Who Is Really Printing Money?
Boris Sobolev
www.ResourceStockGuide.com
August 11, 2008
http://www.gold-eagle.com/editorials_08/sobolev081008.html
During a credit crisis which is characterized by a steep slowdown of credit creation, growth of money supply in the financial system slows as well. It is silly to think that the Fed can replace the whole system of commercial banks by creating money itself from thin air. What the Fed can do is influence money supply by adjusting interest rates creating more or less incentive for the fractional-reserve lending by the commercial banks.
Going forward, gold will likely resume its up-trend due to one of two reasons:
(1) Another spell of problems in the financial system will cause gold (and the US treasuries) to once again take the place of safe haven investments, as was the case in the second half of 2007.
(2) Fear of deflation and a further slowdown in the US will spread around the world. As a result, a vicious wave of competitive devaluation will cause not only price shocks (oil, food, etc.) but also spiraling monetary inflation, eventually raising long-term bond yields. This will be the beginning of a real gold bull market when gold outperforms all other major classes of assets including most hard assets.
Saturday, August 16, 2008
How To Conceal Massive Economic Collapse
How To Conceal Massive Economic Collapse
Ellen Hodgson Brown, J.D.
www.webofdebt.com/articles
August 14, 2008
http://www.gold-eagle.com/editorials_08/brown081408.html
Last week, Fannie Mae and Freddie Mac had just announced record losses, and so had most reporting corporations. Unemployment was mounting, the foreclosure crisis was deepening, state budgets were in shambles, and massive bailouts were everywhere. Investors had every reason to expect the dollar and the stock market to plummet, and gold and oil to shoot up. Strangely, the Dow Jones Industrial Average gained 300 points, the dollar strengthened, and gold and oil were crushed. What happened?
It hardly took psychic powers to see that the Plunge Protection Team had come to the rescue. Formally known as the President’s Working Group on Financial Markets, the PPT was once concealed and its very existence denied as if it were a matter of strict national security. But the PPT has now come out of the closet. What was once a legally questionable “manipulator” of markets has become a sanctioned stabilizer and protector of markets. The new tone was set in January 2008, when global markets took their worst tumble since September 11, 2001.
Ellen Hodgson Brown, J.D.
www.webofdebt.com/articles
August 14, 2008
http://www.gold-eagle.com/editorials_08/brown081408.html
Last week, Fannie Mae and Freddie Mac had just announced record losses, and so had most reporting corporations. Unemployment was mounting, the foreclosure crisis was deepening, state budgets were in shambles, and massive bailouts were everywhere. Investors had every reason to expect the dollar and the stock market to plummet, and gold and oil to shoot up. Strangely, the Dow Jones Industrial Average gained 300 points, the dollar strengthened, and gold and oil were crushed. What happened?
It hardly took psychic powers to see that the Plunge Protection Team had come to the rescue. Formally known as the President’s Working Group on Financial Markets, the PPT was once concealed and its very existence denied as if it were a matter of strict national security. But the PPT has now come out of the closet. What was once a legally questionable “manipulator” of markets has become a sanctioned stabilizer and protector of markets. The new tone was set in January 2008, when global markets took their worst tumble since September 11, 2001.
2008 US Election & Quadrupling The Inflation Tax
2008 US Election & Quadrupling The Inflation Tax
Part I
Daniel R. Amerman, CFA
www.inflationintowealth.com
August 14, 2008
http://www.gold-eagle.com/editorials_08/amerman081408.html
Overview
US presidential candidate Barack Obama has proposed increasing the capital gains tax from 15% to 25%. Unfortunately, the biggest component of investment taxes during inflationary times is not taxation of economic income, but taxation of the government’s destruction of the value of its own currency. As we will explore in the article below, the 1-2 combination of higher inflation and higher investment taxes may mean a quadrupling of the effective real tax rate in 2009. This will have the effect of turning the capital gains tax into an effective asset tax, where all real economic earnings plus a percentage of investment principal are taken through taxation – unless investors take self-defense measures.
