12 facts all investors should know
1) The Federal Reserve is a private bank. It is not a part of the US Government. Ironically, the FDIC is owned and operated by the US Government, as are many other government sponsored organizations that would bear the burden of any crisis.
“Some people think that the Federal Reserve Banks are United States Government institutions. They are private monopolies which prey upon the people of these United States for the benefit of themselves and their foreign customers; foreign and domestic speculators and swindlers; and rich and predatory money lenders.”
– The Honorable Louis McFadden, Chairman of the House Banking and Currency Committee, Republican Senator from Pennsylvania, in the 1930s
2) Since the original issuance of the US Dollar by the Fed, it’s down more than 97% (chart). Article:
”By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens…There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.” John Maynard Keynes attributed to Vladimir Lenin.
3) $1 Million in Gold in 2002 would equal $6 Million today, whereas a $1Million investment in the DJIA in 2002 would equal $1.4 Million today.
Dow to Gold ratio 100 year historical chart shows Dow out-perform Gold by 238%. Compare this to the DJIA’s explicit 700% increase during the same time. Also consider that Gold remains Gold, while losing companies in the Dow are regularly removed, thus providing a misleading result.
4) European banking system is leveraged 26:1 meaning a 4% drop will wipe them out.
The European banking system is a complete and total disaster. Remember how bad Wall Street was in 2008? Europe’s banks are many multiples worse than that. The US at least recapitalized its banking system after the Crisis. Europe hasn’t. At all. That’s right, the banks in Europe have not raised capital to bring down their leverage rations, which is why the ENTIRE EU BANKING SYSTEM IS LEVERAGED AT 26 TO 1. Lehman, which was a total sewer of garbage debt, was leveraged at 30 to 1. Europe’s ENTIRE SYSTEM is leveraged at 26 to 1.
5) Hyperinflation has happened worldwide in more than 56 countries.
Hyperinflation effectively wipes out the purchasing power of private and public savings, distorts the economy in favor of the hoarding of real assets, causes the monetary base, whether specie or hard currency, to flee the country, and makes the afflicted area anathema to investment.
6) 99% of stocks are not owned by individuals, they are owned by the DTCC on your behalf. The European equivalent is Euroclear. Info on DTCC
So, do you think you own the stocks you've bought? Think again. For those of you who have not heard of the Depository Trust & Clearing Corp. (DTCC) and you own stocks ... sit down. This might change your your whole way of thinking. Who is the DTCC and what does it do? The DTCC actually provides clearing for 3.5 million securities from the United States and, get this, from 110 other countries and territories as well -- all valued at roughly $28 trillion. In 2008 alone, the DTCC settled more than $1.88 quadrillion in securities transactions. The DTCC is also the registered owner and holder of your stock. At present, the DTCC holds $23 trillion in assets. It has a virtual monopoly on clearing. In fact, 99% of all stocks in the USA are legally owned by it.
Considering that the Federal Reserve and the Bank of France might not have all of Germany's gold in their possession, (after possibly 'lending' some of it) could be reason enough for deciding to repatriate it in the course of a seven year time period. Legal accounting "tricks" (gold swaps) currently allow central banks to "lease" and provide the physical metal to the market (causing gold price suppression) while still reporting it in their balance sheets.
8) Economically speaking, the British Economy is worse than during the Great Depression.
Economists from the Royal Bank of Scotland said the last four years have produced the worst economic performance in a non post-war period since records started being collected in the 1830s.
Shadowstats.com is a website that analyzes government economic and unemployment statistics based on methodologies used by previous United States administrations, from the pre-Clinton era to the time of the Great Depression.[1] The author of the site claims that using Depression-era methodology, for example, the U.S. unemployment rate would have been 16.5% in January 2009, more than double the announced rate of 6.7%.[2] The site is authored by John Williams, an economic consultant with an economics BA and an MBA from Dartmouth College, New Hampshire.[3]
10) Although the United States has the highest corporate tax rate in the developed world at 35%, the effective tax rate (based on what US Corporations actually pay because of loopholes and the use of offshore tax efficient jurisdictions) is only 12%. On a scale of OECD countries, the US has one of the lowest effective tax rates.
