inflation

Out of Egypt: Protests are Headed for America

Filed in BP, Debt, frontline, Gold, Gold Market, inflation, Lear, o, Quantitative Easing by on February 12, 2011 0 Comments
Out of Egypt: Protests are Headed for America

Don’t think that what happened in Egypt can not possibly happen here. Because the truth is when a big swath of the population is no longer served by the festering status quo, they wake up one day and decide not play ball after all. And once that faith is lost, it is gone forever. I actually think we are much closer to that moment than most people would think. You see, I work all day in an office full of 20-somethings. They are a diverse bunch. They’re smart and they work hard. But the one thing they all have in common is they are stuck on a ladder with no where to go. Buried in debt from student loans and various other sources, they are trapped in time unable grab the next rung. Among them the most common refrain is: “I can’t” They would like to further their education…but they can’t. They would like to buy a house…..but they can’t. They would like to buy a car….but they can’t. They would like to have children….but they can’t. There’s more to the list…but you get the picture. Of course, when you look at their list of wants you realize that what they want is no different than what everyone else has wanted at one time or another. The difference is in their world it’s a lot harder to attain—if not impossible in some cases. The reason for this is pretty simple: The cost of their dreams can’t be met with their incomes and adding more debt for them is not much of an option . Everything single thing on their list and then some simply costs too much. As a result, they go without. One day I suspect they will take to the streets. By the way, here’s a great video I found this morning on zerohedge. It’s your life according to the government… The status quo cannot possibly be maintained. Related Articles: Government Run Amok: Unintended Consequences Trouble in Retail: Three Charts from the Frontlines How Uncle Sam Fiddles with the Figures Quantitative Easing For Dummies To learn more about Wealth Daily click here Advertisement Samurai Super Alloy It was the secret ingredient that turned an ordinary sword into the legendary Samurai Katana— the deadliest weapon before the arrival of modern rifles. Today, it’s crucial to the $987billion/year global steel industry… And the world’s supply is quickly running out. Find out how a tiny mining company sitting on one of the last untapped deposits of this metal could hand you 2682% — in the next 12 months! Out of Egypt: Protests are Headed for America originally appeared in Wealth Daily . Wealth Daily is a free daily newsletter featuring contrarian investment insights and commentary.

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How Gold Could Save America from Nazi Theory

Keynesian economics is the root of economic problems for most countries around the world today. So it’s important to understand both what Keynesian economics stands for and what the opposing brand of economic thinking called Classical economics maintains. In a nutshell… Classical Economics: Keynesian Economics: Thrift, hard work, and productivity are virtues. The classical gold standard restrains the state from inflating and provides a stable monetary environment in which the economy can flourish. Government should strive for balanced budgets and fiscal responsibility. The state should adopt a general policy of laissez-faire of non-interventionism in economic affairs: low taxes, free trade, and minimal bureaucracy. Production is more important than consumption. Say’s Law: Supply is more important than demand since supply of one good creates the demand for another. An increase in savings can contract income and reduce economic growth. Consumption is more important than production, thus turning Say’s Law upside down. There is no need for a gold standard; fiat currency is preferable. Demand is more important than supply. Teaches that governments and politicians can be trusted. It’s no wonder politicians love Keynesian economics over Classical economics. To control the economy, most governments around the world have been using Keynesian economics for the past 75 years. It is the only economic thought that is taught in the schools and universities. “They” want us to believe they are wise and intelligent souls who know what is best for us. But nothing could be further from the truth throughout most of economic history… Read this quote from Adolf Hitler, who openly embraced Keynesian ideas: Gold is not necessary. I have no interest in gold. We will build a solid state, without an ounce of gold behind it. Anyone who sells above the set prices, let him be marched off to a concentration camp. That’s the bastion of money. The Nazis’ economic success when Hitler first came into power was a result of Hitler cooking the books. The rest of his time in power goes down in history as one of the worst atrocities in the history of mankind. Only two other twisted power-seeking devils in the annals of time are responsible for the killing of more people than Hitler &mdash…

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A Self-Employed Carpenter’s Continued Thoughts on the Future

