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September 18th, 2014
Another call for a Fed'l Reserve audit.
Stock prices set a record yesterday after Fed Chief Janet Yellen said the Fed would keep interest rates close to zero for a considerable length of time. The Fed's main issue is joblessness. There is too much of it and the Fed can't do anything about it except play the low interest card. However, that won't work unless citizens and corporations step up their borrowing.
In response to Ms. Yellen's remarks a Wall Street Journal editorial today says "We'll come right out and admit we have no idea what [this] says about the future of monetary policy. We doubt even Fed Chair Janet Yellen knows."
The Journal may not know what the future holds but stock pickers believe they figured it out. The Dow Jones Industrial Average soared to another record high Wednesday. Our contrarian instincts tell us a stock price bubble has occurred and it'll sorely sting gamblers who believe a DOW of 20,000 or higher is just ahead. The DOW at mid-day Thursday had established yet another record.
Mr. Black wanders the world quite a lot and has a better perspective of financial/monetary trends than those of us who stay mostly in one place and get our information from TV, newspapers, and the Internet. We agree this is an exciting time to be alive because the pace of change is picking up and and no one seems really sure what's ahead or how it will unfold.
One little hint for Social Security recipients. Don't look for much
of an increase in your monthly checks in 2015. The amount is based
on the September rate of inflation and it is expected to be very
low. YESTERDAY's REPORT ON
THE AUGUST CONSUMER PRICE INDEX MAY BE A PREVIEW OF SEPTEMBER.
IT FELL 0.2 PERCENT IN AUGUST...THE FIRST DIP INTO
NEGATIVE TERRITORY IN A YEAR AND A HALF. HOWEVER, THIS IS ONLY A
WHIFF OF DEFLATION. THE OVERALL PRICE INFLATION RATE FROM
AUGUST 2013 TO AUGUST 201`4 IS 1.7 PER CENT. THIS POSES A
PROBLEM FOR THE FEDERAL RESERVE BECAUSE ITS EXPECTED INCREASE IN INTEREST
RATES COULD TIP THE ECONOMY INTO A DEFLATIONARY
"The idea that the Obama administration has the budget deficit under control is a complete and total lie," asserts Michael Snyder. National Debt
Snyder's article is on a web site devoted to dredging up evidence that the United States is in for it because of its loose fiscal policies and skyrocketing public debt. Many readers will be turned off by the idea that the USA is headed for bankruptcy and economic depression, but the Federal Reserve chart at left clearly shows there have been seven periods of recession since the late 1960s and the worst one was the most recent. Notice the steepness of the public debt since it began!
Debt never vanishes into thin air. It is ALWAYS paid...either by the borrower or the lender. Somehow this truth is entirely overlooked by the boys and girls we have sent to Congress. They believe their mission is to spend money as freely as possible and let the chips fall where they may.
November 30th vote on gold.
his 15th year Fred Reed got drunk.
The irascible Fred Reed waxes nostalgic about his teen years as he prepares to attend his 50th high school reunion. This indicates he escaped high school in 1964. We and the Missus graduated several years earlier. We were classmates. But our graduating class stopped having reunions after #65 on the grounds there weren't enough classmates left who were able to attend. Time does take its toll!
Fred's point: profound changes have occurred in the nation since our youth. Not all of them for the better. Small wonder there are so many graying, balding curmudgeons loose on the Internet.
Liberal economist Paul Krugman, in his latest New York Times column writes, "The big problem with economic policy is not that conventional economics doesn’t tell us what to do. In fact, the world would be in much better shape than it is if real-world policy had reflected the lessons of Econ 101. If we’ve made a hash of things — and we have — the fault lies not in our textbooks, but in ourselves."
Well, Krugman is right in the sense that we-the-people are at fault for the present economic predicament. But we are at fault for having let Krugman and his ilk lead us astray, persuading us to believe that the government can miraculously create wealth for us all by printing up little slips of paper and calling them "money". In fact, the physical printing of currency is not so much relied upon any more. This pseudo-wealth can be created with just a few strokes on a computer keyboard.
