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Obama’s Recession and His Job Destroying Agenda

Fri, 13 Nov 2009 18:07:00 GMT

As the unemployment rate crossed double digits, the Obama administration cannot seem to figure out why the economy isn’t creating jobs.

To address the issue, President Obama announced that he will hold a ‘jobs summit’ next week to finally get to the bottom of this problem and find a solution. He has assigned some of his top advisors to gather research and propose solutions.

Here are a few comments for Peter Schiff’s article today,

“That's a relief; for a while there, I thought we were in real trouble! In fact, the absolute last thing our economy needs is more federal government interference. If Obama really wants to know what's behind entrenched joblessness, he should start by looking at the man in the mirror.”
“Obama is pursuing, with unprecedented vigor, the same policies that have for decades undermined our industrial base and yoked us to an unsustainable consumer/credit driven economy. This doubling down on Washington's past failures is destroying jobs at an alarming rate. Today we learned that the September trade deficit surged by 18.2%, the largest gain in ten years. Much of the deficit resulted from Americans spending Cash-for-Clunkers stimulus money on imported cars – or “American” cars loaded to the sunroof with imported parts. In exchange for more domestic debt, we have succeeded only in creating foreign jobs.”

To really fix the problem;

“To really fix the unemployment problem, the President must look past his peers in government and academia to understand how jobs are actually created. In the private sector, all individuals have a choice to either work for themselves or someone else. Since labor is far more productive when combined with capital (office equipment, machinery, business models, and intellectual capital), those who lack these assets themselves often choose to work for others who have sacrificed to accumulate them. This increased productivity is shared between the worker and the owner of capital, and both are better off.
However, for one person or company to choose to offer a job to another, there must be an incentive to do so, and they must have the necessary capital. In the first place, employers must commit to paying wages and benefits, comply with government mandates and regulations, and subject themselves to potential lawsuits from disgruntled employees. All of these costs must be measured against the extra profits an employer hopes to earn by hiring an additional worker.
If profit opportunities exist, jobs will be created. Otherwise, they will not. Of course, anything the government does to raise the cost of employment, such as a higher minimum wage, mandated health care, or greater regulatory burdens, not only prevents new jobs from being created but also causes many that already exist to be destroyed. Anything that diminishes the profit potential of extra hiring will diminish the number of job opportunities that are created. Also, since it is after-tax profits against which employers measure risk, the higher the marginal rate of income tax, the less likely employers will be able to hire.
Finally, in order to hire workers, employers must have access to capital to expand operations. Anything the government does to discourage capital formation automatically diminishes job creation. By running the largest federal deficits in history, Barack Obama is diverting all available capital to the Treasury, and is in effect waging a war against private capital formation.”

As Peter said, Obama’s liberal social agenda is in effect waging war against capital formation. Capital is fleeing the country and taking jobs with it. The last decade of government overspending is the reason behind the recession that we are in.

Obama is the exact opposite person that the country should have elected. He fooled the nation by promising the ‘change we need’ and delivered 10x of ‘more of the same’ spending that got us the second largest recession is history.

We really need change, but it’s not a bigger spender that we need. We need a free market economist to drastically cut the budget and save the nation from the pending currency crisis. The daily record price of gold should be a clear sign that the dollar is in big trouble.

Jobs come from Enteprenuers, like me who take calculated risks that are in their favor. In the current environment, their are very few ways to make a profit - until the government gets their hands out of the economy.

Here is part of an article I wrote last month;

"Until the government stops flooding the market with money, it’s very difficult to determine which industries are phony and which are real. What are consumers going to purchase after the government stops printing money?
If an entrepreneur builds’ a business today, for example a construction business based on the high demand to rebuild the roads the bridges, the entire business is bases on government stimulus money. The owners of the business are completely at the mercy of the government’s willingness to continue to borrow and spend money on rebuilding the roads and bridges.
This is not a good business model because it does not depend on the free market and therefore the business owners cannot control the risk of loss to their business.
Therefore, small businesses are not able to see which industry is going to be viable in the future, because they cannot control which industry the government continues to create competitive advantages for with policies and easy money.
Government policy is the biggest risk. If the government was not part of the risk, it would be much easier for a business to manage the risks that they need to take.
Risk management is a large part of the decision that small business owners are constantly planning for and government intervention in the economy drastically increase their uncontrollable risks. "

Government central planning of the economy undermines the ability of the free market to support itself. The free market is not capable of creating jobs without economic freedom. The more the government reduces economic freedom, the fewer jobs will result. That's why government stimulus packages never work and why the bigger they are the more damage they cause - and the last one was a real doozey.

The real economic recovery will start with a change in government monetary policy, perhaps within the next six months.

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10 Reasons Why the Economic Stimulus Package was a Complete Failure

Tue, 10 Nov 2009 18:13:00 GMT

At the beginning of the year Obama said that if we didn’t pass his economic stimulus package that unemployment could reach 8 percent.

On Friday, unemployment was 10.2 percent and is expected to continue rising through next year.

The Stimulus Package Failure

The stimulus package failed in so many ways, here are my top ten reaons;

It failed to revive the economy
It failed to preserve the value of the dollar which foreign nations are now threatening to replace
It failed to stop another housing bubble, which will bust again after the fed stops buying mortgages
It failed to stop a stock market bubble from forming, which is getting ready to bust
It failed to provide any real jobs and in the process removed 7 private sector jobs for every 1 government job that was temporarily created
It failed to protect small businesses from government expanding to increase taxes, regulation, labor costs and energy costs
If failed to provide credit to small businesses by giving the little money available to bailout companies that were ‘too big to fail’
It failed to convince congress to cut spending and promote savings and production (real wealth)
It failed to convince the public that all we need is more spending, after a decade of over-consumption and uncontrollable spending
It failed politically and proves once again that socialism has no saving power and can only further destroy an economy

At this point, the nation is a few trillion dollars MORE in debt than we were before the economic stimulus package and we are projecting trillion dollar deficits for as far into the future as we can see.

How long will the leadership remain focused on its course before the ship starts to break up?

How long will the maddening spending spree continue?

Last week, two GOP governors won in two very liberal states. In one case, Obama campaigned five times for the losing Democrat. Based on this early election, the Republicans look likely to win a lot of seats in next years’ elections.

I just hope a few of them are ready for the Depression that is coming our way. Perhaps they think the democrats will take the blame and they will get in just as the economy starts to recover. Or perhaps they will make the same mistake and push for another stimulus package.

We cannot just replace politicians with politicians and expect to get a different result. We need fiscally disciplined business leaders, entrepreneurs and capitalist to take control and put the national budget on ice. We need free-market leadership, to promote hard work, savings and production.

What is happening is what I wrote about just before the Presidential elections, Let Obama Win - To Prove Socialism Is a Bad Economic Strategy?

The stimulus package has devastated the economy, delayed a much needed recession and created many more problems for the future. As Ron Paul recently said, ‘Prepare for the worst’ unless the government stops the printing press.

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In the Attempt to Take Control of the Healthcare Industry, Politicians Try to Blur the Lines Between a ‘Human Right’ and a ‘Good or Service’

Thu, 05 Nov 2009 20:41:00 GMT

Personal health is made up of two things; personal responsibility and healthcare treatment.

Healthcare is not a human right and cannot be allowed to be mislabeled. Healthcare is no more of a human right than a haircut.

Just because healthcare is very personal does not make it a human right that the government can or should supply.

Wealthy nations can afford to invest more money into new healthcare technologies that result is improved healthcare treatments. Investments come from a surplus of savings, which come from an increase in productivity.

Healthcare is a valuable service that costs money to produce and more money can pay for better service. That means that the wealthier you are the better healthcare you will be able to afford. But the poor that live in wealthy nations will also have better healthcare as they take advantage of the investments in healthcare by the wealthy.

Human rights are defined in our constitution as the right to life, liberty and the pursuit of happiness – with the Bill of Rights.

Human rights are "basic rights and freedoms to which all humans are entitled.”

Human rights don’t cost anything to give someone because they are given to them by God when they are born, although they cost money to protect so that they are not taken away.

The right to life is a human right that is protected by the government and punishable when someone takes someone’s life. But the service of healthcare cannot be a basic right that all humans are entitled because its quality depends on its investment and therefore it is impossible to determine what level of quality to stop at.

A government is inadequate in deciding how much healthcare someone should or should not get.

Furthermore, personal health is made up of two things; personal responsibility and healthcare treatment. A government is inadequate in determining or motivating a change in personal responsibility. The motivation for well being of personal health is best solved by the free market, just as private property results in the motivation for the well being of personal assets.

If healthcare was passed as a ‘human right’, it would mean that the entire medical industry would become a mandated extension of the governments’ responsibility to provide and manage personal healthcare which they are incapable of providing.

Healthcare is not a human right and it never will be. Its time we stopped pretending that government run healthcare is even possible.

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Obamacare: The Right To Wait in a Long Line

Wed, 04 Nov 2009 13:37:00 GMT

The healthcare reform that is being debated in congress is wrong solution to a big problem.

The healthcare system is in desperate need of less government and more free market to bring prices down, not up.

The reform bill is clearly not intended to reduce healthcare costs, but to add more government controls to the industry. The sales pitch that Obama is using to try and passed the bill is 'healthcare should be a right for all Americans'.

But this is the same victim mentality trick that has been used to create the welfare state that has crippled capitalism and destroyed the economy.

Here is a video showing why government healthcare will be a disaster.

Also, here is an article series I wrote about healthcare reform in case you missed it.

Obama’s Healthcare Reform Will Be a Colossal Failure, Causing Prices to Increase Even Faster

Here is a video clip detailing some of the better solutions that have been proposed.

This massive expansion of government is going to end very badly unless congress starts the correction process soon. The nation is broke and the dollar is very close to a major crash, as gold hit another all time high today.

Yesterday, the central bank of India purchased 200 tons of gold from the IMF and they did it at record high gold prices. The central bank of India obviously knows that the dollar is headed for a crash. China also was interested in purchasing the gold, but someone India was able to make the purchase.

The IMF is pretty stuppid to sell there gold at this time in history, when the U.S. central banks is printing money faster than at any time in history.

