Inflation or Deflation?

(click for article)

From table above, notice that since 2007, corp profits have fallen by nearly 2/3, whereas personal income has only fallen less than 1/4. The govt's deficit is going to explode once the layoffs ensue, and this will feedback into lower corp profits and even more layoffs, in a vicious snowball that can not be stopped. The fuse may be the impending corp real estate defaults, which will push corp sector over the edge.

Businesses are cutting costs:

http://market-ticker.denninger.net/archives/2006-Durables-Goods-Oops.html

The bond market is giving off warning signals:

http://www.gold-eagle.com/editorials_08/summers022510.html
http://financialsense.com/editorials/engdahl/2010/0223.html

That is why I say we don't have too much time to get in plans in place in terms of physical metals and having your capital where you want it to be, because I think the chaos coming is going to force capital controls. We know the Australia meeting of central banks was probably about this.

We know there is already a $4 trillion bailout that has been pre-passed by the House. I expect the global money spigot to be opened wide again, but this time there will be serious ramifications to gold+silver and possibly to capital flows (thus forcing capital controls). In short, some key players are going to break away. The hedge funds already started to make their move into physical gold just below $1000.

This is a follow up on my prior post above:

http://www.investophoria.com/2010/02/curing-addiction-and-acquiring-some.html?showComment=1267113093931#c1229943974234061086

http://www.investophoria.com/2010/02/curing-addiction-and-acquiring-some.html?showComment=1267201501676#c7469774478899963522
http://www.investophoria.com/2010/02/curing-addiction-and-acquiring-some.html?showComment=1267201541449#c7135857196610010055

Also the debt-ratios in Europe are almost as bad as in USA:

http://www.investophoria.com/2010/02/curing-addiction-and-acquiring-some.html?showComment=1267204576925#c654500515728870914

Interesting comments about social welfare in Europe:

http://esr.ibiblio.org/?p=1752#comment-249415

(click for article)

The problem here lies in the fact that the national debt is forecast to increase dramatically in the next 10 years. Estimates range anywhere from $18 to $23 Trillion depending on whose forecast you'd like to use. Let's use $18 Trillion as our test case. At this level, assuming an average interest rate of 3.1%, debt service by 2019 will cost around $558 Billion per year. If tax revenues don't change, debt service will eat up 25% of tax receipts.

Ha! Taxable revenue will fall by 30 - 50%, not to mention the massive retirement of boomers (boom of children of post-WW2/Depression problems) worldwide, interest rates will rise to double-digits (for a short while at least) or real interest rates will fall to negative double-digits (which will give the same end result), and thus the cumulative debt (due to exploding budget deficits) will balloon to at least $23 trillion (from $11 trillion currently), thus we are looking at interest payments on the federal debt alone (which doesn't include the private debt which will be serviced out of rising tax rates) exceeding 100% of tax receipts!! That means financial default of the US govt on Treasury bonds.

Do I need to show the exact math? Total govt receipts are $2 trillion, let's assume somehow by magic (not yet accounting for money printing which I do below), these only fall -30% to $1.3 trillion. Given only 10% interest rates (they went much higher in 1980s and this is much worse than 1980s), that is $2.3 trillion annually to service a $23 trillion total debt projected. Where do you get the $1 trillion gap? So you borrow $1 trillion more per year, so everything spirals that much faster to default. But that doesn't even count the fact that all those numbers are co-dependent (dependent variables or covariant), and a vicious downward spiral will circulate between them. For example, as tax receipts fall, the annual deficit increases, which increases the rate at which the total debt increases, which increases the annual debt payments (at any interest rate), which thus increase the rate at which the total debt increases. And this will lead to more unemployment, which will lead to lower tax receipts and higher demands on the govt meaning unfunded liabilities will increase from the current $63 trillion level. Even if the govt prints money, it won't change the dynamics of the ratios (because the govt has to borrow it into existence in order to spend it), it will only adjust the nominal numbers upwards, but still in the same unsustainable ratios. There are only two ways you escape from this trap (well actually they are the same effect), either the govt and society defaults (Argentina) or the govt prints money without borrowing it (Weimer). And as the people with capital start to sense this doom, they will refuse to finance the govt debt, which means interest rates will spiral upwards (MUCH, MUCH higher than 10%), and if the Fed prints the money to buy the govt debt then you've got the Weimer situation, so even if interest rates are nominally 0%, the inflation will be so high that real interest rates are negative to a spiraling extreme. What I mean is that it that the market will not favor bonds and dollars when the real interest being paid on them is negative, the market will run to gold. (Tangentially, this is why I don't advise on betting against interest rates, because you don't know which road the govt will choose, besides your gains are in paper which is being debased, you can't win shorting bonds, it is only a short-term speculation). Example, as interest rates in USA have been falling, the cost-of-living in Asia has continued to increase (and much faster than the Asian govt's are sometimes reporting, but the wages are also increasing fast, so people here don't complain). There is no way out of this, except gold and silver. (Btw, I think the Central Banks will from time-to-time pull back on the liquidity, so that inflation does not become obvious, but this of course drives the long-term interest rates up, although it can drive the short-term interest rates down in a deflation scare. Eventually this game won't work any more, as the wheels start to fall off the western economies and the deficits and debt service spirals out-of-control).

Financial default of the USA (and few other western nations) is virtually guaranteed. The masses lately think dollar and bonds (they've been piling into this "safety") will outpeform gold in that scenario? Why? None of the paper instruments can not survive "backed by the full faith and credit of the US govt", because the govt is bankrupt (soon).

http://financialsense.com/editorials/casey/2010/0302.html

As you probably know, the CBO has stated frankly that continuing along the current path leads to unsustainable deficit levels and bankruptcy for the country.

According to CBO projections, debt will spike sharply upward in 2015, rising – relentlessly and unstoppably – to over 700% of GDP in 2080. Of course, the economy will be destroyed and government forced to default long before then.

If go to my prior post about Pretcher (and other deflationalists), the mistake of their analysis is that they assume there is the possibility of stabilizing the economy with deflation on bonds and dollar, but in fact there is no possible deflation that can render the US govt solvent. Every road (money printing or not) renders the US govt insolvent and in default. That is why gold will outperform in this deflation, because the western nations are going to default. That leaves only gold standing in the end. Go back and look at John Exter's Inverted Pyramid again (he predicted this since 1980s).

http://fofoa.blogspot.com/2009/11/gold-is-wealth.html <--- VERY INTERESTING PAGE

The problem with the logic of such as Karl Denninger (I traded several emails with him in past on this subject matter), is that man's rule-of-law can not be upheld in an environment where the majority is bankrupt, because it either means the majority agrees (to the natural law, aka the Biblical law) to be slaves to the people with capital (allowed for 7 years in the Bible), because any other outcome is the majority stealing from those with capital. You can't have it both ways (which is the myopia of Karl). So in effect, those arguing for the rule-of-law and not at same time arguing for slavery (i.e. man's rule-of-law, not the Biblical law which does not allow centralizing outcomes), are in effect socialists and their "solutions" will in effect be no different than slavery. The Bible is very clear about the outcome which is 100% unavoidable no matter which road is chosen-- "the borrower is slave to the lender". Karl thinks that if somehow we restored the "rule-of-law" (which an oxymoron any way, because man's law is socialism, i.e. pooling of effects), that this would magically make the majority not bankrupt, and thus he hasn't calculated correctly. He thus must think the people with capital are going to stay invested in the USA with such an imploding tax base? He thinks you re-build all the industrial infrastructure and undo all the waste, with a retiring population, in a matter of months? No! First you get implosion (a chaotic release back to the decentralized outcomes of Biblical law). And the sooner you get on with that, the less worse it will be, but no matter what, we are way beyond the point where we have an abyss up ahead. The USA will need massive youthful immigration to pull out of this abyss quickly. The USA has a reasonably high birth rate with all the recent immigrants, and dismantling the welfare state may give these existing youth the motivation to stop taking drugs and emulating rappers and other frivolous activities, and get back to real honest life of hard work. USA has 50+% of the youth unemployed, I remember I started working at about age 13 and nearly always had a job from 15 onward, and I think I had it pretty easy compared to folk who grew up on a farm. A country that spoils or otherwise can't employ its youth, is wasting the most valuable resource it has. When the youth are working hard, I will know the USA is growing again. Heck when Caucasian women start having 3 or more children again (but that may never happen), I will know the USA is back on the mend.