At 35%, the United States has the highest nominal corporate tax in any of the world's developed economies. However, the effective corporate tax rate in 2011 fell to 12.1%, its lowest level since before World War I.
11) The world’s largest trading nation is China, not the US
U.S. exports and imports of goods last year totaled $3.82 trillion, the U.S. Commerce Department said last week. China’s customs administration reported last month that the country’s trade in goods in 2012 amounted to $3.87 trillion.
12) The nation in Europe with most hours worked is Greece. Germans aren’t even in the top 10.
This week Greece is facing more spending cuts after agreeing to a deal of 130bn euros (£110bn, $175bn) to help it avoid bankruptcy. But the statistics suggest the country has not lost its way due to laziness. If you look at the average annual hours worked by each worker, the Greeks seem very hard-working. Figures from the Organisation for Economic Co-operation and Development (OECD) show that the average Greek worker toils away for 2,017 hours per year which is more than any other European country. Out of the 34 members of the OECD, that is just two places behind the board leaders, South Korea.
Asia is in Collapse. The Next Fed Chairman Doesn’t Matter
The big news is what’s going on in Asia.
The US financial media continues to focus on who will be the next Fed Chairman, which is unimportant in the grand scheme of things. Greenspan created the biggest asset bubble in history. Bernanke bankrupted the republic and created an even bigger bubble trying to prove his misguided theories. Whoever takes over the reins at the Fed next will simply have the honor of being in the driver’s seat when the whole mess goes over the cliff.
Ignore the next Fed Chairman debate, the world has much bigger problems to worry about.
Let’s start with China.
China’s economy is based on fraud, not actual growth. The talking heads believe China will hit 7% GDP growth this year. Their electricity consumption is only up 2.9%. Can anyone explain how a country can be consuming electricity at 2.9% growth and hit GDP growth at 7%?
Take a look at the Chinese stock market. We’ve just taken out the “recovery” trendline going back to 2009. And we’ve done this at a time when China has just pumped $1.6 trillion in new credit (that’s 21% of GDP) into its economy in the last two quarters…
When you put an amount equal to 21% of your GDP into your banking system in six months and the stock market still falls, it’s GAME OVER.
Take a look at Japan. Abenomics (print even more money faster) was supposed to bring about growth. Instead, all it’s done is increase consumer prices. This in turn hurts incomes. And that implodes an economy (one which hasn’t seen major growth in 20+ years I might add).
The Abenomics bubble has burst. The Nikkei has failed to reclaim its trendline. This bull market is OVER.
So the second and third largest economies in the world are in collapse with stock market crashes.
What are the odds the world is somehow going to continue to grow through this? What are the odds that the next Fed Chairman will be able to manage this mess?
The Great Crisis, the one to which 2008 was just a warm up, is approaching. The time to prepare for it is BEFORE the US stock market bubble bursts.
We offer a free special report outlining how to prepare your portfolio for the coming crisis. You can pick up a copy at:
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7 Charts Of The Market’s Complete Divorce From Reality
7 Charts Of The Market's Complete Divorce From Reality
Submitted by Michael Snyder via The Economic Collapse blog [10],
The mainstream media would have us believe that the U.S. economy must be in great shape since the stock market has been setting new all-time record highs this month. But is that really true? Yes, surging stock prices have enabled sales of beach homes in the Hamptons to hit a brand new record high [11]. However, the reality is that stock prices have not risen dramatically in recent years because corporations are doing so much better than before. In fact, the growth in stock prices has been far, far greater [12] than the growth of corporate revenues. The only reason that stock prices have been climbing so much is because the Federal Reserve has been flooding the financial system with hundreds of billions of dollars that it has created out of thin air. The Fed has created an artificial stock market bubble that is completely and totally divorced from economic reality.
