Economic Collapse

Agora Financial, LLC & The Daily Reckoning interview with Marc Faber:
http://bitcast-a.v1.iad1.bitgravity.com/agorafinancial/DR/faber/indexAF.html

Here is a great article by Bill Bonner on the state of debt of governments sent out today to Daily Reckoning subscribers.
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One of the best reads on Keynesianism vs The Austrian School of Economics, Slavery vs Liberty, Fiat paper vs Real Money, that I’ve come across in a long time: http://www.goldensextant.com/RKLSage.html#anchor1404
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Here is a great intervew with the legendary Marc Faber on interest rates, T-bills and currencies.

Rocky Vega of The Daily Reckoning took the effort to transcribe some quotes from a little video clip of Marc Faber, publisher of The Gloom, Boom, and Doom Report:

“There’s this huge debate between the inflationists and the deflationists… I belong more to the camp that looks at inflation and deflation from a different perspective. In the sense that in every system you can have some prices going down up and some prices going up. Say if you have a glut in consumer goods, then consumer goods prices can go up. But if you print money and have a zero interest rate, then home prices theoretically could go up, or stocks, or commodities. In any event your cash purchasing power goes down, that’s a symptom of deflation.”

“The worst investments in an inflationary period, when you print money and have large fiscal deficits are, of course, long term bonds and then cash. The best is to have foreign currency and commodities… also equities can protect you to some extent because they adjust upward as the currency goes down.”

“Regarding the dollar he says, “well, it will go to a value of exactly zero eventually.” When pressed for a timeline he explains, “Looking at Mr. Obama and his administration it should already be there, but I think it will take roughly ten years until people really realize that the fiscal position of the US is a complete disaster.”

My personal favorite from this clip:
On Bernanke: “He’s a money printer. He does that well.”

Since the Commercial Real Estate Mortgage bubble has begun to pop with the bankruptcy of Capmark that I wrote about yesterday I thought I’d give you some background to the events unfolding before our very eyes beginning now. These mortgages are given by lenders to companies building and operating commercial buildings such as malls, offices, hotels etc. With a declining economy these companies find it increasingly difficult to pay interest on their loans as income from rents keep falling. Consider these statistics from this month of October 2009 reported by facilitiesnet.com:

U.S. Office Vacancy Rates Continue Climb, But Are Slowing
“The office vacancy rate increased, by 60 basis points (bps), to 16.1 percent, at the end of the third quarter. Although this was the eighth consecutive quarter of rising vacancy rates, it was lower than the 80-bps increase in 2Q 2009 and was the slowest pace of increase since 4Q 2008.
The national industrial availability rate increased 50 bps to 13.5 percent in 3Q 2009. This result marks the 8th consecutive quarter of rising availability. The vast majority of industrial markets experienced rising availability, with 56 out of 61 major markets showing increases from the previous quarter.”

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Dear readers. This might be the biggest financial news to hit the Internet since Bear Stearns and Lehman Brothers. I, and many other experts with far better understanding than I have, such as Catherine Austin Fitts and Krassimir Petrov, have been saying this for years: Oil will not be priced in US dollars for long. When the move away from the Petrodollar happens, the US Empire will fall. From The Independent:
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Paul Tustain, founder & CEO of BullionVault.com just put out this talk in writing. He has been touring Asia talking to investment professionals in Tokyo, Singapore and Hong Kong. It’s a very well written talk and gives you a comprehensive overview of what might be coming our way. Download the 12 page PDF here. He talks about US consumers and what an increase in interest rates would entail for the tax burden:

The cost of a $20 trillion national debt costing 5% per annum in interest rates would
be $1 trillion, or $10,000 per annum in taxes per year for every American family, just to
pay the interest, i.e. before a single government service was delivered. That is the cost of
maintaining a $200,000 per family national debt.
The unavoidable conclusion is that, on-plan, the US cannot react appropriately to a
developing inflation problem. The G20 pronouncement that interest rates would stay
low for the foreseeable future was true. There is no alternative to permanently low
interest rates on these budget figures.

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Comments: This is a funny list of events to look for to pinpoint the next peak in the gold price. My favorite one is “Jim Sinclair is chosen ‘Man of the Year’ by Time magazine”. Sinclair accurately pinpointed the last top of the gold price in 1980 at 850 USD/Oz.
I tag this one as “financial humor” not only because its funny but because I believe there will never be a new top in the gold price. What I mean is that gold will regain its status as money and will not be priced in any amount of paper money. Or, another way of putting it, is that paper assets will be backed by gold once again. In a hyper-inflation environment gold cannot be bought with any amount of fiat paper. This is the difference between “price” and “purchasing power”. As the old saying goes: “Gold will buy you land, silver will buy you bread”. Thats a hint of the future I and many other see coming our way. Enjoy the read…
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Topics: What is money? Why is gold a smart investment?

I often get asked by non-economist friends and acquittances to explain the current economic crisis. I love those conversations because it helps me to keep my language free from the economic lingo with the complex acronyms that really helps nobody to understand what is going on around us. So, I thought I’d write articles that tries to encapsulate typical conversations I often get into in social settings. Almost always the conversation begins around the topic of how to invest in a smart way when the economy is as turbulent as it is. Since I’m a guy of the Austrian School of Economics, I think gold should be in everyones portfolio and this is often what makes people interested in what I have to say since it is not that common yet for people to advocate physical gold in your own possession. That is likely to change soon though since more and more people are moving into gold. So imagine a conversation something like this:
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