Phil wrote: “Conservative bashing is a popular sport for some, as is Liberal bashing for others. Neither of which, IMO, makes a positive contribution to moving ideas forward and solving the mess this country has gotten itself into….”
Phil,
Governments in the region of the US have entered massive debts since back when the states were only colonies- including during the revolutionary war. Any selling of government bonds is entering in to debt. Wars tend to be promoted by lenders because they are typically so profitable for the lending businesses. When the USSR and US were spending huge amounts on their military race, that was strongly encouraged by lobbyists of the banks that lent money to either side- or even to both sides.
Go Away Federal Reserve System! (Photo credit: r0b0r0b)
In 1913, as the next massive war in Europe was being cultivated and planned, the US entered in to 20-year debts connected to a private banking consortium called the Federal Reserve, and that may have seemed great at times (the roaring 20s), but toward the end of the 20 year period, the US had so much economic trouble (AKA “The Great Depression“) that paying that debt was not going well. In 1933 (at the 20-year mark), the Federal Reserve took functional control of the court system in the US by requiring the use of their private currency (the Federal Reserve’s “US Dollar” Note) and all the US Notes that had been in circulation were withdrawn from circulation and possession of gold by US Citizens was criminalized (forcing citizens to exchange gold for Federal Reserve Notes). In other words, the court system was “re-possessed” by the lender/creditor, kind of like a car that has been financed may be sent back to the dealership if the debtor goes bankrupt. So, the Fed collected all of that gold from the citizens of the US and then on January 31, 1934, the Fed dropped the exchange rate of their private currency to gold by 41% overnight while the masses slept.
Related to all of that is this next item. Back in the year 1900, a popular book was published as an analogy for how the “Crowned Heads of Europe” would achieve their financial goals in the US. The book featured a yellow brick road about gold bricks (yellow bricks) that led to the center of power and influence.
The methods of how the masses would be drugged to sleep were referenced as the troop of heroes led by Dorothy marched through poppy fields (as in opium fields). Outside of the dream portion of the story, the character of a Wicked Witch was known as Mrs. Gulch. A gulch is another word for a depression as in a dip.
You probably recognize by now that the book I am referencing is the Wizard of Oz (if the title of the blog did not give it away…), which was made in to a movie in 1939 (and a less well-financed version in 1925). It sets up a series of analogies about how the “Crowned Heads of Europe” would entice the common people of the US in to going to fight a wicked enemy so that AFTER they came back from victory THEN they would be GIVEN courage by holding a magic piece of paper.
Magic pieces of paper are cool. I use them everyday to buy stuff. They give me LOTS of courage, too! 😉
So, in 2002, I read about the history of OZ (as in ounce- like the unit used to measure an Oz. of gold). That was around the same time that I started reading (and, in 2003, publishing) references to the global credit crunch that was emerging, as well as the impact on markets most sensitive to lending, like real estate. In 2004, I began focusing my publications on the specific issue of why fuel prices (like gasoline) were rising and likely to spike soon (like when gasoline in parts of Europe quickly went from $3 per gallon to over $11 per gallon), plus the predictable consequences of such a spike in fuel prices. I published “The real U.S. deficit: OIL” and then “Worth it’s weight in… OIL!” (which was a parody for the gold market enthusiasts who were still trumpeting the same falsehoods about gold that have been well-established as inaccurate since 1980, if not long before….)
Anyway, by 2005, I was watching closely for the first signs of a real estate crash in the US (as had been happening already in other parts of the world). The two areas that peaked first (and have fallen the furthest so far) happened to also be regions extremely sensitive to spiking energy prices, perhaps due to extremely high summer cooling costs in the sprawling desert metros of Phoenix and Las Vegas- like when someone is commuting 50 minutes each way in 105 degree heat with their vehicle’s AC cranked. Other suburbs throughout the US did not have that circumstance like greater Las Vegas and greater Phoenix, so the real estate decline did not hit in those places until later, and not as hard.