We cannot even afford the healthcare system that we have now and we sure don't have the money to create a new healthcare system run by the government.

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The Laws of Economics Are Like Gravity, They Cannot Be Avoided

Tue, 03 Nov 2009 14:11:00 GMT

The basics laws of economics are part of the fabric of every form a money throughout the world.

Every nation has to respect the laws of economics or they will end up paying the price for their ignorance.

The laws of economics are as simple to understand as 'what goes up must come down', yet our government leaders continue to think that they can defy gravity.

Here are the basics Laws of Economics;

The borrower is slave to the lender
Wages can only increase with an increase in productivity
Private property is the most effective way to motivate an increase in productivity
Wealth is created with savings and production

This is why the trillions in government bailouts and stimulus packages has not been able to improve the economy.

The laws of economics have already been broken years ago and the result is that the economy needs to rebalance.

Creeping socialism has transformed America into a culture of over consumption with a bloated government that is standing in the way of ever returning to a sound economic recovery.

Government's don't produce anything and therefore have no money that they haven't taken from the productivity of the people. Governments can only stimulate one sector of the economy by depressing other sectors, since they must tax, borrow or inflate the money supply to finance the spending.

There is no way to quickly undue this mess we have without a long process of re-educating the public to realize that it was pure capitalism that brought America into prosperity and capitalism is the only road back to prosperity.

Repeating Mistakes of the Great Depression

The U.S. economy is in big trouble and the governments' attempt to stimulate the economy has only broken the laws of economics even more, by causing more money to be misallocated. President Hoover, followed by Roosevelt made the same mistakes and turned the recession of 1929 into a decade long depression.

They didn't want to face a recession, even if that is what that laws of economics were demanding. They tried again and again to use government intervention to avoid the recession - to no avail.

Perhaps one of the best explanations of what happen can be found in Thomas J. Dilorenzo book, "How Capitalism Saved America".

How Capitalism Saved America: The untold history of our country

"How Capitalism Saved America"

Contrary to the current political leadership, the best policy for the fastest economic recovery is the reduce government intervention, which is primarily responsible for distorting the markets in the first place, and let the free market take over to adjust for the previous policy mistakes as quickly as possible.

History has shown that the right thing to do is often very difficult for elected officials to do, unless they have a genuine interest in the long term prosperity of the economy, in which many decisions they need to make will not result in a benefit until after their term of office.

President Obama has been quick to take created for 650,000 jobs (according to his numbers) saved or created by his stimulus package. This is a clear indication that he wants credit for his policy actions. Without the government intervention, the free market would have created 6 million jobs by now but no one would have been able to take credit for it.

History has proven again and again that the laws of economics cannot be avoided and the recession that would have been over by now is just getting started.

Time is not on our side. The sooner we turn from socialism the better – no matter what the terms are, we will never find prosperity in expanding the government and printing money to pay for it.

The government cannot product an economic recovery, here are 5 Ways to Turn Around the Economy.

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How I Plan to Double My Money Twice Next Year

Mon, 02 Nov 2009 14:00:00 GMT

Timing the market is always a challenge, but this time I think I have the bull by the horns.

Lets review some of the major events of the market meltdown;

-The DOW reached 14k in Oct 2007 at the peak of the housing market boom
-Six months later, the DOW crashed to 6.6k in Mar 2008
-GDP was negative for 4 quarters, until Q3 of 2009
-Congress and the Fed have pumped trillions into the financial, auto and housing industry
-The Fed continues to hold interest rates at zero
-Hundreds of banks have collapsed and many more will follow
-Unemployment is nearly 10%, millions have lost their jobs and homes
-Congress has passed several bills that are sure to stifle small business growth

To my amazement, the market has climbed back up to 10k, while the economic fundamentals are actually worse than they were when it was at 6.6k.

The Obama administration has attempted to stop the market meltdown by adding trillions into the economy, as the expense of the value of the dollar. The result is that the dollar is sinking against all major currencies and the world is questioning its place in the global economy.

Obama and company have pushed the dollar to the edge of a cliff. Perhaps is it already too late to save the dollar from a major crash. They are backed against the wall with no more easy choices to make. Facing a dollar crisis, they must pull back the easy money and that means the market is going to crash.

When the market crashes the dollar will probably strengthen. After the market crash the dollar will continue downward and we will be facing a deepening recession, with housing, the stock market and the dollar all going down at the same time. Ok, that might sound depressing but I'm not going to let it get me down.

Doubling My Money

Last year when the market crashed, I moved my investments into Bonds to preserve my wealth and it worked out quite well. My 401k increased 3.5%, when most people lost 40-50%. Then I bought back into the market this year and have gained 40% until a few weeks ago when I moved back into Bonds.

This time, when the market crashes, which could start at any time, I'm going to short the market with the ETF DXD. DXD is a 2x ultra short of the DOW. So when the DOW drops 50% DXD rises by 100%. This will allow me to not only preserve my wealth but double my money as the market sinks.

Unforturately 401k plans have limited investment options, which is just one of the reasons that I don't like 401k investment plans. So I can only use my investment funds that are not trapped in my 401k plan to take advantage of this market crash by shorting the market.

Doubling My Money A Second Time

Last year when the market crashed, the dollar strengthened and gold held its value as investors piled into Treasury Bonds to stop the heavy losses they were taking. Gold is the ultimate inflation investment, but gold has not rallied yet because the trillions of dollars the Fed has poured into the economy have not been released into the market because the Fed is guaranteeing the banks 5% if they borrow the money back to the Treasury.

This is the only reason banks are showing profits. They are borrowing dollars from the Fed at zero percent and borrowing back to the Treasury at 5%. Therefore they have no incentive to borrow to businesses.

This is about to change when the Fed starts increasing interest rates. Banks will begin lending money to businesses that will pay higher interest rates. The economy will be flooded with the new money that the Fed has been adding. Once the new money reaches consumers, prices will increase and inflation will be visible to all.

During the market crash gold will probably not increase much - unless foreign nations lose patience with the dollar and start selling T-Bonds. But after the crash, gold will rally. Gold mining stocks offer more leverage with up to 10x the price of gold. If gold prices increase by 100%, gold mining stocks could increase by 1000%.

So after the market crash I move into gold and double my money again.

Best Case

If the market crashed by 50% and my money increases by 100% and then soon after the market crash I move into gold and gold increases by 400% with gold mining stocks increasing by 4000%, I could end up with 80x my original investment.

If gold rallies while the market crashes, I will miss out on a once in a lifetime opportunity. Staying in gold is perhaps a better choice, but if the market crashes quickly then perhaps gold will not have a chance to start increasing because investors will wait for prices to increase before piling into gold.

Therefore I think there will be a windows of time to move from shorting the market back into gold.

Of course anything can happen and I will let you know how my investment strategy turns out.

Disclosure

I am not a licensed financial advisor, so please consult a licensed professional before making any investment or financial decision.

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Extending the $8000 First Time Home Buyers Tax Credit into 2010 is a Terrible Idea

Thu, 29 Oct 2009 13:07:00 GMT

The $8000 Tax Credit is the primary reason that the housing market has begun to recover so quickly – too quickly.

This is perhaps the worst bill that congress has passed this year, next to cap-and-trade.

The Tax Credit gives away money to would be home buyers, but congress doesn’t have any money to give. They do have the authority to allocate money and it’s up to the Treasury to find the money to pay for what they allocate it to.

For now, the money is borrowed from China by selling more U.S. Bonds and increasing the national deficit. But the money will need to be collected from the working class taxpayers at some time in the future by a major increase in taxes.

This is not monopoly money they are giving away. We are obligated to pay this money back either by working harder or working for less money in the future (through a weakening dollar)

This is immoral and should be illegal to take away money from people that worked hard to get it and give it to people that haven’t worked for it. By taking away the reward of hard work, we are reducing the productivity and wealth of the entire nation.

This original bill which expires Nov. 30 has already helped create another housing bubble that will only lead to another housing market crash.

Congress is fully aware of the damage that this bill will cause as millions of homeowners will get crushed when the housing market crashes a second time from this bill. I hope they are held responsible for this disaster in the making.

But they don't seem to care as we approach the 2010 elections. They just want to juice the economy before the elections. The bill is sponsored by the Democratic leadership because many of the Democrats are up for re-election, but the Republicans that support this bill are just an guilty.

What better way to get re-elected then to hand out other peoples money?

This bill is a complete waste of money, which will not help the housing market in the long run but will lead the nation into a longer and deeper recession.

If congress would not have created for first housing market bubble with social policies that resulted in sub-prime lending standards, we would never have had a housing market crash. Those policies were put into place for the same reason that this bill was created, to get re-elected.

Call it what you want, congress is not action in the best interest of the nation and that means we are all getting cheated. Our nation clearly needs new leadership that are fiscally responsible for the well being of the economy.

The difference between a good economist and a bad one has been said to be their ability to look past short term political gains in order to benefit the economy for the long term. This is a perfect example of bad economists trading short term gains for long term economic stability.

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The Stock Market Appears to be Confused

Wed, 28 Oct 2009 20:38:00 GMT

I’m not sure what to make of the market right now. There are just too many things that don’t seem to make sense.

In the long run I believe the stock market is going to sink, once the Fed reverses policy and starts pulling back all the money they poured in.

But so far, they have only been talking about pulling the money back – maybe to test the reaction of the market before they actually do.

Housing

The Fed is talking out of both sides of their month, like today with congress considering extending the first-time home buyer’s rebate – yet a few days ago Obama says we cannot afford to extend the rebate. Which is it going to be?

Without the rebate, the housing market will surely crash. With the rebate the dollar will continue crashing.

Banks

The banks are in bad shape. Many of the largest banks are insolvent if it was not for the accounting rule change that the congress made a few months ago that allowed them to pretend their real estate assets are worth more than they could sell them for.

The FDIC Chair and Paul Volker say we need to stop the ‘too big to fail’ policy and let the banks fail. But Obama and congress want to keep the money coming and pile on the regulation to keep banks from overpaying executives or taking too much risk. Which is it going to be?

