Excerpt from Sjugerud's Daily Wealth:
The Chinese government is now actively encouraging its citizens to buy gold and silver. (It use to be illegal for them to do so) They recently unveiled silver bullion for investing (you can see the video here). The premise is that gold was 50 times more expensive than silver in 2007... but is now 70 times more expensive.
The government is promoting silver bullion as an investment for regular citizens. And remember, a bunch of Chinese students laughed at U.S. Treasury Secretary Tim Geithner this year when he claimed the dollar was safe. The Chinese know the value of real assets... real money like gold and silver.
What does this mean for silver prices? It's impossible to say. But here's a little math that interests me. According to the Silver Institute, demand for silver in 2008 (for industry, jewelry, and investing) was 832 million ounces. At today's price, that's an $11.5 billion market... or about 1/3 the capital available in China alone.
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My Notes:
Remember also that 20% of the existing silver supply is owned by one man, Warren Buffet!
Note also that 95% of all silver mined is consumed by industrial processes and a brand new use for silver was just announced by a start up medical company that could consume a major portion of the industrial silver supply!
The last time there was a run on silver was 1971-1980. Inflation soared, real estate doubled during the decade. A house bought in 1971 for $20,000 (yes, that is what the median priced house sold for!) was worth $42,000 in 1980.
$20,000 in silver purchased in 1971 was worth $770,000 in 1980, an increased of over 3,000 percent!
Only those holding gold and silver will come out on top after the next, inevitable inflation!
Showing posts with label inflation. Show all posts
Showing posts with label inflation. Show all posts
Thursday, August 20, 2009
Wednesday, April 8, 2009
What Would Happen if Your Life Insurance Carrier Collapsed?
Some of the biggest, safest insurance companies in the US have lost over 50% of their capital in the last 2 years.
That is Not the bad news.
The bad news is that much of the remaining capital the companies report are of suspect valuation, since mortgage backed securities, especially commercial mortgage backed securities, CMBS, are about to implode.
Recently, a major office building in Boston was sold for 50% of its “value.” I doubt that the securities that mortgage supported reflected the true value of the property, do you? How much of it are owned by insurance companies? I don't know.
Or how about the impending blow up of one of the biggest Mall owners in the world, in the next 30 days, think that will have an impact on the assets of the insurance companies? (See post, The Next Big Bang)
Update! General Growth Properties, the company hinted at above, today, April 16, declared bankruptcy! The stock market gained over 100 Points!
With 10% of life insurers capital invested in commercial real estate, it is estimated that a decline in value of the real estate of 25% would wipe out 1/2 of the insurers nominal capital, including of course the hidden losses mentioned above.
This would crush their stock and may incite shut downs of many companies by their State Legislatures.
Estimates I am seeing are that about 30% of all commercial mortgages will fail!
Did you ever think what would happen if your life insurance company collapsed, went out of business?
On paper, you would be covered for $100,000 in life claims. On paper.
In reality, most life insurance policies are backed by a State Insurance Guarantee.
How many States are currently facing bankruptcy? About 40 out of the 50.
But even if your family did receive the full $100,000, out of the $500,000 you were paying for with the other $400,000 blowing away with the debris from the insurance company itself; along with your premiums you paid for it over the years, what then?
Take out $10,000 for your burial, $20,000 for final hospital, medical and other bills and your family will have between $30-$50,000 to ‘Maintain Their Lifestyle.”
Obviously, that ain’t gonna help!
What to do?
I am assuming you have a whole life policy with cash value.
Remember how much equity you had in your house back in 2006! How much do you have now?
The same with the cash equity in your insurance policy. I would borrow out as much of the cash value as possible, before it evaporates like your home equity and invest it in precious metals, gold and especially silver.
If you should die in the near future, your family’s insurance proceeds would be lessened by the amount of the loan, but would still total the face value, including your investment in precious metals.
We are predicting that the precious metals are going to go on the greatest Bull Run in the history of the world, once the economy is “saved” by devaluing our currency, as that is the only way the gigantic debts we owe can ever be repaid.
There is precedence for such a move. In the ancient world, Emperors would either decrease the size of their coins or in Rome, dilute the gold or silver with other, less valuable fillers, while proclaiming the coins were worth the same amount of money.
In the First Great Depression, Roosevelt devalued the dollar by raising the price of gold, to which the value of the dollar was pegged, from $20 Oz to $35 Oz. This meant that what it used to take $20 to buy now took $35 or 57% more.
Looked at another way, the supply of money was increased by 57%, enough to pay off the huge debts which of course remained fixed in value; albeit with cheaper dollars. This is China's big fear.
There is simply not enough money in the world to pay off the Trillions of dollars in debts and unfunded mandates like medicare and social security facing the US.
If the dollar is devalued by only 10%, it is estimated that gold will go to over $5,000 per ounce and silver over $100. It is also likely that the devaluation will have to be even greater, maybe 20% which would mean gold at $10,000 Oz. Of course we would no longer call it a "dollar." OMG! They are already with the "new dollar" called the Amero, after the Euro; but that is a different discussion.
For reasons discussed in other posts on this blog, I believe that silver will outperform gold, real estate, and the stock market when the economy is re-flated.
That is Not the bad news.
The bad news is that much of the remaining capital the companies report are of suspect valuation, since mortgage backed securities, especially commercial mortgage backed securities, CMBS, are about to implode.
Recently, a major office building in Boston was sold for 50% of its “value.” I doubt that the securities that mortgage supported reflected the true value of the property, do you? How much of it are owned by insurance companies? I don't know.
