"FDR you said that the FED will soon be gone , give or take a couple of years to 5 years from now.If that is the case then will everything will be back to normal and we continue to prosper again? So i presume that if the FED is gone within 2 to 5 years from now , DOW may not go below 1000?"
There is no doubt in my mind the Federal Reserve will fail, though I've never given a precise time frame and obviously no one knows how it will play out on the political/economic/military stage. We know that the same people who run the Fed today started major wars the first two times we kicked them out of our country. I would bet on that.
Today, we have a situation similar to the Dark Ages, where 99% of the citizenry was kept illiterate and used to the advantage of a few. 99% of Americans have no idea how their money is stolen by private bankers who make up the Federal Reserve crime ring. The People are systemically poorly educated to keep them in the dark. I think we are in the midst of a sea change, as the internet slowly self-educates the citizenry to read their plight.
Your question about the Dow rising above 1,000 after the Fed dies is interesting, because it illustrates how deeply they've indoctrinated our citizens to want their inflationary snake oil. Rising prices are bad, it means we all can afford less, not more. If the Fed ever truly dies, and isn't reincarnated by the next band of thugs two years down the road, prices should stabilize then slowly fall.
In such a scenario, capital gains speculators (99% of Americans actually think price speculation = "investing") would again be replaced with investors, and people would once again value purchasing assets that produce a genuine cash flow. In other words, you'd buy a share of stock, not to unload it to some sucker after Federal Reserve inflation has wrecked our financial system, but to hold on to it forever in exchange for a share of the company's profits. You would be able to pass the shares on to your kids, as the cash flow would only increase in buying power.
The picture of economic prosperity is falling prices. Everyone should want falling prices. Rising prices result when the privileged steal your wealth by printing extra paper, then use that paper to purchase things that those who cannot print must work to buy. Falling stock prices in a fair economy means existing cash flow buys more stuff, including assets to produce cash flow.
So if the Federal Reserve crime ring is slain and the United States Constitution restored, we would, once again, back all Congressionally issued USA cash (not Fed cash) with money. A dollar would again become a credit, not an ultra-high interest rate debt to some faceless international financier. In a constitutional system, the money supply cannot and should not grow, and as a result our money grows in buying power as assets are added (from productivity) and prices correspondingly fall. Prosperity would again break out, and freedom would ring.
That's a long way of saying, in an ideal world, the Dow should slowly fall in price. Falling prices are a great thing, as long as thieves go punished.
Sunday, September 27, 2009
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Ok,
ReplyDeleteI love reading your posts! In 2007 you issued the forecast to go short real estate, REITs, homebuilders, and financials...we would all be joking about this countries troubles had we gone in 80:1 leverage on the shorts;)
Now, if the inflation is to occur, which sectors lead the trend?
We can assume that the SAME EXACT culprits still have the troubled assets, but can we assume that the govt. will force them out in the open?
Where do we short? Because, if inflation is to occur at the extent of your current forecast...there is ZERO long safe-haven other than cash.
However, as investors, we do not wish to just increase buying power at the rate of deflation. I myself, have set a goal to become disgustingly wealthy by diligent studying of the markets and business cycles.
So, where do we start? With the same exact companies that have already taken the hits?
Hi FDR,
ReplyDeleteBrilliant piece.
If you purchase C of I Treasury using transfer
from your Wells Fargo account.
Will this be safe as Wells Fargo collapses
Simply,can you get your cash?
With a static (unchanging in its total supply) currency base, prices fall as a result of two major factors:
ReplyDelete1. Automation. This is essentially a labor multiplier. The greater it is used, the more stuff is made per man hour and the cheaper the stuff is per man hour. This drives the real cost, and thus the price, down.
2. Population increase. The more people there are with a stable currency base, the fewer dollars there are per person to spend. The less an individual has to spend, the less he is willing to spend. This drives demand down and thus drives prices down until the demand rises again at the lower price. And obviously, wages *must* drop to accomodate this.
The first kind of price decrease is obviously good, because the real cost of goods drops as a result.
The second kind of price decrease is obviously *not* good, because the increasing population and thus increasing scarcity of currency per person results in less economic activity, as wages are forcibly dropped in order to adjust them to the lowered availability of currency. Wages are typically forcibly dropped via umemployment increases.