Please note that this is a nonpartisan article about finance and economics, with no political judgments made, and with implications that go far beyond just the United States. The heart of the problem for the coming years is the bipartisan problem of impossible promises that the United States government has made for Social Security and Medicare – promises with equivalents that are even more impossible in many other developed nations. At some time over the coming years, regardless of who is elected, either:
* Taxes must climb to confiscatory levels; or
* Promises to retirees must increasingly be broken; or
* The currency must be destroyed (through monetizing the deficits without sufficiently raising taxes), or
* All of the above
Part I
Daniel R. Amerman, CFA
www.inflationintowealth.com
August 14, 2008
http://www.gold-eagle.com/editorials_08/amerman081408.html
Overview
US presidential candidate Barack Obama has proposed increasing the capital gains tax from 15% to 25%. Unfortunately, the biggest component of investment taxes during inflationary times is not taxation of economic income, but taxation of the government’s destruction of the value of its own currency. As we will explore in the article below, the 1-2 combination of higher inflation and higher investment taxes may mean a quadrupling of the effective real tax rate in 2009. This will have the effect of turning the capital gains tax into an effective asset tax, where all real economic earnings plus a percentage of investment principal are taken through taxation – unless investors take self-defense measures.
Please note that this is a nonpartisan article about finance and economics, with no political judgments made, and with implications that go far beyond just the United States. The heart of the problem for the coming years is the bipartisan problem of impossible promises that the United States government has made for Social Security and Medicare – promises with equivalents that are even more impossible in many other developed nations. At some time over the coming years, regardless of who is elected, either:
* Taxes must climb to confiscatory levels; or
* Promises to retirees must increasingly be broken; or
* The currency must be destroyed (through monetizing the deficits without sufficiently raising taxes), or
* All of the above
Thursday, August 14, 2008
Housing and Economic Recovery Act of 2008
Crony Capitalism for Dummies: Housing and Economic Recovery Act of 2008. How the Bailout will not Help you and Cost you Money. A Deep Look at the 694 Pages of the Bill.
Dr. Housing Bubble’s Blog
July 28th, 2008
http://www.doctorhousingbubble.com/crony-capitalism-for-dummies-housing-and-economic
-recovery-act-of-2008-how-the-bailout-will-not-help-you-and-cost-you-money-a-deep-look
-at-the-694-pages-of-the-bill/
As you will see in this article when we deconstruct this part of the legislation, very few people stand to benefit from this smoke and mirrors. The more troubling aspect of the legislation is a stealth bailing out of Fannie Mae and Freddie Mac with an almost bottomless pit of financial access. The bill practically guarantees a taxpayer bailout for these two.
The problem with our current politicians is this. Democrats with control of the House should have fought harder to simply come out and nationalize the two mortgage giants. If their mission of providing liquidity to the secondary mortgage market and helping provide affordable housing to the American public is so vital, these two should be nationalized, allow shareholders who knew these were quasi-private enterprises take their hit and move on. Unfortunately, the party had no backbone of standing up for fear of being labeled a “socialist” or for fear of their political life come this November. Incredibly the market is the only thing living up to the original mission of the GSEs; ironically lower prices via this correction are making homes more affordable. That is why we have seen some increased action in sales for the Inland Empire where prices have fallen drastically.
Yet the majority of Republicans are playing even a more clandestine game of politics. What the current administration is playing is verbally acknowledging free market capitalism but in reality, what they are doing is nothing more than crony capitalism. Some have called what is currently going on as socialism but socialism by definition is a redistribution of wealth from those at the highest income brackets to the vast majority of those at the bottom. Simply by looking at how the lower to middle class of our country is being on the verge of financial destruction, there is nothing socialist about this. Bailing out Bear Stearns was a targeted effort at propping up a few big key players. The market still ended up going into bear market territory and now here we stand at passing a bill that the current Republican administration strongly said it would not sign.