Or how about the impending blow up of one of the biggest Mall owners in the world, in the next 30 days, think that will have an impact on the assets of the insurance companies? (See post, The Next Big Bang)
Update! General Growth Properties, the company hinted at above, today, April 16, declared bankruptcy! The stock market gained over 100 Points!
With 10% of life insurers capital invested in commercial real estate, it is estimated that a decline in value of the real estate of 25% would wipe out 1/2 of the insurers nominal capital, including of course the hidden losses mentioned above.
This would crush their stock and may incite shut downs of many companies by their State Legislatures.
Estimates I am seeing are that about 30% of all commercial mortgages will fail!
Did you ever think what would happen if your life insurance company collapsed, went out of business?
On paper, you would be covered for $100,000 in life claims. On paper.
In reality, most life insurance policies are backed by a State Insurance Guarantee.
How many States are currently facing bankruptcy? About 40 out of the 50.
But even if your family did receive the full $100,000, out of the $500,000 you were paying for with the other $400,000 blowing away with the debris from the insurance company itself; along with your premiums you paid for it over the years, what then?
Take out $10,000 for your burial, $20,000 for final hospital, medical and other bills and your family will have between $30-$50,000 to ‘Maintain Their Lifestyle.”
Obviously, that ain’t gonna help!
What to do?
I am assuming you have a whole life policy with cash value.
Remember how much equity you had in your house back in 2006! How much do you have now?
The same with the cash equity in your insurance policy. I would borrow out as much of the cash value as possible, before it evaporates like your home equity and invest it in precious metals, gold and especially silver.
If you should die in the near future, your family’s insurance proceeds would be lessened by the amount of the loan, but would still total the face value, including your investment in precious metals.
We are predicting that the precious metals are going to go on the greatest Bull Run in the history of the world, once the economy is “saved” by devaluing our currency, as that is the only way the gigantic debts we owe can ever be repaid.
There is precedence for such a move. In the ancient world, Emperors would either decrease the size of their coins or in Rome, dilute the gold or silver with other, less valuable fillers, while proclaiming the coins were worth the same amount of money.
In the First Great Depression, Roosevelt devalued the dollar by raising the price of gold, to which the value of the dollar was pegged, from $20 Oz to $35 Oz. This meant that what it used to take $20 to buy now took $35 or 57% more.
Looked at another way, the supply of money was increased by 57%, enough to pay off the huge debts which of course remained fixed in value; albeit with cheaper dollars. This is China's big fear.
There is simply not enough money in the world to pay off the Trillions of dollars in debts and unfunded mandates like medicare and social security facing the US.
If the dollar is devalued by only 10%, it is estimated that gold will go to over $5,000 per ounce and silver over $100. It is also likely that the devaluation will have to be even greater, maybe 20% which would mean gold at $10,000 Oz. Of course we would no longer call it a "dollar." OMG! They are already with the "new dollar" called the Amero, after the Euro; but that is a different discussion.
For reasons discussed in other posts on this blog, I believe that silver will outperform gold, real estate, and the stock market when the economy is re-flated.
Sunday, March 22, 2009
Why Falling Gas Prices Are A Bad Thing!
You would think that falling prices, like for gasoline was a good thing.
However, remember the last time you were on a train stopped in the station next to another train or in a boat docked next to another docked boat and suddenly, one of the vehicles started moving? You were momentarily disoriented, because you could not figure out whether your train or boat was moving or the other one.
Prices are Not going down, the supply of money in the economy is going down!
This is called deflation and it is the one thing the Fed and other Central Banks fear even more than being found out that they are really private, profit making banks; well, almost.
Imagine if you lived on a little island with a small population and used a certain type of sea shells for money. The amount of shells stayed basically the same as the reef creature that produced them was pretty rare.
Lets say a gourd full of fresh water cost 7 shells, a new hut, 100 shells.
Now, a disease hit the reef killing all of the little money-shell creatures.
Since the supply of money was droped, the cost of everything had to fall. There was simply less money in the system.
Now the gourd of water cost only 3 shells, the new condo, er, hut only 50 shells and so on.
That is what is happening in this economy. The banks create money, then lend it into existence, you'll just have to take my word on this for now. I will give you a link to one of my resources at the end to explain it.
Now with the our banks unable to lend because they are not able to meet their capital reserve requirements, whose value has been devastated by the collapse in their value; money is draining from the economy, giving the impression that prices are falling. When All prices are falling, it is a deflation.
A prolonged climate of deflation is a central banker’s worst nightmare - it tends to stop consumers from spending as they anticipate prices falling even further.
Businesses cut prices even more to get people to buy, running up huge losses, closing, laying off workers, deeppening the problem the threat to the entire economy.
You see, about the only thing that grows in a deflation is debt. Falling wages and job losses, means that the debts are taking an ever growing percentage of the workers income, which is falling.
For example, your mortgage payment used to take 30% of your income, but now, since you had to switch jobs and make half as much money, the mortgage payment accounts for 60% of your income! Obviously this will lead to widespread defaults on mortgages, auto and credit card loans, further weakening the banks and driving the economy down further in a self-feeding death spiral.
Japan's Lost Decade was actually more than a decade, it is still lost, is a deflation that got out of hand. It is tough to undo.
If the Bush administration had taken steps to stop the housing bubble, we never would have had the collapse of housing and the concomitant collapse in mortgage backed securities. Secondly, the might have been able to mitigate its impact if they had stepped in and bought up the bad mortgages and refinanced them last summer.