English: “Anna Laughlin as Dorothy in the musical extravaganza The Wizard of Oz, 1902” (Photo credit: Wikipedia)
In contrast, we can review Alaska, a fuel-rich state, and notice that there was a very different economic development during the same time. As oil prices rose 1200% from 1999 to 2008, Alaska’s oil exports ballooned their state’s economy, launching it up to the 2nd highest state in the US for per capita income. Further, while other state governments in the US were scrambling to figure out their budget issues (like how to borrow more money to stay in operation), Alaska was paying it’s citizens a socialist-style handout of several thousand dollars a year just as a dividend for living there. Where did all that surplus money come from? Surging oil revenues.
Magic pieces of paper are still cool, but so is magic liquid that can be used as fuel to fly airplanes and power automobiles. Also, magic little shapes called letters and words are very very very cool- like the magic sounds that people can use to direct the attention, perception, and activity of other people.
For instance, when a group of people get together and use intimidation and violence to force other people to pay them a portion of the productivity, what is that called? It is called extortion- except when it is called taxation. If the system of wealth redistribution is stable enough, it is called taxation and the agents of the system protect their monopoly on involuntary wealth distribution by violently punishing any competing extortion operations (or invading them to take over their territory and their racket).
Some economic interests favor cultural developments like masses being distracted by trivia (and the cultivation of psychological shadows of hysterical outrage), as well as the “entitlement society” and “enthusiastic borrowing sprees.” When the ownership of massive amounts of real estate changes suddenly, that is not only rather unfavorable for the debtors getting foreclosed on, but can be rather good for the creditors who suddenly own huge amounts of real estate outright.
Federal reserve police car, St. Louis, MO (Photo credit: Wikipedia)
Wizard of Oz (1925 film) (Photo credit: Wikipedia)
Here are a few articles of mine that give more detail to recent history, and the first one has several links to my original publications plus a link to a video I made in November 2006 in which I reference events well-known by 2008:
“When the credit market shifts, [then] the real estate market shifts, and they are actually connected such that when the real estate market declines… that actually greatly effects [lenders] capacity to extend credit. So, what you have is a context where banks can collapse.”
Title plate of The Wonderful Wizard of Oz (not the cover, it’s the interior title page), 1900 Wizard (Photo credit: Wikipedia)
On Thu, Dec 6, 2012 at 9:55 AM, Phil P. wrote:
Conservative bashing is a popular sport for some, as is Liberal bashing for others. Neither of which, IMO, makes a positive contribution to moving ideas forward and solving the mess this country has gotten itself into.
I am a fiscal conservative and always have been. In addition, I am culturally tolerant, and always have been. I graduated from high school in 1963, six months after JFK was assassinated. I was in an auto store buying parts for my drag car when the news came over the old black & white TV behind the counter. My mother had shaken JFK’s hand at the Lubbock airport during a campaign stop. The country was going to the moon… there was pride & excitement in the air… and then the world stopped. Even though government spending was a lot smaller in 1963, I remember thinking that foreign aid seemed like a bad idea. Today’s solution of borrowing money to keep government programs running would have been considered blasphemy.
It used to be considered honorable to graduate from high school, get a job, work, pay your taxes and make a positive contribution to society. Nowadays, by an increasing number, it seems honorable to not work, and scheme a way to get a government check. We have welfare recipients that are on the 3rd/4th generation of no one in the family having ever held a job. And our government continues to want to grow entitlement programs to enable the recipients… even if we have to borrow the money. The concept of personal responsibility seems to have been lost in the entitlement, feel good society. As a fiscal conservative it makes no sense to me why some think it is a good idea to borrow money from China so Sandra Fluke can have free birth control.
Ronald Reagan has been called one our countries most successful presidents. Yet I was flabbergasted by his military spending, even though some would argue that was the only way to break the Soviet Union… by out spending them militarily. And while it did work… IMO it was fiscally imprudent. I also disagreed with Reagan’s attitude toward AIDS. I lost many business associates to AIDS, great minds, great spirits because, IMO, of Neanderthal thinking from the White House. The plague created a void of creativity in my world that has lasted for over 30 years.
In the 49 years I have been voting there has never existed the political will for a smaller government… and IMO, there has never been a “fiscally conservative” president. The policies of both parties have always been to expand, control and increase the governments power over the people… through regulation & taxation. As a small business owner I watch the policies of the current administration continue to do harm to the small business economic environment, while at the same time wasting huge sums of tax payer dollars on projects like Solyndra. IMO, we don’t have a taxation problem, we have a spending problem.