Dr. Housing Bubble’s Blog
July 28th, 2008
http://www.doctorhousingbubble.com/crony-capitalism-for-dummies-housing-and-economic
-recovery-act-of-2008-how-the-bailout-will-not-help-you-and-cost-you-money-a-deep-look
-at-the-694-pages-of-the-bill/
As you will see in this article when we deconstruct this part of the legislation, very few people stand to benefit from this smoke and mirrors. The more troubling aspect of the legislation is a stealth bailing out of Fannie Mae and Freddie Mac with an almost bottomless pit of financial access. The bill practically guarantees a taxpayer bailout for these two.
The problem with our current politicians is this. Democrats with control of the House should have fought harder to simply come out and nationalize the two mortgage giants. If their mission of providing liquidity to the secondary mortgage market and helping provide affordable housing to the American public is so vital, these two should be nationalized, allow shareholders who knew these were quasi-private enterprises take their hit and move on. Unfortunately, the party had no backbone of standing up for fear of being labeled a “socialist” or for fear of their political life come this November. Incredibly the market is the only thing living up to the original mission of the GSEs; ironically lower prices via this correction are making homes more affordable. That is why we have seen some increased action in sales for the Inland Empire where prices have fallen drastically.
Yet the majority of Republicans are playing even a more clandestine game of politics. What the current administration is playing is verbally acknowledging free market capitalism but in reality, what they are doing is nothing more than crony capitalism. Some have called what is currently going on as socialism but socialism by definition is a redistribution of wealth from those at the highest income brackets to the vast majority of those at the bottom. Simply by looking at how the lower to middle class of our country is being on the verge of financial destruction, there is nothing socialist about this. Bailing out Bear Stearns was a targeted effort at propping up a few big key players. The market still ended up going into bear market territory and now here we stand at passing a bill that the current Republican administration strongly said it would not sign.
Option ARMs, Who Thought Up these Time Bombs?
Option ARMs, Who Thought Up these Time Bombs?
Trader Mark
August 13, 2008
http://seekingalpha.com/article/90765-option-arms-who-thought-up-these-time-bombs
I read about the option ARM as the cover story October 2006 [Nightmare Mortgages]. Another absolute read.
As to the latter article - what's an option ARM you ask? Well after Alan Greenspan lowered rates to HISTORICAL lows, the golden era of adjustable rate mortgages was birthed. Why adjustable? Because despite historical low fixed rates you could only buy so much house at each income level with fixed rates in the 5% ranges. So we needed to find something more to qualify more buyers and goose home prices.... adjustable rate mortgages were the hot thing. But when adjustables with 10% or 5% down disqualified too many people we moved to a new era - the 0% down adjustable rate mortgage. This was dangerous territory - keep in mind the adjustable rate was many times at a teaser rate far below the "future rate" once it adjusted upward. Now I'm a well read person so I knew about this part - but not until I happened upon the BusinessWeek article did I learn about a new invention - the option ARM. This was for the person they could not qualify at 0% down, with teaser rate. So the Frankenstein was created - a mortgage where you don't even pay enough to pay down interest - at the end of each month, you make your payment, and the difference between what you would pay on a normal mortgage and what you paid on this mortgage is added to the principal. Meaning you OWE more on the house each month. Ridiculous you say? Nope! Not if the home price goes up every month, preferably at an annualized rate at 20% a year as we know all homes do! It's GENIUS. (on Wall Street)
The super cool part is we package these loans, mix them up with a bunch of other mortgages, sell them to "super smart" hedge funds with "sophisticated risk" models - along with institutional buyers across the world - and call it a day. Everyone wins.
Trader Mark
August 13, 2008
http://seekingalpha.com/article/90765-option-arms-who-thought-up-these-time-bombs
I read about the option ARM as the cover story October 2006 [Nightmare Mortgages]. Another absolute read.