Now the Obama administration, still in the thrall of the right wingers is still relying on half assed "voluntary" measures which will not fix housing and so the debacle continues.
Traditionally the cure for deflation is inflation!
Back on our little Island, an adventurous Islander sets out on a long journey to find a far off, fabled island whose reefs are teeming with those gorgeous little money-shell creatures!
After a harrowing voyage, whose details are beyond the scope of this little blog posting, he finds Nirvana!
He scoops up a canoe load of the precious shels and heads back home. With more money in the system, (inflation), prices seem to rise again, although we know of course it is the other train moving.
As long as there is not too much money added to the system (hear that Fed?) which would cause Hyperinflation, things will be OK.
It is finding that balance in the money supply that is the key.
What can you do to protect yourself and your family's finances in this chaos?
Get rid of all debt as soon as possible. Declare bankruptcy if you cannot pay. It is time to take matters in your own hands. Walk away from your home if it is seriously underwater, let the bank take it. You will not receive any substantial help from the government if you are not a Wall St bank.
Sell assets such as stocks and real estate as soon as possible, you can always buy them back much cheaper later if you follow this advice.
Buy as much gold and silver as you can. I recommend silver for reasons I spell out in other posts in this blog. Historically, gold rises in price to meet a falling Dow. In the First Great Depression in the 1930's gold and the Dow met at $36, in 1980, after huge stock crash of the 70's they met at $850. Now with the Dow crashing, (despite the recent Sucker's Rally) and gold probing the $1,000 oz mark it is likely that the two will meet again at say $3-$5,000. This is according to Peter Schiff, legendary investor and advisor.
See http://ChrisMartenson.com for a great explanation of how banks fool us into paying them interest on money that they create out of thin air! Ha, what a Hoot!
However, remember the last time you were on a train stopped in the station next to another train or in a boat docked next to another docked boat and suddenly, one of the vehicles started moving? You were momentarily disoriented, because you could not figure out whether your train or boat was moving or the other one.
Prices are Not going down, the supply of money in the economy is going down!
This is called deflation and it is the one thing the Fed and other Central Banks fear even more than being found out that they are really private, profit making banks; well, almost.
Imagine if you lived on a little island with a small population and used a certain type of sea shells for money. The amount of shells stayed basically the same as the reef creature that produced them was pretty rare.
Lets say a gourd full of fresh water cost 7 shells, a new hut, 100 shells.
Now, a disease hit the reef killing all of the little money-shell creatures.
Since the supply of money was droped, the cost of everything had to fall. There was simply less money in the system.
Now the gourd of water cost only 3 shells, the new condo, er, hut only 50 shells and so on.
That is what is happening in this economy. The banks create money, then lend it into existence, you'll just have to take my word on this for now. I will give you a link to one of my resources at the end to explain it.
Now with the our banks unable to lend because they are not able to meet their capital reserve requirements, whose value has been devastated by the collapse in their value; money is draining from the economy, giving the impression that prices are falling. When All prices are falling, it is a deflation.
A prolonged climate of deflation is a central banker’s worst nightmare - it tends to stop consumers from spending as they anticipate prices falling even further.
Businesses cut prices even more to get people to buy, running up huge losses, closing, laying off workers, deeppening the problem the threat to the entire economy.
You see, about the only thing that grows in a deflation is debt. Falling wages and job losses, means that the debts are taking an ever growing percentage of the workers income, which is falling.
For example, your mortgage payment used to take 30% of your income, but now, since you had to switch jobs and make half as much money, the mortgage payment accounts for 60% of your income! Obviously this will lead to widespread defaults on mortgages, auto and credit card loans, further weakening the banks and driving the economy down further in a self-feeding death spiral.
Japan's Lost Decade was actually more than a decade, it is still lost, is a deflation that got out of hand. It is tough to undo.
If the Bush administration had taken steps to stop the housing bubble, we never would have had the collapse of housing and the concomitant collapse in mortgage backed securities. Secondly, the might have been able to mitigate its impact if they had stepped in and bought up the bad mortgages and refinanced them last summer.
Now the Obama administration, still in the thrall of the right wingers is still relying on half assed "voluntary" measures which will not fix housing and so the debacle continues.
Traditionally the cure for deflation is inflation!
Back on our little Island, an adventurous Islander sets out on a long journey to find a far off, fabled island whose reefs are teeming with those gorgeous little money-shell creatures!
After a harrowing voyage, whose details are beyond the scope of this little blog posting, he finds Nirvana!
He scoops up a canoe load of the precious shels and heads back home. With more money in the system, (inflation), prices seem to rise again, although we know of course it is the other train moving.
As long as there is not too much money added to the system (hear that Fed?) which would cause Hyperinflation, things will be OK.
It is finding that balance in the money supply that is the key.
What can you do to protect yourself and your family's finances in this chaos?
Get rid of all debt as soon as possible. Declare bankruptcy if you cannot pay. It is time to take matters in your own hands. Walk away from your home if it is seriously underwater, let the bank take it. You will not receive any substantial help from the government if you are not a Wall St bank.
Sell assets such as stocks and real estate as soon as possible, you can always buy them back much cheaper later if you follow this advice.
