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!

What GDP really tells us

(What is really scary is that the chart above stops in 2005..)

Written by: Joshua Gayman

Gross Domestic Product(GDP) is the sum of all final goods and services produced within a nation’s borders for a given period(year). GDP is made up of only 4 different factors:

1. Personal Consumption Expenditure: The amount spent by individuals on goods and services.

2. Private Investment: Private investing into things such as factories, equipment, and residential/non-residential buildings.

3. Net Trade: The amount the US exports minus the amount it imports.(This is currently a negative number, hence the term: “Trade Deficit.”)

4. Government Spending: Doesn’t matter if it is buying Barbies, war tanks or investing in medical research. It has the same effect on GDP.

In 2011, the United States’ GDP was $15,000 billion.(NOTE: 1,000 Billion = 1 Trillion. This really puts the $16 Trillion national debt into perspective doesn’t it..) Of that $15,000 Billion, Personal Consumption accounted for 71% of GDP. Private Investment accounted for 13% of GDP. Net Exports is a negative number because we import more than we export. You could say it accounted for -4% of GDP. Finally, Government Spending(federal and state levels) accounted for 20% of GDP.

Let’s take a closer look at these four factors of GDP:

1. Personal Consumption: At 71% of GDP, this factor is by far the most important. The amount that individuals spend is determined by two factors: how much money they earn and how much money they can borrow. These two factors are also the most important factors for 2.Private Investment, because business investment and residential construction both are driven by consumer demand, which is driven by the ability for the consumer to take on more debt.

The expansion of debt owed by the individuals in the United States was the strongest factor driving the economy from the early 1990s up until the economic crisis of 2008. In 1993, the total debt of the household sector first topped $4 Trillion. This number peaked near $14 Trillion in the 3rd quarter of 2008. At that point, the donkey collapsed from too much debt on it’s back when individuals could no longer afford the interest payments on their loans and began to default. (From 2002-2007, the household sector increased its borrowing by an average of $1 Trillion per year.) It was all of this debt that funded personal consumption and therefore GDP.

When loans began to default in 2008, the banks refused to lend the household sector any more money. With credit cards and Home Equity Lines of Credit(HELOCS) getting cut, people were forced to spend less money. With personal consumption contracting, private investment began to contract even more. The result of this was a STEEP decline in US GDP in the 4th quarter of 2008. During the same quarter, unemployment shot up to 10%. At this point, the US Government began to spend much, much more. Had it not done so, the economy would have collapsed into a Greater Depression. It’s just math:

Personal Consumption + Private Investment – Net Trade + Government Spending = GDP

3. Net Exports: This number really comes down to the competitiveness of the country’s goods and services in the global economy. Since this number is negative in the US, it is obvious that we consume more than we produce. We offset this number by holding Reserve Currency status and printing money. Luckily for us, the system will collapse when the world no longer buys American debt, therefore the financial system is doing whatever they have to do to keep the dollar alive. This of course is not a good thing if you are a saver.

4. Government Spending: In the United States, government spending is supposed to be determined by elected officials in response to the demands of the voting public, but the voting public is gaining an increased awareness that government spending is actually determined by the demands of corporate donors.

All of these numbers and stats for me to point out one simple thing: Debt is more important to the United States than production. If it weren’t, we would stop taking on debt, stop paying for unfunded liabilities, and start competing to produce and sell in the global economy(export). it is much easier for us to simply take on more debt, as long as the world will buy our bonds and allow us to print dollars.

On facebook?

What Drives the Global Economy?

Written By: Joshua Gayman

The Financial Times has been running a series this month entitled Capitalism In Crisis. When reading this story, it is apparent just how far we are from fixing this global economic crisis. As Richard Duncan points out in his latest post titled This is not a Crisis of Capitalism, “(it’s) not because of the insights contained in the articles, but because the entire premise of the series is completely wrong. This is not a crisis of Capitalism.”

Capitalism is an economic and political system in which a country’s trade and industry are controlled by private owners for profit. More specifically, Capitalism is where the private sector drives production by accumulating capital and investing back into the system. With true Capitalism, the government’s role is very small.