Doctor Krugman, et al, fail to understand that the Federal Reserve notes and computer data are not wealth at all, but merely uncertain promises of wealth. The transition from sound money to fiat currency has been going on for more than 80 years. The economists who believed in sound money are dead.
Theological Concepts at War.
"Consider the major difference between Sunnis and Shi'ites. They both believe in one God, Allah. The Shi'ites also believe in the infallibility of their Imams who interpret the text of the Holy Qur'an. Sunnis frown upon that line of thinking. They believe every word in the Qur'an and are bent out of shape by people who don't. Moreover, Sunnis think they will see God (Allah) when they die and Shi'ites don't think he will be visible in the Hereafter. Shi'ism, in the eye of Sunnis, is a separate religion founded on bad tenets - - hence the unending feud.
"Can we afford to get into the middle of all that? No." Religious Violence
Our staff curmudgeon looked into this conflict in October, 2006. A lot of blood has been spilled since then and no peace between these two factions is expected. It's reported IS (Islamic State) is raising some $3 million a day through the sale of crude oil, muman trafficking of women and children, and other methods people of peaceful disposition would never consider
economy without getting deeper into debt, casting the net wide to consider options from a pan-European capital market to a huge investment fund.
Finance ministers from the bloc's 28 countries are fleshing out a host of ideas circulating in European capitals. With interest rates already at record lows, ministers need radical steps to help growth at a time of near record unemployment.
Talk about your tangled webs! The Eurozone is trying to find an escape hatch from a serious economic slump. The euro has lost parity against the U.S. dollar...interest rates are very low...economic activity is sluggish...a classic picture of deflation knocking at Europe's door.
The U.S. is having its own problems with a strong deflationary tendency with gold prices at an eight month low, the dollar showing new strength, and the Fed poised to stop its emergency bond buying program next month. (The Fed will surely push their deadline into November to avoid any unintended consequences prior to the mid-term elections.)
What should the consumer do? Tough question. Common sense dictates that a deflationary scenario means scarcer, stronger dollars. Debt becomes a greater struggle to pay off. Unemployment increases and a pervasive gloom prevails. The person with little or no debt and an accumulation of real wealth is a winner.
But Congress and the Federal Reserve has been inflating the money supply for years. That tends to drive prices higher (price inflation) and favors debtors because they can clear their obligations with cheaper dollars, although when and if inflation gets out of control and runs into double and triple digits dollars eventually become worthless and chaos prevails.
No money inflation in the history of humankind has ever "not ended." The trick is to be in a relatively safe position when it occurs.
Should the minimum wage be raised to
$15.00 per hour?
The year we and the Missus were married Professor Thomas Sowell was a 16 year old black dropout from high school. What prompted him to follow the path to understanding that government price setting leads to fewer jobs, not more?
"In 1948, the year I left home, the unemployment rate among black 16-year-olds and 17-year-olds was 9.4 percent, slightly lower than that for white kids the same ages, which was 10.2 percent." Minimum Wage
"Don't buy gold. The
government will confiscate it."
Yes, FDR called in the nation's privately held gold in 1933 - but gold was money then. And he did not CONFISCATE it. He paid the mint price, $20.67 per troy ounce. It's unlikely the federal government would pay the present market price of $1,240.00 per ounce in order to rake in gold.
Gold is not "money" now. Besides, what claim could the U.S. Treasury Department have on a gold coin you bought from, say, Canada, Australia, China, or So
Long-time bullion dealer Don Stott puts it this way:
What's the scoop on gold these days? There's been a substantial deflation in the prices of gold and silver which means this may be a good time to swap some surplus cash for precious metal. If you can buy gold at $1,240.00 why wait 'til the price pops to $1,500.00 or higher?
Why buy gold at all? Because it has a better track record for preserving purchasing power over the long run than debt-based fiat currency.