Meanwhile, everything is not so fine [13] for the rest of the U.S. economy. Economic growth projections have been steadily declining [14] over the past two years, and the growth rate of personal income in the United States has been on a huge downward trend [15] since 2008. The U.S. economy actually lost 240,000 full-time jobs last month [16], and the middle class continues to shrink.
So welcome to the "new normal" where most Americans struggle at least part of the time. According to one recent survey [17], "four out of 5 U.S. adults struggle with joblessness, near poverty or reliance on welfare for at least parts of their lives". Things are tough out there, and they are steadily getting tougher.
Yes, the boys and girls up on Wall Street are doing great (for the moment [18]), but most of the rest of the country is really struggling. We have never even come close to recovering from the last major economic crisis, and now another one is rapidly approaching.
The other day, Chartist Friend from Pittsburgh [19] sent me an email and told me that he had some charts that he wanted to share with me and asked if I wanted to see them. I said sure, send them over right away. These charts show very clearly that the stock market has become completely divorced from reality.
In a normal market, stock prices would only rise dramatically if the overall economy was healthy and growing. Unfortunately, our economy is far from healthy and has been decliningfor a very long time [20]. If the financial markets were not being pumped up by so much money printing and so much debt [21], there is no way that stock prices would be this high.
If we truly did have a free market financial system, stock prices should be a reflection of the overall economy. Instead, we have a very sick economy and financial markets that have been very highly manipulated.
For example, just check out the first chart that I have posted below. If the economy was actually getting better, the percentage of working age Americans with a job should be increasing. Sadly, that is not happening...
[22]
This next chart shows how the average duration of unemployment has absolutely skyrocketed in recent years. Yes, the duration of unemployment has improved slightly in recent months, but we are still very far from where we used to be. Meanwhile, the stock market has been soaring to new all-time record highs...
[23]
Traditionally, there has been a high degree of correlation between stock prices and real disposable personal income. From the chart below, you can see that this relationship held up quite well through the end of the last recession, and then it started breaking down. This is especially true at the very end of the chart. Real Disposable income has started to decline sharply but stock prices just continue to soar...
[24]
When an economy is healthy, money tends to circulate through that economy at a healthy pace. That is why the chart below is so alarming. The velocity of money is the lowest that it has been in modern times, and this indicates that economic activity should be slowing down. But the Federal Reserve has enabled the bankers [25] to thrive by pumping massive amounts of money into the financial system...
[26]
When an economy goes into recession, freight shipments tend to go down. In the chart below, you can see that this happened during the past two recessions. Unfortunately, we have never even come close to returning to the level that we were at before the last recession, and yet the stock market has been able to soar to unprecedented heights...
[27]
When an economy is growing and people are able to get good jobs, they tend to go out and buy new homes. Yes, we have seen a bit of an increase in the number of new homes sold recently, but we are still a vast distance away from the level we were at before the last recession. And now mortgage rates are starting to rise steadily [28], and this is likely going to cause the number of new homes sold to start going back down. The chart below clearly shows us that the real estate market is far from healthy at this point...
[29]
For most middle class Americans, their homes are their primary financial assets. So the fact that home prices have declined so much is absolutely devastating for many families. But stocks are primarily held by the top 5 percent of all Americans, and as the chart below shows, they have benefited greatly from the antics of the Federal Reserve in recent years...
[30]
There is no way in the world that the stock market should be this high. The economic fundamentals simply do not justify it. As a society, we consume far more than we produce, our debt is growing at an exponential pace [31], our economic infrastructure is being absolutely gutted and our financial system is a giant Ponzi scheme that could collapse at any time [32].
And no market can stay divorced from reality forever. At some point this bubble is going to burst, and when financial bubbles burst they tend to do so very rapidly.