Buy as much gold and silver as you can. I recommend silver for reasons I spell out in other posts in this blog. Historically, gold rises in price to meet a falling Dow. In the First Great Depression in the 1930's gold and the Dow met at $36, in 1980, after huge stock crash of the 70's they met at $850. Now with the Dow crashing, (despite the recent Sucker's Rally) and gold probing the $1,000 oz mark it is likely that the two will meet again at say $3-$5,000. This is according to Peter Schiff, legendary investor and advisor.
See http://ChrisMartenson.com for a great explanation of how banks fool us into paying them interest on money that they create out of thin air! Ha, what a Hoot!
Sunday, February 15, 2009
Congressman Chas Linbergh on Fed Creation of "Business Cycles"
Cong Chas Linbergh, (R-MN), father of the famous pilot, on “Business Cycles are Not Natural!”
To cause high prices, all the Federal Reserve Board has to do is to lower interest rates producing an increase in credit and rising asset prices. (Bubble, anyone?)
Then when businessmen are adjusted to the new economy, the Fed tightens interest rates, choking off prosperity in mid career.
It can cause mild swings in the economy (recessions) by making small adjustments in the interest rates or produce wild pendulum like swings (depressions) by making larger increases and decreases in the interest rate.
This is the strangest most dangerous power ever given to any special privileged class by any government ever.
The Federal Reserve Bank is private, conducts its business for the sole purpose of obtaining the most profits from the use of other people’s money.
They know in advance when they will create a panic and can profit greatly from that information. Inflation or deflation work equally well for them since they control the economy.
___________________________________________________________________________________
We will continue to be victimized by the Fed until we take back the power to issue and control our own money. So far, Cong Ron Paul is the only lawmaker courageous enough to call for this. Spread the word so that more people become aware that Greedy, Murderous International Bankers are victimizing the American people and demand an end to it!
Ti
To cause high prices, all the Federal Reserve Board has to do is to lower interest rates producing an increase in credit and rising asset prices. (Bubble, anyone?)
Then when businessmen are adjusted to the new economy, the Fed tightens interest rates, choking off prosperity in mid career.
It can cause mild swings in the economy (recessions) by making small adjustments in the interest rates or produce wild pendulum like swings (depressions) by making larger increases and decreases in the interest rate.
This is the strangest most dangerous power ever given to any special privileged class by any government ever.
The Federal Reserve Bank is private, conducts its business for the sole purpose of obtaining the most profits from the use of other people’s money.
They know in advance when they will create a panic and can profit greatly from that information. Inflation or deflation work equally well for them since they control the economy.
___________________________________________________________________________________
We will continue to be victimized by the Fed until we take back the power to issue and control our own money. So far, Cong Ron Paul is the only lawmaker courageous enough to call for this. Spread the word so that more people become aware that Greedy, Murderous International Bankers are victimizing the American people and demand an end to it!
Ti
Monday, February 2, 2009
Interest Rates to Skyrocket This Year!
The Only bright light for the real estate market is about to be smothered. Interest rates will skyrocket this year and next making it that much harder to qualify for mortgages, especially at today's high real estate prices.
The culprit is the US government. It must finance last year's record budget deficit of 1/2 Trillion dollars plus this years record busting deficit of about $2 Trillion, plus the stimulus package and all of the "quantitative easing" of the Federal Reserve, (which again, is as Federal as Federal Express!). And let's not forget the original $700 Billion Wall St Bailout, plus the approximately $2 Trillion additional which will be needed sometime in the next 18 months to bail out the banks again.
You can also expect to see various other multi Billion dollar bailouts; autos, states, pension funds, etc.
These humungus expenditures will be financed by the government saturating the market with Treasury Bonds. As more and more treasuries are issued, their prices will start to fall and when that happens their yield goes in the opposite direction, Up.
Also, 40% of our national debt is held by China and other foreign governments. When the prices of Treasuries and thus their investment in them starts declining, interest rates will have to be raised to incent them to buy more and to hold on to what they already have. Already the Chinese have dumped over 20 Billion in Fannie Mae and Freddie Mac Bonds during the last 5 months of the 2008. They have also halted investment in many American companies. They realize the US is going to flood the market with new Treasury issues and depress the prices.
Not only housing, but all businesses will be adversely affected with the rise in interest rates, including the stock market, which I believe will see Dow 5,000 before the year is out! Possibly as early as the release of the 4th Qtr, 2008 economic data, due out shortly.
It is important that you get out of debt, especially credit card debt, where they can increase your interest rates at will, as soon as possible. For information on debt relief, see our site: http:HowtoSolveYourMoneyProblems.Com
The culprit is the US government. It must finance last year's record budget deficit of 1/2 Trillion dollars plus this years record busting deficit of about $2 Trillion, plus the stimulus package and all of the "quantitative easing" of the Federal Reserve, (which again, is as Federal as Federal Express!). And let's not forget the original $700 Billion Wall St Bailout, plus the approximately $2 Trillion additional which will be needed sometime in the next 18 months to bail out the banks again.
You can also expect to see various other multi Billion dollar bailouts; autos, states, pension funds, etc.
These humungus expenditures will be financed by the government saturating the market with Treasury Bonds. As more and more treasuries are issued, their prices will start to fall and when that happens their yield goes in the opposite direction, Up.
Also, 40% of our national debt is held by China and other foreign governments. When the prices of Treasuries and thus their investment in them starts declining, interest rates will have to be raised to incent them to buy more and to hold on to what they already have. Already the Chinese have dumped over 20 Billion in Fannie Mae and Freddie Mac Bonds during the last 5 months of the 2008. They have also halted investment in many American companies. They realize the US is going to flood the market with new Treasury issues and depress the prices.
