The Revolution is beginning

This Parliament has now lost all moral and political authority and ought, by rights, to dissolve itself.

It is now not only the Government that has ceased to deserve our trust. So many members of the House of Commons have disgraced themselves so completely that their right to make laws for the rest of us has evaporated.

Read the rest of this extraordinary attack on our corrupted Parliament and broken democracy, in the Mail on Sunday here. The blogger-whingeing has now gone mainstream.

The gold bugs are chittering - but don't get over-excited

Jeff Clark at Casey Research (htp: The Mogambo Guru) plays with the numbers to estimate gold's potential.

One stat is created from a comparison of all the world's cash with all the world's gold: "Total central banks reserves (including gold holdings) = $4.8 trillion, divided by 929.6 million ounces total gold reserves held by all official institutions that issue currency = $5,246 gold price." Or about £3,500 per ounce.

HOWEVER: the World Gold Council estimates that all the gold ever mined to the end of 2006 is about 158,000 tonnes, or 5,079.7 million ounces. If we round down to 5 billion ounces (to allow for some permanent loss, but offset to some extent by new mining - esp. in China - since 2006) we get a gold price of $960 per ounce - not far off where we are today. Allow a bit of cash held outside banks, and gold would be worth - what? $1,000? $1,200?

Yes, there may be a spike like in 1980 - and there may not be. But speculation/panic aside, it would seem that, globally, the current gold-to-money ratio is not quite so wrong as might seem at first sight. So the story is not really about gold, but about the weakness of the dollar in a heavily unbalanced US economy. Priced in a different, stronger currency, gold may not zoom to the moon.

Gold, and theft by inflation

A killer graph here from Charles Hugh Smith. Interestingly, the steady real decline of average incomes begins at almost exactly the same time as Nixon shut the "gold window".

Smith's take is that "the speculative mania in housing was fundamentally a tragic last-gasp effort to make up lost ground via speculation in housing". And if housing reverts to mean, it has a long, long way to go yet.

Is it worth a shot?

Our Founding Fathers were not all professional politicians. They were farmers, writers, inventors, lawyers and surveyors. They had organized estates, led men into battle, built furniture, and written books.

By contrast, our modern elite have often never generated anything. I believe that is why they find it so easy to destroy things that they don't understand (which is a long list).

Petty officials in Brussels attack the British banger and English chocolate, not by relevant measures such as taste or safety, but using purely arbitrary scales.

In Britain, the well-educated New Labour, demonstrating their reverse snobbery, diminish the Peerage, and complete the destruction of a once-great educational system.

In the US, we have the legions of draft-dodgers who steer high-ticket military contracts to their friends, while our exhausted troops salvage from junk yards. The managers, accountants and lawyers have brought our economy to its elbows by equating the movement of wealth with its generation. Our fragile education system is battered by consultants and administrators who confuse good grades with competent teaching and actual learning.

Perhaps some of this could be improved by adapting some of the Japanese model, where management trainees first must try every job on the shop floor?

My pay/pension's inflation-protected, so I'll be all right... won't I?

Click to enlarge - I hope!

No.

Take the illustrated cases above, where take-home income is 1,000 zlotys (or whatever), and you are exceptionally fortunate, in that your benevolent employer/government gives you annual rises that exactly match the rise in inflation in the preceding 12 months.

The trick is, although the pay hike brings you up to the new level of monthly expenditure (at least, up to the point where inflation was re-calculated), it doesn't compensate for the cumulative losses over the year.

This is is one way they can exploit inflation to steal from you, and balance the public finances.

It's us or Them - and inflation's coming

Paul B. Farrell argues - plausibly - that we're in a life-or-death struggle with the financial elite, and they will "win", until the system can no longer sustain them - or us.

A self-deprecating blogger styled "The Anecdotal Economist" suggests a fight back in the form of switching your savings and borrowings away from these enemies of the people.

htp: Jesse, who has joined the Angry Brigade and whose regularly changed sidebar links for reading ("Matière à Réflexion") are a treasure trove.

Meanwhile, John Williams of Shadowstats says:

We will see inflation levels not seen in our lifetime by as early as the end of this year. Eventually we will see liabilities of $65 trillion – more than four times U.S. GDP, more than global GDP. There will be a hyper inflation where the dollar becomes worthless, where the paper is worth more as wall paper than as currency.

htp: Michael Panzner, who also is a great pre-reader for us. Michael says he's switched swides to the inflation believers, but he's too modest - he himself predicted deflation followed by inflation in "Financial Armageddon".

Deflation? You're joking!

Newpaper headlines: we're in deflation for the first time since x years.

Yes, looking at RPI, which takes into account mortgage costs, which have plummeted since the Bank of England cut the rate to its lowest since the Bank started.

No, if you look at non-mortgage costs of living - another newspaper article says pensioners' experience of inflation is something over 12%.

I can't be bothered to find and link the MSM articles. In my view, Guido is right: journalists have become lazy, uncritical copytakers. Now have a look at Zeal's graph of the money supply, the immediate-demand form of which has doubled in 12 months in America.

I still think we're in a sort of re-run of the 70s. Cash will be forced out of accounts and into the market, where it will still lose value, but nothing like as badly as if left rotting in banks and building societies. The Great Theft is on its way.

If you follow Marc Faber, you'll know that he's currently suggesting holding half your wad as cash, since the bubble hasn't really burst yet; but other than that, he's thinking 10% gold and 40% in a combination of resource and emerging market stocks.

The world's average per capita income is $8k - $9k; as globalisation continues the levelling-out process, the East will never be as rich as we once were, but they'll be less poor. For us, on the other hand, this may be the last chance to put something away for our future.