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Thursday, December 27, 2012

The Solar System is a Vortex? Why is this important?

This video will support the notion that life is not about a circular models, but more about a vortex or a helix. The famous poet, William Butler Yeats, made references to the grye, spiral or vortex as it relates to consciousness in many of his works. At any rate, this video is pretty amazing!





Financial Planning not a Priority for Most Americans?

According to a study done by Allianz Life Insurance Company, Financial Planning is not a high priority for most Americans. Here is a key excerpt from the article the goes into greater detail:

"Eighty-four percent of Americans will not include financial planning in their New Year’s resolutions, according to a new survey by Allianz Life Insurance Company of North America.  The lack of financial focus is the highest it has been since Allianz founded its New Year’s Resolution survey in 2009."

The ability to save and accumulate capital is vital to a productive society. How is this possible if people are not planning their finances accordingly?


Sunday, December 23, 2012

Raising Taxes: Does it work? Ask folks in the Euro Zone

Economist John Cochrane opines on if raising marginal income tax rates will do the trick here in the US. Most of the discussion surrounding the "Fiscal Cliff" is about raising marginal income tax rates. Will this be the solution? His advice: Run the experiment to see if it has worked. Oh, and Europe is running the experiment for us. Now, Mr. Cochrane has the results here in his article, "Experimental evidence on the effect of taxes"

Dr. Thomas Sowell-Taxing the Poor(with Inflation)

Dr. Thomas Sowell. raises the issue about taxes on the poor. One of the largest taxes on the poor is inflation.  In this article, "Taxing the Poor", Dr. Sowell opines on the matter. Here is a excerpt of the article: 

"One of the biggest, and one of the oldest, taxes in this latter sense is inflation. Governments have stolen their people's resources this way, not just for centuries, but for thousands of years.

Hyperinflation can take virtually your entire life's savings, without the government having to bother raising the official tax rate at all. The Weimar Republic in Germany in the 1920s had thousands of printing presses turning out vast amounts of money, which the government could then spend to pay for whatever it wanted to pay for."

Super Bowls equals an Economic Boom? Or is it a Bust?

Many people believe in the notion of having a Super Bowl in their city will be an economic boom. Is this actually the case? In this article, "Super Bowl L", it addresses some of the myths surrounding the revenue generation of sporting events such as the Super Bowl.  While many will promote and sell the projected revenue generated it is a rarity that people are advised of the cost. For example, here is a key excerpt from the article referencing this:

"To claim an economic windfall based on visitor numbers without factoring in those who avoid the area or are pushed out "is like going to the hen-house, counting all the foxes, and saying 'Look at the economic impact of all these foxes here eating!' Porter says. 'You're not counting all the hens who are gone.' "

City political leaders love to cite how much taxable revenue will be brought into the city thanks to these events. What about the costs? For example, what are the sunk costs for hosting a Super Bowl or Olympiad? Are these costs ever recouped?  How does this impact the economy over the long haul after the events are finished?  Much more research must be done to address the answers of these questions.

Bernanke Loosens Up? What does that mean?

Here is the latest from Dr. Frank Shostak on Ben Bernanke and his stance on current moves by the Federal Reserve regarding monetary policy.  The article is titled, "Bernanke Loosens Up". A key excerpt:


"On Wednesday December 12, 2012 Fed policy makers announced that they will boost their main stimulus tool by adding $45 billion of monthly Treasury purchases to an existing program to buy $40 billion of mortgage debt a month.

This decision is likely to boost the Fed’s balance sheet from the present $2.86 trillion to $4 trillion by the end of next year. Policy makers also announced that an almost zero interest rate policy will stay intact as long as the unemployment rate is above 6.5% and the rate of inflation doesn’t exceed the 2.5% figure."

Wednesday, December 19, 2012

RIP Zig Ziglar

This is a wonderful tribute to a marvelous and amazing man. Zig Ziglar's wisdom influenced millions. His message influenced Salespersons, students, housewives, well almost everyone. RIP Zig Zigar, and I will see you at the TOP!



Monday, October 29, 2012

Malinvestment and Regime Uncertainty - John P. Cochran

An excellent article by Mr. John P Cochran titled, "Malinvestment and Regime Uncertainty" - John P. Cochran - Mises Daily.  The current "solutions" provided by the Federal Reserve and The Federal Government are having some adverse outcomes. He provides technical data to support his points.

Here is a key excerpt:

"The more aggregated model of the economy can lead one to misdiagnose the cause of the boom-bust and the slow recovery as aggregate demand shocks requiring continuing doses of monetary or fiscal stimulus. Examples are the Fed commitment to QE infinity, the call from market monetarists for monetary expansion to return nominal GDP growth to its long-term-trend path, or those who erroneously claim the slow recovery is a normal response to a recession accompanied by a financial crisis.[5] A wrong diagnosis of the problem leads to bad policy. Both current monetary policy and proposed renewal of Keynesian fiscal policies run the risk of generating further misdirections of production, which, to the extent they might positively impact employment now, run the risk of generating even higher unemployment in the future."

Chinese Currency Connection


When a politico makes charges of currency manipulation, I am reminded of a sitcom. I understand it is election season, and the motivation is for the candidates is to procure votes. In this process, someone must be to blame for our problems. And, in this case, it is the Chinese.