English: Protester seen at Chicago Tax Day Tea Party protest with sign reading “I am John Galt”. Edited to protect protester’s identity. (Photo credit: Wikipedia)
Where is John Galt?
John Galt. One of the founders and Secretary of the Canada Company. (Photo credit: Wikipedia)
The purpose of this communication is to introduce you to an opportunity to experience a breakthrough in prosperity as well as in clarity. I promise that, by the end of reading it, you will be grateful for having read it- even changed forever. I am grateful for the clarity that brings me to share this introduction with you, and I am also grateful for your interest in this opportunity which is temporarily available to benefit us enormously, if we are willing.
Simply, there is an immense transfer of wealth emerging. Of course, there is always a shift in wealth toward particular recipients and away from particular sources. In particular, what we are in the midst of in recent years is a shift in an unusually large amount of affluence flowing away from an enormous number of people toward a relatively small number of beneficiaries. This is a transfer of distinctive opportunity, as well as distinctive urgency.
The practical difference is vast between adjusting promptly to the emerging shift or neglecting to adjust. Enormous and easy gains are temporarily available and, once the fastest portion of the shift is complete, those who have neglected to adapt will in many cases be financially ruined.
Next, I’m going to give a few simple examples. Let’s start with one of the most obvious economic developments of recent human history: the rise of the affluence of North Americans.
This chart shows the relatively small but notable advance toward economic prominence of North America from the year 1800 to 1900, followed by the huge advance from 1900 to 2000 toward uniquely disproportionate affluence. The graphics are not statistically precise, nor even close approximations, but only extremely rough estimates for illustrative purposes. However, I do not expect the basic trend would be disputed by anyone.
The simple point of this chart is that North America went from being an emerging market to a developing market to a well-developed market and finally to the leading regional “superpower” in the world. In other words, the percentage of the world’s resources controlled and owned by the North American population has ballooned in recent centuries, especially since the rise of the oil industry in Texas as early as the 1860s.
In contrast, the percentage of the world’s population that inhabits North America has not changed very much in the last few centuries. However, North America went from global distinction in the export of agricultural commodities to global leadership in fuel extraction and refining and then to global dominance in things like the technology of war (nuclear missiles and satellite networks and the internet and so on).
But what is the future of this trend? The trend toward a greater and greater portion of global affluence being controlled by North Americans may have already ended.
In fact, as North America has been gaining in global affluence, it has also come to lead the world in borrowing (indebtedness). While it took centuries for the singular economic dominance of the North American global empire to develop, the recent rise to 50% of global affluence could very quickly fall to 30% or even 10%, as has been the case of many prior empires of singular global dominance.
Note for comparison the last 30 years of the price of the Japanese stock index, which fell by 2/3 from late 1989 to 1992:
I show the chart of Japan’s stock market because Japan also rose to distinct economic prominence in the 20th century. At the time of it’s peak prominence, it had similar affluence to Germany, another leading nation in the manufacture of automobiles. Only Japan and Germany were anywhere close to the disproportionate affluence of the USA.
What if the USA experiences a decline similar to the decline for the last two decades in Japan? How would that compare to the Great Depression?
As shown on the prior chart, 20 years after the peak of the Japanese stock bubble in the late 1980s, prices are nowhere close to a new high. Stock prices in Japan are currently dropping back toward the price levels of the early 1980s.
However, as shown below, stock prices in the US took only 25 years to recover from the 1929 peak to a new high in 1954. Given the current economic situation of Japan, there is no sign of a pending recovery to new all-time highs in the next 5 years to produce a 25-year recovery, as was the case with the US previously.
Japan’s disproportionate percentage of global affluence has never returned to the peak levels of prior decades and shows no signs of recovery, as new emerging powers such as China and India gain in relative economic prominence. So, if the next few decades for North America are anything like they have been for Japan recently, that would be obvious as an enormous decline in the singular global economic dominance of the USA.
We can compare the 1929-1932 decline of 89% in the US stock market to the 66% decline from 1989-1992 in Japan. Given the speed of the decline in the US, I suggest that US stock market investors were even more willing to purchase excessively over-priced stocks than investors in Japanese stocks by 1989.