And this is why US citizens who have any capital have to get it out of the USA or be prepared to protect it well. Do not leave it any where the govt can touch it electronically, as the govt will have no choice. A desperately bankrupt govt is going to do whatever it can to survive!! Remember I saw this in advance when I publicly warned that retirement plans were a scam way back on July 20, 2006. One might argue above that by increasing taxes, the govt can stay solvent, but increasing taxes never increases tax revenues (that is well proven many times in past), because it shrinks the capital available to private sector to invest and produce from. Another small point against deflationalists, is that this will drastically curtail supply (production) of goods and services, thus driving prices for them higher (the economy will reduced to the most efficient producers and consumers, and the rest will be priced out of the market).

Make sure you report all income to IRS, including any losses from debt you default on (I think this is an income gain per the IRS), do not even try to hide what can be tracked, because the govt will hire an army of people to come after every person, where the amount that can be gained is greater than the cost of going after you. Remember, unlike most other countries, US citizens are liable for taxes no matter where they are in the world!!! We are at a big disadvantage. I am seriously considering ending my US citizenship, but it is a big decision and I have not leaped yet. If you have more then $2 million, then you will pay a 50% exit tax on your net worth to relinquish your US citizenship. As the crisis worsens, that ceiling will come down, eventually to cover capital flight in smaller amounts. Europe will also be forced to trap its citizens and capital, even more so, since they can't tax them abroad.

I commented about this in a forum in the Philippines:

http://motorcyclephilippines.com/forums/showthread.php?p=4527078#post4527078

Eric Raymond, the guy who created "open source" which powers the Firefox browser you are using to view this web page, says he will have to buy gold:

http://esr.ibiblio.org/?p=1752#comment-249467

Apparently US Citizens can not escape taxation for 10 years after renouncing citizenship!!!

http://esr.ibiblio.org/?p=1752#comment-249759

Who says we don't have inflation in food and energy:

http://www.investophoria.com/2010/02/gatas-uphill-battle-and-last-ones-to.html?showComment=1267364922616#c8166265144777477038

<--- click it for 90 day money-back trial with in depth report on China and global situation

============
ADD: Vronsky (publisher of Gold-Eagle.com), one problem with your thesis about inflation

http://www.financialsense.com/editorials/vronsky/2010/0301.html

I agree, except there is one problem the USA did not have in 1970s. That is that if inflation rises, then long-term interest rates rise, which means the USA can not service its debt. I calculated that at 10% interest, then taxes can not pay the annual service on the national debt. And that will only get worse if wages do not keep pace with inflation, which is precisely why inflation increases employment.

So sorry, this time that won't work. We are headed for complete implosion of the USA, and a madmax outcome. It is mathematically impossible to get any other outcome. There is a reason our army is in middle east watching over the oil we will need to make war because when we default on our bonds, we will have to steal the energy we import to keep our farms running.Still most people do not understand the math in my previous post above.
==================================




Here I try to state it in more simple way:

http://www.investophoria.com/2010/02/gatas-uphill-battle-and-last-ones-to.html?showComment=1267471809692#c1718112353248608840

And it makes sense now why we went to Middle East to "protect" the oil:

http://www.investophoria.com/2010/02/gatas-uphill-battle-and-last-ones-to.html?showComment=1267473376031#c3096540384378171700

Energy plays a crucial role:

http://www.investophoria.com/2010/02/gatas-uphill-battle-and-last-ones-to.html?showComment=1267478109432#c1581424253513267279
http://www.investophoria.com/2010/02/gatas-uphill-battle-and-last-ones-to.html?showComment=1267450350081#c3281392113549187820
http://www.investophoria.com/2010/02/gatas-uphill-battle-and-last-ones-to.html?showComment=1267426565449#c2596762386418254935
http://www.investophoria.com/2010/02/gatas-uphill-battle-and-last-ones-to.html?showComment=1267487911553#c126801367575154497


==========
ADD: I think I know what Bernanke meant:

http://gold-eagle.com/editorials_08/souleles022810.html

"We are not going to monetize the debt."

He may mean that he isn't going to let the excess liquidity from monetizing the "service on the debt" get into the public's hands. He was warning Congress that he will not give them Weimer hyperinflation now (that comes later at the end). The outcome of a huge debt (as the bible says, "borrower is slave to lender") is that the public must be enslaved. He can accomplish that by transferring the money to the bankers (lenders) instead, as he has been doing. They move the money to the developing world. This is why Gold is going up, even while have deflation in the USA. It is another way of re-balancing the world, without doing it through the exchange rate of the dollar.

Perhaps Bernanke thinks he can inflate up developing world to the level of USA, thus accomplishing the implosion in a stealth manner. So maybe the US budget deficit spirals to enormous amounts, but we just keep printing the money to buy our own debt, but just enough to pay the debt service, not enough to put extra money in Westerner's pockets. Long-term interest rates would go higher, but the fed would just keep bailing out the defaults. This will be very bullish to gold and even more so to silver, and I think physical supply of silver is one major obstacle for Bernanke to do this. I think they will have to let silver run up in price soon or face physical default of the western ponzi scheme.

So indeed the default may not be imminent. No country in the world wants to jump ship, as they all are interdependent. This is what is in Bernanke's favor. The key is for him to manage "inflation expectations" so he can slow boil the frogs in the pot. And this is a mechanism for pulling all the countries together into a new world order. Then at the end, a new currency is issued and everything is reset with all countries re-balanced to the same level. Nice in theory any way, but there will be many challenges to keep such centralized socialism going...

So there won't be any deflation here. Bernanke is dropping the money from helicopters, just not in the USA. I saw it in 2008, when everything imploded in USA markets, all of sudden it was like they flipped a switch and the next week there were new roads going up all over the entire Philippines. I mean every nook and cranny of every provincial area. And this is country that rarely spends a dime on roads.


> I have been reading over you posts on the the mathematical certainty
> of economic collapse. I don't understand people like Bernanke. I am
> trying to put myself in his place right now. There is three
> scenarios I can think of regarding Bernanke's knowledge about where we
> are going.
>
> 1. He doesn't understand where we are headed. This one I have to
> discount. He is not stupid. He can do the same math that you have
> done, and actually has far more resources to predict this. And as
> you linked, he is beginning to issue warnings.
> 2. He does understand, knows there is absolutely nothing he can do
> about it, and is just doing the best he can until financial
> armageddon. This scenario seems most likely, but why would he keep
> his job at the fed? His name will go down in history as the
> man at the helm when it happened. It seems he would jump ship, get his
> financial house in order, and go hunker down until it unfolds. Maybe
> he thinks he can stave it off for a few more years, and dump it on the
> next poor schmuck who takes over the fed.
> 3. He does understand, but thinks he is so smart that he can steer us
> through the black hole. But if that is the case, he really doesn't
> understand, because of mathematical certainty of collapse. Refer to
> number 1 in this case.
>
> What do you think?

And more about the possibility of delaying the implosion:

http://www.investophoria.com/2010/02/gatas-uphill-battle-and-last-ones-to.html?showComment=1267539334931#c1484243191402650384
http://www.investophoria.com/2010/02/gatas-uphill-battle-and-last-ones-to.html?showComment=1267539631672#c3565969923306838654
http://www.investophoria.com/2010/02/gatas-uphill-battle-and-last-ones-to.html?showComment=1267559220693#c9078636866705714587

Also:

Shelby wrote:Vronsky, also I wanted to follow up on my email to you yesterday, wherein I postulated that implosion was the only possible outcome for the USA debt bubble. Well after further thought, that is only if people jump to gold and silver. For as long as they do not, then the world can continue to increase the debt levels and socialize the defaults. It is madness! In this way, Bernanke can inflate the (prices and wages in the) 3rd world up to the level of the west (with carry trades, swaps, currency pegs, etc), thus decreasing labor-cost arbitrage unemployment in the west. Of course the method is horrible for savers (as it socializes wealth) and is part of the bankster ratcheting theft model, and that is why I say Bernanke's plan can only work for as long as savers do not protect themselves in gold. He will go as far as he can, then when gold bugs (more likely the silver is where physical default will first take place) force physical default, then there is no choice but to turn over the mgmt of the next stage to the war mongers.