Currently, both candidates have made statements about Chinese trade policies, and Dr. Don Boudreaux addresses this issue with his "Open Letter to Mitt Romney" In this article, he responds to a charge Mr. Romney is presenting against the Chinese. This charge is that the Chinese would be labeled a "Currency manipulator" if they did not implement "fair" trade practices.

While the Chinese are far from perfect in their trade practices, but who does the devalued Yuan really hurt? Does it hurt the US Consumers or the Chinese citizens?  If the United States decides to place trade tariffs with China, who does that impact? US Consumers or Chinese Citizens?

I applaud Mr. Romney's tough talk against China's practices. To be fair, I am sure Mr. Obama agrees with the notion that China does not do everything perfectly, but protectionist policies ultimately hurt the US Consumer. A devalued Yuan impacts the Chinese citizens with higher prices and inflation all expressed in Yuan. However, this tough talk sounds nice during a Presidential Election season.

0-4 at Bat on the Major Economic Issues

Mr. Kevin M. Warsh from the Hoover Institute discusses the issues surrounding the Fed,2012 Presidential election, and the future of the economy, with an interview here with Larry Kudlow. He also details four major issues that currently are a hindrance to economic growth: Trade Policy, Regulatory Policy, Fiscal Policy and Monetary Policy. Currently, in his opinion, the US Government is batting 0-4 on these issues. These issues are key for an economic recovery, and batting 0-4 and placing all the burden on the Fed for improving the economy is not a winning proposition. Mr. Warsh also makes the case that The Fed Chairman regardless of the influence of the President of the United States, the Chairman will still need to seek the votes of the other Fed Governors to move forward on Monetary Policy.


Wednesday, September 12, 2012

We vote to Destroy Our Wealth

In our zeal to achieve the ideal of "full employment", the citizens have bought into the notion of supporting monetary and fiscal policies that will help facilitate the achievement of this objective. However, does anyone every ask this question: At what cost?


Here is an intriguing quote from Ludwig von Mises and his essay titled, " The Causes of the Economic Crisis, and Other Essays Before and After the Great Depression":

"It is true that the masses do not think of themselves as creditors and thus sympathize with the noncreditor policies. However, this ignorance does not alter the fact that the immense majority of the nation are to be classified as creditors and that these people, in approving of an "easy-money" policy, unwittingly hurt their own material interests. It merely explodes the Marxian fable that a social class never errs in recognizing its particular class interests and always acts in accordance with these interests."~Ludwig von Mises

In other words, if you have a savings account with the bank, you are a creditor with the bank. By voting for these non nonsensical polices, you are in essence usurping your position as a creditor. This activity reduces your ability to accumulate capital and wealth.

Since the current unemployment rate is at 8.1%, the Federal Reserve is contemplating another round of Quantitative Easing--this is covered in the article titled, "QE3 Will not Create Jobs". This action will not create more jobs, but it will continue to depreciate the ability to use the US Dollar as a unit of exchange. In other words, inflation will happen. This is done under the goodwill simply to gainfully employ 4-8% of the population.

Printing more money, lowering interest rates and the Fed purchasing more Govt Securities causes inflation. As inflation rises the prices of goods will increase. Couple this with the notion that the Federal Reserve is price fixing with interest rates in keeping them at historical lows, this creates a problem for savers and/or creditors. We are voting to destroy our wealth simply to ensure others are employed.

AIG has Repaid for Bailout

Interesting development. AIG has paid off its debt to the Government? Read the details in the article below:

Latest AIG Stock Sale Means Government Has Been Repaid for Bailout | LifeHealthPro

Another related story: "AIG on the Verge of Federal Regulation"

Thursday, September 6, 2012

Comedy by Peter Schiff: Banning Profits

Peter Schiff interviews several attendees at the Democratic National Convention. Some are in favor of banning Corporate Profits. The responses are hilarious. NOTE: This is not an endorsement of ANY political party, nor does it represent ALL Democrats. I just found the video quite funny.

Cheers!


Is the Fed preparing for QE3?

A third round of Quantitative Easing is being speculated by experts. Is this really going to happen? What will be the consequences of more QE?  According to this article, "Fed's Bernanke Makes the Case for QE3", Mr. Bernanke is considering another round of QE. Of course, Gold, Silver and Commodity traders will rush to purchase these items, to hedge the currency.

Tuesday, September 4, 2012

"Overdraft": The Documentary discussing the National Debt

Travelers Institute has produced this documentary named, "Overdraft". It is addressing the uncomfortable issue of the National Debt. This issue needs to be addressed. Addressing it is not about who is at fault, but more about dealing with the harsh realities of why this debt has been created. I think we as citizens need to look in the mirror to see the real culprit. Shame on us for passing this egregious amount of debt onto the next generation.


Thursday, August 30, 2012

No Real Recovery: Who is at Fault?

According to Peter Schiff, CEO of Euro Pacific Capital, the US Economy is not in a recovery mode. He opines that the loose monetary policy by the Fed and the fiscal policy by the Federal Government is preventing this recovery. He believes that the environment of low interest rates and expansionist fiscal policy created the Real Estate Crisis, the current Bond market bubble, and it is putting off the economic pain. Personally, I think he is on the right track with his line of reasoning. Listen to this interview.