As Marc Faber recently said [33], "one day, this financial bubble will have to adjust on the downside."
When it does "adjust", we are likely going to see a financial panic even worse than we witnessed back in 2008. Credit will freeze up, economic activity will grind to a standstill and millions of Americans will lose their jobs.
Don't assume that the bubble of false prosperity that we are enjoying right now will last forever.
It won't.
Use the time that you have right now to prepare for what is ahead.
A great storm is rapidly approaching, and I don't see any way that it is going to be averted.
The mainstream media would have us believe that the U.S. economy must be in great shape since the stock market has been setting new all-time record highs this month. But is that really true? Yes, surging stock prices have enabled sales of beach homes in the Hamptons to hit a brand new record high [11]. However, the reality is that stock prices have not risen dramatically in recent years because corporations are doing so much better than before. In fact, the growth in stock prices has been far, far greater [12] than the growth of corporate revenues. The only reason that stock prices have been climbing so much is because the Federal Reserve has been flooding the financial system with hundreds of billions of dollars that it has created out of thin air. The Fed has created an artificial stock market bubble that is completely and totally divorced from economic reality.
Meanwhile, everything is not so fine [13] for the rest of the U.S. economy. Economic growth projections have been steadily declining [14] over the past two years, and the growth rate of personal income in the United States has been on a huge downward trend [15] since 2008. The U.S. economy actually lost 240,000 full-time jobs last month [16], and the middle class continues to shrink.
So welcome to the "new normal" where most Americans struggle at least part of the time. According to one recent survey [17], "four out of 5 U.S. adults struggle with joblessness, near poverty or reliance on welfare for at least parts of their lives". Things are tough out there, and they are steadily getting tougher.
Yes, the boys and girls up on Wall Street are doing great (for the moment [18]), but most of the rest of the country is really struggling. We have never even come close to recovering from the last major economic crisis, and now another one is rapidly approaching.
The other day, Chartist Friend from Pittsburgh [19] sent me an email and told me that he had some charts that he wanted to share with me and asked if I wanted to see them. I said sure, send them over right away. These charts show very clearly that the stock market has become completely divorced from reality.
In a normal market, stock prices would only rise dramatically if the overall economy was healthy and growing. Unfortunately, our economy is far from healthy and has been decliningfor a very long time [20]. If the financial markets were not being pumped up by so much money printing and so much debt [21], there is no way that stock prices would be this high.
If we truly did have a free market financial system, stock prices should be a reflection of the overall economy. Instead, we have a very sick economy and financial markets that have been very highly manipulated.
For example, just check out the first chart that I have posted below. If the economy was actually getting better, the percentage of working age Americans with a job should be increasing. Sadly, that is not happening...
[22]This next chart shows how the average duration of unemployment has absolutely skyrocketed in recent years. Yes, the duration of unemployment has improved slightly in recent months, but we are still very far from where we used to be. Meanwhile, the stock market has been soaring to new all-time record highs...
[23]Traditionally, there has been a high degree of correlation between stock prices and real disposable personal income. From the chart below, you can see that this relationship held up quite well through the end of the last recession, and then it started breaking down. This is especially true at the very end of the chart. Real Disposable income has started to decline sharply but stock prices just continue to soar...
[24]When an economy is healthy, money tends to circulate through that economy at a healthy pace. That is why the chart below is so alarming. The velocity of money is the lowest that it has been in modern times, and this indicates that economic activity should be slowing down. But the Federal Reserve has enabled the bankers [25] to thrive by pumping massive amounts of money into the financial system...
[26]When an economy goes into recession, freight shipments tend to go down. In the chart below, you can see that this happened during the past two recessions. Unfortunately, we have never even come close to returning to the level that we were at before the last recession, and yet the stock market has been able to soar to unprecedented heights...
