Greek Bailouts – Conspiracy Exposed

by: Joshua Gamen

Former Prime Minister of Greece said in an interview that he thinks the media and journalists are being too hard on Greece, and that Greek bonds are actually healthier than they seem. He also said that investors should buy Greek bonds. All of this amidst a $170 billion bailout package to Greek, where investors are taking a 70% real loss on Greek bonds! Conspiracy of the rich at it’s finest… For more on the conspiracy of the rich from Joshua Gamen, click here!

Economic Update: Information – Taxes – Gold n Silver

This week we are talking about information, and how it effects you if you are a trader or a cash flow investor. We’ll talk a bit more about employment. Also on the agenda is the tax code and why it is set up the way it is. Of course I’m going to rant about gold and silver. And then I’ll let you know what I see this weekend in the BCS 

 

QE3 Explained

Simply put: Bernanke, The Fed (Federal Reserve), The dollar, Inflation, Deflation

By: Joshua Gamen

Fed Chairman Ben Bernanke was on TV last night(60 Minutes). And it is important that this issue be discussed.

First off, did anyone else notice how shaky he looked?? Hard to blame him, anyone who is going in front of the whole world and trying to keep an illusion going and blatantly lie, would be thought to be a littler nervous. I wonder if after seeing the interview, the World Bankers aren’t wishing they had Obama be the Fed Chairman instead of the President. After all, let’s be real, the Fed Chairman has more power than the President anyways.

Bernanke “claims” he has two main concerns: unemployment and deflation. He says that at the end of the economic peak of last year(don’t feel alone if you didn’t know there was one) 8.5 MILLION JOBS in America were lost, and since then, only 1 million jobs have been created. He says it could take 5-6 years to get back to normal levels of unemployment.

But let’s be REAL. The real unemployment in our country today is much, much, muuuuuuuch higher than what is being claimed. If you factor in the people who have gone more than the 6 months on unemployment and still can’t find a job, the people who have simply given up looking, and the people who are technically “employed” but don’t make enough money to pay for food, clothing, and shelter, then you are looking at a rate of 22% unemployment – and growing. We will soon be to great-depression levels of unemployment. As was put very well by the National Inflation Association:

“Bernanke’s(The Fed’s) policy of printing more money and creating inflation will not create jobs because the money the Fed creates is going to fund non-productive and wasteful U.S. government spending. The only jobs being created are artificial government jobs.”

Truth be told, we are far from reaching a gold bubble, but we are in a bubble alright. A U.S. government spending bubble. I commend our government for looking at ways to cut our deficit right now, but the truth is, there is no way that can physically do enough, no matter how much they cut back. Government spending is up 108% from 10 years ago. This spending bubble will eventually go bust when the U.S. Dollar becomes worthless and the U.S. government can no longer meet it’s obligations.

Bernanke says we should only be concerned about the long-term deficit, “Because in 10, 15, 20 years from now the entire budge will be spent on Medicare, Medicaid, Social Security, and interest payments on the debt, and there will be no money left for the military or other services the government provides.”

Right now, the truth is that social security, medicare, and medicaid are broke. We are simply financing these payments to these government programs by the taxes we currently paid. The money that our parents and grandparents are receiving right now from those programs is our taxes, as the money that they contributed to those funds was spent by our government a long time ago.These government programs are estimated to be 50-60 Trillion Dollar time bombs!

Countries usually see hyperinflation of their currencies once interest payments on their national debt reach 50% of tax receipts. The U.S. is on track to reach this limit in the next 5 years. So my response to Bernanke saying we only need to be concerned with “long-term” deficits is this: WE NEED TO BE CONCERNED WITH HAVING OUR CHECKINGS, SAVINGS, AND 401 ACCOUNTS WORTH ANYTHING IN 5 YEARS(AKA SURVIVING), BEFORE WE WORRY ABOUT SURVIVING THE NEXT 10,15, AND 20 YEARS.

Bernanke said on TV last night, that inflation is “very very low” and that this is a major concern to him because we are very close to falling prices(deflation). He says the problem with this is that it would lead to falling wages. He said that the risk of deflation is now very low, but only (props to himself)because of the $600 billion in “quantitative easing.” He claims that if they had not acted the way they did with the $600 billions, deflation would be a more serious concern.

The TRUTH: inflation is not very very low. The best gauge against inflation has, and always will be the price of gold. Gold, at the time I am writing this, is at $1,425 per ounce! If deflation was a true risk, as Bernanke claims, we would be seeing the price of gold dropping, NOT SOARING! The Fed’s actions have now made deflation absolutely impossible and we need to be concerned about the risk of massive inflation, even perhaps hyperinflation. If we really were to see deflation, this would actually be a good thing, because our savings and incomes would be worth more and prices of things like food and energy would become cheaper.