Gold vs. Dollar

If the market crashes, which I think it will very shortly although it’s impossible to predict how the government will respond. The dollar will rally as investors sell stocks and gold will probably drop a little bit or perhaps hold its value.

But after the crash, which could be sudden or it could drag on for many months, the dollar will continue to sink as investor will move back into equities.

Interest Rates

Interest rates need to be a lot higher before any real economic recovery can begin because money needs to be worth saving before anyone is going to save it and savings drive innovation by funding new product development. Today innovation is driven by foreign savings and investments, but that will come to an end with the weakening dollar.

Just the other day the Fed said that interest rates will remain low for an extended period of time because the economy is too fragile and Inflation is not a problem.

Fed Chairman Ben Bernanke also said that the Fed cannot support the market indefinitely and the Fed is going to stop buying U.S. Treasury Bills in Nov. as planned, which will cause interest rates to increase. Which is it going to be?

Conclusion

In light of this precarious situation, I’m not sure what to make of the market. The stock market is clearly overvalued, but as long as government policy continues to support easy money and high risk, investors are going to continue to leverage up their assets.

I think the day is approaching when the Fed will no longer be able to control the market like they do today, because all of their influence comes from their ability to print money and once the dollar sinks, they will lose much of their influence - just like the rating agendies that rated the sub-prime mortgage loans AAA have lost their credibility.

The entire financial system has been taken hostage by the Federal Reserve. Everything from the value of our retirement accounts to the value of our currency to our jobs is in the hands of the Federal Reserve.

Their next move will either keep the phony economy going a little while longer or will cause the house of cards to come tumbling down.

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Congress is Holding Back the Free Market from Creating Jobs

Mon, 26 Oct 2009 19:45:00 GMT

The new jobs need to be created from real consumer demand, but until congress quits pumping money into the economy, who know what real consumer demand is?

When a small business builds a business on phony consumer demand based on expanded credit from easy money that the government creates, it can only exist as long as the easy money keeps flowing.

When the consumer credit that is driving the purchasing power behind the customers is removed, the sales drop and the business cannot survive.

This is why the auto, retail, airline and many other industries are hurting so badly right now. They were all build on a phony consumer demand, based on expanded consumer credit which is now coming to an end and the only businesses that will survive are the businesses that sell to real consumer demands – based on current wages.

Entrepreneurs Struggle to Envision the Future

Until the government stops flooding the market with money, it’s very difficult to determine which industries are phony and which are real. What are consumers going to purchase after the government stops printing money?

If an entrepreneur builds’ a business today, for example a construction business based on the high demand to rebuild the roads the bridges, the entire business is bases on government stimulus money. The owners of the business are completely at the mercy of the government’s willingness to continue to borrow and spend money on rebuilding the roads and bridges.

This is not a good business model because it does not depend on the free market and therefore the business owners cannot control the risk of loss to their business.

Therefore, small businesses are not able to see which industry is going to be viable in the future, because they cannot control which industry the government continues to create competitive advantages for with policies and easy money.

Government policy is the biggest risk. If the government was not part of the risk, it would be much easier for a business to manage the risks that they need to take.

Risk management is a large part of the decision that small business owners are constantly planning for and government intervention in the economy drastically increase their uncontrollable risks.

Big businesses manage government policy risks with lobby groups, campaign contributions and social activists, but small businesses don’t have these options.

The result of the current government intervention is that entrepreneurs are unable to make a calculated risk based on supply and demand of the free market and therefore unwilling to invest in new markets and add jobs.

This is why small business (and jobs) thrives when we have a smaller government and why we are unlikely to see any real job growth for several years, perhaps longer.

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The Market is Going to Crash, Get Out While You Can

Fri, 23 Oct 2009 19:13:00 GMT

The primary reason behind the market rally over the last year had been because of all the money the Fed pumped into the financial system.

It took trillions of dollars to avoid a compete market meltdown, but now the time has come to deal with the consequences of printing money at a rate that has never before in the history of the world been see.

As I have said many times before, it would take the entire world to support the dollar through this recession and that is unlikely to happen.

No matter how much foreign nations have invested in the dollar or how important they think the dollar is to keep their exports shipping to the U.S., the dollar is sinking and the world is going to have to deal with the consequences.

A few days ago the dollar reached 1.5 euro = 1 dollar. European finance officials called this a ‘disaster’ for the economy in which they have already intervened by committing billions of euros in stimulus packages and record-low interest rate to help their economy and keep the euro from rising against the dollar.

A few months ago a European official said that if the dollar reaches 1.5 euro, something must be done. That something could be anything from buying more dollar by printing more of their own currency or replacing the dollar or a more likely option to increase the political pressure on the U.S. to stop their reckless monetary policy.

The weakness in the U.S. economy has driven the political pressure to stimulate the economy, with several bad monetary policy action that have weakened the economy even more then before the crash of 2008.

The weakening dollar puts Obama is a corner, as the global political pressure will quickly overwhelming his domestic agenda. Obama and the Fed have already started to put the brakes on the money pumping, but the weakening dollar will demand much more painful changes in monetary policy that I believe will cause the markets to crash.

They are not going be get the dollar to rally just by talking about their 'strong dollar policy' that does not exist or by increasing the interest rates by a few percent. It's going to take a lot more then that to stop the dollar from sinking.

Here are 5 things that will contribute to a market crash;

Rising Interest Rates – The Fed chairman has already said that the Fed cannot continue to hold rates low forever and the political pressure of the weakening dollar will force them the begin raising rates by the early next year if not before.
The Housing Market Crash will Continue – The housing market is going to crash again and it will take a large part of the economy with it. Here are 5 reasons why.
Wage Controls – Just today, Obama’s pay czar ordered seven companies that received billions in government bailouts to cut their salary for top executives. This is not a good idea, because it created yet another anti-business policy. If your business makes too much money, by paying your executives too much, then the government can illegally interfere in your business and force wage controls. These businesses should have never been bailed out in the first place. Then the free market would have naturally imposed wage reductions for these executives. Government wage controls, cause business leaders to leave the country in search for a free nation that they can earn whatever they are worth. This policy could single handedly drive the financial industry from New York to London or China or somewhere else.
More Regulations, Higher Taxes – Ben Bernanke is daily asking congress to overhaul the financial regulation, that he likes to blame for the economic crisis. Mean while the recode deficits and dropping tax revenues have already caused many states to increase taxes across the board. The only reason the Fed has not increased taxes yet is because they can and have been printing dollars.
The End of the Bailouts and Stimulus packages – If the dollar was still strong and the world was still buying up out dollars as fast as we could print them, then congress and the president would continue to hand out money. Just yesterday, Obama said he would like to extend the first-time home buyers credit, but we cannot afford to – even thought the national realtor lobby said that without it, the housing market would crash again.

Some of these are already taking place and others are in the near future as the weakening dollar will be too much for the Fed to continue its reckless monetary policy – and the real economy, based on real consumer demand will finally be allowed to show itself.

The good news is that when the government finally stops it's reckless monetary policy, the economy will be able to begin it's long recovery and build a new foundation.

When the market crashes the small business sector will be able to start businesses because the bogus government policies will no longer be supporting the phony economy that they have tried so hard to pressure.

The market is going to crash. What I don’t know is when or what else the government will try to do when it does. I don’t know if it will crash over several months or within a short period of time.

Either way, I’m going to wait this one out.

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More Debt is Not Going to Help Small Business

Thu, 22 Oct 2009 13:32:00 GMT

Obama and company are redirecting TARP money from large banks to small banks and SBA loans to help small businesses.

More debt seems to be Washingtions solution for everything.

But access to more debt is not going to cause small business owners to start hiring again.

The primary problem they are facing is lack of sales, customers and confidence in the market. Small businesses are unlikely to borrow more money until they have an increase in sales and a clear sign that more investments will grow their business profits.

The real threat to small businesses is the expansion of government, causing taxes to increase and created anti-capitalism policies like minimum wages increases, higher energy costs and healthcare mandates.

Small businesses don’t need more government programs; they need less government programs, lower taxes and fewer intrusions from government mandates that reduce their ability to profit.

Expanding the SBA program to offer more debt to small businesses is not going to help. Certainly access to credit is important, but not if it comes with bad policies that are more burdensome then without the credit.

And if credit is too easy to get, then even badly structured business will success to compete with good business models. Investments will go into businesses that are not truly supported by real consumer demand, which could lead to another bubble that will someday bust.

Even if more credit was the key to small business growth, the SBA loan program has a long history of being as much about social engineering or government central planning then about helping small businesses. The program is designed to try to control the direction of the economy, which cannot be done by government.

I have personally witnessed several business owners struggle with an SBA loan only to realize that it was not a good financial solution for them.

The Obama administration is trying to show some support of the small business sector, but don't hold your breath. Most of their policies are anti-capitalism in nature and therefore anti-small business, which will continue to lead unemployment higher.

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The Blogosphere Continues to Grow, Perhaps Splitting Into Two Camps

Tue, 20 Oct 2009 15:42:00 GMT

According to the newly-released Technorati State of the Blogosphere 2009 Report, the top 5,000 blogs have one thing in common: they publish frequent posts.

That is the conclusion found by Small Business Trends. Top bloggers post upto ten times per day.

I have seen this trend coming, but I think it’s based on news as entertainment. As blog posts get shorter, they are more like introductions to a subject, and the conversation continues on other blogs and social media sites.

If increasing traffic is based on how frequent you post, then why not just post titles with a single paragraph?

I'll tell you why, because short posts do not add to your content base which continue to drive traffic for years to come. I see the blogosphere dividing into two camps, the content creators and the gossipers.

If you want to compete with the gossipers, you need to increase the frequency of your posts. But if you want to market a business or build a brand, than yours better off as a content creator.

The Gossipers

The gossipers are tightly coupled with the social media phenomenon, with sites like Twitter that spread the latest news as fast as possible. If you want your blog to be part of this phenomenon, then you need to increase the frequency that you spread gossip.

The gossipers are going head to head with the traditional media companies and winning primarily because they have an equal playing field by using the Internet to spread news as fast as anyone.

But each day they have to work harder and post even faster for the same traffic that they had yesterday.

The Content Creators

The content creators may not be gaining as much traffic as the gossipers in the blogosphere as shown by the Technorati report, but they have an advantage against competitors that is constantly working for them.