So yes the theme of your article was correct also.

Here is how I explained it to my mother in email:

Shelby wrote:The implosion will instead be a gradual decrease in the standard-of-living in the West, by increasing it in the developing world (with price inflation). That is if the central planners can avoid stepping on any potholes called the "free market" or "nature". Me thinks they can increase the debts and socialize the defaults for while longer, but that piper will be paid much worse in the end because of it, more likely turned over to the WW3 mongers at the end of massive over-extension of mis-allocation of world capital (human productivity).

What does that mean? It means we should implode now, so people set their priorities correctly (stop being allowed to waste the resources of the youth of the world, mostly in developing world), instead Bernanke and our govts will borrow for us and transfer the wealth to the developing world in socialized manner. We will get poorer more slowly so that we frogs do not jump out of the slowly warming pot of water. Then the end game is FASCISM, because the implosion level will be so much more drastic by then.

In short, the Fed will create deflation scares to keep the dollar from imploding too soon, and it will route the inflation to re-balance labor values between west and east, while giving the banks the ownership of what was spent by the inflation. The national debt will rise to ridiculous levels, with Fed financing the interest payments on the debt.

Note this provides a massive opportunity in the free market, if anyone can figure out a way to route society around this bankster plan.

Actually I think I have the idea how to do it. I am working on it, and have 5000 lines of working code written already. The more I think about what I am working on, the more confident I am. 'Nuff said. I need to release it before my 45th bday on June 28. It will be called http://Copute.com. I explained the plan here.

===========
ADD: someone sent me this link. Bernanke is simply hiding the fact that he is already hyperinflating (which is ending up in the developing world as I explained above):

http://www.fgmr.com/us-dollar-money-supply-is-underreported.html

As long as he can continue to create more debt and socialize the defaults with this hidden hyper-inflation, then he can re-balance the world in this "stealth" and socialistic manner.

This explains Bernanke's psychology game:

http://www.kitco.com/ind/Nathan/mar022010.html

When he fails (and mathematically he must eventually), then we get hyper-ininflation:

http://www.fgmr.com/what-causes-hyperinflation.html

The enabler of doing policies that knowingly hurt others ("the greater good" excuse) is driven by this:

https://goldwetrust.forumotion.com/technology-f8/psychology-t123.htm#2763

===============
Let me explain what "purchasing power" means. If gold falls -25% but copper falls -50%, then I can buy 50% more copper than I could before the price of gold fell by 25%.

Do you see why people get so confused?

The Fed is taking advantage of this confusion, to make us think we are in deflation, when in fact we are in inflation.

The Fed is in control of the YoYo ruler we use to measure price. And they need to keep signaling deflation, as that is the only way they keep everyone in dollars while they inflate away the problem

In short, Bernanke is idolizing Mises, not Keynes!! Amazing but true!!

http://www.investophoria.com/2010/03/dow-and-gold-today-and-tomorrow.html?showComment=1267618643202#c4467378737083568708
http://www.investophoria.com/2010/03/dow-and-gold-today-and-tomorrow.html?showComment=1267625788560#c8880896274200249399
http://www.investophoria.com/2010/03/dow-and-gold-today-and-tomorrow.html?showComment=1267640294304#c5382582234651098236

Thus Bernanke is no longer an enigma. Understand how power corrupts:

https://goldwetrust.forumotion.com/technology-f8/psychology-t123.htm#2763

Bernanke sees the opportunity to "help the world" by easing the re-balancing of the world, by bringing the USA down slightly and the developing world up. He knows this can't be done politically with a "hard-down" (stampede) move to gold, because it would cause the public's expectations to turn catastrophically bitter and extreme, there would be probably war, etc.. because the USA is so bankrupted beyond repair. I think it was seen as politically expedient to the cause of humanity, to essentially devalue the westerners relative to the developing world in the most invisible way.

Bernanke is getting to apply his 1500 SAT IQ and his theories to the big game-- the entire world. He must feel so important and validated right now.

Go back to what Mises was teaching-- that inflation or deflation is a function of the mentality of the masses, not how much money is printed or not. The absolute levels of debt and M3 will matter, but not until the public decides they do. Those increasing levels accelerate the pressure but nothing truely breaks fast until the herd stampedes (by then it is far too late, the corral was long ago closed-- the west is bankrupt).

Bernanke will fail, as power always corrupts the end result. Centralization of decisions (not free market) always fails. He is simply making the problem much worse, but I am sure he thinks somehow he can inflate the developing world and balance the world in time. But he doesn't realize that he is causing massive mis-allocation of resources in developing world too, just as Greenspan didn't realize:

http://silverstockreport.com/2009/greenspan-misapplied.html

Greenspan idolized Arlyn Rand instead of the wisdom of the Bible. Bernanke idolizes Mises and wants to apply his theory. Bernanke doesn't idolize Keynes, rather Mises. They all failed the 2nd Commandment, and thus have failed to understand the free market (Biblical capitalism).

http://www.kitco.com/ind/schoon/mar032010.html

Look at the double-digit inflation in China. Look at real-estate prices 80x income. We have already inflation which is driving the purchasing power of the Chinese up relative to the west. You now have 300+ million Chinese middle class who can buy cars, etc, that didn't exist 15 years ago.

So Schoon needs to catch up with what is already happening.

My writings are disappearing on the internet:

http://www.investophoria.com/2010/03/dow-and-gold-today-and-tomorrow.html?showComment=1267640294304#c5382582234651098236

Click any link on this page, except the first one:

http://www.financialsense.com/fsu/editorials/moore/archive.html

So folks, someone is displeased with the revelations I made in the past few days. It is not worth the risk for me to continue writing. I am going to shut down my public writing.

You all know how to reach me via private email?

antithesis at coolpage dot com

I will be focusing more on my personal matters. I have done the best I could to help, but there is nothing more I can do in the public writing sphere. It is really dangerous.

Some of my writings are still not deleted, including the 4446 reads on one article:

http://www.marketoracle.co.uk/UserInfo-Shelby_H_Moore.html
http://www.gold-eagle.com/research/moorendx.html


===========
I posted a goodbye on the jasonhommelforum.com

Someone is deleting my public writings all over the internet:

https://goldwetrust.forumotion.com/economics-f4/inflation-or-deflation-t9-330.htm#2774

Probably because of what I revealed this past week about how Bernanke...any way most of the recent writings on that and points got deleted...

Steve, what I have said is that gold & silver are going much higher long-term, but that I prefer to buy at the 50 - 65 week moving average (which is currently $1050 and $1000 gold respectively). I was a buyer at $1090 and I would have been a buyer at $1050, had I not had my head in sand programming. The other point I made is that no one knows the short-term direction of the price.

I had not login to this forum since Feb. 03, when I made this post:

http://jasonhommelforum.com/forums/showpost.php?p=53206&postcount=22

I suspect this will be my final login to this forum. I wish every one the best. It was a nice run for the past few years with this forum.

I want to tell you that the world is horrendously bankrupt, but Bernanke is going to try to socialize the defaults globally, by driving up inflation in the developing world (my point was that if commodities go up but housing goes down, then the inflation has been exported from the USA, no inflation in USA). Lifting the wages of 3rd world up, thus a re-balancing without a collapse in the dollar nor inflation in USA. But the problem looking forward is there has been too much mis-allocation globally and there is too much oversupply of production. I am not sure how much longer he can hold it together, but he might surprise us. But the end is going to be WW3. It is going to be horrible. The one bright spot will be an explosion on new technology.

Thanks to Jason for everything. And God bless to everyone. I am signing off. You know where to reach me in private email.

