Posts Tagged ‘financial’

3 expensive financial myths- reform bureaucracy, dollar collapse, crisis is complex

February 29, 2012
English: $5000 1934 Federal Reserve Note
Image via Wikipedia
Series 1934 $5,000 Federal Reserve Note, Obverse
Image via Wikipedia

3 expensive financial myths:

myth 1: the financial crisis is complex and confusing.

myth 2: the US dollar must collapse soon.

myth 3: the solution is to properly reform bureaucracy

(As usual, the videos have some improvised content, so if you’d like to read along with the scripted portions, I recommend that you play the videos in a separate window by right-clicking the players to open them in a new window.)

myth 1: the financial crisis is complex and confusing.


- no, the value of cash is simply being re-evaluated. First, this is nothing new. Adults worldwide recognize that a particular currency may fluctuate in value (or practical “purchasing power”) over the course of years or decades, such as what is commonly recognized as the inflation of a particular currency.

What is new is this- and it has been confusing for many people who do not yet understand the simplicity of it: many currencies worldwide have recently been valued more and more by people, rather than less and less as in the case of inflation. The measure of how people value a currency is calculated from monitoring their buying and selling behavior. If people in general demonstrate in their behavior what a gallon of gasoline or milk or water is worth to them in terms of a particular currency (which is called a market price), that behavior is of course also demonstrating how much they value that particular currency relative to those tangible resources. When prices in a certain currency of virtually all goods and services are dropping together- like real estate, stocks, oil, silver, and forex rates- then people are obviously valuing the currency more than they did previously.

Washington DC - Capitol Hill: United States Ca...
Washington DC – Capitol Hill: United States Capitol – East front (Photo credit: wallyg)

More specifically, people worldwide have lately raised their valuing of cash especially relative to debt claims redeemable in cash (AKA “accounts receivable,” such as junk bonds, worthless second mortgages, uncollectible court judgments, and other invoices that were valid accountings of legal obligations to pay, but which can be discharged- as in voided- by bankruptcy courts, etc). Many of those debt claims, on a case by case basis, are being discounted from exaggerated short-term over-valuation back toward real prospects for collecting cash or collateral. As more and more debt claims are recognized by accountants and everyone else to be worthless junk (or otherwise worth less than the “face value”), the demand for cash rockets, thus increasing the value (and price) of cash of most every currency. As debtors are less willing (or able) to go into more debt and lenders are less willing (or able) to extend new credit, old debt claims plummet in value, while delinquencies and reduced settlements and foreclosures and bankruptcies surge, producing a huge increase in the relative value of cash.

Early paper money, China, Song Dynasty

One of the first paper currencies in the world from ancient China- Image via Wikipedia

myth 2: the US dollar (and all fiat currencies) must collapse soon.


- no, the value of all paper currencies, including coupons for gold, have always been backed only by human action, such as the action of exchanging that paper for gold or, in recent decades, the actions of court officials and the actions of organized violence performed by the hired mercenaries of courts. If providing cash influences the actions of the local warlords, such as producing or preventing foreclosures, seizures, evictions, levies, garnishments, executions, imprisonment, and so on, then cash has value.

but, but, but… what about all the debt and deficits of governments?
- even if those governments do not simply collapse, there is still the issue of several alternatives for governments to address their budgetary imbalances. Hyperinflation is possible, but unlikely. I’m not going to explain why here, but I’ll add a few obvious other possibilities. First, governments could increase revenues. This includes not only raising taxes but making more things illegal and raising fines as well as outright confiscation of the private property of foreign and domestic populations. When foreign nations are colonized by imperialists, such as the US is doing in Iraq and Afghanistan currently, wealth is extracted from the colonies to the seat of the empire. In addition to confiscating the property of foreign colonial assets, when the private property rights of a domestic population are discontinued, that is sometimes called a communist revolution. Everything is then owned in common, which practically means controlled centrally by the elite government bureaucrats or military dictators. Also, the second alternative is that the debts and promises of the old government will simply be discarded as in recognized as inoperative and irrelevant. In the case of the United States and the Federal Reserve, the Federal Reserve operates their private currency of Federal Reserve “US Dollar” Notes. The Federal Reserve can operate whether or not the US government operates, just as Federal Express can operate whether or not the US government operates. The Fed has collection agents and other mercenaries to maintain the practical relevance of the promises of organized violence made by the Fed, which is the source of value of the Fed’s private currency. Thus the Fed and the Fed’s currency might operate independently of the activities of the US government and the public perceptions of the spending promises of the US, which may be re-valued and discounted. The Fed can install it’s own private system of enforcing their currency and debt collection proceedings.