A large content base creates a barrier to entry that gives them leverage on the Internet that is hard to duplicate.

They are rewarded for hard work with a residual income model that is difficult to encroach on. They own their niche markets with valuable content that no one else has.

Conclusion

These two blog camps come down to this; either you’re good at passing information along or you’re good at creating valueable information. Either you have a lot to say or you have something valuable to say. Both camps can be very influential.

I have already decided years ago not to try to compete with the gossipers and to focus on building content.

Dharmesh Shah from OnStartup.com just published a book about the importance of building content.

Inbound Marketing: Get Found Using Google, Social Media and Blogs

"Inbound Marketing"

Dharmesh’s article, "How To Build A Barrier To Entry With Inbound Marketing" is an excellent read.

This concept comes back to the basic business idea of being able to find something that you can leverage against your competitors to provide customers something that they cannot get anywhere else and therefore creating value.

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The Outsourcing Trend is a Trap, This Is the Time to Bring in College Interns and Hire Local

Tue, 20 Oct 2009 02:11:00 GMT

Like every business, the company that I work for is looking for way to cut costs.

Despite the fact that we have only had success with about half the projects that we have outsourced over the last several years, which means that we have probably broken even, outsourcing seems to remain a popular executive decision.

Outsourcing has a place in the global economy, but with a falling dollar and high unemployment, the time to outsource is gone.

The executives and managers of the next fortune 500 companies are not going to get there by outsourcing.

CEO’s need to recognize the global economic trends and envision what the future cost of labor will look like.

The primary reason CEO’s continue to outsource is because the numbers look good on paper and there is little resistance to the trend, resulting in happy owners that hand out bonuses.

The down side is that morale sinks and turnover increases (at least in a normal economy). The recession is helping to minimize these down side risks, which makes outsourcing even more attractive, but I tell you it’s a trap.

It’s a Trap

As the recession continues to deepen and unemployment remains high, a wave of new business is inevitably coming. The wave of small businesses that are coming are going to be competing with the big business CEO’s that have moved to the outsourcing model.

Startup business’s that are born in a deep recession have a lot of will and vision, two of the most important elements of any new business. They will be proud to be locally owned and staffed, and that means they will be able to operate at lower costs and with higher morale, which will give them higher productivity.

The current outsourcing trend in going to backfire, as low morale will eventually lead many of the best employees out the door and to work for new competitors.

The Dollar Story

Most CEO’s are not paying attention to the global economic trends and international bank polities and the reason I know this is because I talked to some that run very large international company just the other day.

The dollar is going to crush many of their plans. They have not considered the impact of the weakening dollar on the long term costs of outsourcing.

When the dollar sinks against other currencies, outsourcing contracts will need to be re-negotiated to account for the weakening dollar so that the foreign workers are still paid a fair wage in their own currency.

That means that companies that have replaced knowledge workers with foreign contractors will see huge increases in their costs of labor. Their businesses are not expecting the double-digit increases they will be forced to pay.

This increase in cost will force businesses to increase their prices. But competitors who are less dependence on foreign workers will be able to keep their prices low, allowing them to gain market share and punish their outsourcing competitors.

Even if you don't have outsourcing contracts directly with foreign workers, your business may still be at risk because your suppliers may have outsourced their work. I also expect that local outsourcing will drastically increase as the demand for local resources increases when companies try to find ways to reduce their foreign outsourcing contracts.

Therefore the best way to control your labor costs, will be to maintain local employees with wages based in dollars.

College Students

Right now the U.S. has hundreds of thousands of educated college student that have over paid for their education, yet cannot find work. Their college debts force them to find a job, any job for any pay. Their only other option is to go back to college.

College interns can be scooped up by the handful. College career services also allow businesses use a stipend’s to pay a student for x hours. For example, your business could pay $1000 for a part-time intern of one semester of say 300 hours of work. That comes to a little more than $3 per hour. Minimum wage is $7.25 per hour.

This is a great time to take advantage of local educated students and at the same time give them the needed experience they need to find a place in the global economy. Many of these students will be the one’s that create new businesses, which means either you hire them to work for you today or compete against them in a few years.

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China’s Role in the Economic Crisis and the Rug They Have Yet to Pull

Fri, 16 Oct 2009 14:25:00 GMT

The value of the dollar has been plunging in all major currencies for several weeks, except the Chinese renminbi.

China has maintained a peg against the U.S. dollar for the last decade, which has been the primary driver in their growth in exports.

Here is a quote from an article today,

“For its part, China has been critical of the United States for its fiscal and trade imbalances, without mentioning that those imbalances have been exacerbated by China’s own policies.
“To rant and rave about the unsustainability of our fiscal policy when they have their own unsustainable monetary policy is a classic case of the pot calling the kettle black,” said Robert Barbera, the chief economist of ITG.
“I still think,” he added, “that the single most destabilizing decision of the last 10 years was the Chinese peg.”
That peg forced China to take in huge quantities of dollars and then invest them in dollar-denominated securities, principally Treasuries. That in turn helped to hold down American interest rates and stimulate the housing boom that has since collapsed.”

China’s peg has been the enabler of our decade of credit expansion, which allowed our government to borrow trillions of dollars and our consumers to become 70% of our GDP. Millions of jobs have been lost as the U.S. manufacturing industry has been virtually gutted.

The question is when are they going to remove the peg and what is going to happen when they do?

China is perhaps the only nation left that is not selling Treasury Bonds, hoping for a miracle that the U.S. economy will recover and they will not lose their investments.

The reality is that they have already lost their investments because they have no way of getting them back without selling, and selling will cause the dollar to sink even faster – causing the majority of their investments in T-Bond to lose even more value. And each time they sell more, the majority of their investments will lose even more value.

This is the same reason that they cannot remove their currency peg. They cannot risk the loss of their investments and perhaps their largest export customer.

Eventually China will remove their peg and pull the rug out from under the dollar, take their losses and move on. When they do, I don't want to have any of my investments in dollars.

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Landing a BIG Job in the Recession: A Capitalism Success Story

Thu, 15 Oct 2009 14:52:00 GMT

A few days ago I landed the biggest job that I have ever had with my custom website design business.

There are many reasons why I got the job, which I’ll talk about, but the most important part is that landing this job clearly shows how pure free market capitalism is the best solution to the recession.

Free market capitalism is not understood very well today because of the endless war against it, by the media, government corruption and special interest groups that have hijacked the wealth of our nation.

I’m going to use this experience to explain what capitalism is and how important it is to protect against the powers that be so that someday we can have an actual economic recovery – rather than the deepening recession that we have today.

Here are a few of the reason I landed a BIG job;

Private Property – Private property is a vital part of capitalism because it allows personal ownership of assets, which promotes a self interest in those assets. Assets like farm land, private businesses and all types of equipment used by companies to increase production are best maintained when they are privately owned.

In my case, I own my business and I alone will suffer a personal loss if my business does not succeed. My business is not financially supported or backed by the government in anyway. The private ownership of my business provides me with the motivation to succeed, unlike businesses that are partially owned by the government or have been labeled ‘too big to fail’. They do not have this vital ingredient to succeed and therefore will inevitably fail to produce a profitable result as history has shown time and time again.

Free Labor – Free labor is labor that is not controlled by governments wage controls or government supported unions. Free labor is the ability of employees and employers to change their careers and wages according to the market.

When the market is strong, employers are forces to paid higher wages to keep vital resources from going to work for competitors. And when the market is weak, employers often lower wages to allow them to lower expenses and prices of products and services so the business can continue to operate at a profitable margin while workers remain employeed.

This is not the case when labor is controlled. A few months ago the government increased the minimum wages to $7.25 per hour, which forced many small businesses who rely on low cost labor to cut jobs further increase the unemployment.

Union contracts also reduce the flexibility of free labor, as can be shown by the number of union carpenters in my state that are unemployed. I read the other day that over 1000 union carpenters are unemployed in MN alone. Contras that with the carpenter that I hired to finish my basement this summer, who has been busy all year.

Unions are special interest groups that gain political influence by joining together, but their influence often hinders capitalism by controlling labor and prices, leading many businesses to bankruptcy – which then need to be supported by the taxpayers, through government intervention. GM is a prime example. The public educational system, which contains the two largest unions in the U.S., is another example supported by an ever increase in federal spending.

In my case, I was able to negotiate a price for my service which results in a lower per hour wage than I usually attain. This is a win-win for everyone, but only because I own my business and control the cost of my labor. In other industries, like health care, the government has already taken so much control over prices and wages that even in a deepening recession, prices are increasing. This is a clear indication that the health care industry is already deeply controlled by the government.

Endurance, hard work and experience – The third reason that I was able to land this big job was because of my business planning. In the effort to protect my privately owned business from failure, I plan for financial hardships. That means that I have a savings account and I don’t run up a lot of debts, like many of my competitors have done – which are now out of business. Endurance is a good word for it. When a market shrinks, the weaker players fail first and that leaves more business for the surviving businesses.

Anti-capialist don't create plans to protect their businesses from financial hardships. Their plans focus on government policies to protect them from failure. Their emergency savings plan is a government bailout - which is a taxpayer funded savings plan.

Hard work and experience are big factors in free market capitalism, but only if they are allowed to be rewarded.

In this case, I was rewarded for my hard work and experience which has resulted in my reputation to produce a quality product at a fair price. The people that support the war against capitalism do not like to reward hard work and experience. They want an easier path. That path is to lobby politicians to pass regulations and laws that give their businesses a competitive advantage to protect their business from competition. I believe Adam Smith, who wrote about the original advantages of capitalism called this - mercantilism.

That’s it. That is how capitalism works and now it is being undermined at every turn by the war against it that is ragging in our nation today.

If we want an economic recovery, we need to stop the special interest groups that control our economy and our money supply through the Federal Reserve, but this is no small task. The anti-capitalist are succeeding as the government continues to expand its control over the economy and continues to drive the nation deeper into debt.

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The Dollar is Under a Global Attack

Tue, 13 Oct 2009 19:43:00 GMT

The global attack on the dollar is a direct attack on America as a nation.