[27]When an economy is growing and people are able to get good jobs, they tend to go out and buy new homes. Yes, we have seen a bit of an increase in the number of new homes sold recently, but we are still a vast distance away from the level we were at before the last recession. And now mortgage rates are starting to rise steadily [28], and this is likely going to cause the number of new homes sold to start going back down. The chart below clearly shows us that the real estate market is far from healthy at this point...
[29]For most middle class Americans, their homes are their primary financial assets. So the fact that home prices have declined so much is absolutely devastating for many families. But stocks are primarily held by the top 5 percent of all Americans, and as the chart below shows, they have benefited greatly from the antics of the Federal Reserve in recent years...
[30]There is no way in the world that the stock market should be this high. The economic fundamentals simply do not justify it. As a society, we consume far more than we produce, our debt is growing at an exponential pace [31], our economic infrastructure is being absolutely gutted and our financial system is a giant Ponzi scheme that could collapse at any time [32].
And no market can stay divorced from reality forever. At some point this bubble is going to burst, and when financial bubbles burst they tend to do so very rapidly.
As Marc Faber recently said [33], "one day, this financial bubble will have to adjust on the downside."
When it does "adjust", we are likely going to see a financial panic even worse than we witnessed back in 2008. Credit will freeze up, economic activity will grind to a standstill and millions of Americans will lose their jobs.
Don't assume that the bubble of false prosperity that we are enjoying right now will last forever.
It won't.
Use the time that you have right now to prepare for what is ahead.
A great storm is rapidly approaching, and I don't see any way that it is going to be averted.
The real economic truth about US China monetary ties
This analysis is about debunking the myth that China has some power over the US because of it's large debt holdings. Let's just say this is a myth created by propaganda or lack of understanding. It's nonsense.
Another myth is that China is a currency manipulator. The Yuan is pegged to the US Dollar (although recently it's been allowed to trade in a 'trading band'). Furthermore, if the Yuan would be allowed to freely float against the USD, if it appreciated as many expect it to, the US would see the cost of Chinese goods skyrocket. So what gives?
Origin of relationship
Let's look at how this relationship started. During WWII the Japanese invaded mainland China, and by the US eventually defeating Japan, even if for reasons other than China, the Chinese felt a sense of gratitude. Arguably Nixon opened up China with the beginnings of what eventually became state run capitalism. The US is currently China's 2nd largest trading partner, 2nd only to the EU. For a long time the US was #1. The Chinese Yuan is pegged to the USD, not the Euro. Similar to the situation with the Petro Dollar, China invests much of it's USD profits in what it feels are the safest US investments, treasuries. However China is also a big buyer of US stocks and the recent trend in Chinese business is M&A (used to be trade deals). Covertly and overtly the Chinese are buying US assets as investments. A Chinese investment group recently bought 200 acres of land in Michigan with the intent to build a "China City."
As far as cultural compatibility, the Chinese certainly have Americanized. The Golf industry is booming in China, with over 650 golf courses even though there is an environmental ban on them (yes, contrary to popular belief Golf courses are bad for the environment). By this year, McDonald's plans to have 2,000 restaurants in China. That doesn't seem like much for a big country but consider it took them 19 years to build the first 1,000 and now they want to build another 1,000 in 3 years. The Chinese love American culture. Those who can afford watch NBA basketball through satellite connections. And of course there is a growing obesity epidemic, whereas 30 years ago you'd be hard pressed to find a few slightly overweight people in a crowd. They are also one of the world's biggest polluters, similar to the early 21st century America recently industrialized. They are evolving, enacting regulations, and opening up their capital markets. Yuan trading is exploding, with many swap agreements now in place with major trading partners. Many parts of China look like US suburbs.
The nonsense about treasuries
If China decided in one day to sell all of it's US debt, this would present a few problems. First, because of the size of their holdings, they may not immediately find buyers. This would immediately drive the price down but cause the US to react in a few ways (potentially):
- Buy all of China's debt back from them and 'monetize it' (The Fed would love this as another opportunity for QE, but in effect what would have changed except ownership?)