Wednesday, August 29, 2012

Inflation: The Silent Tax

Inflation is a silent tax. It can usurp the purchasing power of goods and services by reducing the value of the currency. Currently, the CPI(Consumer Price Index) is one way of measuring inflation. There is a debate if this is an accurate way of measuring inflation since it does not include many goods that are purchased by individuals. This is an important topic for people that are investors, saving for retirement, college education, etc. As a long term investor, it is a must that your retirement savings outpaces inflation.

The article titled, "Why Investors see Low Inflation for 10 years" is an interesting article. The author cites the current low CPI as a rationale of low inflation. However, readers of this blog would notice the huge flaw in this argument. Food prices are high, commodity prices are high, Precious metals are also higher, but there is no inflation? Inflation does not make all prices rise at the same time, but rather certain segments rise at a different rate than others. Some market segments go downward in price. To imply there is low inflation is a fallacious argument based the fact that CPI does not include all items in the calculation of inflation.  It is economic impossible not to have some inflation after having an aggressive monetary policy with low interest rates, and an intrepid fiscal governmental policy with record levels of spending and borrowing.



Tuesday, August 28, 2012

LIMRA: Many Americans Don't Fully Read Retirement Plan Disclosures | LifeHealthPro

 This is vital. A contract agreement is between two parties. Regulations require that financial services companies must place the contracts in a relatively easy format for most to understand. Please review all documents before signing AND providing consideration(Money). This trend, as per this article titled, "LIMRA: Many Americans Don't Fully Read Retirement Plan Disclosures | LifeHealthPro" is highly disturbing.

Friday, August 17, 2012

The Causes of the Rising Price of Corn

Corn Prices are sky rocketing based on many factors. Currently, the drought is impacting farmers production output, thus this shrinks the inventory. This action forces prices to rise. However, mandating that farmers must allocate a certain percentage towards ethanol is another factor. The Government mandate calls for 40% of all corn production must be allocated towards fuel production.  This mandate has cause corn prices to increase, this is before the drought. Now with the drought in full swing, corn prices have increased well over 60% since June. While investors can play the futures market with this commodity and possibly make some gains, overall the global economic impact is major. The article titled, "End the Ethanol Mandate" discusses this in more detail.

The Biggest Risk to a Senior’s Finances: Family

An excellent article regarding the financial concerns with the Geriatric population. This population will grow at a faster rate due to the Baby Boomer generation. This segment comprise approximately 28% of the United States Population.


The Biggest Risk to a Senior’s Finances: Family

Thursday, August 16, 2012

Wednesday, July 25, 2012

HealthCare: My Reply to BusinessWeek

Business Week's writer, Elizabeth Dwoskin provides an article titled, After Repealing Obamacare, What Would Romney replace it with? In typical fashion, it assumes that a bad "solution" must be replaced with another bad "solution".

Here is my reply to her article:


This article has a false premise. It assumes that Obamacare must be replaced with something else. Translation: It means that the political class must come up with a "solution". This type of fallacious thinking is why we are in financial dire straights.  The Status Quo motto, "Health Care for nothing and the Check-ups for Free".

To the writer of this article: Why do you assume that a select group in Washington DC must provide solutions for our problems? Never mind the obvious historical data that points to the gross inefficiencies of this outfit. Let us review the "successes": e.g. Medicare, Social Security, War on Terror, War on Drugs, War on Poverty, Postal Service, Medicaid, and etc.  None of these programs are efficiently effective, and all have helped the United States Government achieve the trillion dollar debt load coupled with a trillion dollar deficit.

Now, we are to believe that these same individuals who brought the aforementioned failures can derive a "solution"? Investors use historical data to attempt to project future events. While this method is not 100% accurate, I can accurately state that any US Government solution will be an abyssal and absolute failure, based on its historical failures.

Many believe that Insanity is doing the same things over and over again, but expecting different results. I think this holds true with the majority of people in Washington DC and outfits that push their co-dependency agenda to the American People. Now we are to believe that the Government will get this one "right". Engaging into this notion is quite spurious to say the least.

The winners will not be the minorities, poor, or the sick/shut in. The winners will be the larger health care outfits, the lobbyists and most importantly; the members in Congress. Rent seeking behavior will increase, and the actors that participate in this timeless activity will be compensated accordingly, and on the tax payers dime, of course.

Should a solution involving the egregious inflation the price of Health Care, while concomitantly shrinking the availability of this precious good be considered a "solution"? Is this a viable solution for the poor and uninsured?  How do I know that inflation and increased scarcity of Health Care will happen? Government has a glorious history of providing inflation and shrinking the availability of a good when it enters the marketplace. History supports this claim.  And, the poor and uninsured will be the losers.

The solution is simple, if one understands economics. But, it is not easy if you are conditioned to think in a co-dependent mindset. The solution is not with the Government having a "solution".  The solution lies with the individuals having the freedom to choose to solve their own problems. Optimization of our individual economic utility is the solution, not the Government using the power of Fiat.