The strength of the dollar as the global Reserve Currency of the world is the cornerstone our military and economic superpower status.

Global central banks are dumping U.S. dollars at an accelerating rate, and very few citizens realize what the ramifications of a dollar collapse will look like. Let me tell you, it’s not going to be pretty.

This is a direct attack on our nation and the closest thing to declaring war against the U.S. without an actual military attack.

Much could be said about how the U.S. central bank (Federal Reserve) has mismanaged its power and flooded the world with cheap money and inflation to bring about the economic crisis – and much of it is true.

This time the global central banks are not joking around, they are joining together in direct defiance against the dollar.

“Central banks increased their foreign currency holdings by $413 billion, or 6 percent, last quarter.
That was the biggest rise in at least six years, according to Bloomberg News.
And for the countries that reveal how they allocate that money, 63 percent of the fresh cash went into yen and euros during the second quarter, soaring from 37 percent 10 years ago, according to Barclays Capital. “

Dumping a nation’s currency can devastate its wealth, causing massive economic problems. These actions are more than fighting words. History shows that actions like these lead to wars.

President Obama will soon be facing another war – the global war against the dollar, which has far greater ramifications than a war against a single nation.

Soon Obama will be begging nations to stand with America and defend the dollar. But it will be a very difficult to sell, while he continues to print money as fast as he can. The only choice he will have will be to face the recession.

The world is not going to let the U.S. export inflation anymore, we are very soon going to be cut off from our debtors and forced to live without our means.

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Why America May Never Recover From the Recession: Part 5: America is Not Recorded as a Superpower in the Last Days

Fri, 09 Oct 2009 17:35:00 GMT

The Bible describes four spheres of power in the ‘last days’ before the return of Christ.

This is Part 5 of an article series which takes a look at currency events in relationship to biblical prophecy to explain why America may never recover from the current recession.

I finally got the chance to complete this article series that I started many months ago.

During the 'last days' the world will be in great distress and mighty national will be organized for battle. The question is, "Where is America in the last days?"

World Empires

The book of Daniel describes the four world empires that will come to power during the history on earth before the return of Christ. These four empires become so large that they control the entire world. These world empires should not be confused with large nations like America or China or Russia, which have never become world empires.

In the book of Daniel, the fourth and last world empire will be the revival of the first world empire – the Roman Empire. The details of this empire are shockingly similar to the current European Union, with the formation of 10 primary member nations held together loosely.

If the dollar loses its support as the global Reserve Currency in the next few years, the EU currency (Euro) is the only viable replacement that could propel the EU into the world empire that Daniel described.

Among the four world empires described in Daniel, America is not one of them. That doesn’t mean the America wasn’t a superpower or that it didn’t dominate global trade for several decades. It just means that America will never become a world empire.

Superpowers in the Last Days

Most of my knowledge of ‘last days’ prophecy comes from the prophetic historian Hal Lindsey. Hal Lindsey has done an excellent work in researching and explaining how these prophecies come together. My research is dwarfed by Hal's and I highly recommend his book “The Everlasting Hatred: The Roots of Jihad” for a complete study of the four spheres of power that I'm about to talk about.

In this book Hal Lindsey explains how the hatred towards Israel comes from a long time ago, when God promissed to bless and protect them and use them to show the world that he is the one true God.

The Everlasting Hatred: The Roots of Jihad

First of all, Israel will be the center of the world in the last days and therefore all references to mighty nations in the last days are in reference their location to Israel. Israel has already become the center of world conflict as can be seen at the UN meeting just a few days ago, as all major speakers addressed the conflict in Israel as the most pressing issue. It is also evident that nearly all UN member nations are against Israel.

As Israel becomes the center of world conflict in the last days, each superpower nation will go to war against it, which is why biblical prophecy referring to this time references each sphere of power in respect to its location to Israel.

I will make Jerusalem a burdensome stone for all the peoples… and all the nations of the earth will be gathered [for war] because of it. Zechariah 12:2-5

Here are the four spheres of power in the last days;

The Russia sphere of power called “the kings of the North” and their alliance with the Muslim nations to the south (Iran and company). Ezekiel 38-39.
The Muslim sphere of power Daniel called “the kings of the South”
The Asia sphere of power called “the kings of the East” and their 200 million man army that will attack Israel (China is the only nation is the world that has an arm that large) Revelations 9:14-16, Revelations 16:12-16.
The European Union sphere of power called “the kings of the West”

As you read the news, you will discover all four spheres of power rising. The Russians and Muslim nation have the oil and natural gas that is fueling the world. Asia has become the producer of the world, and the strengthening Euro is increasing the power and influence of the EU.

At the same time, America is declining and our government is only delaying the fact that the nation is bankrupt. The furture of America is going to be a long process of re-negotiating with its debtors through the process of a weakening dollar our debts are being reduced, but so is the wealth of our nation.

The process will include drastically cutting our spending and going to work for our rich Asian lenders. A debtor is a slave to his lender as America has become. These current events make it clear that America is not going to be a superpower in the last days - just as bible prophecy foretold.

Conclusion

America is not a world empire nor is it a superpower in the last days, which are clearly upon us and therefore I must say it again – America may never recover from the current recession.

In this article series I showed how the last days are upon us, starting with the recent rebirth of the nation of Israel. These things that are coming make no reference to America as a superpower or even a world power.

Perhaps America may never recover from the deepening recession as power is shifted to other parts of the world to bring about these prophecies.

Therefore don’t plan on an economic recovery. Instead plan for a deepening recession so that you are not disappointed and are well prepared to continue living through the economic troubles of our day.

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Time to Take Some Profits and Rebalance My 401k Again

Wed, 07 Oct 2009 16:46:00 GMT

Global markets have rallied in the last six months and it’s time to take some profits.

My 401k is up over 36 percent this year, as are many markets around the world. But I don’t think the rally is justified, at least not in the U.S. with staggeringly high unemployment and a deepening recession.

The dollar has begun to sink, but global markets still appear to be coupled together. I think the U.S. stock market could be headed for a crash and soon. The question is what will happen to the markets in Asia and Europe?

Global Markets Coupled Together

Will they follow the U.S. market crash like they did last year or will they break there tie to the U.S. market and continue the rally? I don’t think they will at this time. I think it will take another global stock market crash before foreign markets finally become unglued from the U.S. markets – and the sinking dollar will be the catalyst that causes international investors to pull out of U.S. markets.

In light of my market analysis, I have decided to rebalance my 401k and move my 36% increase in profits into a safer place before the crash. If the rally continues, I will miss out. But if the markets crash, I will have preserved my wealth and will be in a great position to get back into the market at the bottom again.

If the markets stagnate for the remaining of the year, then I have not gained or lost anything. This is also a very likely scenario.

If you recall the last time I rebalanced my 401k at the beginning of the year, I chose two sources from my 401k options; natural resources (oil, gold, other commodities) and International markets. Both have done very well as has the entire global market. I just want to keep my gains and I’m skeptical of the lack of corporate earnings to support the current rally.

Therefore, before the disappointing end of the year results drive the markets into a tailspin, I’m getting out. As of today, I’m rebalancing my 401k into two new options; a money market fund (basically cash) and a utilities fund (which has not seen much growth this year).

The money market fund is risky if the dollar sinks, which I’m convinced it eventually will, but if the markets crash again the dollar will enjoy a flight to safety like it did when the market crashed at the end of 2008.

If the market doesn’t crash by the end of the year, I will reconsider my options. But for now I’m happen with my 36 percent gain for the year and I’m willing to risk losing out of the small chance that the markets will gain any more the rest of the year.

Correction: By the time the transfer of my funds was completed, my yearly gain was over 40 percent.

Disclaimer

I am not a licensed financial advisor, so please consult a licensed professional before making any investment or financial decision.

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Gold Hits New Record as News Spread of a Possible Replacement of Dollars in the Global Oil Trade

Tue, 06 Oct 2009 16:02:00 GMT

Gold hit a new all-time record high above $1,041 in morning trading, passing the previous intraday record of $1,033.90 set last year March 17, 2008.

The primary reason for the new record high was the news that the Persian Gulf states and rich oil countries including Japan, Russia and China are discussing replacing the U.S. dollar as the primary currency for oil trading.

The source of this breaking news story was the U.K.’s Independent newspaper, but Saudi Arabia’s Central Bank Governor Muhammad al-Jasser and Kuwaiti Oil Minister Sheikh Ahmed Al- Abdullah Al-Sabah denied any talks were held.

Just last month Iran, the fifth largest oil exporter in the world, replaced the dollar with the Euro for all oil trades.

Australia Raises Interest Rates

Another blow to the dollar came earlier in the morning when Australia’s central bank became the first nation of the G20 to raise interest rates since the financial crisis began. This was in direct contras to the U.S. and world bank's decision to continue to flood the world with cheap money. Australia’s dollar gained as much as 1.3 percent to 88.96 U.S. cents, the highest level since August 2008.

Reserve Currency Replacement

The dollars reserve currency status is primarily based on an OPEC agreement to use dollars to trade oil. Under an OPEC agreement, all oil has been traded in US dollars since 1971 which made the US dollar the de facto major international trading currency.

All nations have to hoard dollars to buy oil. This fact has given America a huge trading advantage and helped make it the dominant economy in the world.

In 1971 the dollar was still backed by gold and because all other major currencies were linked to dollars, they were also backed by gold. The dollar is no longer backed by gold and neither are any major currencies, which are therefore subject to the monetary policies of the U.S. Federal Reserve.

As long as the U.S. Federal Reserve maintained a relatively contant supply of dollars the global financial system could have continued to operate as if it was still linked to gold. But those days are far behind us and the Federal Reserve has become a source of global inflation.

In order to stabilize the global financial system, all major currencies need to be backed by gold so that inflation can be controlled and asset bubbles can be avoided. Unless the dollar is re-linked to gold again, the world needs to find a replacement to stabilize the global financial system.

