Inflation and the Debt Crisis

Ever wondered why costs in Singapore keep rising? The simple answer is the creation of SGD out of thin air by the central bank and the fractional banking system. Here's some data:

From Sept 2010 to Sept 2011 

M1 money supply rose almost 20%
M2 rose 11.3%

M3 rose 11.3%

From Sept 2008 to Sept 2011, 

M1 rose 69.4%
M2 rose 33.9%

M3 rose 32.6%

Brace yourself, more inflation (theft from the population) is coming!

And for those who think that US doesn't have QE3, technically they are right in the sense that it is not official and there's no program called "QE3" that has been announced by the Fed. I would beg to differ! Ben Bernanke had himself announced that he's gonna keep interest rates at 0% for a substantial period of time. How can he do that? That's right, by printing money. QE3 is just a euphemism for money printing folks! It doesn't matter whether they name it QE3 or not. It has already been going on since the end of QE2 in June 2011. Otherwise, interest rates in the US would have spiked up dramatically. The Fed is there to print money and buy up govt bonds.

Our 40-year old monetary system is a con-job. It allows govts and bankers to grow really big, at the expense of the general population. This system will implode on itself spectacularly, as I have repeatedly said. We are seeing this play out in the form of sovereign debt crisis in Europe right now. People are focusing their attention on the European countries. Pretty soon, attention is going to be turned to the US. We are seeing protests in US right now, and it is only going to get more violent. 

The economic turmoil that is coming will dwarf any of those we've experienced in our lifetime. The world's debt has crossed the world's GDP. The central banking system creates money out of thin air to keep this going. But it will end soon. I am not sure how it will play out exactly in Singapore. But I think interest rates will rise and put a lot of pressure on prices in low-interest-rate-dependent sectors such as the housing and banking sectors.

Till then, I'm steadfastly holding on to my gold and silver. I am going to make my 8th purchase of the year soon, and am looking to accumulate more when the chance arises.

QE3

QE3 is coming in some form or another. No matter, because they are all euphemisms for money-printing. 

Remember a few years back, when the Fed started QE1, and said that they have an exit strategy? Well guess what, we've gone through QE2, and looking at the prospect of QE3. 

Like Peter Schiff said, the US economy is on drugs -- in this case cheap money. For decades, they have been borrowing and printing and consuming, without paying much in return. If this drug of cheap money is taken away, the US will undergo a painful withdrawal period, something which the politicians are trying to avoid. Of course, taking the pain as early as possible would be best. But that's not a politically-expedient thing to do. The politicians are trying to cure drug addicts by shoving more drugs down their throats.

This will ultimately end in a US currency crisis. American standards of living will fall drastically. There will be Greek-like protests on the streets.

I hope that the crisis which is coming will educate the public more about monetary issues, and particularly about Austrian Economics and its teachings of sound money and civil liberty. The world is being robbed blind and stripped of their freedom by the politicians and bankers, and they don't even know it. Even when riots occur, it is more because of desperation on the people's part rather than a true understanding of the principles of sound money and liberty. Although this may send signals to the politicians and bankers that they cannot do anything they want all the time, the underlying problem is still there. The same problems will surface again in the future, just like they have in the past history.

I am hopeful that one day, schools will teach Austrian principles instead of Keynesian ones, which has failed the world in the past few decades. 

Private Roads and Transport System

Tired of road congestions and accidents? I have a suggestion: Privatise the road system. I do not know how this will unfold. The private sector can surprise you in many different ways.

Here are the possible benefits:

- Lower costs (road tax) due to competition

- Lower road casualties (you don't want deaths on your properties, do you?)

- More creative road designs (multiple layers of roads?)

- Better traffic lights co-ordinations (there are absurdly too many unnecessary ones in Singapore)

- Less congestions!

Of course, it comes with problems as well, (such as non-standardized road signs). But I believe these problems can be iron-ed out. If needed, the private sector will create a self-regulatory system to reduce potential problems/conflicts.

We have to admit that govts around the world have failed to solve the road problems. Why not give the private sector a try?

If the govt does not want to give up on the roads, how about a privatised public transport system (as in, really privatised, not majority- or semi-owned by govt)? From my conversation with taxi drivers, I found that there exists such things in the past. It is more efficient, the buses come on scheduled times, and ferry people from one point to one point.

While the Singapore public transport system is efficient compared to other countries, I feel that there is too much wastage, and a lot can be improved. It takes me a painful 1.5 hours to make a 25km journey across the island in a bus.

The bus stop in front of my house services 7 buses. Sometimes they come all at once, sometimes you wait 15 mins before one even appears. Doing some simple calculation, by right I can expect about 25-30 buses per hour at my bus stop. This sounds good, but it's inefficient.  Bus arrival times are irregular and many buses are often empty. And one wonders why transport prices keep increasing. The incumbents are inefficient! There is lack of competition. Many people are against monopolies, but why let the govt monopolize businesses here??

