Poor Ah ma

A few nights ago, I was rushing to the bus stop to catch a bus home. It was around 10.10pm, and I had just finished my last tuition lesson. Missing the bus would be bad, because I would have to wait for 20mins for the next bus. 

I saw the bus approaching, and I was still some distance away from the bus stop when an old lady stopped me. She had been eye-ing me for a few seconds. With a croaking voice, she asked for $1 so that she can buy a bread from a nearby vending machine. Hastily, I reached into my pocket, and could only produce 40 cents. I told her I have no more coins, and rushed off just in time to board the bus. 

I regretted my action. On my way home, this incident dominated my mind. I am angry and disappointed with 2 things. 

The first concerns myself. I am in too much of a hurry to live life, to earn money, to save time. I could have taken out my $10 bill for the lady. It doesn't matter if I missed the bus. I could have chatted with her for 20 mins. But maybe I have been so used to giving donations in coins, and giving in notes just didn't cross my mind at that point in time. 

Secondly, why is she in such a sorry plight? I'm sure there are thousands of people like her living in Singapore right now. People paint such a great picture of this prosperous country, but beneath the surface, a lot of people are struggling. This has got to do with the current monetary system that the world practices. It does nothing but punish the working class and the uninformed. Absolutely nothing but this!

I wish I can change the world. But I do not have the power to do so. All I can do is to help as many people as I can. And at least, try to reach out to people with Austrian Economics. I am interested in setting up a school to teach these kind of stuff. A school which teaches economic freedom, civil liberty, and the limited roles that governments around the world should play in our lives. 

And most certainly, my school will teach that the world will be a much better place without central banks. This central banking system aggregates too much power in the hands of too few people. It is open to abuse and it has been going on for more than a century. People are not outraged because the effects are not that obvious. But slowly and surely, they're creeping up on them. And even if people are outraged and revolt, they often miss the point. This problem will persist if they cannot see the root cause.

No Central banks means less government, less wars, less poverty, and more liberty for everyone.

As I update this blog, silver has hit $33-34. The dip to $27 has been fully bought into. I bought some during the dip but wish I have bought more. Gold is above $1,400. Oil is $108 a barrel. Food inflation is everywhere. The Middle East is in revolt. This is the effect of the unprecedented global money printing in the 2008 economic crisis. This is just the beginning. It is just going to get worse, especially in Western countries.

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US Debt Ceiling

The Treasury Secretary Timothy Geithner, and many economists were saying that if the US doesn't raise the debt ceiling, they are going to default, and it will be catastrophic for the US and the world. (They have raised it, what, 6 times in 3 years?)

To me, this is an official admission that the US is running a Ponzi Scheme. The world has to loan them money or else they will default. 

The end is near for them. Ponzi Schemes always end!

Chinese rate hikes. Passports. Economic Freedom and Civil Liberty

China has been raising interest rates a few times this year. This may be aimed at curbing inflation, because according to their figures, inflation has been rising at the fastest rate in 2 years. While credit has to be given that they are trying to do something about the inflation, I doubt that it will be so effective.

China raises rates but the US is not doing so. This will cause more foreign currency inflow into China to take advantage of the interest rate difference. The Chinese will then be 'forced' (well, they don't have to, but politicians don't know much) to increase their money supply in order not to let their currency appreciate too much. This will cause even more inflation in China. More RMB, higher prices.

What the Chinese should do in conjuction with raising interest rate is to let their currency appreciate. This means that they have to stop printing money! I've read somewhere that China prints US$ 250 billion worth of RMB annually. Which is not good of course. Stop increasing the supply of RMB, and prices in terms of RMB can be controlled. It doesn't matter how much 'hot money' flows into China. There WON'T be inflation if there's no RMB printing. Prices can't rise in terms of RMB if RMB money supply doesn't expand. Also, they should allow the RMB to be traded more freely internationally, otherwise all those RMB is been trapped in China and is causing price increases.

Keynesian Economics should not be taught in schools. Modern economics is a study of how to STEAL from the population. And theft should not be taught in schools. My hope is that one day the world will embrace Austrian Economics. I am not  hopeful that the governments will be the catalyst of this change. Well, maybe they will be, in a way, because they will screw things up so badly that the people will revolt. Austrian Economics preaches economic freedom, something which is sorely lacking in our world today. 

Just the other day on Christmas Eve, I was returning from Malaysia to Singapore. I got stuck at the Woodlands Checkpoint for 2 hours! There were throngs of immigrants and huge amount of hours wasted. In my opinion, passports do nothing but waste resources - time and money. Imagine the millions of man-hours lost at the checkpoints around the world annually. We could have used hundreds of thousands of man-hours, if not millions of hours, to breed fishes and distribute them to the poor and hungry around the world.