- The US could default on it's obligations (Not the most likely, but anything is possible with Wall St.)
- The US could ban Chinese imports, thus crushing their domestic economy (If China was serious to dump treasuries this would be likely political blowback)
- Bomb China (While this may seem extreme, US military intervention is usually started with economic interest such as oil, rubber, bananas, etc. China manufactures large amount of US goods, the US wants to keep those factories open.)
Scenarios that are complete nonsense, that we can assume the US will NOT allow to happen:
- China's bond selling is allowed to go on without any intervention, collapsing US bond market, dragging down the corporate bond market with it, and thus the stock market, and the US Dollar. The world starts using Yuan in place of USD
- China negotiates that in lieu of debt obligations they will take California instead - This is no joke there are articles written about how the Chinese are going to use their leverage to seize US properties. See here
- China abandons using USD completely and ceases trade with US
The Fed creates USD for nothing, sends it to China, who sends manufactured goods to the US. What a great deal, the US is trading worthless paper for products. Some of that money flows back into treasuries at the request of the US. Isn't it in the benefit of the US that some of those USD profits are re-invested in US markets? The alternative would be that China invests in the EU or domestically. China is backing off, while they are not selling US treasuries they are buying less. If China dumped treasuries the US could immediately cut off the supply of USD going to China. Economically speaking they could restructure their economy but this could take decades, as they have used the US model and flow of USD to finance their growth.
Doing business in China
The relationship between the superpowers is mostly economic but fairly complex (maybe intertwined is a better description). It's not only Chinese factories making cheap products for Wal Mart. Now US companies are entering the Chinese market, and establishing themselves. General Motors recently sold more cars in China than it did in the US. Apple manufactures much of its supply line in China, as do many tech firms. A big advantage of off shoring to China is the lack of labor unions and wage floors. So on one hand the US is complaining politically (on the surface) that China is guilty of human rights abuse, while allowing US companies to take advantage of the human rights situation getting cheap labor (see Foxconn Suicides).
Chinese problems
To make this nonsense even more fantastic, China is in no position to stand up to the US even if it wanted to (and it doesn't want to, it would lose it's most valuable partner). China has massive internal problems. The internet is giving rise to a growing educated population (even with the Great Firewall of China). Pollution such as the Asian Brown Cloud, dust storms, desertification, water shortages, smog in cities, and a host of other environmental problems are threatening the health of the domestic population as well as the economy. In order to reform environmental policies sufficient to start solving these problems, it would require political change and an increase in cheap goods to justify the financing of it.
US partner
China relies on the US for much more than money and the US consumer. The US gives credibility to China on the world stage, arguably, if the US pulled out of China the EU would be pressured to back off. China can't exist in an Asian bubble with India and Russia at least for the next 50 years until their economies develop. Also the Chinese rely on US technology, for whatever reason they are not innovative by themselves. Many of the trade deals with US companies include clauses that Chinese companies are granted access to patents and other technological know how. They are very industrious and shrewd but have never proven to be big innovators (unlike their Japanese cousins and many other Asian nations). Losing the US as a partner would be a devastating blow for China.
China partner
While the US has the upper hand, the US would suffer greatly if China was no longer a partner. The US has dismantled it's manufacturing base, and it would take decades to rebuild it, but it would be questionable how that could be economically feasible considering US standards. Many US companies such as Apple rely on cheap Chinese manufacturing. Also the US exports 122 Billion worth of goods and services to China, which is the 3rd largest export partner. Politically, many in the US (especially neocons) see Asia and especially central Asia key regions to control. While China has reluctance to bow to US whims, such as with Tibet and other disputed territories, China is the elephant in the room. It borders India, Pakistan, Afghanistan, Tajikistan, Kyrgyzstan, Kazakhstan, Mongolia, Russia, North Korea, Vietnam, Laos, Myanmar, Bhutan, Nepal, and Hong Kong. It's in the US interest to share close political ties with China for this reason, and also not to completely lose them to Russia. Russia and China have a close political and military relationship which if taken to deeper levels, especially including other regional nations, could pose a regional threat to US interests. Not to mention demographic changes make China one of the fastest growing consumer markets to which the US could market its goods. Finally, there aren't too many countries in the world the size of China, so the US has no reason NOT to foster close relations. China is now growing but in 20 or 40 years what will China look like on the world stage?
