Reinke Faces Life

http://www.survivalblog.com/2007/06/letter_re_request_for_investin.html

Letter Re: Request for Investing Advice from a U.S. Reader
What is your guidance on a safe (conservative) way to invest? What percentage in precious metals? Thanks, – TZK in Central Kentucky

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JWR Replies: I recommend that SurvivalBlog readers should put at least 25% of their portfolios into gold, silver, and barter goods, and roughly 50% into productive farm ground–a retreat to occupy year-round–in a lightly populated region that is well-removed major metropolitan areas.

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I consider any investment denominated in un-backed paper dollars risky, at least in the long term, since the US dollar, as a currency unit is doomed. It faces the same fate as all other un-backed currencies throughout history. In the long run, they will all inevitably revert to their actual value, which if measured either by weight or per square inch is comparable to toilet paper.

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Well, in the long run, we all die too.

One can quibble about the advice. I’m not sure there will be any place to hide in TEOTWAWKI (The End Of The World As We Know It) scenario. But, having said that, one wonders how long the mass global illusion with the Federal Reserve Note aka mislabled the dollar can continue?

Abroad, the Chinese and the OPEC are amassing huge collections of these funny green pieces of paper. Abrogation by the USA gooferment is not unheard of. Think of the French having the gold window closed in their face. At home, look at the mountains of unfunded liabilities the various levels of gooferment have rung up. So gold does appear to be a store of value.

I would respectfully disagree with JWR the greenback isn’t comparable to toilet paper. Toilet papers is useful; greenbacks are a poor substitute.

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http://www.clairewolfe.com/wolfesblog/00002602.html

06/13/2007 Entry: “The Tsunami of Credit”

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Certainly my anecdotal evidence, gained from talking to friends and acquaintances, strangers I meet in my travels, and observing lots of closing businesses and neighbors losing jobs, suggests that times are hard, not good.

Surprise! The government figures regarding inflation and the economy are tissues of lies.

John Williams’ Shadow Government Statistics paint a far different picture. Mr. Williams generally reports economic figures the old fashioned way, avoiding the many gimmicks introduced since the Reagan robbery of social security.

His figures show GDP growth is -2%, and we have been in a recession since the burst of the Greenspan dot-com bubble at the end of 2000. Consumer price inflation is above 10% and rising. (Nixon imposed wage and price controls in 1971 when price inflation rose above 4%.) M3, the broadest measure of the money supply, is rising at over 13% year-over-year.

What’s that? The FED stopped reporting M3 in 2006, claiming it was too costly to produce. Mr. Williams, like all free market actors, is able to produce with very little effort what the bloated FED cannot, or does not want to do. Inflation of the supply of money is the root cause of price inflation, and the FED doesn’t want too many people to pay attention to the men behind the curtains.

I believe the huge increase in M3 explains a lot about why we don’t already have a full-blown, widely recognized depression. At the current rate of growth, an astonishing $1.4 trillion in new money is being created every year. The GDP is $13.6 trillion; adding 10% of that figure in brand new, created from thin air money to the economy increases GDP only 0.6%? Clearly we are losing ground.

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Well, if the fellow is right, and I suspect he is, perhaps we’re both wrong, but it certainly feels like “hard times”. I think my “turkey pen” is now full. (I counsel out of work execs as a hobby and constant reminder that I might be next.)

So how does one “action” this report.

(1) Closely monitor one’s personal “burn” rate. How much are you spending, committing to spend, agreeing to spend? Stolen from the venture capital world, the “burn rate” was probably stolen from the rocket launches where the amount of fuel being consumed was monitored. To a Venture Capitalist who’s invested with a start up, the burn rate is outgo minus income measured on an almost daily basis. To start a successful business one must invest in the future.