==================
Bernanke
==================

Mises had 2 points:

http://www.kitco.com/ind/Nathan/mar022010.html

1) Masses moving their money out of fiat causes inflation, not the excess creation of fiat itself. The excess puts pressure on the various factors that could drive the masses to stampede, but until they do, then mass psychology (delusion of crowds) controls inflation.

2) Eventually excess money creation causes a crack-up boom. It can not be avoided indefinitely, but the timing can be unpredictable and it can be delayed by #1 (which makes it much worse in the end). The reason is because of the mis-allocation caused by excess debt. It eventually suffocates the economic system and forces a stampede by masses (by then it is too late, the corral has already long since been locked shut).

Bernanke is using #1. The plan appears to have been to impoverish the 3rd world over the past few decades, to build up an excess cheap labor supply, by transfering the wealth of the 3rd world to the west via the BOND BUBBLE. Now the debt of the west can be exported as inflation to the developing world. When commodities go up, wages in developing world go up, double-digit inflation in China (housing in cities at 80x income), but the leveraged assets in USA (e.g. housing) decline, offsetting the commodity inflation thus a net no inflation in West (the commodity inflation is offset by a deflation in housing values, well at least the change since 2008):

<--- click

This keeps the western masses like frogs in a slowly boiling pot. Thus this is a way of transferring the wealth back to the developing world and thus re-balance the global economy. But of course, the banksters get special privilege and are able to own a lot of this transfer. Again, I don't think Bernanke will be successful forever, because the mis-allocation being created is so immense that I don't think even Asia can absorb it. For example, I read about massive oversupply of production in China and a huge wave of excess exports loaded into container ships heading to west now as we speak (recently shipping rates have jacked up by +10% on this surge in exports). But the problem is there won't be enough buyers. Again they will repeat another round of global stimulost, again transferring more wealth out-of-west via a stealth mechanism as I explained above. Bernanke has the advantage that as long as all the countries have an interest to stay on board, and as long as no inflation in USA, then there is really no reason for people to stampede. The defaults are not really the problem. They can print as much $ as they need. The threat for Bernanke is to make sure any stampedes or big flight is prevented.

I find it very interesting. They repay the debt to developing world (by printing money and distributing in such a way via swaps, TARPS, currency pegs, bond purchases while China sells out, etc) creating inflation there, but the collapsing western asset values keep net inflation low in west. This is the clever plan Kissinger was putting in place with the Chinese back in 1970s.

That is why I say the central banks will move to capital controls once they see people trying to flee fiat. But that isn't going to happen tomorrow. Maybe in 6 months, but more likely in about 1 - 3 years from now. We may be surprised how long this can go on. The dollar has a huge inertia. No country in the world really benefits by jumping ship, certainly not China (not yet... they have too much oversupply and can't absorb it without the global economy, ditto Germany which is why they won't let Greece fail).

============
ADD: from private email:

Shelby wrote:I suppose I always wanted a simple method, that makes sure I am buying value, so I can sleep well.

I have a responsibility (Parable of the Talents) to use this capital to generate more prosperity and happiness for the people who work hard.

But I I had been searching for a complete understanding to achieve that (my engineering mindset says to have a comprehensive understanding). The answer that FINALLY came was that I don't need a complete understanding, just metric of value.

I am also satisfied that now I understand the big-shift that is taking place. It is so simple. We borrowed capital from the 3rd world (their natural resources borrowed via our declining interest rates from 1982 to 2008), making them poor (this was enforced as our govt colluded with the rich in those countries), which inflated our economy. Now we are paying them back (all the monkey business our Fed is doing with swaps, tarps, currency pegs, bond purchases as China sells, etc means the money leaves the USA), which is causing inflation in 3rd world and basic commodites, but because we have collapsing asset values in west due to the debt defaults, there is no net inflation in west, thus the westerns do not run from the fiat (Mises said inflation is only caused by what the people do, if they run from fiat to hard assets or other fiat, we have inflation). It sounds fair, but the bad part is that it is being accomplished via centralized management and those parties will take most of the profit. It is a socialized model for re-balancing, and thus it will end up with massive failure. For example, China's peg means they have an oversupply of manufacturing and the rest of the world can't consume it, because they have nothing to trade to China (except debt). So that is why I say the westerners are frogs boiling a in pot, and by the time they realize it is boiling, it will be too as all that mis-allocatin of capital will have festered too much.

Any way, lets keep it simple to the those 2 rules I stated.

Inflating the developing world, while stagnating the western world, in theory inflates away the debt because the developing world rises in value and thus the debt is lower % of global GDP. There is no doubt there is some real growth in developing world. However, the reason this can not work for Bernanke, is because this is creating more debt in the west (and in developing world), so thus what is most accomplishes is it lets those with special access to the Fed programs siphon off the profit of this (e.g. banks getting arbitrage of paying near 0% for funds and loaning it on credit cards at 15 - 24%). And it buys some time, because the westerners (and the world) see a mix of deflation and inflation and thus do not run from the fiat (until it is too late in a stampede of hyper-inflation and implosion). This is really just the bankster business model in action:

http://www.silverbearcafe.com/private/01.10/thinklikeabanker.html

The banker's guide to owning it all (14 steps)

1. Become majority lender in an economy of people with assets you want.

2. Encourage indebtedness by loaning generously while securing on assets of interest.

3. Loosen lending standards until the assets you seek to capture are attached. (this makes the economy debt dependent)

4. Once debts are significant for the bulk of the population, sharply tighten lending standards. <-- Economic shock - Onset of deflation

5. Backstop losses with public guarantees if possible. This is gravy if one can get it. (Fannie and Freddie guarantees, for example)

6. Permit default 'without risk' on the assets you wish to sieze to maximize wealth transfer. (stall foreclosure, stay repossession orders etc)

7. Stall the economy to maximize default positions and deplete private liquidity. <-- We are here

8. Successively ratchet the economy downhill, while bettering secured positions.

9. In a series of large actions, sieze all security for default. Target the assets of greatest interest first. (This deals a heavy economic blow and can help cause the ratcheting required for step 8.)

10. Transfer asset ownership, but retain prior owners as renters where possible. (This reduces public lashback and helps maintain the asset for resale)

11. Once the bulk of assets of transferred, write them down to leverage the public financial backstop.

12. Buy up as many remaining assets on the cheap as possible. Hide this action.

13. Hyperinflate to destroy the external claims on wealth. <-- Onset of hyperinflation (This destroys treasuries, gov't bonds, currency. Ensures free title on new assets. May cause war.)

14. Stabilize the currency or devise a new one, resume lending at a reasonable pace. Sell the assets back, secured of course, at your chosen price in new currency.

I want you to understand that article above. Imagine you can loan money out-of-thin air, then you withdraw credit from the economy, and then you own all the secured assets from the loan defaults. But they don't really want to own the assets (they prefer to keep a servant tenant), they want to own the control. They think "money is power", so they are most interested in maximizing power. It is an addiction, just like any other addiction, such as my addiction to writing in this forum:

https://goldwetrust.forumotion.com/technology-f8/psychology-t123.htm#2763

Shelby wrote:...My writings are disappearing on the internet...

Have you spoken with anyone about this?

UPDATE: someone emailed me this, I did not have time to verify it:

http://www.scribd.com/kzuur58

Hi Shelby,
Just wanted to let you know something strange is happening at Martin
Armstrong's site. The administrator's posts, comments and articles keep
being deleted, changed and scribbled out. It seems someone does not want us
reading his work. Also, some others are now claiming it's not even his work.
(I'm sure that was planted). I thought I would send this info to you after
you claimed someone was deleting your work too. I started printing out his
articles as they are posted, as they might not nbe avaialble much longer.
Check out the comments below. Others are already gone!
Keep up the good work,

============================

nuwrldudder wrote:

Shelby wrote:...My writings are disappearing on the internet...

Have you spoken with anyone about this?

Thanks for your concern.

Let's not go back and forth about me in this thread, because I don't want to bury the important point I made about Bernanke's plan in my previous posts just above yours. If you want to start another thread to discuss more about me and disappearance of my writings, then please do.

