The Wealth Code - How the Rich Stay Rich in Good Times and Bad
2010 Finalist: Independent Book Awards - Personal Finance
2010 Finalist: Independent Book Awards - Personal Finance
Double Dip has Begun. Part 2 06/04/2010
With the latest unemployment number being 431,000 jobs created, of which 411,000 were census workers. You think everyone would be happy. That is still job creation. Why the sad face on the stock markets? Because within the 431,000 jobs was another group of people. The birth/death folks who added over 150,000 jobs to the number also. Who are these birth/death folks you ask? The are a product of the imagination of the BLS (Bureau of Labor Statistics) who make the assumption that more businesses are being started in a recession that companies going out of business (Completely backwards in reality) but the BLS doesn't need reality. Reality is whatever they say it is and they have a job which is to paint a economic picture much brighter than the "Reality". Why the markets have started their decent back to lows? A wise man said, "The hardest thing to do is pay attention to the obvious!" Unemployment getting worse; 6 months of housing FALLING in prices; GDP coming in lower than estimates; Manufacturing Lower; Consumer Spending Lower; Lending still non-existant; Housing purchases bottom of the barrel; Housing inventory and huge levels not seen since early 1980's glut; Europe blowing up; What else do you need to realize the lie of 2009. The eye of the storm as I've called it for the last 3 years and the fantasy is coming to an abrupt end. They will call every result that comes in negatively as "Unexpected". For those reading and following this site, you all have been expecting these results and hopefully took my advice and got out of the markets back in between January and April 2010 and are now sitting on the sidelines watching the train wreck. Pull out your popcorn, the train wreck is getting worse! During the week of April 26th. The US Governement issued $129 Billion of debt. Please Read 2/2/10 post on M3. Re-Read it if you did in the past. Long story short. As I reported in early February, the Double Dip has begun and is accelerating faster than ever. Each time M3 (Blue Line) goes negative, the economy goes into recession or a double dip recession intensifies. That is what we are experiencing. Past negative readings: 1969, 1973, 1980, 1991 and we went negative in December 2009. The problem this time, our economy is already on the ropes and the second wave of the economic huricane has landed!  What does this mean over all. GDP will contract and the government will be forced to borrow a lot more money than expected. Current estimate is $1.6Trillion deficit. I believe we'll see upwards of a $2+ Trillion deficit which would put us at a deficit to GDP ratio worse than Greece. Like I've mentioned in the past. Europe is the pre-show to the real deal. The implossion of the US economy and eventually its debt and currency. Imagine a world where the US can not borrow and must live within its means. The government borrows half of the projected budget of $3.8 Trillion. That would be cut in half and thus since government spending is 40% of the GDP, GDP will contract by at least 20% or more. Boy, the good old days of the Great Depression seem like a dream today compared to what is going to happen. The major difference between then and now is the US citizen had savings then. They atleast could ride out a lot of the misery. Todays savings rates are the worst ever. Most people can't go a week, much less a month without a paycheck. IE: 33% of people making over $100k per year, can't go a month without starting to miss bills. Are you ready for this? Are your investments? Buffett's selling his soul! 05/02/2010
For all the good one does in ones life. It is still amazing to me how fast a little bit of money on the line will change ones perspective/ethics. Now, $5 Billion is not a "little" bit of money, but for Warren Buffett, it appears to be the amount that takes him to sell his soul. He came out yesterday at the Berkshire Hathaway shareholders meeting and formally announced his 100% support for Goldman Sachs and stated they did nothing wrong on the Abacas Trades. What are the Abacas Trades? 23 portfolio's of mortgage backed securities or CDO's as they are popularly known which were put together in 2007 and sold to unsuspecting pensions/counties/cities so forth as AAA backed bonds. The only problem, these were not AAA bonds but toxic sludge hand picked by a hedge fund, Paulson and Co., and designed to fail from the onset. Long story short: Imagine a casino (Goldman Sachs), you show up and place a wager on the roulette wheel. Black or Red. Basically a 48% chance of being right. You understand the odds and are willing to play this game of chance. One problem with our "game of chance". Unknowingly to you, the day before you showed up, another gambler, a big fish (Paulson), walked into the casino and asked to create a NEW roulette wheel which they wanted to play on. Only this roulette wheel was 97% Black and only 3% red. The casino happy to oblige the big fish gambler created the NEW game of chance and the big fish proceeded to play their rigged game betting on the 97% odds black. You, the unsuspecting gambler play this roulette wheel which had a mask placed over it hidding the real odds of the wheel. You are told "RED" is the best choice by the casino as an inside scoop. For all intents and purposes, this is the heart of the fraud Goldman allowed to take place milking billions in losses to unsuspecting gamblers (Pensions, counties, hedgefunds...) who believed they were playing a fair game and Warren Buffett is all to happy to say they did nothing wrong. Before the fraud case came out, Buffett had a $3 Billion profit in his Goldman Sachs investments within Berkshire Hathaway. Today his is only up $1.3 billion. If Karma has its way, hopefully he'll be down $5 billion before you know it. Warren, are your feet beginning to get hot..... 8 fun facts about the Federal Reserve. 04/15/2010