As I wrote last year,

“Bailing out the US economy from this recession will take the support of the entire world. It will take the combined effort of all wealthy nations acting together to support the dollar through this recession.
This unilateral support for the dollar, in the midst of a global financial meltdown is unlikely to hold up and eventually the dollar will sink.
The fall of the dollar will create the largest financial crisis in the world, which will force a replacement for the dollar as the Reserve Currency of the world.
The dollar could lose 80-90% of its value – devastating the US economy. It is unlikely that America will recover to its prosperity of the past any time soon from the global financial crisis that is underway.”

I also wrote,

“The only chance that world government leaders have to stop the global recession turning into a global depression is the stop central banks from increasing their currency, and the only way to do that is to link the world dominant currencies to gold.
This is likely to cause the demand for gold to drastically increase and perhaps bring new government controls to the ownership of gold. The price of gold is likely to continue to increase as more and more of these meetings discuss linking gold to currency. “

Fed to Raise Interest Rates

This is really bad news for the Federal Reserve. They will be forced to start raising interest rates even while the U.S. economy has not started recovering and is still facing staggeringly high unemployment.

The world is beginning to take a stand against the inflationary policies of the Federal Reserve, and in doing so, they are risking the U.S. military withdrawal from the entire world which will surely lead many nations to increase their own military spending.

World leaders are also risking the loss of their investments in U.S. dollar reserves, as trillions of dollars invested in U.S. treasuries will lose value as the dollar sinks.

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“Too Big To Fail” Must End: Volker, Bair

Mon, 05 Oct 2009 14:00:00 GMT

FDIC Chief said on Sunday that she wanted to end the "too big to fail" doctrine and shrink the shadow banking system that operates outside the reach of regulators.

And just a few days before, Former Federal Reserve Chairman Paul Volcker and Obama's economic advisor said the Obama administration's proposed overhaul of financial rules preserve the policy of "too big to fail". He said,

“... by designating some companies as critical to the broader financial system, the proposals create an expectation that those firms enjoy government backing in tough times. He says that implies those financial companies "will be sheltered by access to a federal safety net."

Government Intervention Must End

As I have said before, more government intervention in the economy will only make the problems greater. Now, Obama's own chief economic advisor Paul Volker and the FDIC chief Bair are suggesting the same thing.

Support for more government intervention is fading quickly as Ron Paul’s bill to audit the Fed has more than 295 co-sponsors.

Obama's proposed overhaul of the financial regulations and his proposal to give more power to the Federal Reserve to oversee large financial institutions, clearly revile that he has little understanding of how destructive the current policies of government intervention have already been to the economy.

FDIC chief Bair said,

“We need to end 'too big to fail' and this needs to be an overarching policy that applies to everyone," Bair said she believed that bank holding companies with subsidiaries that are shut down by regulators also should be made to pay the price of failure by being subject to the same wind-down process.
"I believe that the new regime should apply to all bank holding companies that are more than just shells and their affiliates regardless or not whether they are considered to be systemic risks," she said, adding that including only systemically important firms in the shut-down regime could reinforce the 'too big to fail' doctrine.”
Financial firms subject to systemic risk shutdown authority should likely also be required to publish "living wills" -- details on how an orderly wind-down would play out -- on their websites to provide more clarity to shareholders and customers.
"If you tighten regulation of the banks even more without dealing with the shadow sector you could make the problem even worse," she said.
Bair added that reducing the shadow banking system and regulatory arbitrage is her top priority for the U.S. Congress as it works on legislation to revamp U.S. financial oversight this fall.”

Obama's push to expand the government regulatory system and blame capitalism and deregulation for the economic crisis have been severely undermined.

The U.S. financial system is already the most regulated system in the world and capitalism does not create moral hazards that encourage banks to take high risks with other peoples money, like government intervention does.

The free market has the only true solution to these problems, which Volker and Bair have testified to.

Will Obama Listen?

The question is will Obama listen or will he turn to Fed Chief Ben Bernanke and other leaders of the ant-capitalism movement and continue to choke out the free market?

So far the government has only let one large company fail, Leman Brothers, while bailing out hundreds of others. Sooner or later, the government needs to let the market solve these problems that they are inadequately capable of solving – in deciding which businesses should survive.

The damage of saving banks and large companies with government money is far greater than the damage of letting them fail.

I don’t see how Volker can stay as the chief economic advisor to Obama while his opinions remain so fundamentally different. Something is going to have to change. Either Volker will be replaced or Obama will begin to change his policies.

As I have said many times before, the policies of Socialism and Inflation will eventually fail and political leaders will once again be forced to turn to the free market for solutions. I'm just glad they are finally started to make the turn before things get any worse.

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A ‘Jobless Recovery’ is a Deepening Recession

Fri, 02 Oct 2009 19:42:00 GMT

The words ‘jobless’ and ‘recovery’ are at odds with each other. New jobs are essential to an economic recovery. Without new jobs, there is no recovery.

The only reason the word 'recovery' is being used by the cheerleading media and political partners in crime is because of all the money that is being spend from the government stimulus packages.

But that money has to be repaid with interest and will result is much higher taxes for many years - further suppressing the economy for a long time.

The money the government is spending is not helping create new jobs, but rather is delaying the small business sector from creating new jobs. The failed inflationary policies of the Federal Reserve who led us into this recession are now suppressing our exit.

Deepening Recession

The economy lost 263,000 jobs in September — far more than expected — and the unemployment rate rose to 9.8 percent, the government reported on Friday.

Despite help from Washington’s $787 billion stimulus, state and local governments slashed 47,000 jobs in September.

More than 15 million people in the United States are now unemployed, as the economy has been bleeding jobs every month, without interruption, for nearly two years.

There is not even a hint of recovery in this outlook. We are facing a deepening recession.

Let the Market Adjust

By now it should be clear that throwing good money after bad is not the answer. We need to rebuild a new economy and that is going to take investments in new markets, based on new consumer demands.

To do that, we need to stop propping up the phony part of the economy that is not supported by real consumer demand. In other words, the government has to let ‘too big to fail’ companies fail. So that their capital and their resources can be freed up for new businesses to use based on real consumer demands.

It’s also going to take much higher interest rates to attract investors and encourage savings so that the small business growth sector can get access to the loans they need to create new jobs.

Perhaps the most important thing is for congress to take drastic action, but not the action that they have been taking. They need to cut spending by 30-50 percent, cut taxes and remove policies that are suppressing businesses to make sure we are globally competitive again.

That is going to take new leadership, free market leadership. We need to throw out the fat cats and bring in the fiscally conservative bean counters.

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Slowing Economy Results In 20% Lower Heating Costs This Winter

Thu, 01 Oct 2009 21:05:00 GMT

Finally I found some good news about the economy that is not related to the phony economy that the government is trying to re-create with more inflation.

Apparently the slowing economy has resulted in an increase in the supply of fuels and natural gas. Inventories are now 16 percent above their five-year average. This increase in fuel is expected to reduce heating bills by 20 percent this winter according to this Reuters article.

"As the economic downturn deepened throughout 2008 and 2009, energy demand fell, but supply was relatively slow to respond. As a result, stocks of many fuels were pushed well above typical historical levels," the Energy Information Administration said in its weekly review of the oil market.
"In total, fuel supplies are stacking up well ahead of winter -- a bright spot for consumers that, ironically, is due in large measure to the recession," the Energy Department's forecasting arm said.
U.S. natural gas inventories are now 16 percent above their five-year average and are expected to hit a record 3.840 trillion cubic feet at the start of the winter heating season on Nov. 1, the EIA said.
CenterPoint Energy (CNP.N) said on Wednesday it will pass along lower wholesale natural gas prices to its customers in Minnesota, which are expected to lower winter heating bills by up to 20 percent.”

This brings up the ongoing inflation vs. deflation argument and points to deflation. But I think that inflation is still going to overtake the few things that are getting cheaper, because most of the goods we consume today are imported and with a weakening dollar, the cost of imported goods will be increasing.

I also suspect that this is only a temporary dip in prices based on low demand and high supply. As the dollar weakens, imported oil and natural gas will increase in price and by next year we may have a 20 percent increase in our heating bills.

Therefore enjoy it while you can and put the extra money that you save in a raining day fund because the storm clouds are still circling.

This is also a testimony to how capitalism reduces prices when prices are allows to function in accordance with supply and demand.

Low prices are a good thing. I wish we had more low prices on cars and houses, but the government is clearly standing in the way of that happening because the entire financial system is in far too much debt based on high inflated prices.

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Asia Needs to Start Outsourcing to America to Restore the Job Market

Wed, 30 Sep 2009 19:36:00 GMT

The national unemployment rate, now 9.7 percent, is forecast to rise above 10 percent before the end of the year and isn't expected to return to normal for five years.

Combine that with a sinking dollar and you have got the perfect opportunity for companies around the world the hire highly educated Americans at very low prices.

As the dollar continues to make new lows against ALL major currencies, the cost to pay someone’s wage in dollars is at an all time low. The dollar is already compromising many outsourcing contracts by many American high tech companies because the cost to outsource is rising as foreign currencies increase against the dollar.

Asia has become the savers and producers of the world, which is the essense of creating wealth. America has become the largest debtor and consumer of the world. Asia has borrowed trillions to the U.S. over the last decade and the U.S. five year budget projection is asking Asia for another 10-20 trillion.

The U.S. already has more debt than we can pay back but the politicians are looking at a different set of data and still think that we have money to burn.

Liquidation

At some point in the near future, America will be unofficially bankrupt and our lenders (mostly Asia) will ask us to liquidate our assets to pay them back. We will be forced to sell many of our companies, farm land, houses, cars and anything else that has value.

Then after everything is sold and we still cannot meet our credit obligations, we will have to go to work for our creditors. We will not be able to afford to buy anything because the value of our money will make foreign goods very expensive. America will have no choice be to start producing things against, both for our own consumption and to export to the wealthy nations of the world.

Jobs

The new jobs will be related to production and distribution, and will need to be funded by savings. But these jobs will not pay very high compared to the wages that Americans' have been used to in the last decade. The higher paying jobs will come from the wealthy Asia nations where companies will outsource to educated Americans who don’t have jobs and can be paid in dollars.

As the dollar continues to decline it will soon become apparent that the costs of imported consumer products will be increasing, and the low demand for consumer products in America will not allow American companies to increases prices or wages or add jobs. Therefore, jobs will continue to be hard to find and unemployment will remain high.