Conclusion
China does not plan to destabilize the US economy by selling treasuries, but even if they wanted to it's not possible. China does not want to replace the United States. It's focus, at least for the time being, is domestic growth and systemic evolution. In many ways China is behind the times, although they are changing rapidly. They do not have resources for foreign entanglements whether they be economic, political, or military. This may not be the case in 50 years but much can happen before then. For the time being, we can sleep soundly knowing the US and China have ties that bind, which if unwoven, would be catastrophic for both countries.
Research about China data
List_of_the_largest_trading_partners_of_China
China - Wikipedia, the free encyclopedia
The World Factbook - China
China Economy :: The Market Oracle
Articles
Yuan reaches record high against the US dollar
CHINA MANEUVERS TO TAKE AWAY US’ DOMINANT RESERVE CURRENCY STATUS
Chinese Central Bank to Test Program to Settle Trade in Yuan Rather Than Dollars
Year of the yuan: China's explosive currency goes global
Jim Rogers Shifts Assets Out of Dollar to Buy Chinese Currency (2007)
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Explanation of example hedge for Argentinian Peso
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Video presentation about "Hybrid Trading" concept
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Are We Investing Or Are We Just Dodging Thieves?
The individual with complete control of all his assets is the only truly wealthy person in a kleptocracy.
Correspondent Jeff W. recently posed a deeply insightful question: are we investing or are we really just trying to dodge thieves?
This question slices right through the carefully cultivated illusion of trust and prosperity and plunges straight into the heart of our cartel-state financial system.
Here are Jeff's initial thoughts on the question:
"As we try to preserve capital and earn a return on it, are we investing today or are we really just trying to dodge thieves?
First of all I question how much real investing is going on in America today. We continue to lose manufacturing in this country, so in manufacturing, disinvestment is what is going on. People speak of investing in houses, but today’s McMansions, if you look at how they are built, do not qualify as long-term investments. They are built more to allow their owners to participate in a real estate asset bubble rather than to live in and enjoy for generations (which is the purpose houses would be built for in a sane and honest world).
Investments in strip malls and big-box stores do not increase the wealth of the nation. When you have enough retailing, it is enough. You don’t need any more. Adding more retail space is malinvestment. A lot of retail space that is being added now will have to close down if The Federal Reserve ever starts tapering in a serious way.
So there is reason to suspect that not very much productive investment is really taking place in American at all. Regardless of that, investors still have to dodge the ubiquitous thieves who are swarming all over the landscape.
If you leave your money parked in cash, you will lose it to inflation. As you have pointed out, each person experiences a differing inflation rate; for some people, today’s rate could easily be 10%-15%. That’s how much they lose if they stay in cash.
If you buy commodities futures, you are at the mercy of the thieves who suppress prices with massive naked shorting. Price manipulation is a form of stealing, and many precious metal investors have been victimized lately by the thieves who do it.
If you buy bonds, you are likely buying at the top of a bubble. Running Ponzis in the form of asset bubbles is, of course, another kind of theft.
How about stocks? Looking at the disinvestment going on in the U.S., an investor might think that Chinese stocks would be the way to go. That’s where manufacturing is booming. But if an investor were to go that route in recent years, he would also have been burned. I believe that Chinese stocks, like commodity prices, have been manipulated in recent years by the Powers That Be.