Not only housing, but all businesses will be adversely affected with the rise in interest rates, including the stock market, which I believe will see Dow 5,000 before the year is out! Possibly as early as the release of the 4th Qtr, 2008 economic data, due out shortly.
It is important that you get out of debt, especially credit card debt, where they can increase your interest rates at will, as soon as possible. For information on debt relief, see our site: http:HowtoSolveYourMoneyProblems.Com
Thursday, January 22, 2009
Latest Housing News
Foreclosures were up 81% in 2008 compared to 2007. There were over 3 Million foreclosures filed and over 861,000 people actually lost their homes. This number probably would have topped 1 million were it not for various foreclosure moratoria passed by several states. All they do is prolong the agony for most. Although some experts are calling for a bottom in 2010, at about a 33% drop in housing prices, there is no rational reason to believe this estimate. I think they say that because 2010 is a year away and probably no one will remember they said that at that time. To the contrary, the only bright spot in real estate has been the low interest rates and that bright spot will be extinquished by the end of this year with the bursting of the Treasury Bond Bubble.
The drying up of funds for real estate lending combined with new lending regulations that eliminate half of the people who could borrow before, in addition to the layoffs and the growing number of people "sending the keys to the bank" because they are under water, will combine to drive housing prices lower than anyone dared project, I believe.
Thinking of buying real estate? Put the money you were planning to use for the purchase (30% down required!), into silver. The overall economy is in a deflation now, with the prices of everything going down, including gold and silver. However, when the economy turns, inflation will be back with a vengeance. This situation is analagous to 1971 when the average home sold for $20,000. Let's see what would happen if Mary bought a home for $20,000 and John put $20,000 in silver. The economy was bad for several years in the 70'S but when the economy turned, prices shot up. Mary's home jumped to $40,000 in 1980, but John's $20,000 investment in silver was worth over $770,000 in 1980!
The stage is set for a repeat performance. When the economy turns, real estate appreciation will be hampered by the huge inventory of unsold homes, restrictive lending standards that will eliminate half of the usual buyers, and sky high interest rates. Silver will have no such retardants holding it back. As it is, silver is more scarce now than in 1980, since 95% of all silver mined is consumed by industrial uses. Also, Warren Buffet has recently bought 20% of All the silver in the World! Think he knows something that we don't?
The drying up of funds for real estate lending combined with new lending regulations that eliminate half of the people who could borrow before, in addition to the layoffs and the growing number of people "sending the keys to the bank" because they are under water, will combine to drive housing prices lower than anyone dared project, I believe.
Thinking of buying real estate? Put the money you were planning to use for the purchase (30% down required!), into silver. The overall economy is in a deflation now, with the prices of everything going down, including gold and silver. However, when the economy turns, inflation will be back with a vengeance. This situation is analagous to 1971 when the average home sold for $20,000. Let's see what would happen if Mary bought a home for $20,000 and John put $20,000 in silver. The economy was bad for several years in the 70'S but when the economy turned, prices shot up. Mary's home jumped to $40,000 in 1980, but John's $20,000 investment in silver was worth over $770,000 in 1980!
The stage is set for a repeat performance. When the economy turns, real estate appreciation will be hampered by the huge inventory of unsold homes, restrictive lending standards that will eliminate half of the usual buyers, and sky high interest rates. Silver will have no such retardants holding it back. As it is, silver is more scarce now than in 1980, since 95% of all silver mined is consumed by industrial uses. Also, Warren Buffet has recently bought 20% of All the silver in the World! Think he knows something that we don't?
Friday, December 5, 2008
Stag/Deflation?
This is a term coined by one my gurus, Dr Rubini, of NYU. What it describes is a nightmare scenario of a Stagnant economy caused by lack of demand. It is inherently different from its similar sounding cousin, StagFlation, which is a Stagnant economy caused by an intemperate increase in the money supply.
We are probably hip deep in StagDeflation right now. Unemployment is ballooning (533,000 lost jobs last month, November, 2008) because business is stagnant due to lack of demand. Imported cars are piling up on the docks because dealers will not accept them because no one is buying them.
High unemployment leads to less demand, which leads to more unemployment, which leads to less demand...You see the problem.
In deflation, the value of everything goes down due to lack of demand. Look at oil prices, which are poised to go below $40/barrel in the next few days. Look at gold and silver, down approx 30 and 40%, respectively in the last 6 months.
The value of the stock market has plummeted 40% this year as well.
Of course the banks and financial institutions are being battered by the drop in their capital due to the loss of value of their reserves, mainly their investments in real estate derivatives. This situation is forcing them to curtail lending which again hits demand, denying credit to businesses and individuals, depressing consumption further.
The only thing going up in this environment is the lowly dollar, since the supply i8s contracting, the very opposite of what happens in an inflation.
During this period of Stagflation and collapse of the banks and financial institutions, your best money strategy is to get out of your investments and into cash, since "things" are losing value and dollars are gaining value.
You will have a great opportunity to buy back your financial assets and real estate at the bottom of the StagDeflation cycle at pennies on the dollar!
However, with banks failing on a weekly basis and hundreds of them in danger of collapse, you want to keep your money in Treasury Only money market funds. FDIC insurance is for suckers! The fund does not begin to have anything approaching enough capital to guarantee anything like the amount of losses they are likely to face if even a fraction of the banks on the Bad list fail.
Treasury only money market funds can act as both business and personal checking accounts as well as money market funds. Your money cannot be safer. The government has Never defaulted on Treasuries, not in the Civil War, not in the First Depression, not in WW2.