Please note that I had emailed my recent posts about Bernanke to many prominent analysts (e.g. CaseyResearch.com, John Nadler at Kitco, Jim Willie, and many others), because I thought it was a very important insight. And also in those posts, I was basically saying that no one can predict the short-term movements of price and thus I was I guess implying that subscribing to analysts is a waste of money. It is possible that I pissed off someone in that industry. However, those who use appropriate stops, apparently are able to earn a return on short-term trading. I wasn't writing about the aspect of using stops and cutting losses and letting winners run (i.e. Chris Vermuelan's strategy, probably Clive Maund also). Nevertheless, I think most people will be better served to just ride the bull market in gold & silver and not trade, and simply time new buys with a simple formula.

I have not emailed financialsense.com (you are welcome to if you want, maybe it was just a clerical error), and the reason is because it had become increasingly difficult to get them to publish my articles (or maybe that was just my wrong interpretation). And for the last article "How Deflation Is Inflation", I said that I would email my 25,000 coolpage.com customers and send them to the financialsense.com article, but I never got around to doing that, because I am very focused right now on programming Copute.com. I think it is best to just leave as it is. Also it appears that someone made sure that financialsense.com articles are not archived:

http://web.archive.org/web/*/http://www.financialsense.com/fsu/

You can see that gold-eagle is archived, but they put a stop to it since 2007, so I think someone is making sure our research can be deleted from history:

http://web.archive.org/web/20071003165603/www.gold-eagle.com/research/moorendx.html

The is another reason why I need to stop writing in public and focus all my efforts on Copute.com. We need to put a stop to the centralized control over the internet. The biggest problem on the internet right now are data jails and deleting data (e.g. people constantly have their videos deleted from YouTube by Google censorship). Example is you join Facebook, and it wants your gmail or yahoo password, so that can know who all your friends are. But you don't want to give Facebook unlimited access to your email data. But your email data is owned by Google or Yahoo (in this example), and Google and Yahoo do not have a feature which allows you to limit what Facebook can retrieve with your password. So you either give complete access to Facebook, or no access. This is a data jail, because your data is not controlled by you, but by Google and Yahoo. The solution to this problem is the "holy grail" of "mashups" which is what everyone on the internet is currently trying to figure out. I think I have the solution (btw I emailed Douglas Crockford and explained why his proposal won't solve the problem), and it involves separating the code (the websites) from the data. And it will be based around http://Copute.com (which will be more than just a new computing language for cooperation). It also means the data won't exist in just one place, it will exist in multiple copies all over the internet (de-centralization), but it will still be encrypted and private and only you will decide what code has rights to do what you want with your data. For now, I am working on the deep technical issues and it will be some months before I have a product that is simple and for the naive consumer:

http://copute.com/dev/docs/Copute/ref/function.html#Purity (explains ONLY SOME of the cooperation technology)
http://copute.com/dev/docs/Copute/ref/
http://code.google.com/p/copute/issues/list

The above will completely change the world if I am successful. So I need to stop writing and spend more time programming. I am really a much more talented programmer than I am a writer.

So please wish me luck. I had been programming like 14 - 18 hours per day the past 3 weeks (had been working on it on/off over past year or so but only recently gelled into a full-time focused effort), but I was wasting too much time interleaving financial writing and research. If I focus exclusively on the programming, as I used to do when I was younger man (before I knew about all the evil in the financial world), then I can do some really amazing things in a very short period of time. I really need to stop talking about doing something important in technology, and JUST DO IT!

In fact if I am successful in starting Copute.com, then there will be many opportunities for people to make money on it (in fact the reason it could kill "open source" is because it will enable a finer granularity of contribution and cooperation that is monetized to the individual, not to the group!!!). All of you who do creative work on the computer, will potentially find a way to earn big money with this. It should open the China market to all of us to sell into it. I will explain more about that later.

Hopefully who ever did not like my writings, will be appeased as I shut up publicly.

If you have any more questions about my theories about where we are headed in the financial realm and why, then please ask now, while it is all fresh in my mind, as I am sure I will forget as I get deep into programming mode for next months. And for the short-term price predictions, lets not discuss more, I have a simple set of rules to follow now.

==========================
From private email about this
==========================

Shelby wrote:ADD: I was sprinting BAREFOOT on the concrete. Feels great, maybe I need
to induce more pain (stimulates the circulation, loosens the
muscle/tendons?) to alleviate the medical problem I been having with my
feet. Also it is theoretically possible TPTB could have a connection at
Google and financialsense, but not at markettocracy and gold-eagle.
Vronky and westerman at gold-eagle know me, because they are CoolPage.com
customers, they used to use my software! But I think they've lost respect
for me lately, because I talk too much and do not produce any good
programs any more. 'Nuff said. Clearly I am suffering from a compulsive
internet addiction (nothing too severe because when I stop and travel I
hate to come back to internet stuff), I need to unplug from internet and
program and do more normal life things like sports/outings.
===================================


Yeah more likely financialsense.com had a clerical error. And Derek
Blaine probably deleted his investopheria.com because his prediction for
gold to fall to $650 was failing.

However, there was a strange thing that happened tonight. A yellow
lowered Honda Civic (white painted rims I think) parked in the extreme
dark across the street from my house tonight at about midnight. That
never happens. Lovers park at the beach line 2 blocks away. I went out
to see what it was about and he started his engine and turned on his
headlights, then off his lights again, then hesistate to drive away. My
gate was locked so I could not get out to his car. He drove away, I ran
inside to get my keys, and then sprinted to the beachline to incept him
before he could turn to exit the subdivision (I live in ungated
subdivision). I stood right up next to his car as slowly drove by and got
his license plate but I couldn't see who was inside because even the front
windshield was tinted black.

Yes TPTB could easily take me out here. Only costs about $500 to have
someone killed. The Davao Death Squad executes criminals in the road in
daylight on drive by shootings. But I trust God. God will decide all.
God knows my faults, and he knows my heart. I leave it in God's hands.
Nevertheless, I proved that my foot problem is not going to slow me down,
as I sprinted on the concrete at blazing speed. It inspired me. I want
to get out of this location where I am living and get back to programming
a lot and doing sports a lot.

I am tired of writing, as it is not changing any thing. I want to achieve
something. I am wasting my life with all this writing.

Thanks for appreciating my writings. Actually the technology stuff really
correlates to what I am working on, because it is true that technology
will increase during this crisis. The programmers are going to get very
wealthy. But I need to focus on doing, not on reading. So try to be very
judicious in what you think needs my attention. I love to talk and share.
I love it! I am a southerner at heart. But i need to get back to being
productive. I am wasting my talent. I have an exception talent as a
programmer. I am embarrassed to God, for wasting my talent.

Too much talking. I am being sent a message, and that message is shut and
work.


P.S. If they are going to kill me, they have to catch me. I am still fast
sprinter. And I am going to start training hard again. I feel really
great after sprinting tonight. after that, I was out at beachline
sprinting and running 2 miles at midnight. Nice to work here at night,
quiet and not so hot.

See prior posts on this page (which I added to since you last read them), and read the following which I wrote in 2006:

http://www.coolpage.com/commentary/economic/shelby/Inflating%20Deflation.html

So all my writings have re-appeared, except for the ones at financialsense.com

I am happy about that, but I am still going to stop writing publicly.

Congratulations to Derek Blaine for getting his site back online.

Derek, explained they were moving the nameservers to the new host (I can do that in 15 minutes, hehe):

http://investophoria.blogspot.com/2010/03/goldman-sachs-update.html?showComment=1267805726397#c2822340566206673682

Jason Hommel has written today about these strange things happening to people who try to spread the truth:

http://silverstockreport.com/2010/silverordeath.html
https://www.youtube.com/watch?v=Ewna0LM1TRw
http://stevenandersonfamily.blogspot.com/search/label/border%20patrol%20abuse (excellent videos! See the interview with Alex Jones)

Here is amazing new chart from CaseyResearch.com (looks like I influenced them! see my prior post above "Doom Calculation"):

<--- click it for 90 day money-back trial with in depth report on China and global situation

CaseyResearch wrote:Is the U.S. doomed?

