Investment Rarities Incorporated
History |  Q & A  |  Endorsements  |  Portfolios  | Flatware | Gold Coins  |  Silver Coins  |  Contact |  Home

Products

Jim Cook

 

RUNAWAY SOCIAL SYMPATHY

Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

..Read More »

The Best of Jim Cook Archive

 
Best of Bill Buckler
January 14, 2008
archive print

INFLATION IS CLIMBING WORLDWIDE

Consumer prices are climbing right around the world. The speed of the climb varies, in some places faster, in other places slower, but they are all climbing. In future, these prices will climb much faster than they are now.

Valid Definitions Are The Bodyguards Of Knowledge:

Behind these coming global events lies a gigantic "con job" perpetrated by Lord Keynes in 1936 which shifted the historical definition of inflation from an increase in the money quantity in general circulation, to prices!

According to Keynes, if prices didn't climb there was no inflation. If it was seen that money prices for goods were climbing, then there was in fact inflation. This trick shifted the focus of attention from economic cause to effect. Attention was diverted from an increase in the quantity of money which is ever and always the true cause of climbing money prices. For more than three generations, governments and central banks have inflated the quantity of money in circulation while at the same time engaging in futile efforts to counter the economic effects of their own inflation. They have used price controls, rationing, more regulations, higher taxes and even subsidies to bring some high prices down. When all that failed, they resorted to "cooking the books" by

ignoring any inconvenient price rises.

It is a fundamental truth that in order to alter an EFFECT, one must act to alter the CAUSE of that effect. This is the essence of the first law of causality - the law of cause and effect. If one does not want climbing money prices, do not inflate the quantity of money in the first place.

The only VALID definition of "inflation" is an increase in the quantity of money. Deflation is a decrease in the quantity of money. It's that simple.

The Theory And History Of - SOUND MONEY - By Ludwig von Mises:

"It is impossible to grasp the meaning of the idea of – sound money - if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments. Ideologically it belongs in the same class with political constitutions and bills of rights"….

The Monster US Credit Machine:

A monetary monster is stalking the world. It is an enormous credit generation, all originating in the US through the many lenders inside the US financial system. This can be clearly observed by closely reading the Fed's third quarter "Flow of Funds" report. In it, the Fed blandly informs the world, or that part of the world which cares to read it, that total US system credit growth expanded at an annualised $US 4.99 TRILLION! That is $US 5 TRILLION of newly generated credit taking place inside a US economy which has an annualised GDP of just under $US 14 TRILLION. If all this US out-of-control credit inflation was brought to a sudden halt, the US economy would contract in GDP terms to only 64.2 percent of its present nominal size. US bank credit expanded almost 12 percent during the past year. US commercial and industrial loans ballooned almost 21 percent. No wonder America's headline CPI screamed to 4.3 percent in November. US prices of food and non-alcoholic beverages rose 4.7 percent since the beginning of the year through November. Here is the effect of the inflation, the one which is labelled as being inflation. If two central economic facts above are brought together, it is clear that the US economy is heading for an inflationary depression caused by the false economic boom generated by the earlier credit expansion and climbing internal money prices. The ultimate result of this credit expansion is US internal capital consumption. This is what is happening - RIGHT NOW!…..

The World Is Inundated With A Tidal Wave Of US Dollars:

The ongoing US internal credit expansion is feeding an outflow of US Dollars to the rest of the world through the US trade and current account deficits with the latter running at $US 860 Billion on an annual basis. This can best be observed by noting the massive climb in US Dollar holdings by most of the world's other central banks. Through

September 2007, China's reserves were up 45 percent over 2007 to reach $US 949 Billion. Russian reserves were up 56 percent this past year to $US 466 Billion, and even India's reserves increased by 56 percent to reach $US 264 Billion. These amounts of "reserves" piled up are remarkable enough in themselves. They have come about because most other central banks around the world are now desperately acting to mop up the tidal wave of US Dollars which are rolling into their own monetary systems. In the process of these mop-up operations, the other central banks' holdings of "reserves" (US Dollars) climb to a near matching degree. Even more noteworthy are the enormous percentage increases in such foreign central bank holdings of "reserves" - US Dollars!

Don't Look At The Amounts - Look At The Percentages:

Look at the huge increase in the percentages of "reserves" held by these central banks - China 45 percent, Russia 56 percent, India 56 percent. With the exception of the "Euro zone, this is now a global phenomenon with most central banks around the world piling up "reserves" at faster or slightly slower rates than the three examples mentioned. In fact, this is a "blow-off" in the rest of the world's acquisition of additional US Dollars, which cannot continue for much longer. In the process of adding these US Dollar reserves to their own holdings, all these central banks are in effect also blowing up their own national monetary systems. This increase in reserves causes faster internal credit expansions as well as faster climbing internal prices. This is why "inflation" - again seen as climbing consumer prices - is now a worldwide phenomenon. It is also why the global financial system is now failing.

Knowledgeable foreigners were net sellers of long-term US financial assets in the third quarter, as the latest US Treasury figures show. Monthly sales averaged US 11.8 Billion over the period. This is as yet a mere trickle, but is does show what lies ahead as foreigners see their $US denominated "assets" continuing to lose value.

Worldwide - You Can Anticipate The Following:

At some point this year, we will be able to inform our worldwide subscribers that a major central bank or a group of central banks is baulking at constantly having to buy the US Dollar. At that point, the international value of the US Dollar will crash! Its gyrations (after this first fall) will be a sight to behold. In the process, this $US crash will hugely increase global doubts as to the real economic value of their own fiat paper money, as well as the safety of the funds in these nations' banks and financial institutions.

As this develops, it will become chaotic. All economic valuations will be in doubt and money prices will be all over the place. Increasingly desperate governments will take desperate actions simply to deal with the internal problems inside their own economies. And at some point, some nation or group of nations will bite the bullet and realise that they have no choice but to return to real - SOUND - money.

That probably won't happen in 2008 - but happen it WILL - historically, it always has.

INSIDE THE UNITED STATES

THE LAST PILLAR - THE ECONOMY - IS FALLING

The first full trading day of 2008 in the US started with a bang as the Institute of Supply Management reported that its gauge of US manufacturing had dived to its lowest level in almost five years. The manufacturing index dropped to 47.7 - the lowest since April 2003. Wall Street was slammed out of its complacency and US shares dived across a broad front. Further down the street, global commodities soared. Oil touched $US 100 a barrel while spot future Gold leaped $US 22.00 to $US 860 and the entire global grains complex soared in value. Higher food prices worldwide are assured. The US economic recession is hitting main street and the last pillar under the Bush Presidency is collapsing. US GDP, which was earlier reported to have climbed at an unbelievable 4.9 percent annual rate in the third quarter, is now expected to come in at 1.0 percent or less for the fourth quarter of 2007. Of course, nobody on Wall Street is yet facing the prospect of a MINUS number for annualised GDP. That's recessionary!

US corporate earnings, never mind US banks and financial sectors which are rolling in rivers of red ink and write-offs, will fall. The US stock market will be next. The Dow has a lot of catching up to do on the downside. The US real economy has already been contracting for several quarters. It's recession time.

Ó 2008 – The Privateer

http://www.the-privateer.com

capt@the-privateer.com

(reproduced with permission)

SUBSCRIPTIONS:

Delivery via email

Trial: 5 issues (once only)

Six-Month: 12 issues

Annual: 25 issues

Two-Year: 50 issues

Subscribe at www.the-privateer.com/sub.html