The reason so many people have talked about deflation and believed the Fed that we have been seeing deflation is simple. Over the past 2 years of our nation’s economic collapse, we have been hit so hard, so fast, they we have had to drop prices in the things we produce, just to make trade still possible in our community. The issue of us not having enough money in circulation to have a strong economy is not that there is a lack of dollars, it’s that there is a lack of dollars to our middle and lower class. The ultra rich and banks have profited from the bubbles we recently rode through, and are still profiting. So devaluing the dollars that we, the people, do have DOES NOT HELP, it hurts us more. A real solution would not have been to print more money, but to let the banks fail when they ran themselves into the ground.

Bernanke claims that those of us who view the Fed’s actions as inflationary are “not looking at the risk of not acting.” He goes on to say that fears of inflation are “way overstated.” He claims it to be a “myth” that the Federal Reserve is “printing money” because “the money in circulation is not changing in any significant way.” To which I reply:

Yes, Mr. Money Manipulator. You are correct about one thing, you are not actually “printing money.” It is in fact just a digital accounting on the computers. A very large digital number that you are creating…However, the Fed’s(M2) money supply(which for all practical uses means the money in circulation plus the money people have in savings) has risen by $44,900,000,000(FOURTY-FOUR BILLION, 900 MILLION dollars) to $8,809,200,000,000(EIGHT TRILLION, EIGHT HUNDRED AND 9 BILLION, TWO HUNDRED MILLION dollars) over the past MONTH.

If you annualize this increase, that is a 6.1% increase in the M2 money supply. This simply means, if you buy food, clothes, or gas, you realize that we are seeing 6% increases on the costs of these things. Compared to the CPI(consumer price index)’s rate of 1.17%. Obviously the CPI is skewed by technicalities and cannot be relied on for any practical purposes.

Furthermore in the TV interview, Bernanke admitted that he did not see the collapse in 2008 coming. He used the excuse that the Fed did not have oversight of AIG or Lehman Brothers, and that if the Fed had (even)more powers, they would have seen the crisis coming.

Interestingly enough, may economists did see the collapse coming. Robert Kiyosaki(author of Rich Dad Poor Dad) has talked about the coming collapse for the last decade. Many Austrian economists warned about the collapse we saw, and all of these economists that warned of the collapse, are now warning about massive inflation coming our way. To again quote the National Inflation Association:

“It doesn’t make sense for Americans to trust Bernanke about inflation when he was wrong about the housing bubble and just about everything else.”

Bernanke went on to say that the gap between the middle class and the rich is due to lack of college education.

Yes, lack of FINANCIAL education. But really, the reason for the income gap between the middle class and the rich is inflation. When the Fed prints more money(Oh I’m sorry…I mean “digitially enhances” the money supply), it steals from the incomes and savings of the middle class and transfers this wealth to the banks and Wall Street, who have access to the Fed’s cheap and easy money. It has nothing to do with college education. Actually, the Fed making it so easy to go to college and get student loans has caused a college tuition inflation crisis.(Note the increase cost of a college degree over the past decade)

We cannot trust Bernanke, or the Federal Reserve. They have continuously lied to us and been wrong about everything. It is all smoke and mirrors and the unemployment and rising prices we are all seeing is starting to expose the truth. How much more can we take?!

It is important for all of us to get REAL financial education. I encourage you to follow the me(Joshua Gamen – http://www.joshuagamen.wordpress.com ), Robert Kiyosaki, and the National Inflation Association. Think about what you are seeing in your lives and try to make common sense of it. Don’t get wrapped up in the fancy financial language that is printed in the newspapers and rambled off on the media. Only together, can we start to unwind the damage that the Federal Reserve has caused over the last 100 years.

Our middle class is our strength. We have brilliant, motivated, strong, driven people. We have the finest businessman, athletes, engineers, teachers, doctors, entrepreneurs, builders, and computer programmers in the world. We are the world’s powerhouse, and we need to maintain it. No more can we let a currency manipulation from the Federal Reserve and World Banks hold us back. We have produced so much in our Nation’s short history, and we need to continue to contribute to mankind and produce more for our coming generations. We don’t need the fed, we don’t need debt. We need REAL.

Today’s statement by the Fed(11/3/2010), and it’s translation into plain English

 

 

Fed’s Statement:

Information received since the Federal Open Market Committee met in September confirms that the pace of recovery in output and employment continues to be slow. Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak. Employers remain reluctant to add to payrolls. Housing starts continue to be depressed. Longer-term inflation expectations have remained stable, but measures of underlying inflation have trended lower in recent quarters.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate. Although the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, progress toward its objectives has been disappointingly slow.

To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to expand its holdings of securities. The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee intends to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month. The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period. The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy was Thomas M. Hoenig. Mr. Hoenig believed the risks of additional securities purchases outweighed the benefits.Mr. Hoenig also was concerned that this continued high level of monetary accommodation increased the risks of future financial imbalances and, over time, would cause an increase in long-term inflation expectations that could destabilize the economy.

Translation:

The economy still sucks. People are spending a little bit more, but they’re stretched thin: One in 10 workers can’t find a job, wages are basically flat, home prices are way down and nobody can get a loan. Companies are buying more stuff, for now, but they’re not building new factories or offices. Nobody’s hiring. Nobody’s building. Inflation has gone from low to super low. 