Here's a sneak peek into what you'll find...
Featured in the March edition of The Casey Report:
Have We Reached
The Point of No Return?

Has the ever-increasing debt load of the United States government reached a point where repayment has become impossible? What will happen once interest rates start to rise? Have we fallen into a debt trap that no matter what we do, we won’t be able to pull ourselves out of? Will the U.S. ultimately follow the path of Greece?

In the just-released March edition of The Casey Report, Chief Economist Bud Conrad weighs in with his findings. View the chart below for a hint...

But that's not all you'll find in this month's issue of The Casey Report. You'll also get:

Deficit Landmines Dead Ahead! An in-depth look at the next 10 years of out-of-control deficits – a perfect storm in the making.

A Chinese Conundrum Doug Casey looks at the bullish and bearish factors for China’s economic recovery… and what you should be doing with your money.

Obama Watch: Appropriations – a Piece of the Pie Casey's Washington Correspondent, Donald Grove on the feeding frenzy in the hallowed halls of Congress

How to Invest The best ways to diversify your portfolio in this apocalyptic climate: gold – cash and cash alternatives – bets on rising interest rates – agribusiness plays – and much more...

If anyone has a copy of the above report, please email it to me, antithesis at coolpage dot com

http://www.bloomberg.com/apps/news?pid=20601081&sid=aKkJA.sjsd7A

Full-year output climbed 3 percent to 227 tons, making Australia the second-largest producer...China’s output reached 314 metric tons last year, making it the world’s biggest gold producer, the research group said. The U.S. produced 216 tons and South Africa 210 tons...

Well the annual GDP of Australia is $1.02 trillion. 227 tons x 30,000 oz / ton x $1100 = $0.0075 trillion (7.5 billion), which is a measly 0.7% of their GDP.

Wonder why TPTB are so fascinated by something that is such a small % of economic output?

Hint: gold is 10 - 100 times undervalued as to the value it will have (7 - 70% of GDP) before this epoch is done.

First, it is flattering to see that David Galland adopted my writings about Entropy (I had been emailing them to him), but he gave me no credit whatsoever:

http://www.kitco.com/ind/Galland/mar092010.html

China has now admitted that there is no way they can ever make gold a significant portion of their reserves, unless the value of fiat declines drastically against gold, which means their reserves would implode in value unless they were the one doing relentless buying, thus driving world into mad stampede to gold (so they are not going to do it):

http://www.reuters.com/article/idUSTRE6280K720100309

"It is, in fact, impossible for gold to become a major investment channel for China's foreign exchange reserves. I have 1,000 tonnes now, and even if I doubled that holding, according to current prices, that would be about $30 billion," Yi said.

China does not want to destroy its export markets, by causing a stampede to gold:

"It is market investment behavior, and I don't want it to be politicized," he said. "We are a responsible investor, and we can surely achieve a win-win result in the process of investing."

So what does this mean? It means that China will continue to cooperate with the banksters to attempt to keep the price rise in gold orderly. For as long as they can, the banksters want to slow cook the frogs. The fiat (socialize the defaults) game can go on for as long as the masses do not stampede to gold. And all the nations of the world are committed to keeping the frogs ignorant for as long as possible. This is a recipe for disaster.

It is our job as investors to see ahead of this calamity and help the world by our investment actions. I just realized how to diversify from gold, yet get leverage on gold and help the world.

Go into a booming economy in Asia (one with high inflation), and loan money at 0% interest to any one who owns land, take a "first" on the land as security (make sure you have the legal right to do this), but value the loan in gold, so the same # of ounces have to be paid back. Set the repayment period at say 5 years. There will be many takers for this, as people think they can use the capital to make a business and then pay you back and keep their land. In the meantime, you have been able to use their land. Try to do this with productive land, such as farms so that you take the income from the land for 5 years. At the end of the 5 years, you either get your gold back, or you get the land. Make sure the loan was much less than the value of land. In Philippines, they call this "prienda" (most farmers lose their land this way), but it is usually done in fiat terms, my epipheny is to value the loan amount in gold. Besides, the land prices are going up in Asia, because population is huge, there isn't much land, and the farm land rises in value when the roads and cities are developed where there is none now. So then you get at least the appreciate of your gold, plus the income from the land. Plus you probably get a bigger rise in the value of the land, than gold. Make sure the terms are that the land can not be sold, until after you are paid, that the payment can not be early and that they have only 30 days to make the payment once the 5+ year term ends. This makes it very difficult for them to sell the land, then pay you off and pocket the difference. However, do offer that if they have a buyer for the land before the 5 year term is complete, then you will take half of the difference between the sale price and the loan value, plus the loan value. The point is you structure the loan contract such that you gain the income plus at least 50% of the appreciation of the value of the land. You are not committing usury, because you are loaning at 0% interest. The advantage over buying the land, is that you can probably obtain the land for much less than the sales price. For example, lets say the land is worth $10,000, but since you will only be using the land for 5 years, you offer 1/5 of its value, say $2000. So what is likely to happen is that before the 5 years is finished, they need more cash because their business failed, so then they want to sell. Say gold has +50 doubled in 2 years, so you get $3000 + ($10,000 - $3000) / 2 = $6500. So that would be 225% in 2 years in fiat terms, or 116% in addition to the appreciation in gold. Also you would have had 2 years of income from the land (and I suggest you structure this into the loan contract so they have to work the land and pay you this, so it like an interest rate but actually it is like a rental fee as they pay you this rent and they keep the excess profit on the production from the land), lets say rougly +10% per annum income, so +21% in 2 years. Now lets say instead they are successful with their business, then after the 5 years they pay you off, let's say gold has risen 175% in 5 years, so they pay you $5511, you simply got your gold back. But you also had a 10% per annum return on the income from land, so +61% extra (on the gold value, not the fiat value, as we assume land value was rising too with inflating food prices). Thus you gained 61 / 175 = 35% more gold. Now lets say instead, their business did okay, so they didn't need more cash, but they don't have enough cash to pay off at end of 5 years, and they also couldn't find a buyer, so you get the land a 1/5 its value, so that is a huge percentage ROI (plus we can assume the land value has kept pace with gold, if you go into undervalued farming area in Asia). The only way you lose (other than legality and sovereign risks), is if gold rises much faster than the value of the land. In that case, you likely get stuck with the land and not gold. Also this is a very illiquid investment overall, except for the income on the land.

From a Biblical perspective, the above is not exactly usury, because the capital you have provided is not being used to create the business from which your rental fee is being extracted. That business already exists. You are providing liquidity so that they can start another business, then you become the temporary owner of the land and are extracting a rental fee which the existing business (a farm) is paying you the rental fee. If they are simply able to multiply your money (faster than the appreciation of gold, but gold is money) with their investment, then they can easily pay you back. You are extracting a rental fee because you have invested your money in the land value. The borrower is not exactly a slave to the lender in this case, because you are simply providing liquidity to their asset, and providing them the opportunity to keep their asset, as long as they can multiply your money faster than the rate of their former business, which is the whole point of why they want liquidity. So in other words, your investment is helping people expand their business from the existing farm business. In short, you leverage their productive abilities and provide liquidity for a new investment. But you are not taking a risk in the new investment, so in that way, it is sort of like usury. But rather you are taking a percentage of the existing business, so in that way it is like secured investment, wherein you invest in a business where the assets of the company are much greater than the market price of the stock. So actually this is just like what Warren Buffet does.

Essentially people are unable to make their farm land liquid because it is not titled (they have some tax receipts claim to ownership) and banks do not loan money with untitled land as security for business endeavor. There are rural banks, but I think they charge very high interest rates. Also bank loans require a monthly payment. The people here prefer "prienda" because it gives them a big window of years to attempt "to get rich". It is sort of tied into the gambling psychology of those who want to escape poverty or "get off the farm".