So, when an official of the US government, or of any other government, promises to spend resources that it does not have, that simply reduces the credibility of all existing promises of that government. It does not equate to hyperinflation. Note that US government spending has multiplied considerably in the last 30 years, while the inflation rate has dropped to negligible or deflationary levels, as long predicted by myself and many other researchers and authors. The reactionary hyperinflationists have been around since at least the 1970s and have been consistently wrong for the last 30 years. Some point to foreign exchange rates of the US Dollar as the last desperate attempt to find some evidence of inflation to cling to their denial. However, foreign exchange rates simply do not measure any particular currency’s rate of credit inflation (or credit deflation). Further, just because the European Union may be disintegrating does not mean that the Euro must hyperinflate. The unified Euro currency could simply be retired with

English: Currencies exchange logo Français : L...

Image via Wikipedia

a reversion to the multiple national currencies as was the case 20 or 30 years ago in Europe. IN prior years, the euro and the stability of the EU may ace simply been over-estimated. The value of the Fed’s US Dollar may have been under-estimated. I point to the last few years of foreign exchange rates as evidence that other currencies have been deflating faster than the US Dollar, largely due to the collaboration the Federal Reserve and eager speculative borrowers, including many fanatical reactionary government-worshiping hyperinflationists. Not only do those people seem to me to fanatically worship governments above all other forms of organizations, but to worship words, especially smears of ink on paper, whether written references to social security benefits which they imagine they might receive or to the stated face value of a worthless second mortgage on real estate or to the contractual terms of a certain Constitution or a certain English translation of ancient scriptures. (Ironically, those very scriptures are rather clear to me about the futile idolatry of such fanatical worshipers of mere words, whether spoken or written.)

Thomas Jefferson - Series of 1918 $2 bill
1918 $2 bill- Image via Wikipedia

Myth 3: the solution to the global financial crisis must begin with political reforms to bureaucracy (and thus debates and arguments and partisan bickering and conflict and confrontation and accusations of who is to blame, and, ultimately, war)

- no, the solution to the over-valuing of such things as the promises of politicians and the debt claims of subprime mortgage lenders has already started, and it began simply with individuals making different choices and taking different actions than previously. As enough individuals learn, prioritize and make new choices, eventually even reactionaries in governments may adapt to emerging trends of human behavior (or else those governments will collapse or weaken to the point of domestic revolution or foreign colonization). Those who have been waiting for governments to save them may be interested in reviewing the history of utopian “final solutions” promised by human governments across the last several thousand years. Those who are committed to participate directly in the evolutionary emergence of a sustainable adaption to resolve the issues of global financial systems, appreciating both the functionalities and drawbacks of the prior system and paradigm, please contact me to explore the practical actions you can take for your own personal benefit and to create the new paradigm emerging.

re-posted from a page that was published on April 3, 2010 (which is about when the videos were made).

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EZ Gains (and a “conspiracy theory” about the burning of fuels leading to warming)

November 9, 2010
EZ Gains… and a conspiracy theory about burning fuels leading to warming

 

EZ GAINS

Because some profits are easier than others.

Aren’t some people older than others? Aren’t some people smarter than others? Aren’t some people braver than others?