Filed in BP, Debt, deflation, economy, Gold, inflation, Lear, o, silver, US Dollar by on February 11, 2011 0 Comments

My first article on this topic concerned the sharp contraction of the residential construction industry in the U.S. I am a self-employed carpenter. The main thrust of that article was that the housing market is not going to recover to anything approaching its zenith. Bloomberg Business reported in January that housing starts fell again in December to a 529,000 annual rate. The annual rate in a good economy is considered to be a million new homes per year. The recent peak in 2005 was 2 million homes. Nationally, production for the residential construction industry has dropped about 75% off its peak. Inflation, lack of wealth, and rising energy costs preclude any great gains in housing output in the near future. The majority of the skilled construction workers will be doing something other than residential construction in the near future. What is it that we’ll be doing? First off, we are craftsman. “Craftsman” is a mind-set, a personality type. Throughout history, craftsmen have exchanged their labor, skills, and ideas for the expendable wealth of those who have it. That is the ball upon which we need to keep our eye. Many of us will likely still be craftsman in the next economy. The best-run construction companies will be able to get lean enough to live through the hard times and carve out a niche in the new residential construction industry. Most companies and individuals will not make it back. The current overextended financial situation in the U.S. will cause our world to “shrink.” Inflation and sharply rising fuel prices will force a lot of economic activity back down to the community level. Many things that we currently take for granted will become more difficult to obtain. Acquiring food, fuel, heat, and shelter will take on a greater importance in the day-to-day life of the middle class. I’m not talking about the Apocalypse. I’m just saying that things will not be as comfortable as they once were. You and your fellow middle classers will be conducting more business within your neighborhoods and communities. What do we craftsman do in the transition? First of all, keep your hand in the old construction game as long as you can. Do not create new debt for yourself. Do not bid jobs so close to the bone that you have no wiggle room. If something goes awry, and it usually does, you will have either new debt or legal problems. Speaking of new debt, get out of your old debt. The leaner you emerge from this transition period, the better your choices will be. If you have any liquid assets, consider owning some physical silver. Cash will be eaten …

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A Self-Employed Carpenter’s Thoughts on the Future

The world is changing. Currently, as a nation, we have a large and well-trained section of our work force dedicated to residential construction. Unemployment within the construction industry now exceeds 20%. That number takes into account only workers getting unemployment compensation. There are also many self-employed individuals, ineligible for unemployment compensation, who have simply run out of customers and work. That is the bad news. Now the worse news: Not only are those jobs not coming back, but the construction industry will continue to diminish for the foreseeable future. The real estate glut is not on hold; it is over. Waiting for its return is similar to waiting for next the big surge in typewriters, 35mm cameras, and home phones. Why are the construction jobs not coming back? There are three main reasons, the first of which is inflation. Decades of credit expansion and the recent printing of money (quantitative easing) have increased the overall volume of our fiat currency: dollars. Therefore, the value of each dollar unit has been reduced, causing prices to rise. This results in increased costs in construction of new homes. Higher new construction costs make staying in and repairing older structures, or renting, more attractive. The second reason is fuel costs. Living rurally and working in urban areas is becoming very expensive. Reasons one and two will keep an increasing number of younger workers and couples living and renting closer to work. Why take the financial and mobility risks associated with homeownership? The third reason is we are broke. Who are “we”? Western civilization, comprised mainly of the U.S. and Europe. Consider this…there are gold and silver coins and bullion: actual wealth storage vehicles. There are paper dollars: temporary wealth storage vehicles. And there are also trillions of “dollars” represented as pixels on screens in accounting software programs. When I say that we are broke it is because I don’t believe those pixel dollars represent anything. All of the wealth supposedly held in those pixels does not exist. It is a classic Ponzi scheme. If you go today and convert your pixels to actual dollars, everything is just fine. But if 10% of us go today and try to convert our pixels into dollars, the banks will shut down…Why? Because the money doesn’t exist. There is no actual wealth stored in any of those pixels. Spain and Portugal may require financial bailouts in 2011. Part of the fallout from the Greek financial crisis last year was the creation of a eurozone bailout fund of $1.01 trillion. That fund could be used to assist Spain and Portugal if necessary. Where did that $1.01 trillion come from? Was it removed from another sector of Europe’s economy? Supplied in gold bullion to EU headquarters in The Hague? Removed from the savings accounts of earnest Europeans? No, none of those could supply …