As to the latter article - what's an option ARM you ask? Well after Alan Greenspan lowered rates to HISTORICAL lows, the golden era of adjustable rate mortgages was birthed. Why adjustable? Because despite historical low fixed rates you could only buy so much house at each income level with fixed rates in the 5% ranges. So we needed to find something more to qualify more buyers and goose home prices.... adjustable rate mortgages were the hot thing. But when adjustables with 10% or 5% down disqualified too many people we moved to a new era - the 0% down adjustable rate mortgage. This was dangerous territory - keep in mind the adjustable rate was many times at a teaser rate far below the "future rate" once it adjusted upward. Now I'm a well read person so I knew about this part - but not until I happened upon the BusinessWeek article did I learn about a new invention - the option ARM. This was for the person they could not qualify at 0% down, with teaser rate. So the Frankenstein was created - a mortgage where you don't even pay enough to pay down interest - at the end of each month, you make your payment, and the difference between what you would pay on a normal mortgage and what you paid on this mortgage is added to the principal. Meaning you OWE more on the house each month. Ridiculous you say? Nope! Not if the home price goes up every month, preferably at an annualized rate at 20% a year as we know all homes do! It's GENIUS. (on Wall Street)
The super cool part is we package these loans, mix them up with a bunch of other mortgages, sell them to "super smart" hedge funds with "sophisticated risk" models - along with institutional buyers across the world - and call it a day. Everyone wins.
You Can Stiff Some Of The People Some Of The Time
You Can Stiff Some Of The People Some Of The Time
by Captain Hook
August 11, 2008
http://www.safehaven.com/article-10968.htm
But, you can't stiff all the people all of the time. To what do we refer? Answer: The likelihood that once the Beijing Olympics are over, because increasing defaults of US corporate paper / agency debt leave a worsening bad taste on foreigner's palates, demand for domestic sovereign debt is expected to wane at an accelerating rate, which would send bond yields (market rates) higher - possibly much higher. Up until this point, Wall Street bankers think they can flog trillions of worthless CDO's and other toxic junk around the world with no ramifications. They think the world will just adsorb trillions in losses on fraudulent junk paper and keep coming back for more. But I can assure you this is not the case. The seeds of destruction of the Western banking model (globalization) have now been planted, and it's just a matter of time before this next card falls in the destruction of our fraudulent and corrupt monetary system.
Naturally then, this would mean that US borrowers (along with everybody else) are likely to face steadily increasing costs with an accelerating reduction of flows into domestic debt securities, especially with skyrocketing defaults reducing foreigner's appetites for all forms of American debt securities. The most recent TIC data shows no problem today the US's large trading partners, with steadily increasing flows into Treasuries - Japan being the exception. But again, once the need to 'save face' for the Chinese is passed with the Olympics this summer, one does need wonder if they will join Japan and cut back on Treasury purchases, especially if the economy continues to weaken, meaning they simply have fewer dollars to buy anything. In this regard you should know the economy is expected to continue weakening, with slower trade being the result.
by Captain Hook
August 11, 2008
http://www.safehaven.com/article-10968.htm
But, you can't stiff all the people all of the time. To what do we refer? Answer: The likelihood that once the Beijing Olympics are over, because increasing defaults of US corporate paper / agency debt leave a worsening bad taste on foreigner's palates, demand for domestic sovereign debt is expected to wane at an accelerating rate, which would send bond yields (market rates) higher - possibly much higher. Up until this point, Wall Street bankers think they can flog trillions of worthless CDO's and other toxic junk around the world with no ramifications. They think the world will just adsorb trillions in losses on fraudulent junk paper and keep coming back for more. But I can assure you this is not the case. The seeds of destruction of the Western banking model (globalization) have now been planted, and it's just a matter of time before this next card falls in the destruction of our fraudulent and corrupt monetary system.