However, the end result of current policies is that the Fed will be powerless to stop the next economic crisis. Assuming no outside shocks (another big war, nuclear attack, etc.), the dollar will over time lose its status as the reserve currency, and we will experience a currency crisis followed by rampant inflation at some point down the road. Back in 1910, Jekyll Island was completely privately owned by a small group of millionaires from New York. We're talking about people such as J. P. Morgan, William Rockefeller and their associates. This was a social club and it was called "The Jekyll Island Club." The island has since been purchased by the state of Georgia, converted into a state park and the clubhouse has been restored and you can visit it. I think you'd be very impressed by it. As you walk through the downstairs corridors you'll come to a door and on the door there is a brass plaque and it says: "In this room the Federal Reserve System was created." The year was 1910, that was three years before the Federal Reserve Act was finally passed into law. It was November of that year when Senator Nelson Aldrich sent his private railroad car to the railroad station in New Jersey and there it was in readiness for the arrival of himself and six other men who were told to come under conditions of great secrecy. For quite a few years thereafter these men denied that any such meeting took place. It wasn't until after the Federal Reserve System was firmly established that they then began to talk openly about their journey and what they accomplished. Several of them wrote books on the topic, one of them wrote a magazine article and they gave interviews to newspaper reporters so now it's possible to go into the public record and document quite clearly and in detail what happened there. Who were these seven men? The first one I have already mentioned, Senator Nelson Aldrich was the Republican whip in the Senate, he was the chairman of the National Monetary Commission which was the special committee of Congress created for the purpose of making a recommendation to Congress for proposed legislation to reform banking. The second important person there was Abraham Andrew who was Assistant Secretary of the Treasury. He later became a Congressman and he was very important in banking circles. Frank Vanderlip was there. He was the President of the National City Bank of New York which was the largest of all of the banks in America representing the financial interests of William Rockefeller and the international investment firm of Kuhn, Loeb & Company. Henry Davison was there, the senior partner of the J. P. Morgan Company. Charles Norton was there; he was the President of the First National Bank of New York which was another one of the giants. Benjamin Strong was at the meeting; he was the head of J. P. Morgan's Banker's Trust Company and Benjamin Strong three years later would become the first head of the Federal Reserve System. Finally, there was Paul Warburg who was probably the most important at the meeting because of his knowledge of banking as it was practiced in Europe. He was a partner in Kuhn, Loeb & Company and was a representative of the Rothschild banking dynasty in England and France where he maintained very close working relationships throughout his entire career with his brother, Max Warburg, who was the head of the Warburg banking consortium in Germany and the Netherlands. Paul Warburg was one of the wealthiest men in the world. In fact, those of you who are Little Orphan Annie fans will remember Daddy Warbucks. Daddy Warbucks was the characterization of Paul Warburg and everyone at the time was well aware of that fact. These were the seven men aboard that railroad car who were at Jekyll Island. Amazing as it may seem, they represented approximately 1/4 of the wealth of the entire world. These are the men that sat around the table and created the Federal Reserve System. Consider the composition of this group. Here we had the Morgans, the Rockefellers, Kuhn, Loeb & Company, the Rothschilds and the Warburgs. Anything strange about that mixture? These were competitors. These were the major competitorsin the field of investment and banking in those days; these were the giants. What is the word “cartel”. It is a group of independently owned businesses which come together for the purpose of reducing or eliminating competition between themselves to enhance their profit margin or to secure their positions in the market. They do this by various means one of which is price fixing--no competition on price. This is just as true with a banking cartel as it is with any other industry. We come to the conclusion when we analyze the nature of the Federal Reserve System how it operates, read the Federal Reserve Act, place it against the context of the historical background and we come smack to the realization that the Federal Reserve System although it parades around looking as though it's a government operation of some kind, is merely a cartel of banks right under our noses and it is protected by law. Let's take a look at it and see how they create money. The thing I want to warn you about is don't try and make sense out of this because it can't be done; this does not make sense and you'll blow a fuse trying to make it make sense. Just remember that it is a scam and if you keep that fact in mind then you'll have no trouble comprehending what's going on. The Federal Reserve and the Government form a big partnership. Here's how it works. It starts with the government side of the partnership, it starts in Congress which is spending money like crazy. It spends far more money than it takes in. It is spending way