The truth is that the United States has not been Capitalistic for decades. Our federal government spends 25% of the money in our economy and the central bank AKA “The Fed” creates the money out of thin air and manipulates it’s value. Thus, our economy is no longer driven by capital accumulation and investment like before. So if it’s not capital accumulation and investment that are driving the economy, what is it you ask? The answer is DEBT.

Credit creation and consumption(using stuff) have now become the dominant forces driving economic growth. Thus, we no longer live in a Capitalistic economy. 

Capitalism was a phenomenon of the 19th century, one that did not survive past the 1st World War. WWI destroyed the standard upon which Capitalism was built. This standard was the gold standard, and once it was gone, central banks and governments gained near-total control over economic production.

The ENORMOUS expansion of government debt that was used to fund WWI created a credit bubble that we know refer to as “the Roaring Twenties.” This bubble of the Roaring Twenties soon popped and became the Great Depression of the 1930s once the debt was too big to repay.

WW2 was no different, with again complete government control over the economy. In the coming decades after, government spending surged on social programs and military expansion. By the 1960s, the government was using Keynesian tools to control monetary policy and the rate of economic growth. In 1971, President Nixon removed the dollar from the gold standard, which meant that dollars were no longer backed by gold. This gave way to a HUGE explosion of a fiat currency supply(money backed by nothing but the faith the people have in their government’s currency). This expansion in the money supply transformed our world and gave way to the biggest economic boom in human history.

In 1964, the total of all credit in the United States hit $1 Trillion. By 2010, the credit supply had expanded 50 times to $50 Trillion(Source: Richard Duncan). This new found money, or credit, created enormous wealth, profits, jobs, and tax revenues, and ultimately brought on a new age of a global economy. As long as credit keeps expanding, prosperity increases. Credit has replaced Capital as the key driver of the economy.

The economic crisis of 2008 had nothing to do with Capitalism. The crisis of 2008 and that we are still facing today stems from issues with credit creation. Because for what caused the biggest boom(or bubble) in human history, is a debt that must be repaid(unlike Capital). The debt that was taken on which drove the expansion of the last 40 years cannot be repaid, hence the crisis. Even more disturbing, is that now a large percentage of the population is now not credit worthy. This makes further credit expansion nearly impossible. And under this credit-ran economy we now live under, when the credit doesn’t expand, the growth slows, until eventually, the music stops altogether.

This 40 year period of credit expansion birthed a new era in the global economy. The United States has been de-industrialized as a result of being able to buy products from low wage countries on credit. As Industry got smaller in the US, the Finance sector became the dominant sector of the US economy. But the music has slowed down dramatically in the Finance sector as well, now that Americans can’t bear any additional debt. Now that we are weak in industry and in way too much debt, it is a growing problem for the United States to be able to act as the driver of the global economy.

But it’s not just the US who’s economy is no longer capable of working successfully. It’s also the economies of all the countries, such as China, that have seen growth as a result of strong manufacturing and export. This is another global imbalance yet to correct.

Truth is, at least to a large extent, the government now manages our nation’s economy. The US’ demand is still the most important factor to economic growth to the global economy. The world NEEDS us to buy their stuff! But without credit, we can’t!

Now, the actions of other governments and government-related institutions(IE: the European Union) must be carefully monitored. Point in case, the news 2 months ago by the European Central Bank(Europe’s Fed) that they would lend Euros($630 billion worth) to European banks for up to 3 years at low interest rates, is the reason that global stock markets have been gaining over the past 6 weeks. The stock market is also at a high since the 2008 crisis, following news from the Federal Reserve that they would keep interest rates at near zero level through 2014.

Global markets have came back sharply not because of the success of the intervention from the Central Banks itself, but because investors are realizing that more government-directed interventions will come when necessary to prevent future crises.

It is flat out sad that the global economy depends on government intervention. This topic leads to a very controversial political subject regarding smaller or bigger government. Once side argues for bigger government to avert the crisis and the other wants small government with less regulation to get us out of the mess. The reality is, unless we can come together to find a true solution to our monetary problem, both sides will get slaughtered as the biggest bubble in human history pops and credit stops, wiping out the America middle class and taking the benefits with it that we have seen as a by-product of our global economic status.