Naturally then, this would mean that US borrowers (along with everybody else) are likely to face steadily increasing costs with an accelerating reduction of flows into domestic debt securities, especially with skyrocketing defaults reducing foreigner's appetites for all forms of American debt securities. The most recent TIC data shows no problem today the US's large trading partners, with steadily increasing flows into Treasuries - Japan being the exception. But again, once the need to 'save face' for the Chinese is passed with the Olympics this summer, one does need wonder if they will join Japan and cut back on Treasury purchases, especially if the economy continues to weaken, meaning they simply have fewer dollars to buy anything. In this regard you should know the economy is expected to continue weakening, with slower trade being the result.
Why Paper Silver is not as good as Physical Silver
Why Paper Silver is not as good as Physical Silver
By: Jason Hommel, Silver Stock Report
Posted 12 August, 2008
http://news.silverseek.com/GoldIsMoney/1218557976.php
Paper silver is all forms of silver held by another, such as ETF's, 3rd party Vaults, futures contracts, options, certificates, brokers, or even bullion dealers orders in transit
Silver Stock Report
Yesterday, silver hit a low, and was down dramatically to as low as $14.08/oz. I'm sure the dip caused a lot of margin calls on people who owned silver futures contracts, who had to sell out. Perhaps this is a time to review a few more reasons why all forms of paper silver are not as good as owning physical silver.
(1) Default risk. (2) Bankruptcy risk. (3) Broker risk. (4) Exchange risk. (5) Confiscation risk. (6) Buying paper silver diverts demand away from physical. (7) Paper is a promise. Silver is payment. (8) Silver is limited. Paper promises can be created endlessly and have no limit. (9) The entire reason for buying silver is to avoid the failing paper promises of an entire industry. To trust another paper promise is just silly. (10) Fraud is admitted as "standard business practice" among brokers who hold paper silver (not futures contracts) for clients. (11) Storage fees are charged for silver that does not exist, as "standard business practice" in the broker industry. (12) Buying paper silver creates a lower price for silver. (13) Buying paper silver puts "cash" into the hands of the manipulators, and enriches the "enemies" of truth and true value. (14) Leverage risk. (15) Margin increases. (16) Time risk. (17) Gambling risk. (18) Moral risk. (19) Tax risk. (20) Market risk. (21) Real money does not grow on trees, nor is it printed on paper! Money is not only, and not merely, a "medium of exchange". Money is, and must also be, a store of wealth, a unit of account, and a means of final payment (not a promise to be paid!)
By: Jason Hommel, Silver Stock Report
Posted 12 August, 2008
http://news.silverseek.com/GoldIsMoney/1218557976.php
Paper silver is all forms of silver held by another, such as ETF's, 3rd party Vaults, futures contracts, options, certificates, brokers, or even bullion dealers orders in transit
Silver Stock Report
Yesterday, silver hit a low, and was down dramatically to as low as $14.08/oz. I'm sure the dip caused a lot of margin calls on people who owned silver futures contracts, who had to sell out. Perhaps this is a time to review a few more reasons why all forms of paper silver are not as good as owning physical silver.
(1) Default risk. (2) Bankruptcy risk. (3) Broker risk. (4) Exchange risk. (5) Confiscation risk. (6) Buying paper silver diverts demand away from physical. (7) Paper is a promise. Silver is payment. (8) Silver is limited. Paper promises can be created endlessly and have no limit. (9) The entire reason for buying silver is to avoid the failing paper promises of an entire industry. To trust another paper promise is just silly. (10) Fraud is admitted as "standard business practice" among brokers who hold paper silver (not futures contracts) for clients. (11) Storage fees are charged for silver that does not exist, as "standard business practice" in the broker industry. (12) Buying paper silver creates a lower price for silver. (13) Buying paper silver puts "cash" into the hands of the manipulators, and enriches the "enemies" of truth and true value. (14) Leverage risk. (15) Margin increases. (16) Time risk. (17) Gambling risk. (18) Moral risk. (19) Tax risk. (20) Market risk. (21) Real money does not grow on trees, nor is it printed on paper! Money is not only, and not merely, a "medium of exchange". Money is, and must also be, a store of wealth, a unit of account, and a means of final payment (not a promise to be paid!)
Subscribe to:
Posts (Atom)