Competition will improve quality and reduce costs. This is very evident in markets where there are very little govt intervention, regulations, and involvement. One prime example is the computer and phone business. In places where govts are involved - such as education, medicine, and public transport - prices keep rising (for sure), and quality keeps dropping/remains stagnant/rises slowly at best.

I hope that more politicians will address this issue and place more faith in the free market. One should not be too quick to blame the private sector for problems (such as the sub-prime crisis). If examined deeper, one will find that the root causes of the problems are the rules and policies set by the govt/central banks.

A response to an article in The Straits Times

I wrote an e-mail to the author of a straits times article:

Dear Hui Yee,

I refer to your article "When Free Markets Fail" on The Straits Times dated May 25, 2011. The article argues that free markets are not fail-safe, and active government intervention can forestall a global economic collapse.

In fact, from the Austrian School of Economics' point of view, it is totally the opposite.

The US hasn't had free markets for decades. How can one call the US a free market when the Federal Reserve is manipulating the interest rates, and the governments intervene whenever they have the chance to do so?

The 2007 sub-prime crisis has its roots in around 2000. Back then, the dot-com bubble has just burst, and President Bush and Greenspan, not wanting a recession which will cure the imbalances, injected tons of paper money into the system. Interest rates were lowered to 1%. The market is flooded with cheap money. The result is that people used this money for speculative purposes, such as the housing market. 

An economy can only be healthy if sound money is being used. And sound money means letting market forces determine the all-so-important interest rate. Sound money does not mean having a central bank and a small group of men trying to set interest rate for the whole economy.

Concurrently, Freddie and Fannie were created. These government organisations backed the mortgages. With these government guarantees, who wouldn't want a piece of the action in the housing market? 

Free market capitalism only works if greed is being balanced by fear. The government removes all these fear with those institutions that they created. Without these institutions, the population wouldn't have allowed such wild speculations to go on! The bankers won't dare to bet so heavily on housing. The depositors won't allow bankers to gamble with their money. But the government created this moral hazard, which effectively removes the natural checks and balances that the market provides. Nowadays, I bet people spend more time researching on the camera that they are buying, instead of the balance sheets of the banks that they are going to put their live savings in. Why? Because government guarantees the deposits. But where do government get their resources from? By printing money, in most cases.

I hope that some of these arguments can dispel the myth that free market has been at work in our world. We haven't have free markets at all - far from it.

Thank you for your time. I would be glad to get a reply from you.

Have a nice day.

Regards,

Jin

Some musings

I started studying monetary history after graduating from NUS (I'm sorry to say this but I wasted 4 yrs of my time and money there learning nonsense). What I learnt is something profound, something distasteful and disgusting.

When I first started, I could see right away the MAIN source of the illnesses in our world today. Smaller and smaller families, dual-income families, rising poverty, rising income-gap, rising education and healthcare costs, rising costs of living, rising housing costs, wars..... And the souce of all these is the Central Banking System. The Fractional Reserve Banking System complements the Central Banking System nicely. They are both good friends to each other.

I couldn't keep this knowledge to myself, hence I started this blog. I knew not many will read it, and I didn't actively promote it, but heck, I just need to vent my thoughts somewhere. Some good friends of mine bothered to read my humble opinions though, and I am grateful for that.

While I think gold and silver and commodities are the best protection against the craziness of the world right now, I am by no means advocating it as a get-rich scheme (although you can get rich investing in commodities :D ). Some of my friends thought that I am too free, too conspiracist in my thinking, but I am glad that some of them bothered to do some research, and came to the same conclusions.

We live in this world thinking that things are always the way it is, but it is most certainly not! Do not believe what the economics professors teach in school! The current fiat monetary system is only 40 years old, and I think the end is near. I am not saying the world is DOOMED. Just saying this current monetary system will end somehow.

ANYWAY, here are some nice quotes I have gathered through the course of my study:


"A system of capitalism presumes sound money, not fiat money manipulated by a central bank. Capitalism cherishes voluntary contracts and interest rates that are determined by savings, not credit creation by a central bank." — Ron Paul, the only politician in the world whom I support

“I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the Bank…You are a den of vipers and thieves. I have determined to rout you out and, by the Eternal, I will rout you out.” - Andrew Jackson,  the first and only President in U.S. history to pay off the National Debt. He fought valiantly to close down the 2nd Central Bank of the USA.

"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." - Henry Ford, founder of the Ford Motor Company

“Those few who can understand the system (check book money and credit) will either be so interested in its profits, or so dependent on it favors, that there will be little opposition from that class, while on the other hand, the great body of people mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests.” - The Rothschilds of London

"If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them, will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered." - Thomas Jefferson, third President of the United States, and one of the Founding Fathers of the USA

The Source of Inflation

This is an excellent article, with ample examples and statistics:

http://www.theburningplatform.com/?p=15246

US debt bomb