Archive for September, 2012

Gold and silver is real money

September 30, 2012 Leave a comment

And beat everything this year.


Food Glorious Food!

September 28, 2012 Leave a comment

Food will be everything (EVERYTHING) in the next 10 years.

From ZH:

There are so many factors driving food prices higher. From a demand perspective, world population is growing at an extraordinary rate… plus the rise of billions of people from developing countries (especially in Asia) into the middle class is quickening demand for resource-intensive foods like beef.

From a supply perspective, drought, soil erosion, and reduction of available farmland all put significant pressure on global agricultural output. And finally, from a monetary perspective, the enormous amount of paper currency being printed in the world is finding its way into agricultural commodities.

I cannot envision a slowdown in any of these factors anytime soon. Central bankers will continue printing, people will continue procreating, developing countries will continue becoming wealthier, etc. So we should absolutely expect rising food prices for quite some time.

Long-term, technology will ultimately solve these problems… but large-scale implementation is a long way off, and it may certainly be a bumpy ride ahead.

Individuals can hedge their exposure in a number of different ways. The simple option is to invest in agricultural ETFs or long-term futures contracts. But I can hardly recommend this as a course of action given the massive systemic risk in the financial system.

Just as we often recommend holding physical gold and silver rather than owning a gold ETF, it’s much better to own physical agricultural assets.

If you’re on a budget, small gardens can be planted for a pittance as long as you’re willing to roll up your sleeves. Even if you live in an urban area surrounded by a sea of concrete, tabletop hydroponic and aquaponic systems can be set up on the cheap… and they’re easy to maintain.

If you have more capital to deploy, consider buying agricultural property, preferably overseas. Buying foreign real estate is a great way to move money overseas, plus it gives you a place to go if you really need to escape.

As I survey farmland prices around the world, the best region to buy is South America, particularly Chile, Paraguay, or Uruguay.

There is no free lunch

September 27, 2012 Leave a comment

Sometimes the Telegraph gets it right.

But let’s not get too carried away here. To think that central bank
money-printing offers a largely pain-free way out of our economic difficulties
is sadly deluded. Carried to extremes, it ends in hyper-inflation, and in any
case, in an era of low growth and the progressive loss of Western employment to
technology and foreign competition, it does nothing for living standards. Wages
may lag prices for years to come. Friedman offers some plausible solutions, but
even he cannot magic away the consequences of years spent living high on the
hog. One way or another, a price has to be paid.

A price has to be paid – but it’s never the bankers or the government unions.  It’s always the pleb workers and the “market” that has to pay.

Jim Willie hits the nail on the head again

September 27, 2012 Leave a comment

Brutal truth again from the Man.

Insanity is defined as repeating the same action but expecting a different result. So the USFed conducted QE, then QE2, then Operation Twist (a deceptive QE), now is set for QE3. It expects a different result from the rising costs and debasement of the currencies. Somehow by enlisting the cooperation of the Euro Central Bank, the Bank of England, the Bank of Japan, and the Swiss National Bank, together they can pull off QE3 in a veritable ongoing QE to Infinity when all previous efforts have failed to produce a solution or economic recovery. The high priests from the central bank altars do admit that liquidity does not address the insolvency ills, yet they hit the monetary levers and accelerators more quickly. The central bankers are in a panic, and it is beginning to show clearly. Their solutions solve nothing. They will next attempt to rule more formally over the ruins.

The 1% are slave owners and the 99% are Native Americans

September 24, 2012 Leave a comment

OK, so we know the system is incredibly exploitative, unsustainable and “rigged to blow” if threatened.  The banks and the government have us in chains.   Lots will slowly become poor, lose their retirement funds or simply be cast aside.

But that doesn’t mean the top won’t stop laughing.  You could have said slavery was unsustainable.  But few blacks benefited from its abolition in an immediate material sense and many wealthy slaveowners remained wealthy.

The current system is unsustainable but the counterfeit wealth generated over decades won’t just disappear with a different system.

Sad, but the 1% will still be the 1%.

What to do?  Resign yourself to your lot or aspire to be an asshole.  That’s the only choice we have.

Central bankers seen laughing at inflation expectations

September 20, 2012 Leave a comment

Why it’s worse – much worse – than you think

September 19, 2012 Leave a comment

People think the government can’t go bankrupt.  Yes it can.  Forget about democracy.  Focus on money.  Think that people “vote” with their own money and earnings all the time.  Some passively.  Others actively.  Now those votes matter.

Let me explain.  As Gary North comments:

Mises was a senior advisor to the equivalent of the Austrian Chamber of Commerce after World War I. He understood monetary theory. His book on money, The Theory of Money and Credit, had been published in 1912, two years before the war broke out.

In the post-War edition of his book, he wrote of the process of the hyperinflationary breakdown of a currency. He made it clear that such a currency is short-lived. People shift to rival currencies.

The emancipation of commerce from a money which is proving more and more useless in this way begins with the expulsion of the money from hoards. People begin at first to hoard other money instead so as to have marketable goods at their disposal for unforeseen future needs – perhaps precious-metal money and foreign notes, and sometimes also domestic notes of other kinds which have a higher value because they cannot be increased by the State ‘(e.g.the Romanoff rouble in Russia or the ‘blue’ money of communist Hungary); then ingots, precious stones, and pearls; even pictures, other objects of art, and postage stamps. A further step is the adoption of foreign currency or metallic money (i.e. for all practical purposes, gold) in credit transactions. Finally, when the domestic currency ceases to be used in retail trade, wages as well have to be paid in some other way than in pieces of paper which are then no longer good for anything. The collapse of an inflation policy carried to its extreme – as in the United States in 1781 and in France in 1796 does not destroy the monetary system, but only the credit money or fiat money of the State that has overestimated the effectiveness of its own policy. The collapse emancipates commerce from etatism and establishes metallic money again (pp. 229-30).

In 1949, his book Human Actionappeared. In it, he discussed hyperinflation. He called this phase of the business cycle the crack-up boom.

The characteristic mark of the phenomenon is that the increase in the quantity of money causes a fall in the demand for money. The tendency toward a fall in purchasing power as generated by the increased supply of money is intensified by the general propensity to restrict cash holdings which it brings about. Eventually a point is reached where the prices at which people would be prepared to part with “real” goods discount to such an extent the expected progress in the fall of purchasing power that nobody has a sufficient amount of cash at hand to pay them. The monetary system breaks down; all transactions in the money concerned cease; a panic makes its purchasing power vanish altogether. People return either to barter or to the use of another kind of money (p. 424).

Later in the book, Mises discussed the policy of devaluation: the expansion of the domestic money supply in a fruitless attempt to reduce the international value of the currency unit.

If the government does not care how far foreign exchange rates may rise, it can for some time continue to cling to credit expansion. But one day the crack-up boom will annihilate its monetary system. On the other hand, if the authority wants to avoid the necessity of devaluing again and again at an accelerated pace, it must arrange its domestic credit policy in such a way as not to outrun in credit expansion the other countries against which it wants to keep its domestic currency at par (p. 791).

People think that the United States government can never go bankrupt. It can print its way out of every obligation.

No, it can’t.

People will eventually be forced – by sheer necessity – to vote for something else.  This is when the government really does lose the election.