Thoughts on Markets

Friday, July 10, 2009

FIAT Economics Builds The City of Man for Chaos

For today, I hope you will take time to glance over the articles which I have referenced. There is a lot of good information there which should help you in your understanding of economics and investing. The Guide to Mises' Human Action is important for all. You can download it from the referenced site FREE. There is great lack of insight into economics throughout America, since all are deeply into Keynesian Economics which is the FIAT economics of St. Augustine's City of Man.

Men, always feel that they can do better than God, so early on the built the Tower of Babel. Since that time, man has sought, as did Adam and Eve, to be as God - determining what is good and evil. We see this graphically in America as the Federal Government has expanded in size, cost, and power since the War for Southern Independence failed to protect state's rights. Successive administrations, congresses, and supreme courts have substituted man's law for God's Law. Thus, the American City of God has been built and is not in full bloom.

FIAT "money" is at the root of much of our financial woes, but the real problem is a turning from the God by Whose providence our nation was founded. As we look around each Lord's Day, we see more shoppers than corporate worshippers. This is a tradgedy. The Lord requires so little of us and rewards our obedience so greatly through His grace and mercy toward His people, that we willingly respond to Him and attempt to follow His law. His law provides life and peace, but man's law results in choas and death.

Let us all join in corporate worship at a church which preaches the whole word of God, administers the two Christ ordained sacraments, and exercises discipline over its members. Through these churches, the people of God are prepared to present the gospel to the world to bring all under the Kingship of the Lord Jesus Christ. It is up to us to spread the good news of the gospel and to warn against building the City of Man. Let's put an end to the new Towers of Babel.

The 3-Year graph of gold, below, shows that gold remains in an upward trend, but that it seems to be taking a break which could last through the summer. This, of course, depends upon the whims of the bullion banks as they play in the paper futures markets.

Spot gold has been recovering a bit from the overnight lows, but is still a long way from where it was last week. It is struggling upward at 912.40 presently.
Silver has really been hammered and is now at 12.60. That is a real buy, but remember it could go lower as the summer doldrums continue.
The dollar is above its opening in relation to other currencies, but remains week. There is nothing backing it, but the full faith and credit of the bankrupt United States. Since it has been and is the reserve currency of the world, people have become accustomed and comfortable with it. The treasury sales went quite well as central banks bought in an effort to save the world financial system.
Our miners are at price levels which are very attractive. I bought some HL yesterday under 2.50. Here are the current prices for some miners and ETFs >> AUY 8.54; CEF 11.12; DROOY 7.51; GLD 89.63; HL 2.40; HMY 8.57; IAG 9.22; SLW 7.47; SSRI 17.36, and VGZ 1.57. If you decide to buy, buy in smaller than normal chunks. Whether you buy or not, should be based upon your present holdings, cash available, and your risk tolerance. I know that in the future, we will regret that we did not buy more, but that happens very often in investing. Use extreme caution.

For the general market, the DOW is off 28 to abour 8156. Not too happy a situation there, either.


Cap-and-Tax: Government vs. America
By David Limbaugh

There is still time to stop the legislative monstrosity known as the Waxman-Markey cap-and-trade bill before the Senate approves it. But for that to happen, Americans must learn how bad it is.

Let's briefly review the basics: The bill is ostensibly designed to curb man-caused carbon emissions (presumably without outlawing breathing) to retard global warming.

Even if we accept, for purposes of argument, the assumptions of radical, hysterical leftist environmentalists that man-caused global warming will destroy the planet if evil, rich capitalists don't radically curtail their own contributions to the catastrophe, Waxman-Markey would not prevent this Armageddon. Read it HERE.

This is bad legislation which will not accomplish any of the alleged "goal." Once again, we see the truth in Rusas J Rushdooney's statement in a presentation on economics and the family in 1982 which was that our government was, in fact, at war with us, not with the USSR. The war continues and is now escalating greatly. By the way, it is impossible to separate economics from politics. I hope you understand this fact.

In Gary North's Reality Check today, he pointed the way to an excellent study guide on Mises' Human Action. The study guide is 360 pages long, but worth the effort for anyone who wants to really understand true economics which is not taught in many universities today. You can download it in pdf from HERE.


Gold is bad in a deflationary environment - another gold myth

This is Myth #5 in Ronald Stoeferle's Special Report on Gold for Austria's Erste Bank

Author: Ronald Stoeferle
Posted: Friday , 10 Jul 2009


The fact that gold is an excellent hedge against inflation should have established itself more or less as common knowledge. Investors use it to protect themselves against the erosion of their purchase power. However, the development of gold in a deeply deflationary environment has not been subjected to much analysis. The only relevant period that would lend itself to comparison is the Great Depression of the 1930s. However, those were the times of the gold standard, i.e. the gold price was fixed. Read it HERE.