Respectfully Submitted,

Robert Williams Jr

CEO of robertwilliamsjr.com




Monday, June 4, 2012

The Spanish Exodus of Capital

The Euro Zone crisis is a situation that is unraveling daily. Each day there are consistent talks of bailouts or solutions, but the crisis seems to persist forward each day. Greece was the first country to receive most of the attention, with its current talks about either moving out of the Euro Zone, or receiving some sort of bailout. The recent elections in France may signal a change in their approach in solving this problem, but their Government spending is close to 57% of GDP, and they claim austerity measures have not worked. Some economists claim austerity has never been used, and claim they have not forthright in their statements.  Portugal and Italy are in dire straights, and Spain is suffering from a major Real Estate market correction. And, of course, that leaves other countries like Germany to possibly bailout the struggling nations. Right now, Spain is in the spotlight.
 
Most would see this and state, " But, I am in America, this does not have anything to do with my investments". This statement is myopically false. We live in a global economy, and it is connected. For example, as mentioned earlier, Spain is going through a Real Estate market correction--one that is similar to what was witnessed in the United States in 2007-2008.  The Spaniards are witnessing capital jettisoning from their country at a high rate.  Government Bond yields for Spain are breaching the danger zone of 7%, as they currently are at 6.70%. Since yields are rising in Spain, where are investors parking their Capital? Answer: Government Bonds and securities. But, not just any Government. Investors are placing capital into countries like Germany and the United States. These two countries are seeing an increase purchase of Government Securities.

Germany is offering on their short term bonds close to a 1.17% yield.  And, the United States, is providing  short term bond yields around 1.45%. Currently, investors are seeking safety and are attempting to mitigate their investment risk in the Euro Zone. Since global investors are pouring money into the US securities, it has an impact in the US Economy, impacting the US Dollar. If US Bond yields keep going down further due to the mass exodus of capital leaving the Euro Zone countries and entering the US viz a viz US Securities, what will be next "safe haven"? The US Dollar? Gold or Silver? Let us not forget, the Federal Reserve is already heavily investing in US Government Securities. If interest rates rise in 2014, what happens then with these securities? These questions must be entertained by US Investors as the increasing popularity of US Treasuries may continue to drive down the yield curve, altering the US Dollar's value in the Global marketplace.

Back to Spain, the Prime Minister of Spain has stated based on his data, that net of 66 billion(euro) or $81 Billion US left his country since March of 2012.  The fiscal house in Spain is in disarray as Spain, the fourth largest economy in the Euro Zone, owes investors over 731 Billion Euros.  The budget deficit is major concern for Spain, as it is double Euro Zone countries' deficit average.  And, Spain's unemployment rate is around 24%, the highest in 18 years. If  the Spainish Government and/or economy  is not productive, it does not make it an attractive "investment". People will not invest heavily into markets were there is a decline in productivity. Remember this basic economic axiom: Wealth comes from production.

In summary, the moral to the story is simple: Capital will flow to its most urgent needs. Also, capital will go to where it is can be nurtured and it can grow "safely". Investors seek safety in knowing their hard earned capital will be placed to good use, and it will be used wisely.  If a Government or a Business Entity is showing prodigality towards issues regarding its fiscal house, it will be difficult to attract more capital and investors. If the Government or a Business entity does not show fiscal prudence towards capital, they will need to hard sell outside investors to take a risk. This is the issue that the Prime Minster of Spain has on his hands. So far, the sales job is not working.

Friday, May 11, 2012

Gold Prices dropping?

Gold prices are down 3%, but is Gold tumbling? Typically investors acquire Gold to hedge against the currency's depreciation. One of the signs of its depreciation is inflation. Of course, the "experts" state that inflation is low based on the CPI, but this index does not include all goods. Gold maybe down for now, but will the Fed inject another round of Quantitative Easing? If so, then Gold may increase in price based on more currency in the system.



Thursday, May 3, 2012

Centrally Planned Economy: Is it Possible?

Is it possible for Government to "manage" an economy? In order for this process to take place, the Government must have the ability to control the factors of production. Next, the Centrally planned economy must understand and know the needs of all the actors in the process known as the Free Market. Of course, if the Centrally planned Government has control of the factors of production, individual private property rights would be an lost ideal.

If the Government has control of the factors of production, how will costs be allocated? Will prices play a role? If no prices are used in the calculation, how will the economy allocate resources to its most urgent needs or uses?  With regards to running an effective and efficient Centrally planned economy, is this really possible?

Professor Joseph T. Salerno explores the polemic that was eloquently presented by Ludwig von Mises in his book "Socialism" and other lectures.


Monday, April 30, 2012

Is Government Too Big?

Currently, the US Government has a multi-Trillion dollar debt load. The Federal Entitlement spending is approximately 3 times the amount of military spending. Oh, speaking of military spending, people are questioning our projects in the Middle East, are they effective? Time will tell. However, Government spending is egregious. Here is a link regarding the current spending($3.7 trillion) To contrast to the GDP, GDP out put is $15,601 billion.

Here is a debate between discussing the concept of the role of Government. The Debate that includes Dr. Yaron Brook and Dr. David Callahan

Tuesday, April 10, 2012

Quantitative Easing, Inflation for Jobs

There are rumors of implementing the third round of Quantitative Easing delivered by the Federal Reserve. This third round aptly known as QE3. The possible implementation will be delivered based on how the economy performs moving forward. Currently, U-3 Unemployment levels are at 8.3%, while U-6 unemployment levels are at 14.5%. GDP trended up 3.0%. If the economy trends upwards, and unemployment goes down, will the Federal Reserve implement QE3? The answer: Probably not. If the economy continues to be stagnant, or goes down, look for the implementation of QE3. If this happens what does this mean? It could mean inflation, simply to lower the unemployment rate.