Now, the answer to Deflation, is Inflation, printing money and pumping it into the economy, as the government is doing to recapitalize the banks as well as to jump start consumer spending. There is usually a lag of about a year between the growth of the money supply and the onset of inflationary prices.
As gold and silver prices will rocket upward as inflation sets in and their prices are depressed now, you will want to convert some of those Fat dollars to gold and silver now. You have about a year before their prices will start excellerating at which time the dollar will drop like a stone.
Recommendation: Sell deflating financial investments, real estate. Hoard cash, invest 20% in gold, silver: http://SilverSnowball.com/964
We are probably hip deep in StagDeflation right now. Unemployment is ballooning (533,000 lost jobs last month, November, 2008) because business is stagnant due to lack of demand. Imported cars are piling up on the docks because dealers will not accept them because no one is buying them.
High unemployment leads to less demand, which leads to more unemployment, which leads to less demand...You see the problem.
In deflation, the value of everything goes down due to lack of demand. Look at oil prices, which are poised to go below $40/barrel in the next few days. Look at gold and silver, down approx 30 and 40%, respectively in the last 6 months.
The value of the stock market has plummeted 40% this year as well.
Of course the banks and financial institutions are being battered by the drop in their capital due to the loss of value of their reserves, mainly their investments in real estate derivatives. This situation is forcing them to curtail lending which again hits demand, denying credit to businesses and individuals, depressing consumption further.
The only thing going up in this environment is the lowly dollar, since the supply i8s contracting, the very opposite of what happens in an inflation.
During this period of Stagflation and collapse of the banks and financial institutions, your best money strategy is to get out of your investments and into cash, since "things" are losing value and dollars are gaining value.
You will have a great opportunity to buy back your financial assets and real estate at the bottom of the StagDeflation cycle at pennies on the dollar!
However, with banks failing on a weekly basis and hundreds of them in danger of collapse, you want to keep your money in Treasury Only money market funds. FDIC insurance is for suckers! The fund does not begin to have anything approaching enough capital to guarantee anything like the amount of losses they are likely to face if even a fraction of the banks on the Bad list fail.
Treasury only money market funds can act as both business and personal checking accounts as well as money market funds. Your money cannot be safer. The government has Never defaulted on Treasuries, not in the Civil War, not in the First Depression, not in WW2.
Now, the answer to Deflation, is Inflation, printing money and pumping it into the economy, as the government is doing to recapitalize the banks as well as to jump start consumer spending. There is usually a lag of about a year between the growth of the money supply and the onset of inflationary prices.
As gold and silver prices will rocket upward as inflation sets in and their prices are depressed now, you will want to convert some of those Fat dollars to gold and silver now. You have about a year before their prices will start excellerating at which time the dollar will drop like a stone.
Recommendation: Sell deflating financial investments, real estate. Hoard cash, invest 20% in gold, silver: http://SilverSnowball.com/964
Wednesday, November 19, 2008
Why Silver?
The Economic Crisis Signals That Now is the Time to Buy Gold and Silver!
A Must Read Special Report by Personal Financial Consultant Bill Young
A Must Read Special Report by Personal Financial Consultant Bill Young
The astronomical costs of the Wall St. Bailout can only be met by massive borrowing and unlimited printing of more money by the Federal Reserve Bank.
At this moment, the total costs of “saving” the economy, including the bailout of Fannie and Freddie, AIG and the latest $850 Billion Wall St package, (Senate version) is over $1.29 Trillion and counting!
There are literally Trillions more in damaged assets that may have to be rescued by the Federal Government. Fannie Mae and Freddie Mack, the failed mortgage giants rescued by the Feds have another $1.5 Trillion dollars in shaky mortgages that may need bailing out.
There will be more, starting with the FDIC, the Federal Deposit Insurance Corporation, whose job it is to insure depositors bank accounts. It was rumored the FDIC already needed an infusion of $150 Billion more just to be able to back stop the total of insured bank deposits up to $100,000.
They have now raised the insured ceiling from $100,000 per depositor to $250,000. Does this mean they will now need an extra $225 Billion to insure the higher limits?
The only way debts of this magnitude have been handled throughout history is by starting a war against the creditor or to devalue the currency.
Although some may savor the vision of a Main St vs Wall St Civil War, the more likely choice is a massive devaluation of the currency.
Devaluation can be accomplished by Executive Order as President Roosevelt did in 1934. He devalued the dollar by lowering its value against gold, raising the price of gold from 20 dollars per ounce to 35 dollars per ounce.
The “modern,” stealth way of devaluing the money is simply to print more of it! Already, some measures of money supply, including M-3, the ultimate source of devaluation of a currency and inflation in the economy; show money growing at an annual rate of more than 14%.
And in the last two weeks, M3 has exploded! It is now running at an annualized growth rate of over 200%, something usually seen during war time or in 3rd world country economies!
A realistic illustration of dollar devaluation is the cost of a Hot Dog at Nathan’s of Coney Island.
In the 1950’s, their flagship Hot Dog cost .10 each. Now they cost $4!
In other words, today’s $4 now buys you .10 worth of value, in 1950 dollars.
More recently, in 1971, you could buy an ounce of silver for $1. Now it takes about $12 to buy an ounce of raw silver. So, it takes $12 today to buy what you could have bought for $1 in 1971.
This is normally looked at as price inflation, but you can easily see that it is also devaluation of the dollar.
