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October 30th, 2014  
  Alan Greenspan: "Price of Gold will rise."
Q: “Where will the price of gold be in 5 years?”
Greenspan: “Higher.”
Q: “How much?”
Greenspan: “Measurably.”

   The former head of the Federal Reserve will not be pinned down on the question, but less than a week ago he said he thought the dollar price of gold will be "measurably higher" in five years.  He also said that a gold money standard is not  possible in a welfare state, although he did not say the U.S. is a welfare state. 

    Is Greenspan predicting a burst of inflation?  The Federal Reserve balance sheet indicates that's a strong possibility.  At the moment, however, the gold barometer is flashing the deflation sign.  That is, the dollar is a bit stronger.   You can buy more gold with it, more euros, more oil, and a great many other things.  We think the situation has the feel of skating on a frozen pond in late winter.  Stretches of ice become thinner as tendrils of spring warmth arrive.  The skater gets the ominous feeling of danger and decides to go ashore and hang up his/her skates. 

    In answer to the query "Why are central banks buying more gold?" Greenspan responded, "That is a fascinating question."  

    It's hypocritical for central bankers to hoard gold on the one hand and condemn it as a useless monetary relic on the other.  It strikes us as a good idea to emulate what the bankers DO rather than what they SAY.

No change in Part B premium in 2015

   The Social Security Administration says the average Social Security benefit will increase by $22 per month, from $1,306 in 2014 to $1,328 in 2015. The average benefit for a married couple who both receive benefits will increase by $36 per month, from $2,140 to $2,176.

      The COLA benefit increase is 1.7 percent.  But the usually unreliable Internet gossip says that the Administration is withholding news of a Medicare Part B premium increase until after next Tuesday's election.  Not according to CBS and other media.  Medicare Part B premiums will remain the same in 2015.  RETIREMENT COSTS

        Getting old is a precarious proposition, if one must depend only on Social Security income.  An extra $22.00 a month won't go far.  When the system was launched in the late1930s it was advertised as as a means to augment one's income after 65, not to serve as a sole source of support.  Today, millions of recipients live almost entirely on their monthly Social Security income.  With thousands of Baby Boomers coming into the system every day the SSA will be forced to dig more deeply into its Trust Fund.  The fund contains mostly government IOUs (bonds). It will run dry at some point.

America’s most incurable disease is spending
Taking prudent steps now will improve health down the road.

   "Let’s look at recent history," Suggests Dr. Ben Carson. "In the past 10 years, projected deficits for [federa] entitlements created long ago, such as Social Security and Medicare, have grown dramatically. In fact, existing entitlement programs consume about 60 percent of all federal spending. During this time much political effort has been expended — unsuccessfully — trying to reform these programs. I’m not saying this wasn’t an important effort. But, if these programs are not reformed soon, they will consume 100 percent of projected federal revenue within the next three decades."  Uh-oh! Where is the Doctor headed with this?  Surely he's not saying the federal government is spending money it doesn't have and faces a monumental money crisis!  Or is he?  The Incurable Disease.

    Very hard to argue against Dr. Carson and not look foolish.  


   Ben Garrison sees the stock market as a bubble, albeit a tough skinned one, that has bounced back from its recent swoon.  Depending on what the Federal Reserve's Open Market Committee says in its Wednesday public comments this week the DOW may climb above the 17,000 level it last saw on September 30th.  (The DOW record high of 17,269.24 was reached September 18th.)

   What next for stock prices?  We don't pretend to know, but we've never seen a bubble that didn't eventually burst.

   More of our nephew's 'toons at GRRRGRAPHICS

    ITEM: With U.S. inflation weak, the European economy stumbling and the dollar on the rise, the big question is to what extent Fed officials acknowledge risks to their expectations that the U.S. recovery will continue to strengthen and allow them to raise rates around the middle of next year. WORRY: Low Inflation

    The deflation commentator Vern Myers worried about in the dreadful inflationary days of the Nixon, Ford, Carter years waited some 40 years to reassert itself, but to almost everyone's astonishment the fear of DEFLATION is the Federal Reserve's worry, not the price hyperinflation so widely expected after years of Fed money printing.  

     It's really beginning to look like the US is slipping into a Japanese style malaise.  With so many Harvard and Yale economists at the helm one would think this could be avoided. <insert smiley face>

Solving the problem of aging.
You can't live forever, but how about a longer, healthier life?

   Finding ways for people to live even longer might sound like the last thing needed in a world whose aging population increasingly looks like a social and economic time-bomb. But what if life could be extended in such a way that allowed people to remain active and economically productive for longer?  SEEKING AN AGING 'CURE'

        The key words in the above paragraph are "active" and "productive".  The last thing society needs is discovering methods of keeping people alive merely so they can watch television all day and live almost entirely off the efforts of younger generations.  

Obama plans executive actions to strengthen U.S. manufacturing

   (Reuters)  "President Barack Obama will launch a series of executive actions on Monday to strengthen U.S. advanced manufacturing, including a $300 million investment in three technologies considered crucial to the country's industrial competitiveness."