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An Egyptian Firebrand Away from $400 Oil

Investors are remarkably sanguine about the events in Tunisia and Egypt… Oil actually fell yesterday to $88.27. The Dow has been on a hot streak and is up again today — as it has been for months — to 12,149. History suggests events in the Middle East go from bad to worse. According to the Democracy Index put out by The Economist , there are no “established democracies” in the region. Israel is listed as a “flawed democracy.” Lebanon and Turkey were listed as “hybrid regime,” along with Palestinian territories, Pakistan, Armenia, and Iraq (Lebanon is now run by Hezbollah). The rest are categorized as “authoritarian regimes.” The last free vote saw Hamas sweep the Palestinian elections in 2006. Hamas started as an offshoot of the Muslim Brotherhood in Egypt. On gaining power, they started lobbing rockets into Israel. In 2007, the Battle of Gaza was fought between Hamas and the Palestinian security forces. Hamas is listed as a terrorist organization in most G-20 countries. In the aftermath, Israel and a Hosni Mubarak-ruled Egypt imposed an economic blockade on Gaza that is still in effect. Population and scarcity Jack Andrew Goldstone points out in his book, Revolution and Rebellion in the Early Modern World , that all revolutions from the French to the Russian, from China to Japan, occur where there is a rising population and diminishing resources coupled with an inflexible ruling party. (Note: The population in Russian doubled between 1850 and 1913.) Today, the Arab world has the fastest growing population on earth— and the youngest. In Yemen, the average age is 17.9 years with a birth replacement rate of 2.71, which puts it at number 23 in the world. The United Arab Emirates is in fourth place with 3.56, Kuwait is fifth with 3.50, the Gaza strip is six with 3.29. Libya, Chad, Egypt, Oman, Syria, and Iraq all make the top quintile. These young people will be the next rulers of the largest oil-producing region within the next ten years — mostly because all of the current leaders are in their 80s… with the exception of Qaddafi…

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Darden Restaurants’ Target, Estimates Boosted at Susquehanna (DRI)

Full-service restaurant operator Darden Restaurants, Inc. ( DRI ) on Friday saw its price target and earnings estimates raised by analysts at Susquehanna. The firm said it lifted its price target on DRI from $56 to $57, which implies a 16% upside to the stock’s Thursday closing price of $49.30. Susquehanna also maintained its “Positive” rating on DRI, and boosted its earnings estimates. The analyst said that “expectations for 7-8% commodity inflation over the next 18 months will be a headwind to margin expansion; however, we view DRI as best able to defend margins with price increases, supply chain efficiencies, and real estate ownership.” Darden Restaurants shares were mostly flat in premarket trading Friday. The Bottom Line Shares of Darden Restaurants ( DRI ) have a 2.60% dividend yield, based on last night’s closing stock price of $49.30. The stock has technical support in the $44-$46 price area. The shares are trading near all-time highs and have little overhead resistance. Darden Restaurants, Inc. ( DRI ) is not recommended at this time, holding a Dividend.com DARS™ Rating of 3.4 out of 5 stars. Be sure to visit our complete recommended list of the Best Dividend Stocks , as well as a detailed explanation of our ratings system here .

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Recovery Chronicles: Tales From the Modern Food Line

Filed in BP, frontline, Gold, GOld juniors, inflation, Lear, o, Quantitative Easing by on February 4, 2011 0 Comments
Recovery Chronicles: Tales From the Modern Food Line