But the rest of the world, Asia particularly, will continue to see a major increase in consumer demand because they have savings to spend and production to continue to generate more income. Their companies will be hiring and looking for ways to increase profits by outsourcing to cheaper educated Americans looking for work.

America will finally be on the other side of the global outsourcing equation and the worker in Asia will be the one’s complaining about their jobs being lost to cheap labor in America.

Based on this business trend that is likely to result from the declining dollar, now would be a good time to start a consulting service that specializes in recruiting Americans to work for international companies.

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How to Hedge Against Inflation With a Home Equity Loan

Tue, 29 Sep 2009 14:00:00 GMT

Home equity loans were a large part of the consumer credit expansion that fueled the economy for more than a decade.

The housing market bubble drove up housing asset prices, but without refinancing a homeowner couldn’t spend their new found fortune unless they got a home equity line of credit.

If you are unaware of the coming wave of inflation that will threaten to unravel the global financial systems, all I can say is wise up or read some of my previous articles.

If you are aware of the inflation that is being created, then I want you to also know that the Federal Reserve is not leaving you with any low risk options to park your money. This is the time to bet your savings on inflation. In the next few years, inflation is going to confiscate your hard earned savings unless you hedge against it.

Stealing From The Savers

If you did the right thing and saved your money, paid off your debts and didn’t extract the equity from your home to buy a big screen TV, then you don’t deserve to lose it all to inflation. Inflation is the process that the government hopes to pay it's bills with, by confiscating the wealth of the savers to pay for the debts of the spenders.

By borrowing money that we cannot possibly repay without increasing the currency supply by buying our own treasury bonds, the Federal Reserve is in the process of confiscating the wealth of the savers to pay for the debts of the spenders that cannot pay their debts because the risks they took were so great.

The big banks that took the huge risks were encouraged by the very same Fed monetary policy to take the risks that they did – knowing that they were ‘too big to fail’ and sure to get bailed out – which they did.

Few Safe Places

Savers have a tendency to avoid risk, which the Fed is very aware of and is taking every advantage of. Yet the only way to protect your wealth against inflation is to invest in asset classes that are usually risky like foreign markets and precious metals. Inflation has reversed the risk, making bank savings accounts and homes the most risky place to store dollars.

It is always a good idea under normal conditions to pay off your home, which I advocate. But in this situation, with failing home prices and a falling dollar, you should consider using a home equity loan to borrow your own money at low interest rates and investing it in inflation protection assets like gold and silver.

If you were to use a home equity loan to borrow 50K at 5% and invest it in gold with a 30% return, you would be netting 12.5K per year. Before you think that is a great deal, realize that investing in gold will only keep you even with inflation. So if your return is 10% or 60% it's not that you made a lot of money it’s just a reflection of the real rate of inflation and you are just keeping even with it.

A home equity loan is a good way to protect at least some of your wealth invested in your home from inflation, but if you home is worth 300K, then 50K in only 1/6th of your investment. I realize that it’s hard for savers (like myself) to come to the understanding that the current monetary policy of the Fed does not protect money that is invested in a home, but that is exactly what has happen.

Your money is not safe, even if it feels safe. The value of the dollar is dropping like a rock and that means that the dollars invested in your home are losing value. Your money is being confiscated while you sleep in your own home every night.

For this reason, I cannot pay off my home and I have a home equity loan with the money hedged against inflation.

A lot of people who are trapped on a fixed income are going to suffer with the high prices that will result from the inflation that the Fed is pursuing. Only smart investors will be able to protect themselves. A home equity loan is a poor mans hedge against inflation.

Another reason to get a home equity loan right now is because they will probably not be available within a few years as consumer credit continues to decline. So get one while you still can.

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The Fed Defend Their Independence to Try and Stop the Federal Reserve Transparency Act of 2009

Mon, 28 Sep 2009 14:02:00 GMT

On Friday, the Committee on Financial Services, heard testimony from Scott G. Alvarez, the Legal Counsel of the Federal Reserve.

The Federal Reserve Transparency Act is gaining momentum, with 295 cosponsors.

The testimony of Mr. Alvarez was very interesting, arguing that this bill would undermine the Fed’s ability to act independently of political pressure and would undermine confidence in the market because any scrutiny of their actions would lead investors to second guess their monetary policies, which could destabilize markets.

You can read the entire testimony here.

Mr. Alvarez pointed out that the Fed has increased the detail in which it provides information during the economic crisis.

“Since the System began operations in 1914, the Federal Reserve has published its balance sheet every week, showing the assets and liabilities of the Reserve Banks, both individually and on a consolidated basis.4 During the crisis, we have added significant new information to these weekly balance sheets, including information about the amount of credit outstanding under each of our credit facilities.”

Yet they have not given out much information relating to many special programs like currency swaps between nations and there involvement in the gold industry or who they all gave money to in bailing out banks during the economic crisis.

“Altogether, we now provide more information about our operations than ever before, and we continue to explore whether additional information can be provided without jeopardizing the effectiveness of our efforts.”

Mr. Alvarez failed to mention that although the Chairman of the Fed Ben Bernanke does testify before congress, he often refuses to answer questions related to information that the Fed is unwilling to share.

Under the current system, the Federal Reserve has complete authority to "independently conduct the Nation's monetary policy." But the actions of the Fed go beyond our nation because the dollar is used as the Reserve Currency of the world; therefore they control the monetary policy of the entire world.

When questioned about why the policies of the Federal Reserve have lead of the housing market crash followed by the stock market crash and how they are now leading us to a dollar crisis, Mr. Alvarez deferred those questions to the Chairman Ben Bernanke, who has deferred the same questioning by congress to the Treasury – round and round we go.

This argument Mr. Alvarez put forth to protect the Fed from a congressional audit is a poor one because the markets has shown to be much more speculative with a secret monetary policy than a transparent monetary policy.

The market crashed while they were keeping secrets and large banks took unprecedented risks to become 'too big to fail', proving that a secret monetary policy didn’t stop these things from happening.

Secret monetary policy has already proven to fail. Faith in the Federal Reserve has been lost because their monetary policy didn't work. Even faith in the Chairman of the Fed has been lost.

Ben Bernanke has said many things that were completely wrong over the last few years like when he said; “The problems in the sub-prime housing market are contained”. If he didn’t understand the market when he said that, then why would he understand it today when he says, “The recession is coming to the end”.

It has also been shown that the previous Chairman, Allan Greenspan, is to blame for the technology and housing bubble.

If the Fed audit was to take place, my suspicion is that we would find political influence on a grand scale, which would completely undermine the very notion that the Fed is trying to suggest that they are independent of politics.

The primary job of all central banks is to protect the value of its nations’ currency while maintaining a monetary policy that promotes growth. The dollar has lost 95% of its value since the creation of the Fed, which clearly shows that the Federal Reserve has failed and continues to fail at protecting the value of the dollar, as the dollar continues to hit all time lows against many other major currencies just in the last two weeks.

The only reasonable explanation for the willingness of the Fed to sacrifice their own currency that they are suppose to be protecting is if their political independence has been compromised. If the dollar is going to be saved, the Fed needs to be audited.

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Everything Points To the Federal Reserve As The Cause Of the Economic Crisis

Thu, 24 Sep 2009 21:52:00 GMT

Every day I seem to read someone else that has made the connection that the Federal Reserve is the source of the global economic crisis.

Ron Paul has a long standing history of pointing out that the Federal Reserve is the source of the economic problems, while almost all have ignored his claims.

Today Robert Kiyosaki released his new book, “The Conspiracy of the Rich” in which he said points out that the Federal Reserve is the source of inflation, which has distorted the financial system of the world and led to the economic crisis.

The Federal Reserve rules the world by controlling the value of money used around the world.

"The Conspiracy of the Rich"

Yesterday, Sarah Palin attack the Federal Reserve for creating asset bubbles and encouraging excessive risk-taking that hurt working-class Americans.

On Monday, Peter Schiff’s new book, “Crash Proof 2.0” points out that the Fed is responsible to maintain the value of the dollar, which they have not done. Peter is now running for Senate in the state of Connecticut with one goal – “Stop the Fed” and the runaway spending with it.

Inflation is the wrench in the system causing the free market to perform poorly, while the government continues to accelerated inflation because they benefit from inflation in so many ways.

"Crash Proof 2.0"

Then, last week Congressman Ron Paul released his new book, “End the Fed”, which is entirely dedicated to pointing out that the Federal Reserve is the wrench in the system.

Inflation is the wrench in the system causing the poor to get poorer and distorting the market.

"End The Fed".

Also, Thomas Woods new book "Meltdown" came out in February and is perhaps the best explanation of why the stock market crashed and how government bailouts have made things worse.

The inflationary policies of the Federal Reserve caused the free-market to go astray and result in boom-bust cycles.

"Meltdown"

I myself have written about how the Federal Reserve had created the recession and how they are now leading the international banking community into a snake pit – without a rope.

There is a bill on the table in the congress threatening to audit the Federal Reserve, which needs to happen so that the truth can come out and the dollar can be saved.

Momentum is building against the Federal Reserve. The Federal Reserve is run by the richest people in the world and they control the value of the dollar, which is the Reserve Currency of the world.

The Federal Reserve was created in 1913 and is suppose to be independent of the political leadership, but they have not acted like it since the late 1970’s when Paul Volckers was the Chairman.

Of course the reason that the Federal Reserve has distorted the market with massive inflation is because of the out of control spending by congress and the president for the last 20+ years. If the Federal Reserve stood up to congress and the president and said NO we will not continue printing and borrowing money anymore, then congress and the president would be forced to stop spending.

And when that day happens and the Fed stops increasing the currency supply, nobody is going to be happy either because we will finally be face to face with the mother of all recessions and a contraction in the supply of money.

The alternative is to continue on the path of hyperinflation which leads to the collapse of the entire financial system as we know it today.

Pick your poison. I say we stop the Inflation, but either way it's not going to end very well.

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10 Reasons Why Sarah Palin May Have Led to a Real Economic Recovery

Wed, 23 Sep 2009 21:09:00 GMT

Since the 2008 presidential elections, Sarah Palin has become the single most influential and leading candidate for the GOP.