Right now, Fed has been purchasing up Assets(see the chart). Since 2008, the Central Bank's assets have grown well over 200%.  In the Bloomberg article, "To QE3 or Not to QE3?", here is a key excerpt: 

"The Fed is now sitting on a balance sheet that has ballooned to $2.89 trillion after three and a half years of aggressive bond-buying activity" 

The rationale behind this aggressive asset purchase is rooted in an attempt to increase aggregate demand.  If the Fed can purchase more Government securities, keep the interest rates low, and pump more money into the system, the objective is to have more spending by consumers. And, the other objective is to lower the unemployment rate.


The problem is that this action creates inflation, as witnessed by a depreciating dollar, and a spike in Commodity prices:e.g Gold. (see chart with current Gold Prices)

Gold typically has been used as a hedge against a depreciating currency. It is a good indicator of how the currency is depreciating or if inflation is around.

This leaves the Fed at the paradox: Should they continue with their quantitative easing strategy to "stimulate" the economy? If so, what is the cost of this action? Is it worth higher prices from a depreciating currency? People may have lower unemployment levels, but at what cost? Higher Gas and food prices?

If you are saving for retirement, how does this impact your portfolio? When you "cash" out your monies from your qualified accounts(401k, 403b, and the like), how long will your money last if the currency is being depreciated?

Thursday, April 5, 2012

Thought for the Day:Inflation

Inflation is commonly known as the rise in prices. Many economists argue that it is monetary phenomenon, or related to the money supply as it circulates in an economy. For example, many economist state the current high gas prices are related to inflation, thanks to the Federal Reserves expansionist monetary policies. Of course, another school of thought believes that re-establishing the Gold Standard might help control inflation. Here are some videos and links explaining this issue.




How inflation destroyed the Roman Empire:

http://mises.org/daily/3663





Nixon's famous speech ending the Bretton-Woods agreement. SN: After this major change, the US experienced stagflation.




FDR Removing the US from the Gold Standard in 1933:








Dr. Milton Friedman discussing the Great Depression:
 

Tuesday, April 3, 2012

Private Property: A Foundation for a Strong Economy

Private Property ownership or control is central to having a strong economy. It obviously establishes ownership, but what else does it establish? From the establishment of ownership, the owner of the property can manage risk, calculate economic costs, generate and produce goods or services to the marketplace. It is key because it allows the individual ownership or control over factors of production. Some articles expanding on this topic:

http://www.econlib.com/library/Enc/PropertyRights.html

http://mises.org/daily/4718


Thought for the Day: Debt

"The Rich Rule over the poor, and the borrower is the servant to the lender"~Proverbs 22:7

Sunday, April 1, 2012

The concept of the Quantity of Money and Inflation

A lecture from one of the great minds in the world of Economics, Ludwig von Mises. This lecture is on the topic of Money and Inflation.

Saturday, March 31, 2012

Thursday, March 29, 2012

Dollar is strong..against the weak Euro: Spain is next

Please do not get excited because someone states, "The US Dollar is strong". Yes it is strong, against the Euro. In which is struggling right now.  The strength of the currency is relative and comparative to another country's currency.

Now the Spanish are beginning to strike: http://www.marketwatch.com/story/euro-rebounds-vs-dollar-on-firewall-hope-2012-03-29?siteid=rss&rss=1

The Germans will be key to this deal. Of course, they one of the productive nations in the Euro Zone. I agree with the German Chancellor, the bailouts are NOT enough. In my opinion, people must produce, save, invest..repeat process: http://www.marketwatch.com/story/bailouts-may-not-be-enough-2012-03-29?siteid=rss&rss=1

If the dollar is so strong, why is Gold and other commodities continuing to stay strong?? If the currencies are so strong, why are the Central Banks attempting to purchase MORE Gold?  http://www.marketwatch.com/story/the-next-leg-of-golds-bull-run-2012-03-28?pagenumber=2

Professor Ben Bernanke does not stop the rise in Gold, Gas, and Oil Prices with his loose monetary policy. Let us not forget Palladium too..

http://www.bloomberg.com/news/2012-03-28/palladium-seen-beating-gold-with-record-car-sales-commodities.html

The REAL Cause of the Financial Crisis!?

The Economic think tank known as the Cato Institute has published a new study on the cause of the Financial Crisis of 2008.   An interesting analysis and research paper.

What Made the Financial Crisis Systemic?, Cato Policy Analysis No. 693

Euro Zone Update:Greece, Spain and Italy

Greece, Spain and Italy are continuing in their attempts to shake the shackles of their fiscal problems. Mounting debt, lower credit ratings, bailouts, etc. Here are the current unemployment numbers:

Spain: 23%
Italy: 9.2%
Greece: 20.7%

What is the lesson? Wealth comes from production. Increased Economic savings will yield more investment which will fuel production and growth. These nations have embraced a concept of borrowing and egregious levels of Government spending. Nations that have egregious levels of Government spending crowd out capital as witnessed in these aforementioned countries.

