What utter foolishness.
1 in 7 Americans are living below the poverty line. 1 in 8 Americans are on food stamps. More and more Americans are living from paycheck to paycheck. According to a study done by careerbuilder.com, in 2007, 43% of Americans said they are living from paycheck to paycheck. In 2008 it was 49%. In 2009, the supposed year of great stimulus and great recovery, the figure was 61%. And in 2010, the year when it was announced that the recession is officially over, the number jumped to 77%. Does this look like the richest nation in the world? I beg to differ. Without the life support from China and Japan, the US will be long gone.
The US has no savings. It is living off the savings of the Chinese. Why should the Chinese work so hard, save so much, and lend it to the Americans so that they can consume the goods that the Chinese make? It makes no sense and the Chinese will wake up to the reality that they can consume those goods themselves. They can enjoy the fruits of their own labour.
In the next few years the world will see the great flaw of Keynesian economics, which focuses on demand-side economics. People may come to realise that it is supply and production which really matter. And hopefully, the world can also come to see the great immorality of Keynesianism.
Thursday, September 16, 2010
Greenspan and Gold
So the former FED chairman has been touting the merits of gold in the media recently. Now that he is retired, he can finally tell the truth. He is of the view that fiat currencies have no place to go but gold.
He has advised central banks to keep a close look on gold, and also influenced John Paulson, one of the star hedge fund managers, to start a gold fund which focuses on gold mining stocks and gold-related investments.
Why is Greenspan in support of Gold now, but not back then when he was Fed chairman? Afterall, his policies were similar to Bernanke's policies. Low interest-rates, flood the economy with paper, easy money. He was the one who blew up the real estate bubble in 2007 when he tried to re-flate the economy from the dot com bubble burst back in the early 2000s.
It shouldn't be surprising that Greenspan recently made these gold-related comments. In fact, it gives credence to gold vs fiat currencies. Greenspan was once a supporter of the Gold Standard, but he had sold his soul to the Fed when he became chairman of the organisation in 1987. Noted investor, author and commentator Jim Rogers has claimed that Greenspan lobbied to get this chairmanship in his book Adventure Capitalist (It's a great read by the way).
It's too late, Mr. Greenspan. He has destroyed millions of lives and possibly an entire generation with his printing presses.
For me, being a central banker is one of the worst crimes in humanity.
Monday, September 13, 2010
US Recovery.... Not!
So the US govt tells us that they are on the road to recovery. I would beg to differ. Unemployment is still way to high (22% if you use the past method of measurement). Deficit is increasing. Debt is exploding. Government is getting bigger and sucking the private sector dry of resources.
The reported 2009 budget deficit was $1.4 trillion. But according to John Williams from shadowstats.com, if one were to use the same accounting methods that businesses are required to use, this deficit jumps to $4.3 trillion. That's about 30% of the US GDP. Look at how much trouble Greece got into with their deficit at about 10% of GDP.
Democracy has an inherent flaw in that it gives rise to populist governments. And populist governments more often than not drive up the national deficits and debts. Here are the largest annual contribution to the outstanding public debt for each of the preceding US presidents: Nixon $30.9 billion, Ford $87.2 billion, Carter $81.2 billion, Reagan $302 billion, Bush(Sr) $432 billion, Clinton $347 billion, G.W. Bush $1,017 billion, and now Obama $1,885 billion.
Professor Laurence J. Kotlikoff, Professor of Economics at Boston University, says the US, and even IMF data, reveal that the US is already bankrupt. That is due to its unfunded Medicare, Medicaid, Social Security, defense and other liabilities totalling $202 trillion, or over 14 times the annual US GDP of $14 trillion.
========================================================================
Americans are having a hard time getting a job. The chart here shows the median duration of unemployment. It has risen straight up to more than 2 years. Imagine going 2 years without income! You'll be utterly broke. Not to mention that the Americans have ultra low savings. An interesting tidbit to share: More than half of the Americans have less than $10,000 saved up for retirement.A study conducted by Boston College's Center for Retirement Research says Americans aged 32 to 64 are $6.6 trillion short of what they need to retire. And the assumptions used in this study were conservative.
Obama is still trying to create more jobs with the $50 billion infrastructure stimulus. But what's the use? Why spend unnecessary resources building and repairing roads just so that some people can have jobs? Afterall, all these jobs are non-productive and will not strengthen the economic fundamentals. If the previous $1 trillion "stimulus" package doesn't work, why would a $50 billion package work?
Analysts agree unanimously that the USD will weaken against other currencies, yet at the same time they proclaim that the US economy (70% based on consumer consumption) will strengthen. I think this is contradictory. If you want consumers to spend more, you need more purchasing power, a stronger dollar. A weak dollar can't buy you many things.
Obama's administration also advocated a weak dollar because it helps in exports (making US goods cheaper and therefore more competitive). Have we seen a reduction in the trade deficit in the past decade, while the USD has been getting weaker? Not so! This idea is flawed. The strength of a currency is indicative of the economic well-being of a nation. Strong economies have strong currencies. The US used to have a strong currency, they were the largest creditor nation, they pay the workers the highest wages, and yet they have one of the cheapest and best-quality products. I remember back in my younger days, I still see Made-in-US products (although it's very few), but now there are none at all. Back then, I read of the American tourists spending money like no one's business while on vacations in Europe and Asia, because their currency was so strong. Things were cheap for them. Now the reverse is true.
The real problem with the current trade deficit lies in the policies that the US govt has been pursuing for years and decades. Growing govt crowds out the private sector, reducing the capital available. The cost of capital is high. Higher taxes take away the incentive to produce in the US. Excessive regulations increase the cost of operation.
So what are they gonna do? Well, Bernanke's recent speech shows that they are most likely going to print more money. The rest of the world usually follows suit. And this means much higher prices for real assets.
Monday, August 23, 2010
Peter Schiff da man!
I certainly learned a lot from this man. I think i watch at least 30mins to 1 hour of his videos everyday on average. Unfortunately he did not win the Connecticut 2010 Primary. What a shame for the Americans. From this I can safely conclude that a lot of people over there are still very clueless about economics - specifically AUSTRIAN ECONOMICS. And this is certainly very bad news for the US.
Subscribe to:
Posts (Atom)