But I do not like this sort of business investment, because the capital is not at risk in the business (but rather at risk in terms of legal enforcement). I know that risk == reward. I would prefer to invest in my own businesses if possible. I would only use "prienda" if I was forced to, because there is otherwise no other reasonable way for me to obtain control over land in a country where foreigners are not allowed to be owners. I could instead go for 25 year lease, but that would be more expensive and I have no capital gains.

So actually I would probably do it for land that has no existing income potential, thus the price would be even lower. Then I am not in any way a parasite on the locals, rather helping them make their idle land liquid and productive. So I am getting no usury-like rental fee, but at least my capital is keeping pace with gold or better, while I am able to use the land. And I would probably thus go for a longer term period maybe 10 or 15 years, because of the overhead cost of finding and doing the deal and then developing living structures on the land. Within that time, I might get married to a local, or obtain some rights to buy land, or at end of the 10 or 15 year term, the contract could be that the land would be sold and owner and I split the difference (assuming owner can not pay back my loan value otherwise).

Marc Faber seems to have calming influence on Mish, and we get some very good insight into their thinking:

http://finance.yahoo.com/tech-ticker/faber-and-mish-we're-doomed-and-washington-can't-do-anything-about-it-441381.html

So now Mish clarifies that was he sees deflating is credit, leverage asset classes, and real wages of Americans versus the developing world. Well heck! That is exactly what I have been saying. And he closes by admitting this allows for prices rises in some things!

Yeah like gold, silver, oil, land! But remember I don't favor land in indebted countries (unless your county is debt free and can resist the federal govt), as taxes must rise.

It is really difficult to determine whether TPTB are going to (or did, since effect occurs on a lag) back off of liquidity enough to cause a 2008 style crash now. But you know, it really doesn't matter. If gold falls -30%, it will still be ahead of nearly everything we need to buy except for fiat itself. And it won't stay down for more than a year. You should have 6 - 12 months of fiat cash any way (you should be lowering your expenses drastically). Any more fiat than that, and you are gambling the grand casino is not inflating (debasing) faster than you can time a trade.

I am preparing to move to a farming area, and I will reduce my expenses except for spending $18,000 (if I don't go over budget) to construct a simple but nice house on leased land ($150 per year lease). I will then get most of my food for nearly free. And I will reduce my aircon bill ($50 per month) because I will be in colder climate, and I will increase my comfort and probably health and productivity.

I urge everyone to try to reduce your expenses, while trying to continue some form of income if possible. Programmers can follow me, as I think I am working on something that will help you generate income and you can work from your farm. Keep it simple, you do not need to spend a lot.

And simply buy gold and silver, get off the grid in a very simple and cost effective way. No need to maintain every luxury, but no need to go back to caveman or survivalist tactics either (but if you really want to do that, chalk it up to a sabbatical, not maximizing your REAL production).

And that is what I am writing about, maximize REAL production. That means the level of your production not consumed by debt service, expenses, inflation. We in an epoch of returning to REAL value, which means all leveraged things will lose value. So that means for example, if you expect food prices to rise, do not try to lever it with land prices. Food is food, land is land, and they have different equations for value. Remember land is valued on the profit potential of the food after subtracting energy costs, and taxes and the general health of the proximate economy.

Remember gold won't give you leverage. Society won't allow for that. If gold does give you leverage, we will be in a madmax outcome that will make it very difficult to extract that leverage and transfer it to something else. We are in period where leverage must die. Make sure you remember that. We are in a period where REAL work and REAL production is what matters. You must get back to basics. Gold will merely keep paces with the changes a foot, it will preserve for your purchasing power, but not grow it in REAL terms. And relative to wages and land values in Asia, gold will not keep pace. That is because REAL work is what is valued most at this time. This is because the Western economies are 80+% dependent on the REAL production of the developing nations. Most people see this as deflation, because they see 6+ billion competing for jobs, driving wages down. Rather I see wages have increased from < $1 per day 15 years ago to roughly $5 - $10 per day now. Gold and silver are not keeping pace. The REAL production is gaining, as it should be. These people have been stolen from and held down for too long by the fiat debt machine which financed the oppression of the developing world at the hands of the rich in those nations backed by the CIA, etc. Go listen or read the "Confessions of an Economic Hitman".

And this death of leverage will tell you what I think about mining stocks. They will bite you in two directions if you buy and hold. The mines will be nationalized nearly every where, either overtly or in effect by debasement of the share count to enrich the insiders. Also energy costs will rise probably as fast or faster than gold and silver prices, until the near end game, and at that time I see the govts go ballastic with taxes and regulations on brokerage accounts, etc.. Yeah maybe you can squeeze a gamble out-of-this. Investors will now move up the risk curve from mid-tier to juniors, so there is maybe a play there. But you risk a downside plunge should TPTB pullback on their levers.

Peace.

Extended comments:

http://investophoria.blogspot.com/2010/03/muddy-waters-of-market.html?showComment=1268449429964#c7607673985791756247
http://investophoria.blogspot.com/2010/03/muddy-waters-of-market.html?showComment=1268449831834#c4341110742529694923

=============
ADD: I said all of this in 2006:

http://www.coolpage.com/commentary/economic/shelby/Inflating%20Deflation.html

Bill Gross explains it:

http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2010/Investment+Outlook+March+2010+Bill+Gross+Dont+Care.htm

To begin with, let’s get reacquainted with the fundamental economic problem of our age – lack of global aggregate demand – and how we got to where we are today: (1) Twenty years of accelerated globalization incrementally undermined the real incomes of most developed countries’ workers/citizens, forcing governments to promote leverage and asset price appreciation in order to fill in what is known as an “aggregate demand” gap – making sure that consumers keep buying things.

http://www.zerohedge.com/article/ecri-leading-economic-index-drops-12th-week-row
http://www.gold-eagle.com/editorials_08/baltin031510.html

We seem to be a in topping process. The markets are signaling up, but this may be part of a blowoff top. We may get the blowoff top first, but in summertime? Seems it needs to happen now if it is going to.

But Katz has a different perspective:

http://www.gold-eagle.com/editorials_08/katz031510.html

My thoughts:

http://investophoria.blogspot.com/2010/03/lazy-markets-lazy-psychology.html?showComment=1268753535732#c4459953404767512

But don't use margin (debt) that you can't cover for periods of implosion of up to one year.

Although there will be interim implosions medium-term, inflation (debasement) is the overriding theme. This will mostly be observed in your relative net worth to those in the developing world:

http://investophoria.blogspot.com/2010/03/lazy-markets-lazy-psychology.html?showComment=1268884353935#c3103448082594954040

Shelby wrote:We won't have deflation of developing world until global real interest rates here turn net positive again (as they did in 2007). With roughly 7 times more people than western (deflating leveraged asset) world, and 1/7 the GDP per capita (and growing faster than western GDP is shrinking), I say there is no net deflation on the horizon. TPTB are managing the re-balancing in their favor, which means wild and multi-year cycles between growth and implosion. Again I urge you to read this:

http://www.silverbearcafe.com/private/01.10/thinklikeabanker.html

See the evidence in the yield curve:

https://goldwetrust.forumotion.com/precious-metals-f6/gold-as-an-investment-t60-195.htm#2836

============
ADD:

http://investophoria.blogspot.com/2010/03/long-buy-for-core-holdings.html?showComment=1268905012339#c4687636987706582002

Shelby wrote:Derek wrote:
"Chinese government is using cash and not debt to finance its stimulus, it is still over 400% greater relative to GDP than the spendthrift US Government"

But their capacity for compounded growth is much more than 400% higher than the USA, because the USA is in negative real growth.

No doubt that China is building excess capacity that can not be absorbed by the world, nor probably domestically. But the implosion of this can come much later. The key is inflation, which is already skyhigh on big city housing, but not yet apparently on food. Again watch the yield curves (interest rates) world wide to see when the mis-allocation is real the moment-of-truth, which is when real interest rates turn positive. Real interests can also turn positive if there is a near total shutdown of the banking system, as then even 0% is positive interest rate. but that will be a very short-term event, followed either by reflation or chaos if reflation can't be achieved. Either case is bullish for gold after any turbulence. And I really don't think the world can chart any course that does not involve continual reflations that ultimately end in chaos failed fiat/banking system. Maybe only a technology revolution (nanotechnology?) could alter this outcome.