"The Private Sector has been Destroyed"




A article discussing the the possibility of Spain Debt Restructuring:

http://www.marketwatch.com/story/citigroup-spain-debt-restructuring-more-likely-2012-03-28

This article discusses the unemployment rates of the youths in Greece:

http://www.theatlantic.com/business/archive/2012/03/the-51-tragedy-a-majority-of-young-greek-workers-are-now-unemployed/254181/


Greece may have to restructure its debt again:

http://www.bloomberg.com/news/2012-03-28/greece-may-have-to-restructure-debt-again-s-p-s-kraemer-says.html

Is Italy on the upswing? Are they out of the woods? Here is an article discussing the sell off of Bonds:

http://www.bloomberg.com/news/2012-03-29/italy-sells-8-billion-euros-of-bonds-as-yields-decline.html

The United States is walking down a similar path as these countries. Who will bail us out if this happens to us? Tough decisions need to be made, and it can be fixed.

Thought for the Day: Knowledge and Power

"Knowledge is only power only when put to use, and then only when the use made of it is constructive"~David J. Schwartz, PhD

Wednesday, March 28, 2012

Thought for the Day: Mental Slavery

"Before man can be enslaved, his state of mind must be reduced from spirituality to carnality. He must learn to think of himself as basically an animal with no spiritual purpose." ~Samuel Smiles

Tuesday, March 27, 2012

Monday, March 26, 2012

Is the Dollar getting weaker? Is it Near a Collapse?

Here is a video with Mr. Detlev Schlichter discussing Gold vs Fiat money. In his book, Paper Money collapse, he reviews the problems with Paper Money, specifically on how it relates to the Central Government's ability to spend and expand credit. For an example of this currency depreciation in the current news, see this article, "Dollar near lowest month after Bernanke Speech"

The Fed works with the Federal Government to print more money and keep interest rates low to spur on economic growth. This causes and creates asset bubbles, which eventually correct as Mr. Schlichter explains in this video.  The lack of savings, and the egregious use of borrowing and spending leads to disastrous results.

Lets do the twist: Operation Twist err QE3?

The Fed in September of 2011 has implemented "Operation Twist".  It is a policy that started in October of 2011 and will end in June of 2012. The process of "Operation Twist" is to sell out long term Government Bonds for short term Government Bonds. This is an effort to keep the long term Government Bond yield curve lower. It stays consistent with the Fed's overall policy to keep interest rates low. While this policy seems to have merit on the surface, it still is consistent with the overall trend to keep interest rates down. The logic in keeping the Interest rates down is to stimulate the economy by increasing aggregate demand.  The rationale is to keep interest rates low, so that people will borrow money to help boost the economy for businesses, home purchases, etc.

The downside of this method is that it increases the money supply, and this leads to inflation. If people do not believe inflation is here, please check the prices of commodities and food.  Eventually, interest rates will need to rise. Of course, this will have adverse consequences, but the correction must take place for all the egregious spending, bailouts, TARP, and the like.

Here are some links related to Operation Twist:

"Federal Reserve Launches Operation Twist" 

"Operation Twisted Logic"

"The Fed's Long Shot"

Hauser's Law: The Tax Collectors Enemy

In the current economic crisis, one of the topics that is central to the politicos is the Federal Government Debt. Many are seeking to raise taxes, citing this is a potential solution. While others are seeking to lower taxes as a solution as well. Regardless of which direction is chosen, Hauser's Law must be considered.

What is Hauser's Law? W.Kurt Hauser, an investment economist, has reviewed economic data over the last 60 years, and it has shown that regardless of how the marginal income tax rates have been structured, the total income tax collected has been approximately 19% of GDP.  The top Marginal Income tax rates have been as high as 92%, and has low 28%. In both extremes, the rule of 19% of GDP has not been violated.

Why is this the case? Many possible things could lead to this answer, but ultimately it is about the elasticity of behavior towards taxes.

Here are some links regarding Hauser's Law:

"There is no Escaping Hauser's Law"

"Will Hauser Law Protect Us from Revenue Hungry Politicians? "

"Hauser's Law"

The question is really this: Do we want the Government to tax us at higher income tax rates, but receive a smaller piece of the economic pie, or do we prefer the Government to tax us at a lower rate and receive more revenue from a larger economic pie?  In either case, the Government will still receive 19% of the GDP.

Thought for the Day: Choose to Set Goals

Motivational speaker Zig Ziglar discusses goal setting. Making a CHOICE on setting Goals is paramount in success.

Saturday, March 24, 2012

Interest Rates: Is the Fed waiting to long to raise Rates?

Interesting video regarding the Fed and interest rates. Is the Fed waiting to long to raise rates? Should unemployment be a primary signal to raise or lower interest rates?  This video addresses those issues.

Thursday, March 22, 2012

Tuesday, March 20, 2012

Monday, March 19, 2012

Thought of the day:Nature of Freedom

The late Dr. Milton Friedman discusses the Nature of Freedom. He uses a pencil as an example. Powerful concepts sometimes are displayed with simple examples.

Sunday, March 18, 2012

Speculation: Good or Bad?