beyond its income. How can it do that? Basically this is what happens. Let's say Congress needs an extra billion dollars today so it goes to the treasury and says "we want a billion dollars" and the treasury official says "you guys have got to be kidding, we don't have any money here, you spent it all a long time ago, everything that we've taken in taxes you fellows have spent by March." Congress says "we thought that was true but we thought we'd stop by just in case somebody sent some more in." They get together and they go down the street and they get the idea that we'll borrow the money. So they stop at the printing office and they don't print money at the printing office, they print certificates and they're very fancy things with borders on the edge with an eagle across the top and a seal at the bottom and it says "US Government Bond" or "Note" or "Bill" depending on the length of the maturity of it. If you hold it up to the light it really says "IOU" because that's what it is. They print these things up and it looks very impressive and then they offer them to the private sector; they're hoping that people will come up and loan money to the federal government and a lot of people do and are anxious to lend money to their government. Why? Because they've been told by their investment advisors that that's the most sound investment that you can make. Why? We've all heard that these loans are backed by the full faith and credit of the US government. They're not quite sure what that means but it sure sounds good. I'd like to explain for you who are in doubt what that means. The full faith and credit of the US government means that the government solemnly promises to pay back that loan plus interest if it has to take everything you and I have in the form of taxes in order to do it, it's going to do it. It will take everything we have if necessary to hold its pledge. People don't realize that they're putting themselves on the line, they're going to get their own money back minus a substantial handling fee. Plenty of money is loaned to the government but never enough. Congress needs more money than that. They say not to worry. They go further down the street to the Federal Reserve building. The Fed has been waiting for them, that's one of the reasons it was created. By the time they get inside the Federal Reserve building the officer of the Fed is opening his desk drawer. He knows they're going to be there and he's ready and he pulls out his checkbook and he writes a check to the US Treasury for one billion dollars or whatever the amount is that they need. He signs the check and gives it to the treasury official. We need to stop here for a minute and ask a question. Where did they get a billion dollars to give to the treasury? who put that money into the account at the Federal Reserve System? The amazing answer is there is no money in the account at the Federal Reserve System. In fact, technically, there isn't even an account, there is only a checkbook. That's all. That billion dollars springs into being at precisely the instant the officer signs that check and that is called "monetizing the debt," that's the phrase they throw at you. But what about the banking side? This is where it really gets interesting. Let's go back to that billion dollar check. The treasury official deposits the check into the government's checking account and all of a sudden the computers start to click and it shows that the government has a billion dollar deposit meaning that it can now write a billion dollars in checks against that deposit which it starts to do real fast. This newly created money goes out into the economy and it dilutes down the value of the dollars that were already out there. It's like pouring water into a pot of soup, it dilutes the soup. So by throwing more and more money into the economic soup out there the money gets weaker and weaker and weaker and we have the phenomenon called inflation which is the appearance of rising prices. I emphasis the word "appearance" because in reality prices are not rising at all. What we're seeing is that the value of the dollar is going down, that's the real side of the equation. Since the money is created out of nothing from the Federal Reserve, it cost nothing to make it, but it wants something from you. It wants you to sign on the dotted line and pledge your house, your car, your inventory, your assets so that in case for any reason you cannot continue to make your payments they get your marbles, they get all of your assets. That’s the benefit to the large banks is a confiscation of assets over time for no money down. Let's summarize. What is the benefit to the members of the partnership? The government benefits because it is able to tax the American people any amount it wishes through a process which the people do not understand called inflation. They don't realize they're being taxed which makes it real handy when you're going for re-election. On the banking side they're able to earn perpetual interest on nothing. I emphasis the word "perpetual" because remember when the loan is paid back it's turned around and loaned out to somebody else. Once that money is created the object of the bank is to stay loaned up" as they say. In reality the banks can never stay 100% loaned up and that ratio varies a lot but the objective is to stay loaned up to whatever extent is possible. Generally speaking once this money is created in the loan process it is out there in the economy forever, perpetually earning interest for one of the members of the banking cartel which created that money. There you have in a condensed form a crash course on the Federal Reserve System and I can assure you that you know more about the Federal Reserve than you would probably if you enrolled in a four year course in economics because they don't teach this reality in school. The biggest