Could the banks be trying to prevent people from paying off loans with cheaper dollars after end of Q2 2010?

http://www.marketoracle.co.uk/Article17865.html

Yet the bank stated they would only give him until April 15 to find alternative financing. The bank is also willing to let him buy the subdivision at a 33% discount to what is currently owed...It seems there are many banks doing the same thing...

Or is this just smaller banks trying to raise reserve requirements, so they don't get closed and eaten by the FDIC and larger banks?

I think this is the sign of the commercial banking crisis accelerating, and thus the local banks are getting in trouble and face bankruptcy if they can't raise capital. Maybe they are in a rush to package these up and sell them off.

Too many possibilities for me to analyze.

After reading the following, go back to my prior post (2 posts above this one), where I have been pointing out that all future growth is coming from developing world:

http://finance.yahoo.com/news/China-warns-US-against-apf-2448997968.html?x=0&sec=topStories&pos=3&asset=&ccode=

The USA is bankrupt (99% of people do not know this) and USA will soon collapse into massive poverty. America's top accountant says so:

https://www.youtube.com/watch?v=7WHwcDF3hhU
https://i.servimg.com/u/f68/13/18/36/81/sc33.png
https://www.youtube.com/watch?v=cgJjr-kX7KI (protectionist forces to rise)
https://www.youtube.com/watch?v=KAS_Xjer7Nw
http://caseyresearch.com/pdfs/20090504_StreetFightingMan.pdf
https://www.youtube.com/watch?v=n0ywCHKXJ5o (plan is to ruin millionaires)

US CBO officially projects US national debt (credit) to $20 trillion soon, when interest rates rise to 10%, that will be $2 trillion yearly interest payments, but USA govt only collects $2 trillion in taxes. And unemployment is increasing (jobs are being outsourced to cheaper countries, i.e. call centers), 80 million 62 year olds are retiring, thus tax receipts will fall to $1.4 trillion, thus the USA govt will be unable to pay (bankrupt), causing interest rates to rise more. DOLLAR DEFAULT! In 2005, I predicted the 2007/8 crisis, and now I am predicting a DEADLY crisis by 2012/14. I have strong skills in math & research.

USA dream (& Europe) is dying.

CBO interprets next 10 years too optimistically, because they are not factoring in the next wave of mortgage resets and other stuff that is going to wrong between now and 2012:

http://www.financialsense.com/editorials/conrad/2010/0323.html


The plan is after this global depression, there will only be 2 classes, the billionaires and the rest of humanity (no more millionaires):

I think it should be a given, that TPTB have a plan to take away the gold and silver from those who try to hoard $millions of it. The problem is you can't easily hide that much metal. They know who is buying metal in that quantity. And the rest of us, won't have the scale to do much more than survive with the amount of metal we are able to get away from the roaming gangs, etc.

There is a bigger trend, which is the end of the monetary incentive:

https://goldwetrust.forumotion.com/economics-f4/peak-oil-nonsense-t102-15.htm#2845 (watch the video at this link)

The current Doom is fabricated lie because TPTB are afraid of the lack of scarcity!

After you watch the video at that link, TPTB are trying to retain control over the technology, so they can retain control over these excess resources. As we need less and less people to do the hard-engineering, then we have a mass of "useless eaters". TPTB want to use this mass as political force to maintain their control.

But what is happening is that as price of resources drops to near 0 due to automation, then the value of art/creativity is rising relatively speaking. Thus the new money has to be some form of way to trade art. So again the money can be based on truth or the lie of usury. I think this is why TPTB are forced to move to 666 (pay in blood) digital body tagging, because they will need to control the trade of digital art/creativity.

This is very interesting because it shows me exactly what I need to be working on in the computer realm.


===========
ADD: to elaborate on the theme of the "Resource Economy" (see video in above link), I think the trend may not be mostly about removing profit, as it is about making the added value of the industrial economy and labor, nearly irrelevant (very insignificant cost), and making the input resources (think silver!) and creativity/art a much more significant portion of the economy. Thus the ideal should not be to eliminate profit, but as it has always been, to make savings ideally in the resources we need. The new wrinkle is that software itself could possibly be a resource and could be a form of money, except it is probably not fungible. So I think we are still looking at silver and gold as representations of effort, as the most equitable system, and still the bankster trying to keep the masses on the hamster wheel of usury. What really changes is that added value of the industrial economy and labor deflate precipitiously now and this will cause massive dislocations and opportunities. The opportunity to add value with creativity/art/technology will have never been greater, because the resource/manual labor cost will be so low in doing so. The person who can figure out the way to involve as much of humanity as possible in creativity/art/technology production, will become a $trillionaire.

Google has apparently recognized that ultimately industrial monopoly will fade as creativity/art/technology surges, thus China will be the big loser:

http://finance.yahoo.com/banking-budgeting/article/109159/stance-by-china-to-limit-google-is-risk-by-beijing

Google's decision may not cause major problems for China right away, experts said. But in the longer run, they said, China's intransigent stance on filtering the flow of information within its borders has the potential to weaken its links to the global economy.

We are surely to get a disintegration of the current monetary system, with TPTB's driving the masses towards false (human induced, via socialism) scarcity and chaotic failure, and the terminal descent towards hyperinflationary (relative to gold) greatest hell depression is accelerating:

http://market-ticker.denninger.net/archives/2104-How-Far-Down-The-Rabbit-Hole-Must-We-Go.html

$HUI:$GOLD compared in prior 2001 reflation, shows that deflation is winning (gold is gaining relative strength to gold stocks):

https://goldwetrust.forumotion.com/precious-metals-f6/gold-as-an-investment-t60-195.htm#2861

My broad view is crushing deflation (declining assets, purchasing power) combined with inflation (negative real interest rates), and capital controls/seizure to sustain socialism, position in physical precious metals and long-term invest for next epoch technological shift.

http://investophoria.blogspot.com/2010/03/long-term-hui.html?showComment=1269686346310#c4007926895665526281

Jerry I did not write "negative interest rates", I wrote "negative *REAL* interest rates". We will have negative REAL interest rates until gold peaks in value and until socialism has been defeated. Because to have positive REAL interest rates, would mean to let all the defaults (and over indebted "useless eaters") go bust and to reset the western economies to 3rd world status. Positive REAL interest rates would mean that no one is bailed out, no one is given welfare, all the fat is chopped off, so only the lean and mean part of the economy can grow fast. It would end all of the mis-allocation and put billions of people in their deserved place as "nearly worthless eaters" (so they could change or starve, and the former with God inspired community). So it is extremely unlikely we will see positive REAL interest rates. We will see world war before that, because socialism is deeply engrained and will go on until it fails into fascism.

We do have some offsetting growth of capitalism in developing world, which mitigates and extends the time that the socialism parasite can live on.

I did not write "deflation", I wrote "deflation of assets and purchasing power" and monetary "inflation measured as negative REAL interest rates". How can any one argue that we don't have deflation of the RELATIVE value of stocks, houses, and other leveraged assets. Jerry you would have to blind to look at $SPY:$GOLD chart and tell me that S&P500 has not declined in value (purchasing power!) relative to gold (money)!

Did I really need to explain that?

The trap of land is that it can keep its value in inflation (energy cost is too high a component of the food profit) and the C$ is going to be worse than the dollar under deflation because of its resource dependence.

Only technology offers us any hope out of this mess. Otherwise hold tight to the most liquid asset (gold) and pray. And try to be productive in technology paradigm shifts that could defeat the socialism faster.

You will not be able to win by sitting in your easy chair, with a cigar and land, as socialism spreads every where. This will take everything down. Even gold could become so dangerous, we will throw it into the street. As I said, pray we are not in the final tribulations, and that this socialism is breakable early enough. I do see hope with nanotechnology and the internet. Google's move to uncensor for China is pointing towards the internet breaking the back of the socialism. The big push will come from P2P commercialization, which will then be unstoppable by courts and govts.

-S