(2) Zero debt. Certainly at the very least zero short term debt. Even colateralized debt (i.e., your home mortgage) maybe “bad debt” if you don’t have a job. You must recognize the fact that you may not be able to sell for what you owe. If you can’t sell and can’t pay, then you’re foreclosed. For high net worth people, where a mortgage is more of a tax saving device (i.e., having a low-rate mortgage that is covered by assets for the purpose of being able to itemize deductions), one doesn’t have to go nuts. Everyone else should be “storing up” for long cold financial winter.

(3) Network in your white collar job. You only sure of your last paycheck that cashed.

(4) Develop a blue collar skill; never met a poor plumber.

(5) Explore entrepreneurial business on the inet. For under a grand, you can incorporate “Your Wild Ideas” as your personal incubator. Sell stuff for a profit. It’s the new wild west gold rush.

(6) Learn from the Amish and the Mormons about self-reliance.

Fasten your seat belts; there’s turbulence ahead.

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http://www.survivalblog.com/2007/06/
letter_re_greenspan_gold_and_t_1.html

Letter Re: Greenspan, Gold, and the Safe Store of Value

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Dear Mr. Rawles,

Regarding the use of gold as a store of value, it’s important to realize that gold often functions as a fiat currency. It does have intrinsic value for jewelry, electronics, rust-proofing, and some chemistry applications but the vast majority of its value comes from the shared expectation that people will accept it as being valuable in the future. The only difference from fiat dollars is that it’s harder – but not impossible – to increase or decrease the gold monetary supply, and that supply isn’t controlled by any government.

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JWR Replies: I agree that gold will have only marginal utility for barter during an economic collapse. It will only come into its own in the recovery phase. Gold can act as a “time machine”, preserving your buying power from now until the far side of a currency collapse.

{Extraneous Deleted}

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Interesting comment and response.

Greenspan in his younger days WAS a gold bug before he want Darth Vader on the American People. Like Freedman, the economists seem to “see the light” and turned to the dark side to earn a handsome living.

Gold has imho a function today. JWR alludes to it as a time machine. It IS the only “safe store of value”. Just as in the “non-modern times”! You can’t use, for example, grain as a store of value because it spoils or the rats get at it.

Money is a token that everyone will accept in exchange for the things they have to sell. The essential functions of money are: medium of exchange; unit of account; standard of deferred payment; and store of value. Effective money has to be: divisible; fungible; measurable; and countable.

Leaving aside the TEOTWAWKI scenario, gold is valuable today imho because:

(1) It avoids the “inflation tax”. In 1970, I had a dollar. That same dollar today can only purchase five cents what it could back then. Where did the “other” ninety five cents of purchasing power go? Yup, stolen by the Federal Reserve! When the FRB produces inflation by printing more greenbacks, it acts as a tax on savings. Anything dollar denominated is taxed. You really didn’t thing that your house was “worth” that much more. Did you? No, it’s the “dollar” is worth less.

(2) It avoids the “estate tax”. There’s a rumor that when Trump’s casinos were in trouble his dad went into one of them and bought a few million in chips. An untaxed gift? An off the books loan? Something else? Envision you have save some gold coins, you die, your executor just passes them to your heirs, like furniture, books, or your clean undies. No estate tax on those.

Bear in mind, the Smithsonian exhibit reports that a “fine men’s garment” has cost two ounces of gold in the days of the Romans, before the French Revolution, during the Victorian Era, and for most of American history. Having bought a “less than fine” American suit recently, I can assure you that standard is alive and well today!

So gold is an “interesting investment”. It doesn’t pay interest. May be lost or stolen. But, not by the gooferment. And, can’t be taxed. Interesting!?

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http://www.spiegel.de/international/spiegel/
0,1518,363663,00.html

July 04, 2005
SPIEGEL INTERVIEW WITH AFRICAN ECONOMICS EXPERT
“For God’s Sake, Please Stop the Aid!”

The Kenyan economics expert James Shikwati, 35, says that aid to Africa does more harm than good. The avid proponent of globalization spoke with SPIEGEL about the disastrous effects of Western development policy in Africa, corrupt rulers, and the tendency to overstate the AIDS problem.