Here’s one from the recovery chronicles: food stamp usage is up 14% from last year. Today, the Supplemental Nutrition Assistance Program (SNAP) serves about one in seven Americans. Of these, about half are children USDA officials say. From the Wall Street Journal by Sara Murray entitled: Some 43 Million Use Food Stamps “Nearly a year and a half into the economic recovery, some 43.6 million Americans continued to rely on food stamps in November. More than 14% of the population drew food stamps in November to purchase groceries as high unemployment and muted wage growth crimped budgets. The number of recipients was up 0.9% from October, according to the new report by the U.S. Department of Agriculture. Compared to a year ago, the number of people receiving food stamps was up 14.2%. In both Washington, D.C. and Mississippi more than a fifth of residents received food stamps — the highest recipiency rates of any state. But demand has grown stronger in the past year in a handful of other states that recorded significant increases on a per capita basis. In New Mexico, 19.4% of the population tapped into food stamps. That’s up 3.2 percentage points from the same month a year ago, the largest increase for any state. Idaho reported a similar jump: 14% of residents received food stamps, up 3.1 points from a year ago. Washington, D.C., Florida, Delaware and Texas all experienced similar year over year increases.” For comparison sakes here’s how the food stamp roles have grown

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Ben Plans, Food Prices Reach All-Time Highs

Ben Plans, Food Prices Reach All-Time Highs

Don’t you just love the Federal Reserve…? Higher prices have helped to set the world ablaze and Bernanke & Co. continue to insist inflation is a figment of our imagination. You see, despite the obvious fact that commodity prices are skyrocketing……. …the Fed comes out with this nonsense this morning. About inflation the Bernank remarked: “On the inflation front, we have recently seen significant increases in some highly visible prices, notably for gasoline. Indeed, prices of many commodities have risen lately, largely as a result of the very strong demand from fast-growing emerging market economies, coupled, in some cases, with constraints on supply. Nevertheless, overall inflation remains quite low : Over the 12 months ending in December, prices for all the goods and services purchased by households increased by only 1.2 percent, down from 2.4 percent over the prior 12 months. To assess underlying trends in inflation, economists also follow several alternative measures of inflation; one such measure is so-called core inflation, which excludes the more volatile food and energy components and therefore can be a better predictor of where overall inflation is headed. Core inflation was only 0.7 percent in 2010, compared with around 2-1/2 percent in 2007, the year before the recession began.” Meanwhile, the reality is food prices around the world have hit their highest levels EVER… From Breitbart entitled: World food prices hit record high: UN agency “ World food prices reached their highest level ever recorded in January and are set to keep rising for months, the UN food agency said on Thursday, warning that the hardest-hit countries could face turmoil. Rising food prices have been cited among the driving forces behind recent popular revolts in north Africa, including the uprising in Egypt and the toppling …

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Do I See Lipstick On A Pig? Or Is The Stock Market and Gold Still Going Up?

Filed in AIG, BP, Debt, Gold Investing, inflation, o, silver by on February 3, 2011 0 Comments

As most sophisticated investors and traders are aware, the U.S. Federal government has run up significant deficits and the long term debt burden is becoming a drain on Gross Domestic Product. That being said, most economists are discussing the possibility of a major decline in the value of the U.S. Dollar going forward as inflationary

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Answering Krugman on Austrian Economic Theory

Answering Krugman on Austrian Economic Theory

I still get the sense that Krugman truly doesn’t understand the Austrian position. For example, he asks, “Why is there overwhelming evidence that when central banks decide to slow the economy, the economy does indeed slow?” But because the Austrian theory says the bust occurs when the central bank backs off and allows interest rates to rise toward their “correct” level, this is hardly a problem. In fact, if central banks couldn’t slow the economy, as an Austrian economist I would be worried about my theory. Krugman also poses questions concerning (price) inflation rates and the connection between nominal and real GDP. But I think he is conflating the Austrian theory with a purely “real” business-cycle theory. Austrians understand that monetary influences can have real effects. To repeat, that is the very essence of the Mises-Hayek theory. Although most of Krugman’s objections are due to his unfamiliarity with the actual Austrian theory, I think one source of confusion came from the particular illustration I used in my article. First let’s set the context by quoting Krugman : “So what is the essence of this Austrian story? Basically, it says that what we call an economic boom is actually something like China’s disastrous Great Leap Forward, which led to a temporary surge in consumption but only at the expense of degradation of the country’s underlying productive capacity. And the unemployment that follows is a result of that degradation: there’s simply nothing useful for the unemployed workers to do. “I like this story, and there are probably other cases besides China 1958–1961 to which it applies. But what reason do we have to think that it has anything to do with the business cycles we actually see in market economies?” First, I should say I’m glad that Krugman at least concedes that (his understanding of) the Austrian explanation both is theoretically possible and actually happens in the real world — coming from the guy who referred to it in 1998 as equivalent to the “phlogiston theory of fire,” this is progress! However, Krugman still doesn’t have quite the right understanding of the Austrian view of the “capital consumption” that occurs during the unsustainable boom. As I said above, on this particular issue the fault lies with the necessarily simplistic “sushi model” I used in the article that Krugman read . In that article, in order to make sure the reader really saw why Krugman (and Tyler Cowen) were overlooking something basic, I had the villagers boost their daily sushi intake even while they developed a new technology to help augment their fishing. So during their “boom,” it would have seemed to a dull villager that both consumption and investment were rising. In my fable, this was physically possible because the villagers neglected the regular maintenance of their boats…