One may argue that without passports, there will be a huge influx of immigrants into Singapore, overcrowding an already overcrowded city. That may happen. But what about immigrants out of Singapore? If immigration is easier, people will move out too. There is only so much humans that can be crowded into this island. This wasn't a problem in the past in a passport-less world. I am not sure if it will be a problem now. In every society, there was a limit to how much population the land can support. A natural equilibrium should be reached.

One may argue that passports discourage crime. While I do agree that it does help to some extent, but I feel that the benefit is so minimal given the costs. You spend so much time and money just to prevent a few crimes. There has been research which shows that IDs do not help to prevent crimes or track criminals. 

I love Ron Paul's quote: "Governments are supposed to protect the secrecy of the people, not the secrecy of governments." 

Politicians just love to have control. They need it to further their political agendas and their careers.

If the governments really are so keen in tracking criminals, I have a better suggestion. Issue a barcode to each and every one in the population. To pass through a checkpoint, the immigrant just needs to scan his own barcode, much like how those barcode scans in the supermarkets operate. This will make immigration so much more pleasant, and save so much resources. How about not using any passport or this barcode at all? How about using those saved resources to hire private tracking companies? I am sure without this passport system, private investigative companies that track criminals will flourish.

Why aren't governments doing this on a large scale? Well, I think it is inertia, like Jim Rogers once mentioned in his book. The world just simply adopted the passport system that the British started to use on a large scale during the colonial periods. Before that, the world did fine without passports anyway. In fact, today there are still agreements between certain countries that travellers do not require passports to pass their borders. (Keynesians probably won't like my idea because they will say it destroys jobs - but this argument is invalid. Ah well, that's another topic of discussion)

I like to 'downscale' large issues down to an individual family unit. This helps us to understand things better. When a family is in debt, they need to work harder and save more, not borrow more and spend more (like the Western countries). 

And you will not want your parents to track every single thing you do, you do not want them to monitor which streets you pass through, which malls you visit everytime you go out to chill. You prefer to be left alone to do your own things. 

Why then do people allow their governments to track and monitor them? Why allow them to decide what you can or cannot do? Allow them to decide where you can or cannot go? Why allow them to dictate economic policies? Do they really know much more than us? Are our overlords so much smarter than the rest of the population, that they can know what the ideal interest rate is, which industry will be great, which form of energy is the wave of the future? People will argue that this gives a more stable society, but I think the free market can do a much better job. We do not have a stable world today, with all the business cycles and such.

Have sound money and free market capitalism. That's what will give us economic and individual liberty and stability. When a government fails, the entire nation suffers. When an entrepreneur fails, the damages are limited. Entrepreneurs (and thus the market) are much better judges of which businesses are viable. They spend their time, effort and risk their money for their ventures. Politicians, on the other hand, just need to write legislations and pass laws and then sit back and feel good about themselves.

To end this post:

Republics generally do not last 200 years. They all fail because of implosion of their finances. They self-destruct from within. Economic freedom and civil liberty can prevent this. Central planning and controls and regulations will not work in the long run. The politicians perpetuate the problems, and the population do not wake up until it is too late. This is pretty much what is happening in the US right now.

Anyway, Happy New Year everyone. Wish you more wealth and better health in 2011.

Short US govt bond

The biggest bubble in history!

:)

650 Years of Silver Prices and what it means

This is a 650 year graph of silver prices in terms of 1998 dollars (blue line) and silver/gold ratio (gold line) from 1344 to 2004. (To have a clearer view of the graph, you can go to http://goldinfo.net/silver600.html 

At first glance, it will seem that the price of silver is going down. But take note that this all the prices u see on the graph is in terms of 1998 dollars. What does this mean? I'll provide my 2-cents. 

In 1477, the price was $806 (806 "1998" dollars). Ever since the "peak" back then that you see on the chart, the price of silver in 1998 dollars has been declining steadily. Take another point in time, say the year 1998 when the price was $5 (5 "1998" dollars - I can't really see very clearly since the chart is so small, but let's take it as $5)

Now, if you live in 1998, you can take $5 and go buy an ounce of silver for $5. Suppose you decide to travel back in time to the year 1477. You bring along your $5 with you and approach a silver seller back there. Will he sell his silver to you for $5? DEFINITELY NOT! Not with your "1998" $5 note! He will demand $806 "1998" notes from you! Even if back then, silver priced in "1477" note is $1, he will not sell his silver to you for your $5 "1998" note. 

So what do we see here. The dollar has lost so much purchasing power between 1477 and 1998. A silver seller back in 1477 will demand more than 160x of the dollar that you use in 1998. This chart does not show that silver is falling in value, but rather, it is showing that the dollar is falling in value. 