And so, I disagree with FDR on his assertion that a static currency base is the best kind of currency base to have. No, what you want is to maintain a currency base that is directly proportional to the population. You want *wage* stability. Only then will there be no pressure, one way or the other, to save versus spend. Only then will the decision to save or to spend depend solely on the individual's situation and not some concern about what the currency is doing.
And only then will the decision to hire or fire depend solely on how well your specific business is doing, and not what the currency is doing.
"Simply,can you get your cash?"
ReplyDeleteYes, any Treasury you accidentally defund to a failed bank auto diverts to C of I.
You can then set up another electronic bank account. Electronic Ts are redeemable in any bank you set up, but I think you have to have the account open for 6 months or so.
"The second kind of price decrease is obviously *not* good, because the increasing population"
ReplyDeleteI think that trend is about to plunge too.
"You want *wage* stability. Only then will there be no pressure, one way or the other, to save versus spend. Only then will the decision to save or to spend depend solely on the individual's situation and not some concern about what the currency is doing."
ReplyDeleteA static, fully backed currency is always stable or better in buying power.
Printing more cash to maintain "price stability" is a game played by scoundrels, because stable prices means they've bought off all genuine production with freshly printed paper.
"Stability" is really the sneakiest form of inflation, because all prices will fall every time someone produces something. Of course counterfeiters want us to want to buy their new paper at the same (or better) rate we produce goods.
That way, they print and the people work.
So, in a couple years, if deflation shifts in to third gear, 400k is the new millionaire
ReplyDelete"So, in a couple years, if deflation shifts in to third gear, 400k is the new millionaire"
ReplyDeleteTry $50K.
Try $50K.
ReplyDeleteFDR , Are you driving a 3speed, or 4speed?
LOL, Just kidding
FDR wrote: "Printing more cash to maintain "price stability" is a game played by scoundrels, because stable prices means they've bought off all genuine production with freshly printed paper."
ReplyDeleteOh, I completely agree. But I'm not talking about maintaining stable *prices*, I'm talking about maintaining stable *wages* -- simply put, maintaining a constant amount of currency per individual. They're not the same thing at all.
Regardless, the bottom line is that any entity which has the power to control the currency supply has the power to control the entire society that uses that currency supply. If you want freedom from that problem, you have to eliminate the use of a centrally-issued currency entirely.
I guarantee that Congress will be no better about its use of that power than the Fed, despite the Constitutional mandate giving it that power.
As for the population, what matters with respect to that is the change in size of the population making use of the currency to exchange their labor with that of others. I expect that if a country is prosperous in real terms, the number of people who make use of its currency in that way will grow continuously (limited, of course, only by the size of the world's population).
What exactly have you got in mind for dealing with the problem of significant unemployment as a result of continuously decreasing availability of currency? Companies don't cut people's wages usually, they cut headcount instead. And if prices are continuously decreasing as a result of the number of people who make use of the currency growing over time, individuals will spend as little as possible in order to make the money in their bank account buy as much as possible. The effects on the supply side, unemployment, etc., should be clear, because we're experiencing that very thing right now!!
And that means you will have a *continuous* recession/depression as long as the number of people using your currency grows over time.
There may be some counterbalancing mechanism here, but I'm not sure what it is or how strong it would be. I'll have to give this some thought.
"Try $50K.
ReplyDeleteFDR , Are you driving a 3speed, or 4speed?"
6
I'm not kidding we're going to have 95% price deflation, but it'll take awhile (2025).
FDR is putting our money in BRIC markets an option instead of US treasuries? Since BRIC economies like china etc continue to grow and outpace the rest of the world , would it not be wise to invest there so as to generate greater returns? Or do you think that these BRIC economies will suffer greater than US and price deflation will destroy them too? Heard some of these BRIC based banks offer more than 6% returns over a longer term.Please guide.
ReplyDelete"Since BRIC economies like china etc continue to grow and outpace the rest of the world , would it not be wise to invest there so as to generate greater returns?"
ReplyDeleteI think the central bank liquidity scam has become near-universal. I am sure there are deals to be had both BRIC and here, but in general I think you are running up the down escalator.
It is possible that they are in a different scale cycle than we are, so a genuine buying opportunity could come sooner. One would probably would need more long term price data than is currently reliable to evaluate their markets. But if you have it, I'd love to see it.
Do you see any difference in value down the road between a $1 coin (which I think is issued by the Treasury) and $1 Fed note?
ReplyDeleteSo a $50 gold coin might carry a low price but have a high value. Is that correct?
You give me a lot to think about. Thanks.