Don’t expect to find this information in any official government report. Most of the statistics coming out of Washington these days are lies, including whether we are in a recession, we are; the Official Unemployment Rate and , the Official rate of Inflation which does not count the cost of food or fuel!
In fact, the government stopped reporting M3 money growth a few years ago! They do not want you to know the shocking truth of how quickly your money is becoming worthless.
M3 is now maintained privately, by think tanks or non-profit institutions.
That kind of monetary growth can be wildly inflationary.
How do you protect the value of your savings, your money and even position yourself to profit from the collapse of the dollar?
The best way is to buy hard assets whose value inflates as the economy inflates, as the value of the dollar deflates, especially gold and silver.
See what Robert Kiyosaki the author of Rich Dad, Poor Dad has to say about this in the video, below.
Although many people recommend gold, silver has some intriguing facts working for it. Right now, in the short run, there is an historic imbalance between the price of gold and silver. Historically, it took 15 oz silver to buy 1 ounce of gold, but the price of gold has gone up so quickly, silver has fallen behind. It now takes 50 oz of silver to buy 1 ounce of gold! Silver will rise rapidly in price to restore the historical price relationship to gold. The other factor is a permanent and important consideration. Silver is both hoarded and consumed!
Silver is used in the production of products too numerous to report here. It even has medicinal qualities, such as being anti bacterial that creats demand for silver in a growing number of medicinal products. Electronic devices are also big users of silver. This means that more has to be mined every year to supply this demand. Right now, there is a 10 year supply of silver in the world, period.
More will be mined, of course, but as demand increases because of the explosive growth of the Chinese and Indian economies, the upward price pressures will increase over time, althought there will be ups and downs as supply and demand ebb and flow.
One of the gold dealers I mentioned earlier, Mr. Heller, says he thinks silver has even more upside potential than gold. He’s not alone. And the investor rush into silver has just been astonishing , including Warren Buffet, (yes, The Warren Buffet), he has bought up 1/5 (20%) of the world’s supply of silver! Think he knows something that we don’t?
“The shortage of physical silver is also severe. Silver coins used to trade very near the spot price of silver. But no longer. Now, a silver coin can carry a premium of $1 to $3 per ounce.” Weiss Research
Another factor is that the lower price of silver means that it is accessible to more people. More regular, middle class people can afford to buy silver at $12/ounce than can buy gold at $900, ounce.
Watch what Robert Kiyosaki has to say about Silver and Gold:
http://www.youtube.com/watch?v=FOKn7tiUMyc
Whichever you decide, most experts advise you to put approximately 20% of your portfolio in either gold or silver.
Update! The Financial Crisis is Now Morphing Into a Global Recession And Perhaps Deflation!
The global financial panic has caused a “Flight to Quality.”
Spooked by the collapse of every investment bank on Wall st. as well as the 2 largest bank failures in US history, everyone is dumping their stocks, even the supposedly, “Sophisticated Investors” in hedge funds.
As a result, mutual funds and hedge funds have had to sell everything, even gold and gold stocks to answer margin calls or to handle the redemption requests from investors who’s requests to get out have been stalled by the “small print” in fund prospectuses.
Watch the last quarter of this year. November 14, is the cut off date for investors wanting to get their money out of hedge funds. This forced, firesale selling will devastate the stock market. I predict the Dow will dip under 6,000 in the resulting carnage!
It is estimated that over 300 hedge funds will be forced to close as a result of these withdrawals.
The “Real” economy, where goods and services are bought and sold, is now unraveling under the double blows of tightened credit and falling demand.
“We’re entering a really fierce global recession,” Mr. Rogoff, a Harvard Professor said. “A significant financial crisis has been allowed to morph into a full-fledged global panic. It’s a very dangerous situation. The danger is that instead of having a few bad years, we’ll have another lost decade, like Japan.”
Consumer demand is off, not surprisingly, as home prices plummet and now stocks too and because of that, prices are falling. The name for that unusual phenomenon is Deflation, a very nasty word to economists.
It portends a downward spiral of weak demand forcing prices down, which leads to business slowdowns and layoffs which lead to even lower demand, causing even more deflation and so on. To put it simply, Defaults lead to Deflation, Deflation leads to Defaults!
This can be a tough situation to combat. The answer to deflation is inflation, but the Fed has used up most of its Atomic firepower; lower interest rates. Its benchmark, Feds Funds rate, is now down to 1%, from a high of 5.25% just last year ago.
The poster child for deflation, besides our own Great Depression, is Japan’s “Lost Decade” when deflation ravaged their country for 10 years! Their stock market lost 60%, their real estate market, 70%! Even reducing their interest rate to zero for several years did not help, there simply was no need for credit, since so many the businesses were shut down.
Fed Chairman, Ben Bernanke is a student of the Great Depression as well as Japan’s Lost Decade. His prescription will be to flood the market with dollars until the vehicle begins to move again, unleashing wild inflation.
Although, the interest rate spigot will soon be tapped out, he can still issue US Treasury Bonds, the sale of which will generate a Tsunami of Dollars!
The Canary in the Mine!
Just as miners used a caged canary down in the mines to warn of impending danger, you should keep an eye on the yields of the US Treasury Bonds!
“Signs of strain in the US Treasury market are already there, despite the current low yields. (Cost of “default insurance” on Treasuries has increased by 2500% in a year!)The culprit is the huge and rising government debt. Add up all the guarantees and the bailout loans and you have the US private debt to GDP ratio at levels never seen before – close to 300%, according to Steve Keen, the Australian economist – the question is surely whether the whole debt pyramid can avoid crashing down via a violent and uncontrollable chain of defaults, dragging the government bond market down with it!”