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Shikwati: If they really want to fight poverty, they should completely halt development aid and give Africa the opportunity to ensure its own survival. Currently, Africa is like a child that immediately cries for its babysitter when something goes wrong. Africa should stand on its own two feet.

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Like the Hippocratic oath, when you donate to a charity, “first do no harm”.

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http://www.lewrockwell.com/sennholz/sennholz18.html

Money Is Flooding the World Markets
by Hans F. Sennholz

Dr. Hans F. Sennholz was professor and chairman of the department of economics at Grove City College.

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A few pessimistic economists are convinced that a devastating economic cataclysm lies ahead. They usually point to three threats that may have a serious impact on the American economy. There is the burgeoning tower of public and private debt resting on a foundation of greed and overindulgence. There are a multimillion-dollar list of promises to a retirement system and a vast building of government guarantees and promises that are bound to be unkept. There even is a world of complex derivatives, the value of which depends on something else, such as stocks, bonds, futures, options, loans, and even promises. They all, according to these economists, will be the victims of the coming cataclysm.

This economist, who has observed central bank policies since the 1950s, is in basic accord and feels sympathy for these pessimists. They seem to have a clear view of the principles of money markets and the policies conducted by governments ever since they discarded the natural money order, that is, the gold and silver standards. But these pessimists tend to ignore the countless ruses, devices, and stratagems used by government officials and central bankers to hide the consequences of their policies. Long before there will be a financial Armageddon, there will be a myriad of government regulations, controls, edicts, and rulings that hide the consequences of monetary policies. Policies will be readjusted frequently to cover the actual effects. Given the public confusion and unfamiliarity with monetary policies and their consequences, a large majority of the public is likely to accept official explanations and welcome the regulators and controllers.

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We know that the gooferment is broke, made promises it can’t keep, and will be mia when the you know what hits the fan.

Self-defense: Zero debt, save; save in things that don’t inflate or depreciate or disappear; be aware; be educated; be vocal; develop skills; stay healthy; be prepared; be practiced. imho

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FROM STOP INFLATION NOW

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I struggle with Say’s Law. It says that bad money drives good out of circulation. Obviously! If I have a gold ounce and 700 frbnies, which will I use for the item? Yup, goodbye furbies. So how does one get people using “honest money”? Any honest money? See the Liberty Dollar, Ithica Dollars, or egold. It’s all the same problem. “Honest money” will be horded; fiat paper will be used. The gooferment can then inflate (i.e., tax) us to poverty. Until TEOTWAWKI! I’m befuddled.

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via Chris Pirillo President at Lockergnome and Owner, Lockergnome.com

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Dear Network: I received this letter from a reader. Thought I’d throw it out to you to help her with an answer…..

“Dear Chris,
My husband got me a fake Gucci bag for Mother’s Day, and I really appreciated the sentiment, but had a revelation. I’m tired of the knock-offs…I want to be able to afford the real thing sometimes. Do you have any advice for me about how to invest my money? (I earn $60K annually). How do I find an investment advisor? Is online stock trading advisable? Thanks for any advice you can send my way!”

Shirley S.
Seattle, Washington

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Chris,

With all due respect, this is a train wreck. And, you’re in the middle. This person is going to be disappointed, unless she’s wildly lucky to pick the next Microsoft / Google / Berkshire Hathaway, and subsequently be mad at you for bum advice. The market is a rigged game, and online trading is a fast path to the poor house.

Earning 60k per year, the person probably can’t (shouldn’t) even get a trading account because of “suitability rules”. There’s a reason why traders in big firms get paid lots of money and for an amateur to think they can compete is absurd. I’d suggest that they shelve this idea as a path to wealth.

If the writer wants to be truly wealthy, they need to give value to others in a way that is unique to them. It could be buying real estate and renting it. She will have to have a laser like focus on value and positive cash flow. Perhaps she can own her own side business. Maybe she can provide a service.