There is a great deal of truth in this article. We must understand these facts. The precious metals never go to zero value, while at some time in the future, the unbacked paper currencies will be worth virtually nothing.


US dollar mostly higher, gold down in Europe

LONDON (AP) - The U.S. dollar was mostly higher against other major currencies in European trading Friday morning. Gold fell. Read it HERE.

The dollar and gold have been delinked by the intervention of the bullion banks. Go figure this >> During the last five weeks the US Dollar has moved upward just over 1%, and over the same period, gold has lost 7.8%. Nothing but the paper manipulation by the boyz can account for this strange action. They hold a monstrous short position in the paper futures markets which they will be unloading at some time. In the mean time, they are just sitting there and laughing among themselves as they move the markets at will. Were the dollar to drop precipitously, as it may in the future, they could get their comeuppance. That would be a great day of retribution for their immoral activities.

From Reuters yesterday:

China demands currency reform, France backs debate

By Simon Rabinovitch and Matt Falloon

L'AQUILA, Italy, July 9 (Reuters) - China called on Thursday for reform of the reserve currency system at a meeting of world leaders in one of its most direct attacks on the dollar's global dominance.

Chinese State Councillor Dai Bingguo did not specifically name the dollar at talks between the Group of Eight rich nations and G5 emerging powers, but he was unequivocal in calling for the world to diversify the reserve currency system and aim at relatively stable exchange rates. Read it HERE.

The tempo of this music to replace the dollar is rising. I believe, Chuck Butler has pointed out, the push by China for IMF SDRs is a subterfuge to hide their real goal of replacing the dollar with the Renminbi. Could happen, you know, but not today or tomorrow. Maybe we should all be learning Chinese.

From Bloomberg yesterday:

AIG May Have Zero Value After Rescue, Citigroup Says

July 9 (Bloomberg) -- American International Group Inc., the insurer bailed out four times by the government, fell the most in nine months after Citigroup Inc. said the firm may have no value left for shareholders after repaying the U.S.

AIG plunged $3.62, or 28 percent, to $9.48 at 4:15 p.m. in New York Stock Exchange composite trading, the biggest drop since September 2008. The insurer has lost more than half its value after implementing a 1-for-20 reverse stock split when trading closed June 30.Read it HERE.

The bailouts have really saved the recipients of the largess, haven't they? NOT!

From yesterday:

G-8: Not Much Ado About What To Do
By Jon Nadler

Precious metals values recovered some of the ground they lost in previous sessions, following a retreat to near 80 on the index by the US dollar, and on the heels of an initial $1.30 bounce in crude oil prices. This morning's initial jobless claims data did little to bring the greenback up from its 0.64 point loss on the trade-weighted index, albeit gold gave up some of its initial gains after the nine o'clock hour saw a decline in oil values back towards the $60.50 level. At last check, oil was on the negative side on the day, trading a nickel under the $60 mark.

Spot gold prices added $5.20 on the open, climbing to $914.30 per ounce. Participants remain aware (and wary) of this week's breach on first-line support in and around this value zone, but opinion remains somewhat divided as to whether or not significant bargain hunting will emerge in this price neighborhood.Read it HERE.

Good news from

Swiss: We Will Seize UBS Client Data

ZURICH -- Switzerland has vowed to prevent UBS from handing over client information to U.S. authorities, in an attempt to defend bank secrecy, saying a tax case targeting its main bank is souring diplomatic ties.

Wealth management giant UBS is facing a court hearing in Miami next week after refusing to disclose data on 52,000 Americans holders of secret Swiss bank accounts to U.S. tax authorities.

The Swiss Justice Ministry said on Wednesday that Swiss law prevents UBS from handing over client information and the government would seize UBS client data, if necessary, to stop that happening.Read it HERE.

At least, for the time being, there is one nation which respects the rights of secrecy for investors. Of course, we have a great protection of personal matters in the U.S., don't we? If things go the way here they seem to be headed, we will have the cameras in every room in our homes. Just like in the book 1984. By the way, if you have not read it, you should. It shows the problems of totalitarian governments for which America is headed. 1984 describes a total totalitarian government.


Shipping flashes early warning signals again

Port statistics are revealing. They were a leading indicator before the production collapse in the Japan, Europe, and the US over the winter, and they may be telling us something again.

Amrita Sen at Barclays Capital says the number of Baltic Dry ships waiting to berth — mostly in China and Australia — has begun to fall after peaking at 154 in mid-June. Read it HERE.

Once again, we see that everything is not beautiful and rosy as we are being told. The proof is here, as it is in other places. The green shoots are simply more dried weeds.

Best to each, Doug


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