I also assert that most of today’s investors in the US are even less concerned about investment security than investors in Japan in 1989 or the US in 1929. US speculators today demonstrate with their investment behavior an overwhelming faith (a blind faith) in the future of the US economy, plus the interventions of the Federal Reserve, the US government in general, and, in particular, “socialized” insurance schemes like the FDIC (as well as the Social Security Administration, FHA, etc etc etc).
By the way, I could list extensive data comparing the stability of various US markets today with 1929 (when US stocks began a fall of 89%) or 1987 (the year in which the US stock market fell 29% in one day). I could also compare the stability of US real estate trends or of borrowing trends or of the prior acceleration of the overall affluence of the US economy relative to the rest of the world.
Consider that what is really odd though is not just what the data would show. What is odd is that the vast majority of investors have never explored how to specifically measure or even vaguely approximate the risk of their investments. Their confidence in the US economy, the FDIC, the Fed, the SEC, and the US Government is so incredibly high that they borrow huge amounts of money to invest in real estate, then paycheck after paycheck dump money indiscriminately into the US stock market and accounts with banks whose finances they have never studied. In other words, most people do not even consider what I am inviting you to consider. By the way, they probably never will.
Most people- at least in the middle class of North America- have a very limited sense of personal responsibility for the results produced by their own financial choices. The herding masses leave it to the government to assess and approve the financial risk of various investments, various banks, various insurance companies, and so on.
They want the government to protect them from financial risk and rescue them from danger as well as save them from personal consequences for their actions. They are unaware that they are gambling on their investments, with increasing confidence each time governments announce a new program for the average taxpayer to bail out the average taxpayer. 😉
Now, all of that was the first set of “simple” examples. Let’s simplify even further.
Imagine an investor named Mr. J.P. Lee. He has earned huge amounts of money speculating on real estate and dumping money indiscriminately paycheck after paycheck into many popular stocks, especially in the high technology industry, just like so many of his neighbors. Mostly from “flipping” real estate, his net worth has grown in only 10 years from 1 million yen to 60 million yen.
He is extremely confident in the economic future of his nation and in the government and in the insurance industry and so forth. He does not even think “can the insurance company actually fulfill the promises that they are making me in this contract?” He just presumes that because the insurance industry is regulated by the government, insurance companies must be very safe.
He presumes the same things about banks and about savings and loan institutions, which he knows are also insured by taxpayer guarantees. He is not especially concerned about personal responsibility for his own investments because he has faith in the nationalized social security insurance program and the pension plan from his prior work in the insurance industry.
He is 45 years old. It’s the end of 1989.
By 1992, in only 3 years, his Japanese stock market investments are down over 50%. His real estate portfolio has gone from a net positive equity of 30 million yen at the peak to 10 million yen now. He still owes 200 million yen in mortgages.
However, remember, he has tremendous confidence in the future of his government and the various investment markets and he has never heard of the “deflation” of the Yen currency from a credit bubble, so when he reads about it online, he thinks “I don’t know what deflation is, and if it was important, I’m sure that the media or the government would handle it for me and then let me know that it is already handled.” The chairman of the Japanese central bank says that it is patriotic to keep investing in stocks and keep speculating in real estate on borrowed money, and Mr. Lee is a proud military veteran, a direct descendant of the Samurai class, so he keeps holding his old investments that did so well in prior decades.
Year after year, the government proposes incentives and rescue packages. Year after year, people get excited, support the latest proposed solutions, then eventually blame the latest politicians, then get angry at some new executive scandal, then get excited about the next proposed solutions and elect some new politicians to go for it one more time again and again.
By 2010, he’s 65. He has been trying to come out of a forced retirement, but the job market in Japan is… not what it used to be. He lives in a tiny government-subsidized urban apartment complex, for which he is very grateful. He’s facing bankruptcy.
His positive equity in real estate did not recover back to 30 million yen after 1992 and instead it then went to a negative equity of being upside down by 80 million yen. He does not have 80 million yen left in his stock market portfolio.
In fact, he does not have a stock market portfolio anymore. When he did, he never had anywhere near 80 million yen in it either.
He never thought, when signing his mortgages: “what will I do if the Yen credit bubble deflates and my real estate drops in value by 50% or more? How will I come up with the money to pay off these mortgages?” He had bought a book from a TV ad about flipping real estate and the book did not mention anything about any of this.