Don’t get me wrong, market forces still have an important impact in the economy. My point is that now, more often than not, it is government or central bank’s action that has so much influence on market forces that it becomes a very grey area as to where the government influence stops and the market influence itself begins. Supply and Demand still play the key role in setting value. It’s just that today, governments have an enormous role in influencing both. It is imperative that we recognize this, and understand that this is not Capitalism. We must no longer worry about fixing the crisis with Capitalism but instead shift our attention to the crisis in the current economic system that exists in this global economy, a system of debt. The only question we should be asking is this, “Do we try to fix the current debt system, or do we need a better system? Do we need to abolish the current system and go back to the former phenomenon that was a true Capitalistic economy?” I woud say this, either way, one must understand what is going on in the global economy if he(or she) wants to join the rich, as opposed to be forced into the poor, as the middle class is wiped out.

 

Are You Living On Financial Edge?

             Are You Living on the Edge without a Financial Education?

Posted on: Tuesday, January 24, 2012|Written by: Robert Kiyosaki

When I was a young boy, the path to retirement was simpler. For the most part, if you saved your money regularly, paid your mortgage off, and lived modestly, you could retire well. This was partly because inflation was low since the dollar was pegged to gold and also because most employees could expect a company pension and health benefits until the day they died. It did not take much intelligence to have a secure, financial future.

Today, we live in a world that requires an extremely high, financial intelligence to retire well.

It is no longer enough to save money, as higher inflation and taxes wipe out your earnings. You can’t rely on a company pension because most companies don’t offer one. Instead, it is expected that you contribute to a 401(k) plan that may or may not provide you a secure retirement and that is simply a glorified, tax-deferred savings account that benefits the rich, not you.

These changes are because of two actions by the U.S. government that I’ve written extensively about, most notably in my book Conspiracy of the Rich. In 1971, Nixon took the dollar off the gold standard, making the dollar a currency instead of money. And in 1974, the Employee Retirement Income Security Act was passed, paving the way for 401(k) plans, forcing uneducated workers into the stock market, and creating the financial services industry.

It’s taken about three decades, but we’re seeing the devastating effects of those actions today as individuals and countries are living on the edge of financial disaster.

On an individual level, take for instance a young friend of mine’s father whose dad worked his whole life in an old-world industrial plant. Every time my friend talked with his dad, his dad would mention how long it was until his retirement, where he’d collect a pension and health benefits and enjoy golf a few times a week and sports on TV. There were no savings to speak of, some stock options decimated by the economic downturn, much debt, and no other plan. Unfortunately, only a few months before my friend’s dad hit the minimum retirement age, the plant went for sale, found no buyers, and closed. Now he, along with hundreds of others at that plant, cannot find a new job, have no savings, and are looking at a very insecure, financial future. For him, it may be too late.

On a national level, look at the Euro Zone. According to The Wall Street Journal, “The global economy faces a depression-era collapse in demand if Europe doesn’t quickly act to dramatically boost the size of its debt-crisis firewall, implement pro-growth policies and further integrate the euro zone, the head of the International Monetary Fund warned Monday.”

As IMF Managing Director Christine Lagarde remarked over the weekend, the Euro Zone’s efforts to stymie debt problems “is about avoiding a 1930s moment, in which inaction, insularity, and rigid ideology combine to cause a collapse in global demand… A moment, ultimately, leading to a downward spiral that could engulf the entire world.” If Europe collapses, the world goes down with it — and the jury is still out on what will happen. But the world’s financial experts are sending out the warning cry.

As you read these stories above, they probably sound vaguely familiar, have little emotional impact on you, and you may have even skipped over them.

Why?

These stories echo stories that have been shared for many years now. The news is filled with stories of people living in countries on the edge of financial collapse, and then buffered by good news here and there to keep us all from falling into complete despair.

The reality is that we have become used to living on the edge, and we’re forgetting what it means to live comfortably inland. This is not all bad, if you have the right mindset.