Speculation is a topic that provides a variety of responses and reactions from various individuals. Some folks want to ban it, some folks defend the activity. Many activists are seeking to ban the activity, and are pushing politicians to pass legislation to eliminate this practice.  I believe speculation plays a vital role in the free market.  Here is a quote from the famous economist Ludwig von Mises regarding speculation:

 “Speculation is the link that binds isolated economic action to the economic activity of society as a whole. “

Speculation provides a mitigation of volatility while providing liquidity to the market place; and it does not create increases in demand of the underlying asset.  It should not be banned; in fact, banning this practice will increase the volatility in the marketplace, making the banning of this practice very dangerous.

 A Speculator assumes the risk of the volatility of future prices and brings them into the present.  In other words, he assumes the risk of the rapid price changes in the marketplace, thus making the volatility, well quite frankly, less volatile for the producer.   Many people assume speculation is like gambling.  As Economist Dr. Thomas Sowell writes:

“Speculation is often misunderstood as being the same as gambling, when in fact it is the opposite of gambling. What gambling involves, whether in games of chance or in actions like playing Russian roulette, is creating a risk that would otherwise not exist, in order either to profit or to exhibit one’s skill or lack of fear.  What economic speculation involves is coping with in inherent risk in such a way as to minimize it and to leave it to be borne by whoever is best to equipped to hear it.”

For the most part, speculators are mitigating the risk—the risk of price fluctuations.   They serve as a form of “insurance” for the marketplace.  For example, a farmer that is growing a particular commodity may be unsure of how his crop will turn out.  His prices of his crop are determined not just based on the availability of his crops, but a worldwide inventory.  If there is a situation that causes shrinkage of the worldwide inventory, the farmer’s prices will be impacted.  This may place the farmer in a precarious financial situation. To mitigate this situation, he will enter into a contract with a speculator. That speculator will assume the risk of the uncertainty of the price fluctuation. This agreement allows the famer to move forward in working his operation; the speculator has provided an offer to purchase a finite quantity of the farmer’s crop at a set price in the future. Of course, the speculator will never take issue or inventory of that particular good or crop.

Let us assume that the farmer was in an environment where speculators were banned. What would be the consequences of this action? Reviewing the scenario, the farmer would still be uncertain of future prices and how the future prices would turn out. So, he is placing his operation’s resources at risk in the event that prices are not able to satisfy his cost to produce a crop. If he guesses wrong, he loses money, maybe his operation.  Transferring this risk to a speculator actually protects his operation and its finite resources.  This scenario can be used in any sort of speculative transaction.

What about the claims that the speculators are raking in all this cash, and operating with surreptitious motives? This claim does not tell the entire story. Most trades do not make money. Obviously, they earn money as a whole; otherwise they would do something else.  They must have the ability to predict for each contract the proper price on the contract. If the contract prices do not meet the actual price projected by the farmer, the speculator can and will lose money. Since the risk is being passed from the farmer to the speculator, they absorb more of the risk. This makes this type of enterprise with a potential high reward, and very high risk. 

Lastly, there is no evidence that speculation drives up the market price. The Hunt brothers in the 1970s attempted to corner the silver commodities market. They lost billions within a matter of days or weeks.  Here is a quote from Economist Darryl Duffie of the Hoover Institute:

 “The market for silver was temporarily cornered in 1979-80, when Nelson Bunker Hunt and his brother William Herbert Hunt held silver derivatives representing approximately half of annual global silver production. In the end, the Hunt brothers were unable to maintain a corner. As they sold, silver prices fell, causing them calamitous losses “

The FTC did an investigation [ http://www.ftc.gov/os/2011/09/110901gasolinepricereport.pdf,] where they found no correlation between speculators and gas prices.

In closing, speculation is a needed function in the marketplace. Removal of this activity would be extremely hazardous.  Speculators provide a method of handling risk in the marketplace. It is a means to provide producers a way to transfer the risk of uncertainty of prices, so producers can focus on what they are well equipped to do: Produce. 

Friday, March 16, 2012

Thought of the Day: Life, Liberty, and Property


“Life, liberty, and property do not exist because men have made laws. On the contrary, it was the fact that life, liberty, and property existed beforehand that caused men to make laws in the first place.”~Federic Bastiat

Thursday, March 15, 2012

Thought for the Day: Reasoning


"A Few Lines of Reasoning can change the way we see the World"~Steve Landsburg

Monday, March 12, 2012

Thought for the day

Ludwig von Mises: "We must comprehend that it is impossible to improve the economic conditions of the underdeveloped nations by grants in aid. If we send them foodstuffs to fight famines, we merely relieve their governments from the necessity of abandoning their disastrous agricultural policies." - Money, Method, and the Market Process

Thursday, March 8, 2012

Words from Robert Kiyosaki


Excerpt from Mr. Robert Kiyosaki's regular update, "Conspiracy of the Rich"


Online Exclusive Update #115 - Tax Which Rich?

Conspiracy of the Rich
The 8 New Rules of Money
by Robert Kiyosaki
Online Exclusive Update - #115
  March 6, 2012

Tax Which Rich?
By Robert Kiyosaki

It’s that time again—election time. And in true form, politicians are willing to say and do just about anything to get elected. Generally, the things that politicians say during an election year are contradictory at best and downright idiotic at worst. But this time around, the Republicans are doing their very best to sound like socialists by attacking one another for being rich and not paying enough taxes.
The reality is that the rich are easy to pick on right now because everyone is hurting financially. But it’s important to define what you mean when you say rich—because there are many different types of rich people in the world.