    If the chief executive aims to micromanage the economy through a series of executive actions it dramatically lessens the need of a congress of citizen representatives.  In a free market competitiveness flows from the investment of private capital and lots of ambition.  In a government directed (socialist) scheme taxpayers are forced to foot the bill to attempt to achieve competitive goals.  

   Today's action may be an attempt to bolster the chances of Democrats in next week's election, but as FDR demonstrated eighty years ago trying to manage economic policy from the Oval Office leads to bad results.

     "We'll get to that after the election."
The White House stall is on until after November 4th.

   It's the way of politics.  A cascade of important decisions is being held up by President Obama until after election day.  Knowing what's happening isn't helpful.  There's not much the common citizen can do about it. 

   For instance:  

   "The administration has announced that health-insurance premium rates on the ObamaCare exchange won’t be available until Nov. 15, when the Healthcare.gov website is set to start enrolling people for 2015.

   "How politically convenient.

   "Rates are expected to go up by a whopping 14%, but voters won’t know because they won’t be revealed until after the election. Last year, enrollment began on Oct. 1. Clearly, the date was pushed back to hide the increases from the voting public." Post Election Agenda

An elderly man sees the Obama presidency as a danger.
Socialism and the Constitution don't mix.    

   "Needless to say, I was saddened and very disheartened. I still am. I am sad because at age 76,  I’m living the last chapters of the book of my life in a country that I no longer recognize.  I am sad because the generations who follow me will not be privileged to live in the country which I grew up in and came to love so much. I am saddened because I believe the chance we had to turn away from Socialism and back toward Individual Liberty and responsibility by not returning Obama to the presidency, was lost for a long time to come. That ship has sailed." America's Death March

   Being in the last chapter of life our self we can strongly relate to John Porter's lament about the US embrace of socialism and abandonment of the sound precepts of the Constitution.  But the socialist instinct is born in us, we think.  Isn't it perfectly natural to expend as little effort as possible to receive as much in the way of comfort and leisure as possible?  If we become incapacitated or old don't we instinctively feel that we have a kind of "right" to the best care possible whether or not we have the means to pay for it?  

   People of Mr. Porter's age, and older, usually have collected all the money they and their employers paid in FICA taxes through the years (adjusted for inflation) and are living out of the pockets of present FICA taxpayers.  Most of them consider it a benefit from "the government" that is owed them and don't make the connection between today's workers and their own well being.  

   In our own juvenile years there was no such thing as Social Security.  The prudent lived on whatever they had accumulated.  The less fortunate elderly relied upon family and charity.  Unimaginable today, but a fact of life before federal central planning and the idea that government owed everybody a living.  This "free lunch" can't be sustained forever but there are plenty of eager politicians willing to try  - and they will have to continue to dip into the ideals of socialism to do it.  Both Democrats and Republicans embrace the U.S. style of socialism.

"A pessimist sees the difficulty in every opportunity;
an optimist sees the opportunity in every difficulty."

~ Winston Churchill

      Did Mr. Churchill get this bassackwards?  Depends on one's interpretation, we suppose.  

     The pessimist, for instance, will see problems with government seizing the opportunity to increase tax rates whenever it chooses.  Political leaders, on the other hand, see every social problem as an excuse to expand the costly role of government.  The pessimist worries about paying back stupendous levels of debt...the optimist says "Don't worry about it.  Let future taxpayers take care of it." 

 TV newsrooms are not covering midterm elections intently.

  (From the Washington Examiner) - The nation’s Big Three TV networks that breathlessly reported the 2006 anti-Bush election which gave Democrats control of Capitol Hill have practically ignored this year’s anti-Obama midterms that are expected to return full control of the Hill to the GOP. A new and exhaustive Media Research Center analysis compared the last seven weeks of CBS, NBC and ABC news coverage with the same period in 2006 and found a 6-1 disparity between the Democratic election wave and the current election. The story count: 159-25. The worst offender is ABC’s newly-renamed “World News Tonight.”

    We snitched this graphic from an essay by Gary Christenson which maintains that the fiat currencies of the world cause serious economic distortions that can't be fixed by merely printing more of them.

    "Loss of confidence in fiat currencies and never-ending debt causes a major depression or financial collapse. What could create such a loss of confidence?  Insolvent governments, a global pandemic, derivatives implosion, massive bank failures, financial melt-down, crude oil price spike, debts that will never be repaid, and leaders who don’t lead – are just a few."   Gold or Paper?

     Some of the world's central banks are importing gold hand over fist.  India, for instance, increased its import 449% from a year ago.  China has been a big importer.  And, lately, Russia is reported to have sharply increased its gold imports.  

      Why are these nations hoarding such an archaic out-of-favor commodity as GOLD?  

      The dollar price of gold is wallowing around just over $1,200.00 per troy ounce.  It's a bargain price IF price inflation increases.  If deflation breaks through and prices plunge the present gold price may be too high.  One thing for sure - according to history - an ounce  of gold conveys purchasing power into the future better than depreciating paper money.   Bottom line...it's probablyi time to add another Krugerrand to the collection in your sock drawer.