Living on the Edge Requires a Financial Education

Living on the edge requires alertness and intelligence, you cannot give up or be lulled or else you will fall. Each step must be calculated and taken carefully, but confidently, to get to safety. The only other option is to do nothing and hope someone will save you —which is akin to suicide.

It’s for times like these that the Rich Dad Company was formed. This website, our books and DVDs, our coaching, and financial education all exist to help equip you for the perils of our modern economy so that you can be sure to have the knowledge and practical application required to survive and thrive while others fail and fall.

For many, there is no choice about living on the edge. The die has been cast for us by people much more powerful and influential than us. But we can control our actions on the edge. It’s my hope you’ll step forward confidently and smartly, equipped with as much financial knowledge and courage as you can gain and muster. It sure beats the alternative.

To increase your financial education now, click here to find out about our free resources and online community.

Gold and Silver Rise Following President Obama’s State of the Union Speech?

No…I am pretty sure it was because of the Fed’s news to hold interest rates at all time lows through (at least) 2014.

 

Global Economy 2012 – One World Currency Approaching?

As we are diving into 2012 I want to take a minute to talk about a couple of things I see going on in the global economy that I think will have an impact as the world heads in the direction of a one world currency.

 

 

 

 

 

 

REAL – America is the best nation in the world! But we cannot lose it to the ultra rich and elite.

By: Joshua Gayman

 

We can get back to the lifestyle we all want. But it will take REAL revolutionary change, and their will be massive sacrifice. But which is worse? To live as a slave or die as a free man? We have a compromise on our hands amongst freedom and slavery. We are all slaves to money. Fear is a distressing negative sensation induced by a perceived threat. We are living in a state of distressing negative sensation that continues to get worse each day as we work harder and longer while our quality of life diminishes. Every day that we compromise our time and labor for less and less is a day we must fight to get back.

Money is a man-made commodity – thus, we can easily wipe out our national debt by ending the dollar now. We must reclaim our own government so that to serve us. This would require a new federal government. we then need a new currency, banking system, and education system.

Do you want a good future and freedom for your children? If yes, then you must not be lazy. Too many people are choosing to labor for 10 hours per day rather than stop for 10 minutes and realize the full potential of their brain.

The global banking system has not only been the path to greater wealth for, but has at the same time been the vehicle through which the ultra rich have controlled and managed the enormous resources of our planet, and continue to do so. These resources are not limited to commodities. They include humans.

The rich love bubbles and they love depressions. When the rich desire for more man-made things, they allow more money to flow through the world. When they need to cash in on their *Dear Money, they simply constrict the money supply as to collect on all of the resources(collateral) that they “lent” to the people using their made up currency. At this time unemployment is no problem for the rich, but rather they find it to their benefit. The more unemployment, the more relief. The more relief, the more bonds. The more bonds, the more taxes. The more taxes, the more interest coupons they are able to clip on their bonds.” This means that the government becomes in more debt to them. When the government is in debt to them, WE are in debt to them. The government does not pay taxes, they are actually funded from taxes. Only WE pay taxes.

An international banker said in a letter to his son in 1932 in regards to control over man via money, “If young men like those in charge of our national finances can carry over the program as now laid out, we have the foundation of a great international hegemony of finance. The power given to the board to remove officers and directors anywhere in the country is a bold and masterful stroke of legislation. Of course, while these things will be done under the pretense of preventing bank failures, they will in fact, galvanize the central banking power down to the smallest village. Credit can then be so controlled that political uprising will be impossible and credit extension can be used strictly to hold class distinction tightly within bounds.… This is not so difficult as you might at first hand suppose. To properly do so, it is only necessary to control the letters which, on our modern times, simply means to control the press.”

How can you serve two masters – your Creator and your Government? The answer is that you cannot server two masters, therefore the Government had to create a system that tricks you into thinking you must serve them, where in fact, Governments must serve us, the people

Future of the Global Economy

Joshua Gamen talks about how the history of the global economy has brought us to our current global economy, as well as the future global economy we are headed towards.