Also, the insurance company he used to work for is now out of business. They got involved in insuring some sub-prime mortgage securities in the USA and went bankrupt in 2008.
So, his life insurance policies have been canceled, plus his health insurance. His pension fund fell 80% from the two-decade Japanese stock market decline and then in 2008 was apparently embezzled by a government bureaucrat who was supposed to protect the pension fund from embezzlement. However, that information is dangerous to mention, so please pretend that you did not just read that.
It is safe to openly say that the government accused some former employees of the insurance company of causing the demise of the pension fund, but the accused were let off with only a civil fine of a billion Yen, which is a fraction of what they were accused of taking. This all happened during the massive central bank rescue program of the insurance industry. A lot of money changed hands very quickly and the records of the transactions unfortunately were all lost in what was reported as a terrorist bombing.
Mr. Lee trusts the mass media in Japan because he went to public school and there he was taught to trust the mass media in Japan. Also, his parents trusted the mass media in Japan, so why wouldn’t he trust them?
Every day, he watches the TV news, sometimes seeing that same old advertisement about flipping real estate. The sexy young lady on TV says that the future of Japan is going to be better than ever before because of the last two decades of dropping prices and corporate bankruptcies and economic de-stabilization and rampant corruption. He says to himself “I like the way she laughs.”
Now, what about that lady on TV? She is 30. What else did you want to know about her?
Yes, she is married. Why do you ask?
Oh yes, of course: her newest husband is that one famous investing guy. He is 45 and he made A LOT of money selling books about flipping real estate, which helped bring buyers in to the real estate market while he was selling out of his real estate investments.
He also exited Japanese stocks in 1989, noticing that the “relative strength index” for Japanese stocks (shown on the middle chart above) was not making new highs by the late 1980s. He looked for stocks that were a better opportunity as indicated by their RSI levels, among many other indicators and statistical correlations that he studied diligently.
So, in the early 1990s, he invested in the US high tech stock sector and the stock market of Mexico. He made immense gains, especially in Mexican stocks: 2,588% (shown here as compared to a popular US stock market index: the S & P 500).
In 1999, he shifted out of US tech stocks to oil. His oil investments rose from $11 in 1999 to over $140 by 2008.
He also diversified into a US stock sector for companies that mine gold and silver (HUI). That made well over 1000% from 2000 to 2008.
So, after reading that, he began to sell out of commodities and stocks, investing in things like the US Dollar foreign exchange market and US treasury bonds, which rose dramatically in 2008. Then he read this one by the same author in 2008: http://groups.yahoo.com/group/redpill_info/message/491
So, he also took some positions “short-selling” the US stock market and made 100% on that as the market dropped more than 50% in about 15 months. He read this update in early 2009: http://groups.yahoo.com/group/redpill_info/message/592
After making 70% in 3 weeks as indicated in that article, he went on to make a few hundred percent in the next several months in FAS and BGU. Today, August 11, 2010, he made 12% on TZA in a single day.
He hopes that all the people reading this stay in their real estate investments and stock market investments. He hopes that they remain confident in their government and the central bankers at the Federal Reserve and the insurance industry and of course the real estate market. He hopes that they focus on sports and sitcoms and personal dramas and Alex Jones and do not consider the future of the singular economic dominance of North America.
He does not just hope, though. He is confident, because he is monitoring the relevant data closely, and indeed he is investing directly in the hopefulness of you, dear reader. He has spent a lot of money advertising in the US mainstream media, plus political lobbying and making campaign contributions through a few US companies that he owns. He was one of the designers of the tax credit for first-time homebuyers. On a related note, his book sales on flipping real estate, after weakening sales in Japan in recent years, have also been doing very well in the US, with sales of the book especially strong right after the initial announcement of the tax credit.
In fact, our old friend Mr. Lee (the one who used to work for the insurance company and who grew his first 1 million to 60 million in only 10 years) has an autographed copy of an old Japanese edition of the book which he bought in 1992, which he recently sold on e-bay to someone in the US for $3, which at current exchange rates is close to the price he originally paid in Yen. It was one of the best returns on an investment that he has made in the last few decades: – 5%.
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