 

US default 1971, Supply Vs Demand

After WWII, the world was under the Bretton Woods System. All currencies were tied to the USD, and the USD in turn was redeemable in gold. Back then, the US possessed about 22,000 tons of gold, or about 75% of the world's monetary gold!

By 1971, the US had only 7200 tons of gold left, and owed other nations close to 40,000 tons. Alarmed at how fast gold was leaving the US, President Nixon conveniently announced that the USD will no longer be convertible to gold, therefore closing the gold window. The world currencies started 'floating' against each other, without any tie to a physical stuff whatsoever.

In my view, this is equivalent to a default by the US. The US now has unrestrained power to print money to repay its debt. The world quite foolishly agreed to what the US did, because they thought that the USD was as good as gold. 

Back then, the US was still a creditor nation and had a manufacturing base. Fast forward to today, it has become the largest debtor nation in history! It will be much harder to dig themself out of debt this time round, because they are not producing much stuff as a nation. Exporters to the US will suffer for a while, but if they can retool themselves and sell to other nations, then they will be much better off, because the currencies of other nations are sounder than the USD. 

If the USD tanks, it does not mean that demand will drop sharply and the world will be doomed and gloomed, because the purchasing power lost by the USD will simply be transferred to other currencies. The largest creditor nations to the US, China and Japan, will benefit greatly given that they no longer have to throw good money after bad. They will no longer lend to the US. A huge burden will be suddenly lifted off their backs. Their currencies will appreciate relative to the USD, and purchasing power will shift across the Pacific Ocean.

People will do well to get out of the USD or US-denominated assets and into hard assets (commodities) or other sounder currencies.

It's all about keeping oneself in an asset that will gain in PURCHASING POWER. 

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I will quote from my memory 2 of my favourite excerpts from Peter Schiff, with some of my comments added in:

1) If you take US out of the globe, you are left with the producers (Asia). The producers can consume their own products just as well as the US. Everyone will have a higher standards of living! The Chinese will no longer have to work as hard, just to produce stuff for the US, and then lend money to the US so that the US can buy the Chinese-made stuff. If you take the rest of the world out of the globe, you are left with the consumers (US). Who is going to produce for them and how are they going to survive? So you see, the US is the one holding the rest of the world down right now. 

2) (Can't remember the exact details for this one, but the idea is there): Imagine 5 people stranded on an island. One of them is American. The other 4 are Asians. These 5 people need to survive, and they need to gather food and cook, so each of them are assigned different tasks to do. Everyday, one of the Asians is assigned to the role of fishing. The 2nd Asian is assigned the job of collecting firewood. The 3rd Asian collects fruits from all over the island. The 4th Asian is responsible for cooking. And the American? He is assigned the job of eating. So at the end of each day they will gather around and eat. The American eats most of the stuff, leaving just enough crumbs for the Asians, so that they will have enough energy to do their job again the next day. 

Now, a modern economist will look at this island-economy and say: Look! The American is the engine of growth! Without his demand, all the Asians will have no job!!

Well, the reality is, the Asians can consume those food just as well as the American can. In fact, if they kick the American off the island, now they will have much more to eat. They may not even have to work as hard to feed the ravenous appetite of the American. They can take a day or 2 off, relax on the beach, etc.

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There you go! Modern economists focus so much on 'aggregate' demand. They think that demand is everything. This is classic Keynesianism (Now I know why I have no interest in my economics class in university). Unfortunately, supply is what makes an economy. If you want to produce more, if you want more of other people's stuff, you have to produce some things yourself which you can then trade away. Demand is not so important. Everyone has demands for more materials and a better life. Even babies can demand for milk and toys and sweets. The problem is whether you can produce those goods, or whether you can produce something else to trade for those goods with someone else.

Economies don't grow with demand per se. And they certainly don't remain healthy due to 'consumer confidence', like most economists will say. To quote Tom Woods, if you think consumer confidence is so fundamentally important, why not pour money into researching a "happy pill" or something. That will keep everyone happy and confident and spending away, and the economy will not crash.

So, what is the US exporting to the world?? Paper money! And inflation! Why the world will accept this paper money is beyond comprehension. And this applies to all other currencies as well. The world should be furious that an elite group of people is controlling the money, taxing the population with inflation, and creating booms and busts in the economy and profiting from them.

If there are no central banks in the world, and if there is no fractional reserve banking system practised by the banks, the world will be a much better place. Less wars, less poverty, more individual liberty.

$600 billion 'stimulus' package

Another nail in the coffin for the US economy, as simple as that.

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.