U.S. commercial banks will take their fight against disclosure of Federal Reserve lending in 2008 to the Supreme Court if necessary, the top lawyer for an industry-owned group said. Continued legal appeals will delay or block the first public look at details of the central bank’s $2 trillion in emergency lending during the 2008 financial crisis. The Clearing House Association LLC, a group that includes Bank of America Corp. and JPMorgan Chase & Co., joined the Fed in defense of a lawsuit brought by Bloomberg LP, the parent company of Bloomberg News, seeking release of records related to four Fed lending programs. The U.S. Court of Appeals in Manhattan ruled March 19 that the central bank must release the documents. A three-judge panel of the appellate court rejected the Fed’s argument that disclosure would stigmatize borrowers and discourage banks from seeking emergency help. “Our member banks are very concerned about real-time disclosure of information that could cause a run on the banks,” said Paul Saltzman, the group’s general counsel, in an interview yesterday. Bloomberg sued in November 2008 under the U.S. Freedom of Information Act, after the Fed denied access to records of four Fed lending programs and a loan the central bank made in connection with New York-based JPMorgan Chase’s acquisition of Bear Stearns Cos. in March 2008. The Fed Board of Governors’ “refusal to disclose the names of borrowers renders public oversight of its actions impossible -- it prevents any assessment of the effectiveness of the Board’s actions and conceals any collusion, corruption, fraud or abuse that might have occurred,” the news organizations said in a letter to the appeals panel. Of course the banks don’t want you to know how bad of shape they really are. The quote from Paul Saltzman says it best. To repeat: “Our member banks are very concerned about real-time disclosure of information that could cause a run on the banks” Here is the council of the banks stating perfectly clear, if the people actually knew what was going on, they would have pulled all their money out. Basically, keep the people ignorant and let us do our corrupt and greedy deeds. Pulled from Paul Farrel, CBS Marketwatch 4-12-10 The Propaganda Machine: In 2007-2008 BusinessWeek, Kiplinger's and USA Today reported the false predictions made before the 2008 subprime credit meltdown which spread rapidly across America and the world:
Taken from the 2003 book "Bull! 144 Statements from the Market's Fallen Prophets," published during the 30-month recession, when Wall Street was losing $8 trillion in market cap. Here's a few of America's opinion leaders spreading their misleading happy talk as the market slowly disintegrated for 30 months from 11,722 to 7,286 in October 2002. Yet they prattled on. Unfortunately, many of these fallen prophets are still misleading investors as members of the new Propaganda Machine:
The Propaganda Machine in the 1929 crash and 1930's depression Let's go back to the crash of '29 and the first Great Depression. So listen closely to all the happy-talking -- past, present and future -- and plan accordingly because 2012 is the new 1929:
The Canary in the Coal Mine. 03/26/2010
Yields on 10-year notes rose 2 basis points, or 0.02%, to 3.90%. Last June, they peaked at 3.94%, which was the highest since October 2008, when the credit crisis really took off and sent yields to all-time lows. From Bloomberg 3-26-10 Former Federal Reserve Chairman Alan Greenspan said the recent rise in Treasury yields represents a “canary in the mine” that may signal further gains in interest rates. Higher yields reflect investor concerns over “this huge overhang of federal debt which we have never seen before,” Greenspan said in an interview today on Bloomberg Television. “I’m very much concerned about the fiscal situation,” said Greenspan, 84, who headed the central bank from 1987 to 2006. An increase in long-term interest rates “will make the housing recovery very difficult to implement and put a dampening on capital investment as well.” Rising rates cause companies to pay more to borrow. This effectively will cut off the greatest corporate borrowing spree we’ve seen in decades. Less capital, less growth. If rates rise, that draws people out of their stock positions as debt looks more and more attractive for the higher yields. The miners who had the longest careers were the ones who paid attention to the canary. Don’t ignore it. Pay attention to Britney Spears! 03/24/2010
This morning the US ratings agency, Fitch, downgraded Portugal debt rating to AA. Still investment grade and a few notches higher than Greece, but a downgrade all the less. This will now cause Portugal to have to pay more for selling more bonds and will likely send them down the same pathway Greece is now travelling. Default. Funny how USA rating agencies are very quick to downgrade countries in the European Union, causing their debt problems to get compoundingly worse, and to issue statements like "they are not doing enough to control their debt and deficits!" Almost like they are diverting everyones attention away from the real countries with the biggest problems. Namely the USA, Japan, and the UK. Greece's deficit to GDP is 13%. Portugal's is 9.7%. USA is 11.5% (Assuming 2010 GDP growth is POSITIVE 3.2%). If they are wrong about our growth this year and I believe they are, are 2010 deficit will likely go from a projected $1.6 Trillion to well over $2 Trillion and that would be a Deficit to GDP of 14%. Can you say downgrade! | FREE SUBSCRIPTION!Receive Emailed Articles as they are Posted. Click Below on RSS Feed!Jason's Thoughts!My goal is to use this format to bring important and timely ideas to the surface on recent events which I feel will affect all of us financially. ArchivesJune 2010 Categories |
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