What a Week!
Everything down, so the Federal Reserve stepped in "to save the day." They gave us an interest cut of 1/2%. What does that mean? It means that there was great "official" concern about the housing market and the financial markets. But there is another side to this which is somewhat below the radar of most people.
Yes, the interest rate was lowered to increase liquidity. That results in an increase in the supply of paper dollars. This is the definition of true inflation which results in the price inflation which is followed by the mainline media and governments. Governments would much prefer to have price inflation than recession. So they take this action which is like pushing on a string. They with the central banks increase the currency supply. There will come a time when people will recognize what has happened and the ploy will no longer be "successful."
International banks will read this action for what it is. They will see that the dollar will lose more purchasing power. The initial trends away from the dollar are beginning to show in Russia and Asia. China, in particular, has moved to "invest" a growing portion of its trillion plus dollar reserve into other assets. They have been investing in natural resource companies in Canada and Africa. Also, they have created in conjunction with "professional" money managers to invest world wide in other assets. Other nations are joining a similar strategy of their own.
Bottom line is that we can expect higher prices on imported products, because the dollar is worth less than it was. It will cost more to pursue the war on terrorism and finance the nations welfare programs. In spite of the TEMPORARY relief at the gas pumps, we are already seeing prices increase for food, medicine, clothing, and other necessities of life. There will be further increases now.
While this is happening, we as worker - consumers are being squeezed by our wages not increasing in proportion to the price inflation. Regardless of what is reported, income for the vast majority of Americans has not been significantly increasing since 9-11. The drop in income is now having a large impact on the recent "fancy easy financing" for homes. Many can no longer afford the payments on their home loans and foreclosures are increasing. The Federal Reserve's action of last week could give some minor relief, but the damage to the dollar will likely have a greater impact upon us.
While gold rebounded fairly well, the mining stocks were slow to recover and then the recovery was not as significant, for the most part, as the drop. It is important to understand that the mining stocks were sold off during the drop in the general markets, due to investor selling to cover margin calls and increase personal liquidity. Investors sought cash where ever they could find it. So the mining stocks were sold along with the rest of the financial instruments.
Gold still has a long way to go in spite of this temporary set back. Thus, the precious metals are still a realistic store of value. The paper currencies have no real backing and will continue to lose purchasing power over time. The mining stocks provide the leverage for the blow out of precious metals as the late comers, lemmings climb aboard at the last minute. When we hear the benefits of gold being discussed over cocktails, bars, dinner parties, and the media picks up on it, we will be well into the third and final wave which comes to the end with a bang and bust. We must try to sell our mining stocks to take advantage of the final party. Then we can use our dollars to eliminate the final bit of debt and to acquire other valuable assets.
There will be a third wave in the general markets, as well. When? This is always the question. We do not know until after it has come into full bloom. We have had a bull market in the financial markets for some years now. Most of the bull markets, except for the dollar remain intact, but for how long? There are still a lot of dollars on the side line and being invested by the rich in a variety of collectibles, antiques, and other high cost items. The real pressure has been upon the middle income people here in America. The middle class in China, on the other hand, has been on the increase with the growing effluence. Figure that, the land of the totalitarian government is more benevolent to capitalism than this land of the free.
Regardless of the circumstances with which we are faced, we must seek the truth which is found in the bible. There is great comfort in knowing the Sovereign Ruler of all. Yes, Jesus Christ is the creator of every one and thing that has ever existed, exists now, and will exist in the future. While He is the Creator, He does not leave after creating, but sustains us on a moment by moment basis. Our next heart beat and breath come from Him. He is our all in all. To know Him is to rest in the surety of His love and caring for each of His people. Accept this truth, rest in Him, and life is much more satisfactory even in times of trouble when He does not leave His people. Nothing can separate us from His love and support.
Best to each, Doug
Yes, the interest rate was lowered to increase liquidity. That results in an increase in the supply of paper dollars. This is the definition of true inflation which results in the price inflation which is followed by the mainline media and governments. Governments would much prefer to have price inflation than recession. So they take this action which is like pushing on a string. They with the central banks increase the currency supply. There will come a time when people will recognize what has happened and the ploy will no longer be "successful."
International banks will read this action for what it is. They will see that the dollar will lose more purchasing power. The initial trends away from the dollar are beginning to show in Russia and Asia. China, in particular, has moved to "invest" a growing portion of its trillion plus dollar reserve into other assets. They have been investing in natural resource companies in Canada and Africa. Also, they have created in conjunction with "professional" money managers to invest world wide in other assets. Other nations are joining a similar strategy of their own.
Bottom line is that we can expect higher prices on imported products, because the dollar is worth less than it was. It will cost more to pursue the war on terrorism and finance the nations welfare programs. In spite of the TEMPORARY relief at the gas pumps, we are already seeing prices increase for food, medicine, clothing, and other necessities of life. There will be further increases now.
While this is happening, we as worker - consumers are being squeezed by our wages not increasing in proportion to the price inflation. Regardless of what is reported, income for the vast majority of Americans has not been significantly increasing since 9-11. The drop in income is now having a large impact on the recent "fancy easy financing" for homes. Many can no longer afford the payments on their home loans and foreclosures are increasing. The Federal Reserve's action of last week could give some minor relief, but the damage to the dollar will likely have a greater impact upon us.
While gold rebounded fairly well, the mining stocks were slow to recover and then the recovery was not as significant, for the most part, as the drop. It is important to understand that the mining stocks were sold off during the drop in the general markets, due to investor selling to cover margin calls and increase personal liquidity. Investors sought cash where ever they could find it. So the mining stocks were sold along with the rest of the financial instruments.
Gold still has a long way to go in spite of this temporary set back. Thus, the precious metals are still a realistic store of value. The paper currencies have no real backing and will continue to lose purchasing power over time. The mining stocks provide the leverage for the blow out of precious metals as the late comers, lemmings climb aboard at the last minute. When we hear the benefits of gold being discussed over cocktails, bars, dinner parties, and the media picks up on it, we will be well into the third and final wave which comes to the end with a bang and bust. We must try to sell our mining stocks to take advantage of the final party. Then we can use our dollars to eliminate the final bit of debt and to acquire other valuable assets.
There will be a third wave in the general markets, as well. When? This is always the question. We do not know until after it has come into full bloom. We have had a bull market in the financial markets for some years now. Most of the bull markets, except for the dollar remain intact, but for how long? There are still a lot of dollars on the side line and being invested by the rich in a variety of collectibles, antiques, and other high cost items. The real pressure has been upon the middle income people here in America. The middle class in China, on the other hand, has been on the increase with the growing effluence. Figure that, the land of the totalitarian government is more benevolent to capitalism than this land of the free.
Regardless of the circumstances with which we are faced, we must seek the truth which is found in the bible. There is great comfort in knowing the Sovereign Ruler of all. Yes, Jesus Christ is the creator of every one and thing that has ever existed, exists now, and will exist in the future. While He is the Creator, He does not leave after creating, but sustains us on a moment by moment basis. Our next heart beat and breath come from Him. He is our all in all. To know Him is to rest in the surety of His love and caring for each of His people. Accept this truth, rest in Him, and life is much more satisfactory even in times of trouble when He does not leave His people. Nothing can separate us from His love and support.
Best to each, Doug
posted by Doug @ 8:54 AM
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