How can investors take cover if concerns over government solvency spread? There are tactics that can help, such as hedges and bond futures, but if push came to shove:
A US debt default (on Treasury Bonds) would have cataclysmic consequences for the financial economy, bankrupting the entire system.
"So the ultimate safe haven is in the precious metals, which would rapidly regain monetary status in such a scenario.” Paul Amery, European Editor of IndexUniverse
Update, 11-18-08
Today we turn our attention to commodities including gold and silver, which have been badly battered by the global financial crisis, deleveraging and a worsening economic outlook, with commodity indices having lost 50% of their value since the July peak!
After a brief rally in autumn, gold now trades between $700-750, about 28% below the March peak. Slowing inflation (growing deflation)and the U.S. dollar’s uptrend sapped support for gold as a store of value despite the possible inflationary consequences of massive fiscal expansion and monetary policy easing to counteract the economic and financial effects of the global credit crisis. Though gold tends to be less sensitive to a global economic slowdown than industrial metals or energy commodities, deflation is a clear and present danger for gold prices. Even physical demand for gold – mostly for decorative use – looks likely to weaken alongside consumer confidence.
The coming global recession, a strong dollar and forced fund liquidations in the medium-term will keep gold and silver prices under pressure until late 2009.
RGB Monitor, 11-19-08
“Silver has been particularly hard hit by the drastic drop in demand in the last few months because of its use in so many industrial processes, which have been in sharp decline, falling about 40% from July to October, 2008”
“I agree that the U.S. government can't create trillions of dollars out of thin air without making all the existing dollars worth less. That is the definition of inflation. I think the safest place to protect your cash is in precious metals…” Matt Badiali, The Commodity Investor
Bottom line, gold and silver prices are being beaten down by the worldwide slump in demand occasioned by the growing recession. But since the cure for deflation is inflation, the Decline in the value of the dollar, I am recommending the purchase of gold and silver aggressively to take advantage of the lull before the storm!
The Declining Dollar
The purchasing power of the U.S. dollar has steadily declined over time and is expected to continue to do so. Precious metals can often provide a “hedge against inflation” capability. For example, between 1971 and 1981, the U.S. dollar lost more than half its value, while silver prices rose nearly five times.
Options for investing in silver:
Exchange - Traded Funds (ETFs)
Advantages:
For investors who seek exposure to the physical silver market, but have no desire to possess the metal or pay direct insurance, assay, and storage costs, ETFs offer an alternative. They have major exchange listings and trade like equities. Investors can buy shares in a trust that owns the silver bullion.
Disadvantages:
Because the ETFs are created to reflect the price of the silver, the market price can be as unpredictable as the price of silver on any given trading day.
Silver Bullion Bars of Approved Refiners
Advantages:
Usually the least expensive...Convertible into cash...Internationally negotiable...Price is widely quoted.
Disadvantages:
Must be stored securely...Possible need for assay at time of sale...Yields no interest.
Silver Mining Stocks
Advantages:
Offers capital appreciation opportunities...Dependent on the company's management and operating strength...May yield a dividend.
Disadvantages:
May require greater investment than small physical bullion purchases...Requires knowledge of equity market.
Silver Mutual Funds
Advantages:
Many mutual funds offer investment programs in silver and precious metals...Diversified holdings among dozens of companies.
Disadvantages:
May require greater investment than small physical bullion purchases...Requires knowledge of equity market.
Silver Bullion Coins
Advantages:
Relatively inexpensive, some less than US$10.00...Small and easy to store...Instant convertibility into cash...Easy to transport...Internationally negotiable...Prices quoted widely.
Disadvantages:
Must be stored securely...Yields no interest...Premium over bullion bar prices. They will cost more and sell for more than bars.
Silver Medallions
Advantages:
Prices can range from least expensive to most expensive...Small and easy to store...Easy to transport.
Disadvantages:
Similar to coins, but not always easily convertible to cash unless they bear the mark of a reputable refiner.
Silver Certificates or Storage Accounts
Advantages:
High liquidity...But at competitive prices...No storage risk...No sales tax...Prices widely quoted...Invest by dollar amount.
Disadvantages:
Several days' delay in delivery of silver...Silver not in physical possession of owner.
Silver Accumulation Plans
Advantages:
Invest as little as $100...Discounted commission rates...Highly liquid...No sales tax...Offers dollar cost averaging...No storage fees.
Disadvantages:
Silver not in physical possession of owner.
Silver Futures Contracts
Advantages:
Speculative appeal...Leverage reduces capital tie-up...Liquidity...Contracts widely quoted...No storage risk.
Disadvantages:
Many trading limitations...High risk factors...Unlimited loss potential...Requires market expertise.
Silver Options
Advantages:
Speculative appeal...Leverage reduces capital tie-up...No storage risk...clearly defined risk.
Disadvantages:
Trading limitations...Highest risk...Less negotiable and less liquid...Investor must be willing to sustain the loss of their entire investment in a commodity option...High degree of knowledge required.
So you see, silver coins are the easiest and least complicated ways to invest in silver. The least expensive silver coins you can buy are bullion coins. These have no monetary or collectible value, so you are only paying for the silver content with no additional premiums.
Click here to learn how you can get the Government to buy you 1 oz of silver for every two ounces you buy! http://SilverGoldIRA.Com
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