How about this: aren’t some companies older than others? Well, even if a company may not be very old, it can still work very well with smart people, especially if those people are brave, too.

Back in 2003, when many old companies were ignoring the risks of the global lending market (including the subprime mortgage market) as well as ignoring the geological realities of things like oil and natural gas and coal, some people were smart enough to look closely at the behavior of investors worldwide… plus brave enough to admit the obvious. One of the most obvious things is that fossil fuels are finite resources.

Another obvious thing was that if humans burn more and more fuel for decade after decade, then eventually there will be much less of those fuels. For economies dependent on oil, that dependency could get very expensive- and not just in terms of dollars, but also in terms of social stability, human welfare, quality of life, and even national security.

Another obvious thing is that all that burning of fossil fuels might heat things up a bit, right? Still, lots of people choose to argue about things like the possible causes of global warming, with some activists maybe protesting against sunlight and others protesting against empty oil wells. ;)

Smarter people might actually predict in advance that burning huge amounts of fuel worldwide might result in a measurable rise in heat. However, it can take a lot of bravery to stop arguing about who to blame and admit that billions of people are involved in the global economy.

By the way, the global economy is just a phrase that actually means the actions of a whole bunch of humans. The global economy is not something that happens to us. It is something that we do.

Anyway, in early 2003, I published an article about the future of the global lending market, which just means the lending and borrowing of a whole bunch of people. I specified in particular the increasing risk in the real estate market of countries like the US, which had become so dependent on borrowing. I also forecast a continuing surge in global prices of commodities like oil and gold, contrasting that with the diminishing opportunity for gains in the US stock market.

In 2004, I published “The Real US Deficit: Oil.” In 2005, I published “Worth it’s weight in… Oil,” noting the practical priority of oil over all other global markets, as evidenced by the price increase of over 1200% from 1999 to 2008, while other commodities of lesser current importance, such as gold, went up “only” by a few hundred percent. So I took the old phrase “worth its weight in gold” and replaced gold with the commodity that everyone who has ever waited in line 5 minutes to get gas knows is far more important than gold: oil. Most people also know that oil is the source not only of gasoline and kerosine and so forth, but also plastic and many pharmaceuticals and pesticides.

As the years went by, myself and others continued publishing articles and giving lectures about the easily predictable future of things like oil prices, the US real estate market, the US stock market, and even things like the fact that the burning of fuels can result in the melting of ice, as in the case of oceans rising faster and faster. In addition to lots of publications and lectures, I recorded a video in 2006 (and uploaded it to the internet) which detailed the sequence of events that would predictably result in the collapsing of major financial institutions like banks, brokerages, and insurance companies. In 2008, that precise sequence of events was frequently referenced in the mainstream media as “surprising.” Major banks in the US, Europe, and elsewhere were facing similar troubles to those faced in similar circumstances, such as in Japan in the 1990s.

Of course, in Japan in the 1980s, many smart forecasters had been brave enough to publicly forecast what developed in the following years, too. As often happens with unpopular forecasts, when those precise developments which had been forecast did arise in the 1990s, the mainstream media in Japan called those developments “surprises.” Soon, the public poured their hopes in to promising reforms and then desperate rescue packages and then eventually a string of politicians with shorter and shorter periods between receiving public confidence at first and then later being blamed as incompetent or even as traitors.

Some things are easily predictable. For instance, burning fuel raises the temperature.

Also, smart people recognize what is obvious. But perhaps only smart people that are also brave would be willing to accept responsibility for adapting to what is obvious. Others may be surprised by the surge of heat in the summertime or in the direct sunlight at noon, and then may look for someone to blame for the surprising heat, such as certain politicians. In fact, that may just be the first stage of adapting. Making personal adjustments may come eventually for them, such as embracing the most obvious opportunities to make easy gains.

So, aren’t some people smarter than others? Further, aren’t some people braver than others? Well, aren’t some results more valuable to you than others?

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