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Why Paul Krugman Is Wrong on the Austrians

The Austrians on Capital In contrast to mainstream macro models, which either do not possess capital at all or at best denote it as a homogenous stock of size “K,” Austrian theory explicitly treats the capital structure of the economy as a complex assortment of different tools, equipment, machinery, inventories, and other goods in process. Much of the Austrian perspective is dependent on this rich view of the economy’s capital structure, and mainstream economists miss out on many of the Austrian insights when they make the “convenient” assumption that the economy has one good. (Krugman will be glad to know that yes, I can spell all this out in a formal model — and one that referee Paul Samuelson grudgingly signed off on.) Krugman and other Keynesians stress the primacy of demand: they keep pointing out that the owner of an electronics store, say, won’t have the incentive to hire more workers, and buy more inventory, if he doesn’t expect consumers will show up with money to spend on new TVs or laptops. But Austrians point out that demand per se is hardly the whole story: Regardless of how many green pieces of paper the customers have, or how much credit the store can get from the bank, it will be physically impossible for the electronics store to fill the shelves with new TVs and laptops unless the manufacturers of those items have already produced them. And in turn, the manufacturers can’t magically create TVs and laptops merely because the demand for their products picks up; they rely on other sectors in the economy having done the prior preparation as well, such as mining the necessary metals, assembling the proper amount of tractor trailers needed to ship the goods from the factory, and so on. These observations may strike some as trivial, not worthy of the consideration of serious economists. But that’s only because normally, a market economy “spontaneously” solves this tremendous coordination problem through prices and the corresponding signals of profit and loss. If someone had to centrally plan an entire economy from scratch, there would be all sorts of bottlenecks and waste — as actual experience has shown. Without the guidance of market prices, we wouldn’t observe a smoothly functioning economy, where natural resources move down the chain of production — from mining to processing to manufacturing to wholesale to retail — as neatly depicted in macro textbooks. Instead, we would see a chaotic muddle where the various interlocking processes didn’t dovetail. There would be too many hammers and not enough nails, too much perishable food and not enough refrigerated railroad cars to deliver it, and so on. The Austrians on Interest When it comes to explaining the coordinating function of market prices, Austrians assign a very important role to interest rates, for they steer …

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Bob Janjuah Sees a 10% Correction.

Bob Janjuah Sees a 10% Correction.

Here’s great video from Bloomberg with Bob Janjuah. In it Bob discusses what we have known all along: Without the helping hand of the Fed, the market would have ended the year much lower. Start to finish, Janjuah pretty much nails it. Related Articles: Government Run Amok: Unintended Consequences Trouble in Retail: Three Charts from the Frontlines How Uncle Sam Fiddles with the Figures Quantitative Easing For Dummies To learn more about Wealth Daily click here Advertisement History is About to be Made… As one tiny Nevada-based mining exploration company rewrites the rules on gold mining. And as the global economy gears up for what may be the biggest gold rush in history… Their timing couldn’t be better. Turn $1,000 into $108,000 with this once-in-a-lifetime gold investment. Bob Janjuah Sees a 10% Correction. originally appeared in Wealth Daily . Wealth Daily is a free daily newsletter featuring contrarian investment insights and commentary.

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