And this. . . 
..from economist Jim Rickards.

  Frankly, we don't know if Rickards ever sat through a class of Econ. 101 but his books on the weaknesses of fiat currency have made a dent on the national psyche.  He writes, "There isn’t a central bank in the world that wants to go back to a gold standard. But that’s not the point. The point is whether they will have to."
Your Personal Gold Standard

  He's right, all the establishment experts are poo-poohing even the slightest mention that there may be a role for gold after the debt=based fiat money flows down the drain.  However, as we've pointed out above China, Russia, and central banks of other large nations have been importing vault gold by the tons.  Why would they do that if gold were really so useless?  

   Remember.. paper bills are evidence of debt.  These IOUs are not wealth...they are the PROMISE of wealth.  A piece of gold, on the other hand, is the Real McCoy - a substance that is valued around the world for its several attributes, including its long history of holding purchasing power over time,

The deserving poor vs. the non-deserving poor.

     "Conservatives understand that people sometimes need help. We are in favor of feeding the poor and housing the homeless, although we believe that is more appropriately managed by extended families, churches and non-profits rather than government. What we cannot support is a culture of ever-expanding welfare that removes any incentive for families to take responsibility for themselves, and work to improve their own situations." 48 percent of Americans get Gov't Assistance.

    Once upon a time a distinction was made between the non-deserving poor and the folks who are poor because of bad luck and lack of opportunity.  The so-called "deserving poor."  Taxpayers paying the bills may insist on it. 

Going into debt for a CAR.
It may be one of the silliest things people do. 

     "Most new car 'buyers' are in fact debtors. They sign loan documents and make monthly payments. Typically, for five years, the length of the average new car loan. Some extend this to six years – and seven years is not unheard of."  ~Eric Peters.

      Mr. Peters writes about automobiles for a living.  He points out that most new car buyers do not pay cash but finance their vehicles for terms of six to seven years, a far cry from the 1960s and early '70s when a two year finance plan was common.  The consequence is many "owners" are underwater on their car debt before the vehicle is paid for.  

      Our first car was a 1929 Chevrolet which we acquired for $75.00 right after World War 2 ended.  It was 16 years old and had seen some hard use, but it was transportation and got us from one place to another without much difficulty.  

      We have no car now because we can't see reliably enough to drive one, but the Missus has a very nice luxury vehicle that is 18 years old and well maintained.  Insurance and taxes are quite low and we can't think of any reason to swap it for something new.

      To calculate the price of a new car one must add to the purchase price the high cost of long-term financing.  The tab, over time, can be staggering.  And, as Eric Peters points out, it is an appliance that depreciates in value. ENDLESS DEBT

This does not make us feel warm and fuzzy about Internet financial privacy. 
     About 110 million Americans — equivalent to about 50% of U.S. adults — have had their personal data exposed in some form in the past year, said Tim Pawlenty, president of the Financial Services Roundtable and the former governor of Minnesota.

   About 80% of hacking victims in the business community didn't even realize they'd been hacked until they were told by government investigators, vendors or customers, according to a recent study by Verizon cited by Pawlenty. Hackers at work.  


It could cost consumers billions of dollars of Congress doesn't extend it.

   Bottom line...if Congress lets the INTERNET TAX FREEDOM ACT expire on December 11th the cost could cost consumers more than $14 billion a year tin new taxes.  

   It's possible to force an extension of the act if voters hold their Congressional members' feet to the fire before the November elections.  "Congressman, what is your view of the Internet Tax Freedom Act and how do you propose to vote on the question in December?"

   Do it. 

     Potiphar Gride, our staff curmudgeon, got a strong whiff of deflation in March, 2009, and wrote:  

  "Right now the signals are flashing "deflation."  That's always the eventual payoff after a long economic boom fueled mainly by debt.  Consumers are forced to cut down on their demands.  Businesses cut back on their operations.  Some go out of business entirely for lack of consumer support.  This shrinkage leads to an increase in bankruptcies, and the bankruptcies trigger more dominoes to fall as the economy spirals down into a deflationary depression.  But all this pain is necessary to clear away the trash accumulated during the years of false prosperity created by debt, both private and public. 

   "The federal government is trying to halt the natural correction by doing exactly what caused it in the first place - - by borrowing massive amounts of money.  In other words, taking on stupendous debt to 'cure' a problem that was caused by taking on stupendous debt!" COPING WITH DEFLATION 

   Predicting economic trends is an inexact science, despite the reams of historical charts with which economists punctuate their forecasts.  The charts are HISTORICAL and don't necessarily forecast future human behavior.  

   The big question at the moment is:  Is our monetary system on track for collapse or can official Washington policy clearly identify the problem and fix it?  History reveals that all fiat currencies wind up in the trash can, but we of the high-tech age have mostly abandoned old concepts of circulating currency and have come to depend on "digital money" the creation of which requires little more than precise computer key strokes.  

   So - are we in for an inflationary outburst, or is deflation going to upset our hopes and dreams?  

   We don't know.  But we get a whiff of that unsavory stink of deflation every now and then and try to plan accordingly.  

`and don't necessarily ITEM}