At 60k per year, I’d urge her to put her discretionary income into a tax deferred savings plan like a RothIRA in Vanguard Mutual Funds, and seek to increase her earning power. In thirty years, she may not be buying Gucci bags, but she won’t be eating dog food either.

I believe that the model for success NOW is: (1) ruthless financial discipline to capture part of your earnings while making every dollar work hard; (2) seek a white collar job; (3) have a blue collar skill; and (4) create one, or hopefully more, profitable web based businesses.

Then, she might become truly wealthy. If she has a husband who tried to make her happy, then she’s already blessed. Part of being wealthy is not having more “stuff”. It’s valuing what the Universe has given you. It’s not about having what you want; it’s about wanting what you have.

imho

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http://www.lewrockwell.com/north/north529.html

Debt: An Inescapable Concept
Part 2: Personal Debt
by Gary North

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There is no tooth fairy. There is no retirement fairy. There will be no streams of income for the vast majority of old Americans. There will probably be monthly checks. They will not buy much.

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Medical costs will destroy us. The unfunded promises of the Medicare and drug benefits will bankrupt the country. When the politicians make promises, they leave the bill for the future taxpayers to pick up the tab. When the bill comes due, it’ll be devastating.

http://www.masternewmedia.org/information_access/
central-bank-federal-reserve/panama-has-no-central-bank-20070512.htm

http://tinyurl.com/25db5o

May 12, 2007
The Federal Reserve – Who Needs It? How Panama Has Thrived Without A Central Bank
David Saied is head of National Public Policy for the Government of Panama
and also directs the National Competitiveness Program.

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The Federal Reserve is America’s Central Bank, owned by an unnamed corporate cartel, given a license to print money, and holding significant sway over the national government and economy. If it were dissolved tomorrow, the average tax-payer would doubtless be a lot better off. But we couldn’t do that, could we?

The Republic of Panama has managed just fine without a Central Bank for over a hundred years, and in actual fact, if you compare the rate of inflation between Panama and the USA over the last twenty years, Panama comes out a lot better off every step of the way.

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I’m just an injineer; not one of them there highly educated highly compensated ekkynonnymists. BUT, it seems to me, that you are tying yourself to the USA Federal Reserve Bank Note and the rate that they choose for inflation. That “tying” can become a hangman’s noose when “helicopter ben” starts dropping FRBNies from the sky. ALSO, it would seem that shifting from the “US Dollar”, which is really the FRBN not a real Constitutional Dollar, to a gold / silver standard for a Panamanian currency could make you the darling of all the gold bugs in the world. A national currency redeemable in gold might well be a great growth industry. But then, I’m just an injineer.

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http://www.homelandstupidity.us/2007/04/26/
ten-years-left-for-social-security/

Ten years left for Social Security
By Michael Hampton
Posted: April 26, 2007 3:01 am

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By 2017 Social Security will begin paying out more in benefits than it collects in taxes and will have to begin redeeming bonds from the Social Security Trust Fund. Worse, Medicare is expected to cross the same line later this year, resulting in a massive fiscal crisis.

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Well, this certainly has to be added to the list of risk that the retiring baby boomers face.

Inflation is always the number one risk. You have to worry about a “wealth tax” that simultaneously devalues your savings, reduces the buying power, raises prices, and (usually) decreases your Social Security Insurance (a Ponzi fraud on a mammoth scale) earnings (i.e., the Gooferment calculates the inflation rate that it has to pay you based on?). Now you have to throw on the concern that you’ll get nothing for your SSI “contributions”! Look for lower benefits, increased taxation of benefits, means testing, making it more into a welfare program, and — when the Ponzi scheme breaks — the Gooferment walks away from the obligation.

That might be the thing that brings out the pitchforks and torches. Like during the French Revolution, that might not be a good time to be an aristocrat.

“Let them eat cake” might be superceded by “the Social Security trust Fund is broke”!