The Fed has two main jobs: Keep unemployment low and prices stable. At the moment, as you may have heard, unemployment is really high. And inflation is so low that it’s making us nervous. We keep saying that unemployment’s going to fall. And it keeps not falling.

So to give the economy a kick in the ass—and to pump up inflation a little bit—we decided to go on a shopping spree. First of all, we’re going to keep buying new stuff when our old investments pay off. Second—and this is the big news for today—we’re going to create $600 billion out of thin air and use it over the next eight months to buy bonds from the federal government. We hope this will make interest rates go so low that people will borrow and spend more money, and companies will start hiring. By the way, this is an experiment, and we don’t really know how it’s going to work out. We reserve the right to change our plans at any time.

Of course, we’ll continue our policy of letting banks borrow money for free. If you’re worried this is going increase inflation and destroy the dollar, please reread everything we’ve said to this point. We plan to keep rates near zero for as long as it takes, but we won’t tell you how long that is. In the meantime, we’ll keep an eye on things.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy was Thomas M. Hoenig. He’s the president of the Kansas City Fed, and he’s voted against Fed policy at every one of our meetings this year. He thinks this whole creating-$600-billion-out-of-thin-air thing is going to do more harm than good.He also thinks that all this money we’ve pumped into the economy could inflate another bubble and create widespread worries about inflation. That could lead us right into another crisis.

Competition Towards Disaster

By Joshua Gamen

An article in the Wall Street Journal this last week titled “Fed Officials Mull Inflation as a Fix,” talks about the Fed reversing over 3 decades worth of monetary policy to fix this fragile economy and contribute to a recovery that is not happening like they had hoped for.

*(Monetary Policy is simply the regulation of the money supply and interest rates to control inflation and stabilize interest rates.)

The Fed is hoping that by lifting inflation, they will push “real” interest rates(nominal rates minus inflation) down. This would encourage consumers and businesses to save less and spend or invest more.

SAVING SUCKS

Robert Kiyosaki claims that savers are losers, and what is going on strongly supports his stand on the issue. It is absolutely insane to think that you can get ahead by simply saving dollars when the Fed is willing to speed up the printing presses to get more dollars into circulation, purposefully causing more inflation. As many know, President Nixon took the US off of the gold standard in 1971, severing the tie of our dollar to the gold standard. So for over 3 decades, the Fed has tried to keep inflation low. More dollars in circulation means the value per dollar in the existing supply goes down.

The point that the Fed is even considering inflation as an economic fix shows that they have given up on the dollar. And the world is catching on.(See value of precious metals vs value of US dollar.)

Last week, the dollar dropped to a 15-year low against the Yen. Investors on Wall Street are betting on the Yen, believing that the Fed will sacrifice our dollar to help economic growth.(Shown by a 72% increase on pro-yen votes.)

WHY WOULD THEY DO THIS?!?!?!

By weakening our dollar through inflation, US exports would become cheaper, creating export-lead growth. The dilemma with this is that EVERY nation is looking for export-lead growth, and they too, are willing to sacrifice their currencies to make it happen. China is keeping theirs artificially depressed to try and stay ahead in export wars. Thus, the US is trying to get China to let their currency appreciate, and trying to get the IMF(International Monetary Fund) to rally behind them on this. This competition is causing a race by the currencies towards disaster.

SO…????

My point is that the dollar is EXTREMELY dangerous now. All I hear is people talking about ways to cut back to save more. This is touted as a “responsible” economic strategy. The known financial voices are cheering that the people are being “wise with their money again.”(How’s that working out for anyone?…. :\ ..

I am saying this – Saving dollars is not smart. Financially, it’s actually quite ignorant. If you think saving dollars is a good idea, you are ignoring the fact that the Fed is doing everything they can to make the dollar weaker – by raising inflation in hopes of stimulating growth to the economy, and push us all into more debt.

(I know I am getting to get a lot of arguments on this here, so do your research and verify with facts what I am saying.)

GOOD DEBT VS BAD DEBT

Debt is money’s reality these days. Our economy only grows now if you and I are spending more, and more, and more. It is actually the interest on our loans that the ultra-rich are now after. (They already have everything else from us.)

Debt can, however, be good OR bad.  Good debt puts money in your pocket, bad debt is money that takes more money out of your pocket. (IE: Going into debt using leverage to buy an asset like rental property which puts money in your pocket after paying the mortgage, taxes, management, and maintenance is good debt. The tenant pays the debt down, and you get the asset, plus a little(or a lot) of spending money each month. Plus, you get the appreciation(If there is any). Bad debt would be taking out a credit card to take a vacation. This only takes money out of your pocket, and for a long time.(Thanks to interest payments.)

GOOD NEWS

There is always a good perspective that can be sought out. With all of this stuff going on, there is an abundance of opportunity. With all of the depreciation that is going on, there is a huge opportunity to acquire assets(something that puts money in your pocket) at rock bottom prices. This won’t last forever. The Fed will find a way to create inflation(sounds like they’re already working on this). When inflation hits(and it’s inevitable), savers will become losers and debtors will win.