Just came back from the pre-premiere of a Swedish-made movie called “Overdose - The Next Financial Crisis“. It’s narrated by Cato Institute affiliate and free-lance writer Johan Norberg and the movie is also based on one of his books. I must say the movie portrays the dire mess we are in, in a manner that’s very easily grasped. This makes it a very good movie to share with your friends if you find it difficult to get people close to you to listen to boring financial lingo. Highly recommended! The film features trend forecaster Gerald Celente, investor Peter Schiff and many others.
This is a great article by Alar Tamming, Tavex, Estonia and Dr. Krassimir Petrov, Ahlia University, Bahrain on the situation we are in right now minus all the mass-media propaganda. Their cannot be a “jobless recovery”, you can’t print your way out of this mess. Keynesianism is wrong at the core, no matter what bureaucrats, politicians, journalist or bankers tell you. The printing of money of Central Banks around the world has gone parabolical and the paper will return to its intrinsic value of zero. Read the rest of this entry »
As I posted a two days ago, Peter Schiff does not agree with Nobel Prize winner Paul Krugman about China and what would happen if the chinese stopped buying US debt. As he said in the video he would write an in-debth article on the same subject. That article is now available, entitled “Paul Krugman Versus Reality“. Here are a few quotes:
In his latest weekly New York Times column, Nobel Prize-winning economist Paul Krugman put forward arguments that were so nonsensical that the award committee should ask for its medal back…
According to Krugman, our secret weapon of economic invincibility is the Fed’s ability to print dollars endlessly. If China were to foolishly decide to attack us by selling our debt, the Fed could simply step in and buy the excess with newly printed greenbacks. (In other words, Krugman sees no difference between funding the debt and monetizing it. See my latest video blog on the subject.). For Krugman, China would gain little from such an attack, but would lose the ability to export to its best customer and suffer severe losses in the value of its dollar holdings. Krugman’s worldview is reassuring - but it has absolutely nothing to do with reality…
There is a huge difference between selling your debt to another and “selling” it to yourself. When China buys our debt, it uses its own savings. In order to purchase a trillion dollars of U.S. Treasuries, the Fed would have to expand our money supply by a corresponding amount. Even Krugman acknowledges that this would cause the dollar to lose value; however, he feels that a weaker dollar is good for America and bad for China…
Krugman does not believe that a tanking dollar will translate into higher interest rates or higher consumer prices at home. No matter how many dollars the Fed creates, or how much value those dollars lose relative to other currencies, he is confident that as long as unemployment remains high, rates will stay low and inflation will remain under control. This is absurd…
To construct a policy around Krugman’s ridiculous assumption that we benefit China more than they benefit us is to invite catastrophe on an unimaginable scale.
What is the difference between the State of California and the State of Greece? The State of California is a bigger bankruptcy… The financial industry is at war with Greece. The CDS-attack (Credit Default Swaps, an off-the-counter derivative) is a nuclear financial attack on Greece.
In part 2, Jim Sinclair talks about Quantitative Easing, hyperinflation and the coming One World Currency of the IMF and a de facto financial One World Government.
The interview ends with Jim Sinclair concluding:
“Be prepared! This is a great civilization change. The most positive thing you can do is to recognize what is out there. The greatest contribution you can make to your family is to be prepared. So when all of this happens, you already have things in place: plans as of what you can do.
…We are not trying to scare anybody or trying to sell anything. We are simply saying, this is the hand writing on the wall. This is what’s most likely going to happen. In order to prepare you have to look at your financial and physical situation. You have to se weather or not this is a really great and significant shift in world history.
…The entire purpose of all this is preparation, because the truth will set us free.”
That last statement is at the core of why I have this blog. The world is changing. If you want to protect the purchasing power of your savings from the devaluation of the printing press - buy gold. If you want to stimulate your mind and stay a head of the game, keep reading, listening and watching. Stay tuned…
I got a question from a friend today and I thought I’d share it with you here on my blog:
Question: The value of the dollar has gone up recently and it seems to be holding steady. Why is that so?
My short answer is this:
First, the derivatives and equities markets are highly leveraged. This means that fund managers borrow cash, with stock or other assets as collateral, to buy even more stock.
The more they borrow the worse their credit rating gets and the more interest they have to pay on their loans, their “leverage”. How do they get a better credit rating? They call AIG and purchase a “credit default swap”, insurance from defaulting on loans, and they borrow even more…
Now, when the value of the stock invested fall, they get a “margin call” from the bank or institution that provided the borrowed cash. This means that the fund manager by contract is forced to sell.
The loan for the cash is taken in USD, but the stock bought with the cash is often purchased on a stock exchange outside the US in the currency of that market. When the stock is sold, due to the margin call, this sale is also done in the local currency. But since the loan is denominated in USD the fund manager first have to sell the local currency and buy back USD to pay back the loan to the issuing institution (paying back the loan is called “deleveraging”). This creates a temporary demand for USD which causes it to go up compared to the local currency.
Also, the second point to be made is that US government bonds are considered to be a “safe haven” in times of turmoil. This is because the USD is still the preferred reserve currency of central banks. This is about to change as inflation kicks in due to the expansion in the money supply and the mega borrowing from the Fed. When the deleveraging is over, and the central banks around the world realize that the USD is no longer a safe haven, the USD will drop like a stone – game over. The other currencies will then shortly after collapse as well. Only gold and silver will preserve your purchasing power at that point.
In late 2009/2010 the USD has been rising again. This is caused by the massive short on the Euro in connection to the crisis in Greece. The financial industry will hammer the Euro, Sterling and eventually the USD again. Remember, all fiat paper will go down to its true value Zero. It’s not how high gold will go, it’s how low paper will fall.
Wherever we look at the world economy today, we see a wall of risk…and potential financial catastrophe. We see a large number of virtually bankrupt major sovereign states (US, UK, Spain, Italy, Greece, Japan and many more) teetering atop a financial system that is bankrupt, but is temporarily kept alive with phony valuations and unlimited money printing. Increasingly, therefore, investors will want to exchange this funny money for gold.
Great interview with Marc Faber. FT.com really lets Faber talk in this 4-part interview giving him the chance to go into more depth than he is usually allowed to in F-TV interviews. Video on FT.com
Gold has reached a new high in terms of Euros. Or, to put it more correctly: The Euros purchasing power falls to a new record low in terms of gold. Remember, gold is not rising, fiat paper currencies are falling.
James Turk puts it this way:
Here’s my point. We live in a world of floating currencies that bob up-and-down against each other as a consequence of what central banks in each country might be doing at any given time. But all national currencies are sinking against gold.
Johnny Mellgren is a Swedish entrepreneur with a keen interest in macro economics and macro politics. This is his web site where he blogs about the economic collapse of our time, what to do about it and the economic future we create together. Contact Johnny Mellgren.
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I provide advice on investment portfolios for private and corporate clients. I also hold lectures in the history of money and the current economic collapse and how to protect your wealth in a time of transition.