Does it make sense that Chinese stocks should have lost 40% of their value since 2010 if their economy is growing 8-10% a year? Does it make sense that U.S. stocks should have gone up as they have? The whole investment environment today stinks of price manipulation.
So the skill we need today is not traditional investing skill; it is thief-dodging skill. It consists of knowing the thieves’ techniques and whom they are targeting, of knowing the bad neighborhoods to avoid, knowing how to avoid being a target, trying to stay one jump ahead of them as they target new victim groups. These are skills people had back in the Dark Ages, and as we enter a new Dark Ages, these are skills we need again.
Millions of middle class Americans are being wiped out by thieves, and millions more will be wiped out as trends continue. But those who can successfully dodge the thieves can continue to maintain some civilized standards as they hope for better days."
Thank you, Jeff, for posing a thought-provoking question and commentary.
How do we avoid thieves when the financial system itself is theft? The obvious answer is to peel away from the crowd of lemmings running full tilt for the cliff edge of asset bubbles.
This requires substituting skepticism for blind faith. Please glance at this chart and ask yourself if this bubble is different and boom will not be followed by bust for the first time in human history:
The first step to avoid losing to thieves is avoid being a mark in the thieves' game.To some degree, this may mean absorbing a smaller, known loss (inflation by holding cash) to avoid the thieves' high-risk asset-bubble games where a potential loss of 40% of one's capital is not just possible but the unstated purpose of the game.
Another is to remove as many assets as possible from exposure to the thieves' systems. This means withdrawing your capital from Too Big to Fail Banks, pulling capital out of Wall Street, and limiting the amount of cash you hold in any one bank to limit losses from "bail-ins" where your cash is stolen to pay off banking-sector thieves.
The cartel-state debtocracy indentures the unwary with debt. Debt is the thieves' poisoned-sugar method of addiction and servitude. The high from debt is like the high from crack cocaine: it seems so "cheap" at first, and then the addiction kicks in and withdrawal becomes impossibly painful.
Welcome to the Thieves' Den of Debtocracy.
Since the system yokes those with high earned incomes into teams of tax donkeys, one way to minimize one's time on the tax donkey team is to reduce one's earned income, either by working less or by deploying one of the vanishingly few incontestably legal tax shelters open to the lower 99.9% (for example, socking away money for retirement).
The cartel-state Den of Thieves will naturally skim and steal what is most easily stolen, which is money and assets held in their own systems (banks, Wall Street, Treasury bonds, etc.).
This explains the popularity of the coffee-tin/glass-jar bank in kleptocracies: the cost to the authorities of trying to locate and confiscate millions of coffee-tin banks is prohibitive, and prone to marginal returns. Stealing money from depositors via a "bail-in" is effortless and essentially cost-free to the state, as is requiring all retirement funds be invested in Treasury bonds ("for your own good," of course).
No matter how desperate the cartel-state thieves are for more cash, they know that confiscating the serfs' tools and land without the cover of taxes and debt would trigger revolt. So assets that are physical objects or immaterial assets such as human and social capital are beyond the easy reach of the cartel-state thieves.
Taxes and debt are the two methods used for wholesale thievery via confiscation.Can't pay your mortgage or property taxes? Oops, your assets, land and home are confiscated. The ideal situation is not have a mortgage or any other debt, as debt is what gives the thieves leverage over you. The only protection against wholesale theft via suddenly higher property taxes is a limit on annual tax increases (a.k.a. Prop 13).
Our financial system is structurally a kleptocracy. The less exposure one has to Wall Street and the financial debtocracy, the lower one's exposure to the thieves.
It's called opting out, or voluntary poverty. Poverty is of course a relative term. If all one's assets are real-world possessions and immaterial assets such as skills, personal integrity and networks of trusted associates, one is indeed poor in financial assets. But if control of one's assets is the only real measure of wealth, then the individual with complete control of all his assets is the only truly wealthy person in a kleptocracy.