One of the very first lessons I learned from my rich dad was the CASHFLOW Quadrant.






E stands for employees. Whether they are a janitor or a CEO, they are an employee of a business.
S stands for small business or self-employed. These are small business owners and specialists. Many highly educated professionals such as doctors and lawyers fall into this category.
B stands for big business. These are companies with 500 or more employees.
I stands for investor. These people are always looking for other people’s money to fund their business projects.
In each category of the CASHFLOW Quadrant, there are many people who would be considered rich because they make a lot of money. However, the real dividing line between the true rich and those who simply make a lot of money is how much money they actually keep in their pockets. Those with high financial intelligence can make a lot of money but also keep that money come tax time.

As my tax advisor, and author of Tax-Free Wealth, Tom Wheelwright, teaches, the tax code is simply a tool for governments to get you to do what they want you to do. If the government wants cheap housing, they’ll give you a tax break to build it. If they want oil discovery, they’ll give you a tax break to do oil exploration. If they want to encourage debt, they’ll give you a tax break for debt. In this election year, there will be a lot of talk about taxing the rich. This is funny and depressing because the only rich who pay lower taxes are those who do what the government wants—stimulate the economy by creating housing, industry, jobs, and more.

Those with a high financial IQ—those on the B and I side of the CASHFLOW Quadrant—have a lower tax rate because they’re rewarded for doing activities that the government needs to help the economy. There are many rich who already pay extremely high taxes—in fact, for those on the E and S side of the CASHFLOW Quadrant, the more they make the higher their percentage in taxes paid—sometimes up to 40 percent of their income.

Again, it’s only the rich who build the economy and provide jobs who are rewarded with tax breaks. But that’s an inconvenient truth in an election year when rhetoric gets you further than facts.

This election year, focus on the facts and not the rhetoric. As you get rich for all the right reasons, you shouldn’t be punished for it. You should be rewarded. And my hope is that all of you will experience the benefits of building a better world through financial intelligence.
© 2012 Robert T. Kiyosaki. All rights reserved. No publication or use without the prior written permission.

Thought for the Day: Master Yoda

"Do or Do not, there is no try"~Master Yoda


The Ongoing Greek Tragedy

As the Greek are seeking a buyer of their debt, many feel they should be kicked out of the Euro.I think it is a smart move, since their lack of Economic output is the real issue. Unfortunately, more borrowing and consumption is being done as compared to saving, investing and production. These are the keys of building an economy. These keys have been eschewed by the Greek, thus they are seeking someone to bail them out.  This article from Bloomberg discusses the possibilities of a Greek exit from the Euro Zone. 

This video below discusses the need to make cuts for the Greek Government:




And, here is a video discussing the potential unrest in Greece AND Italy. Italy, is tied into Greece with being one of the world's largest bond holders.





A Response to LEAP Advisers. RE:Dave Ramsey

As a member of the social networking site, Linkedin a question was posed about my feelings towards Dave Ramsey. Here is my reply:

Dave Ramsey, Suze Orman both are mountebanks of the highest order. He has a poor grasp of Economic fundamentals, thus making his disdain towards Insurance and investing flawed and irrational. His appeal to emotion makes him a wonderful charlatan. People cite that he should continue his "get out of debt" message. But, what is so unique about that message? Is there something special about his methodology of getting out of debt that differentiates from other methods? Is that a complicated message that requires spending $200+ dollars to figure out? Really?

I eschew every aspect of his message including his debt message. Getting out of debt is a wonderful deal, but integrated with maxing out qualified plans does not provide people with a capital base. Investing in mutual funds viz a viz a qualified plan in the hopes to be self insured in 20 years, is the most ridiculous concept of his sophistry style message. And, it is highly risky. If your home was paid off, would you remove the homeowner's insurance? Answer: No. Why recommend to be "Self insured" when you do not have economies of scale over your life? Transfer the risk to the Insurance company and have a built in growing capital base. One can invest in equities, Real Estate, etc once a sufficient capital base is built.

If Mr. Ramsey understood economics, Capital reserves is the starting point of production. You save to invest, not invest to save. With using perm life, that gives the client the secured foundation, along with debt freedom if the client seeks to get out of debt.

In short, Ramsey is a quack. Nothing in his message is solid simply because its all integrated into a one size fit all scam.















Here is a video mix with Peter Schiff and Dave Ramsey: (DISCLAIMER I am not a Gold Bug, but nothing is wrong with looking at commodities)




Monday, March 5, 2012

Thought for the Day: Quitters vs Winners

"A Winner Never Quits, and a Quitter Never Wins"~Napoleon Hill from his timeless work, "Think and Grow Rich"

Here is a sample of the Audio version the famous book:

Friday, March 2, 2012

Thought for the Day:Freedom from Fear

This quote needs no introduction. Well, this is an introduction.

"So over you is the greatest enemy a man can have and that is fear. I know some of you are afraid to listen to the truth-you have been raised on fear and lies. But, I am going to preach to you the truth until you are free from that fear...."~Malcolm X


Fear is an emotion that acts as a parking break on the accelerator of success. Many have a variety of fears, and these fears are just an illusion. Overcoming fear requires one to dig and seek the truth. This action will help people knock down those beliefs or fears that hold most back from success.