Why moneylenders MUST be busted

The equivalent of one US dollar invested on the night of Christ's birth at less than 4 per cent per annum, would today be worth more than the Earth's weight in gold.

Here's the math:

a. The Earth's mass is estimated at (5.9722 times 10 to the power 24) kilograms
b. According to goldprice.org, a kilo of gold today costs $53,235.21
c. a*b = $(3.17931 times 10 to the power 29)
d. $1.03434 to the power 2012 = $(3.18127 times 10 to the power 29)
e. d>c.

Yes, you say, but what about tax?

Let's assume that interest over the last two-millenia-and-a-bit was taxed every year at the outrageous rate of 50%. All that does, by reducing the effective interest rate to 1.7% p.a., is defer the date at which the goal is reached; in this case, the year 4030.

The same argument applies to inflation, as long as it's significantly less than the interest rate.

So in the long run, the lender must end up owning everything - provided he can always find borrowers and especially, always have his capital safe.

Our governments, by bailing out the banks, have ensured that capital security.

Better still, under the present arrangement banks hardly need their own capital at all. If the Federal Reserve conjures up a billion dollars and lends it to a bank at zero interest, and the bank uses the money to buy safe government securities (albeit at a low yield), then the bank is being drip-fed free cash. Inflation doesn't matter - there's no bank capital to erode, so all inflation does is reduce the value of the guaranteed profit.

Give the lender complete security of capital, and real interest after expenses, taxes and inflation, and you will in time give him the Earth.

Which is why there must be a reset, or Jubilee.

There is no such thing as a perpetual motion machine, or a safe paper-based solution to a broken economy in which a minority increasingly takes ownership of their fellows. Sooner or later, the gathering of wealth by materially unproductive means must end.

Cause for outrage: what bankers and traders have done to "the people"

"When floodwaters cover our homes, we expect that FEMA workers with emergency checks and blankets will find us. There is no moral or substantive difference between a hundred-year flood and the near-destruction of the global financial system by speculators immune from consequence. But if you and your spouse both lose your jobs and assets because of an unprecedented economic cataclysm having nothing to do with you, you quickly discover that your society expects you and your children to live malnourished on the streets indefinitely. "

- From "The Sharp, Sudden Decline of America's Middle Class" by Jeff Tietz, Rolling Stone magazine. The article details the harrowing experience of recession victims, many of whom have done "all the right things" and never been unemployed before.

Inequality is starkly worse in the USA than in other "developed" countries, as shown in the graph below (source):

 

 

That uses data from 2010, but according to the official Census it's getting worse:

 

"The Gini Index for the United States in the 2011 ACS (0.475) was significantly higher than in the 2010 ACS (0.469). This increase suggests more income inequality across the country."

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Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Cause for outrage: what bankers and traders have done to "the people"

"When floodwaters cover our homes, we expect that FEMA workers with emergency checks and blankets will find us. There is no moral or substantive difference between a hundred-year flood and the near-destruction of the global financial system by speculators immune from consequence. But if you and your spouse both lose your jobs and assets because of an unprecedented economic cataclysm having nothing to do with you, you quickly discover that your society expects you and your children to live malnourished on the streets indefinitely. "

- From "The Sharp, Sudden Decline of America's Middle Class" by Jeff Tietz, Rolling Stone magazine. The article details the harrowing experience of recession victims, many of whom have done "all the right things" and never been unemployed before.

Inequality is starkly worse in the USA than in other "developed" countries, as shown in the graph below (source):

 

 

That uses data from 2010, but according to the official Census it's getting worse:

 

"The Gini Index for the United States in the 2011 ACS (0.475) was significantly higher than in the 2010 ACS (0.469). This increase suggests more income inequality across the country."

Why buy gold?

Gold is a condensed way to hold your wealth.

Currently the most popular US gold coin, the American Gold Eagle, retails for around $1,800. A recent Federal Reserve survey says that the median US family had a net worth of $126,400 in 2007. Today, that would buy 70 gold eagles and some change. Everything you have, in two handfuls: two 4-inch-long rolls, weighing 43 ounces each.

Actually, less: the same Fed survey shows the average family net worth was down to $77,300 in 2010. That's 41 gold eagles and change; or, a handful of coins 4.63 inches long and weighing less than 50 ounces. It doesn't rust or rot, and although the value will vary, it'll never be worthless.

But there you are, gold in hand, standing in the street. You can't eat or wear the stuff, it won't cover your heads or cook your food. It doesn't earn interest, and unlike farm animals, it doesn't breed. And it doesn't protect you and your loved ones. Your 50-ounce stash against a 40-ounce, fully-loaded 1911 Colt 45? You'd be lucky to walk away empty-handed.

It preserves wealth, but not necessarily for you. Three years ago in central Britain, a man with a metal detector discovered a hoard of well over a thousand intricately-worked gold items. Together they weigh some 6.3 kilos - worth a third of a million dollars in scrap value (but over $5 million because of their history and artistry). The magnificent Anglo-Saxon treasure dates from the 7th or 8th century.

The key point is, whoever buried it didn't come back.

Gold doesn't ensure your survival if society breaks down altogether, but it can help protect you from the wipeout that happens when paper money becomes worthless. However, remember how the hungry Esau sold his inheritance to his brother Jacob in exchange for a bowl of stew: it's not enough to have gold, you need someone to sell it to, and at a fair price.

So ignore the apocalyptic prophets; gold is for troubled times, not for utter disaster, and it's not the only thing you should have. As Eric Sprott said recently, "most ... experts say that you should have 5% or 10% of your money in gold".

The question is, how to hold it.

Via a broker? MF Global held gold in a client account (effectively, as trustee) for investor Gerald Celente, yet the holding was seized by the firm's creditors when it collapsed in 2011.

Via a depository? Congressman Ron Paul has tried to get the Federal Reserve to open its vaults to auditors to find out how much is actually there; we're still waiting, and Germany is getting worried about its holding in the US. It is even rumoured that China has "lost" 80 tons from its own national treasury. Attractive stuff, is gold.

How else? An August 2012 article in Investors Chronicle looks at other ways: gold funds, gold bars, coins. Even then, you need to be confident that the fund holds 100% of its stock, 24/7 - you'll recall that fractional reserve banking began among gold dealers who took advantage of the fact that their customers usually didn't all want access to their metal at the same time. And it's worth noting that some outright physical fraud is now going on: tungsten has the same density and is far cheaper, so selling a gold-wrapped bar of tungsten represents a fat profit for criminals.

In these times of weakened trust, perhaps you could accumulate some gold coins from a reputable dealer, and keep them safe somehow - and don't tell those who don't need to know.

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Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Where are the rich investing?

Last week I visited a successful Midlands brokerage. The boss was looking where to invest tens of millions of pounds for a client.

Stocks, bonds, real estate, commodities?

No: cash.

He'd found somewhere that offered 3.6%. Security of capital, and protection against our current moderate inflation.

How many individuals and corporations around the world are doing much the same? Are they waiting for the optimistic losers to slug it out, before stepping in and buying up when everything gets cheaper?
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Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Why buy gold?

See new post, here.

Political Correctness: a straw in the wind

I deal with primary age children who are excluded from mainstream school. They have a variety of problems and we do the best we can to straighten them out. Without humour, we'd go under.

Currently we have a student social worker who comes in weekly for the experience. I told her the old joke, "How many kids with ADHD does it take to change a lightbulb? Ans.: Hey, let's go out and ride our bikes!"

Her mouth gave a small upward twitch and she said, "That shouldn't be funny."

Humour is anarchic and often contains a germ of truth. So it is the first target of the cold forces of repression.

I have been warned.