Even after resigning from the Governor of Alaska for personal reasons, she remains a political giant and perhaps a front runner in the 2012 presidential race.

Just yesterday Sarah visited China to talk about trade and the economy.

We will never know how the economy would have reacted to Sarah’s leadership, but here are 10 reasons how Sarah Palin may have led the economy to a real recovery:

Offshore drilling for oil would have reduced the prices of gas and the trade deficit and our dependence on foreign nations and improved our bargaining relationship with large trade partners like China and Japan.
End the bailouts that have been given to large banks and large union labor companies like GM that were strong supporters of Obama. This would have also reduced our $1.7 trillion budget deficit this year.
Strong support for the small business sector of the economy would have decreased the unemployment rate, which would have also lead to a housing market bottom – critical to stabilizing the economy.
Reduce the size of the federal government and therefore reduce the tax burden on the economy.
Win the war in Afghanistan, followed by a cut back in military spending.
Stop Ben Bernanke from creating more inflation, by buying treasury bonds and holding interest rates much too low.
Lower health care costs by creating policies to allow health insurance companies to compete with each other, while reducing the role of government in the industry and allowing more options like a catastrophic health insurance plan for younger health people.
Lower education costs, by reducing the public education budget and allowing other educational options to compete with the public educational system.
Increase the value of the dollar, by increasing the interest rates and thereby encouraging people to increase their rate of savings to provide for their retirement and future living expenses.
Decrease government expense of fighting crime and housing more jail inmates by encouraging non-profit groups that increase morality.

The economy is sure to remain the top political issue for years to come as we head into a possible double-dip recession with 10% unemployment and a weakening dollar.

Eventually, the president and congress will be forced to face the recession and stop kicking the can down the road. It’s not going to be fun cutting back on government spending and raising interest rates, but that is what must be done and the sooner the better. The crisis is only getting larger as we are now facing a currency crisis.

As hope in Obama fades, people are looking for a new leader to place their hope in. Sarah Palin represents a renewal of freedom and liberty from big government spending, which makes her a magnet for a new hope to revive the economy.

It has been very interesting to watch this battle of economic ideas swell up at the recent Tea Party Rallies, which shows how discouraged the public is getting, even if they can not do anything about it yet.

I think Sarah Palin could quite easily rally the energy into an organized campaign centered on ‘Stop the Spending’ and save the economy.

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5 Reasons Why We Are Likely To Have a Second Mortgage Market Collapse

Tue, 22 Sep 2009 14:56:00 GMT

The housing market that began to stabilize in the last few months, as the plethora of government interventions in the housing market has finally helped form a bottom, is about to give way.

A Bloomberg article yesterday outlined what is holding up the housing market.

First, there is the $8,000 first-time home buyers’ tax credit that is about to expire.

“Obama administration is studying whether to let a first-time home buyers’ tax credit expire as scheduled at the end of November. “

Second are the low interest rates, which are only low because the government is purchasing billions of dollars in bonds to keep the interest as low as possible.

“Bernanke and his Fed colleagues may continue talking this week about how to wind down purchases of mortgage- backed securities, according to Peter Hooper, chief economist at Deutsche Bank Securities Inc. in New York. The two programs have helped stabilize real-estate demand, with new-house sales rising 9.6 percent in July from the prior month, the most since 2005.
Ending these efforts may stifle the housing rebound by depressing sales and pushing up both mortgage-backed bond yields and interest rates on home loans”
“Under the current program, the Fed is scheduled to buy up to $1.25 trillion of mortgage-backed securities and $200 billion of agency debt by the end of the year. So far, it has purchased $862 billion of the former and $125 billion of the latter. “
“An abrupt stop might push up mortgage rates by a half to one percentage point, said Hooper, a former Fed official.”

Third, there are millions of foreclosures yet to hit the market because many of them have been held off the market by banks waiting for the market to show signs of recovery.

“We could be facing a triple whammy at the end of the year: the expiration of the tax credit, the end of the Fed mortgage-buying program and rising foreclosures.”

The question is how can the Fed exit the housing market without it collapsing again? There is a very slim chance that these programs will get extended.

“Congress may not pass an extension; the chances “seem slim,” said Mark Calabria, director of financial-regulation studies at the Cato Institute in Washington and a former staffer on the Senate Banking Committee. Public opposition to increasing the federal budget deficit is high, and there’s little appetite on Capitol Hill for finding spending cuts to offset the cost of the tax credit, he said.
The deficit will total $1.6 trillion this year as revenue falls and the government spends at the fastest pace in 57 years.”
“In a sign of the public’s concern about the deficit, 62 percent of people surveyed in a Sept. 10-14 Bloomberg News poll said they would be willing to risk a longer-lasting recession to avoid more government spending. “

Fourth, ARM mortgages "are about to explode." At least, that's what the attorney general of the sovereign state of Iowa says. ARM loans allow homeowners to pay only the interest for the first few years. Many ARM loans are coming due and will be resetting next year, which will increase these mortgage payments by 2 to 3 times what they are today.

Almost all these homeowners are underwater. They bought at the peak of the bubble. How many of them can afford a 200% increase in their mortgage payments? Not many.

That's why a new wave of foreclosures and personal bankruptcies is coming.

Fifth, the unemployment rate continues to climb and is likely to reach 10% in the next few months. California’s jobless rate has risen above 12%. Few jobs means few people will be able to purchase homes, which means the supply of homes will remain higher than the demand.

Conclusion

The government will have to end their programs that are propping up the housing market and banks will be forced to sell their foreclosures - leading us to a second housing market collapse. The only thing that will stop the fall of housing prices this time will be the effects of inflation as the trillions of new dollars that the Federal Reserve has created make their way into the economy.

Based on this information, housing prices are likely to drop another 10-30% in the next 2-5 years. Renting is likely the best option during this period, unless you can secure a long term low interest rate with a mortgage payment that you could pay without having a job.

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The Reason the Rich are Getting Richer is Because Inflation Pushes Money Up and Inflation is Accelerating: Part 2

Mon, 21 Sep 2009 19:22:00 GMT

This article is a continuation of the topic that I started last week with a look at why the rich are getting richer.

Here is part 1. There are two primary reasons for this result and both of them are not in the governments’ best interest.

In short, the government benefits at the expense of the poor getting poorer and therefore the politicians would have to act against their best interest in order to help, and very few ever do.

There are two primary reasons for this result;

1 – Lack of Financial Education

When more credit is made available or money is given to the poor without also giving them the education to manage it, their lack of financial education does not allow them to uses the money wisely, by saving or investing.

Sometimes this is used to argue against capitalism, showing that the free market does not result in the purchasing of the most productive products. But I refute this argument because capitalism is not ment to be an educational system but an economic system, yet it does educate by way of profit and losses for financial decisions if allowed to. It is the government who intervenes to stop this educational process from taking place by bailout out failed companies.

The result of the poor getting poorer, while being handed money, is a clear indication that the public does not have a sound financial education. Instead of saving and investing, the poor spend the money they are handed as fast as they get it.

The financial education of the middle class has also been declining; in fact this is the primary reason that Robert Kiyosaki and Donald Trump blame for the economic crisis in their book “Why We Want You Be to Rich” and the motivation behind Roberts’ book “Increase your Financial IQ”. These guys realize that without a strong financial education, the public cannot make good financial decisions to save and invest.

The rich need the poor and middle class to save their money so that the banks have money to lend to the rich to grow their businesses, and so they can pay their bills. Without a strong middle class, Robert and Donald cannot grow their businesses.

They need a middle class that is making good decisions with their money, but the government policies that are redistributing money are working against their capitalistic efforts and causing the poor and middle class to get poorer. Everyone gets poorer when capitalism is not allowed to function as with the current financial system we have today in which the governments hands are all over.

2 – Inflation Pushes Money Up

Despite a decreasing financial education, Inflation is perhaps the largest contributor to the economic problems that enslave the poor.

As slick politicians increase the handouts to the needy by making credit more accessible, they also give big businesses more leverage. The needy use the easy credit to purchase things like car and houses with long term payments that tie up their future earnings for 5-10-30 years – and everyone cheers. But at the same time, big businesses take advantage of the easy credit to purchase smaller companies and increase their risks.

When money is cheap, big businesses borrow billions of dollars to purchase companies that have predictable revenues. Predictable revenues come from long term consumer contracts, based on a history of consumer demand or commitments. So the companies that have hooked the consumers into long term payments that have tied up their future earnings become the growth engine for big businesses.

You see, it is impossible for a government to help the poor and middle class by making credit more available – yet that is exactly what the government has been doing for decades.

Moral Hazard

Inflation is defined as the increase in the currency supply, which is the result of increasing consumer credit. Therefore, inflation causes the poor to commit more of their income to long term debt, while encouraging big businesses to grow in size and power.

The larger a business gets the more political influence it gains and that influence gives them even more leverage to take bigger risks with the government backing them up and the taxpayer stuck with the bill if they fail.

This is sometimes called the “moral hazard” of government central planning. Easy credit is not the answer to economic prosperity. It is better to leave the availability of credit at whatever the free market sets it. When the government interferes with the credit market, by making credit more assessable or by lowering interest rates, they are causing this “moral hazard” to take place.

Increasing Prices

Inflation also takes more wealth away from the poor then the rich because the results of inflation cause prices to increase, which the poor have a harder time protecting against.

When the increase in money supply causes prices to increase, which it always does eventually, the poor and middle-class that live paycheck to paycheck cannot protect themselves by investing in stronger currencies or precious metals or foreign investments. They are trapped in the currency used by the inflating government.

The poor and middle-class are without a question getting poorer and inflation is the primary reason. The government has soo many benefits to creating inflation that it cannot resist the temptation to continue its inflationary policies – at the expense of the people. This story has been played out in history again and again and now it looks like the U.S. is on the path to hyperinflation.

Conclusion

Michael Moore doesn’t recognize that the current government policies are actually causing the money to pool at the top. If he did he would realize that we need to stop government central planning to allow capitalism to function properly in order for capitalism to result in prosperity.

Less government redistribution of money would propel millions to build successful businesses and create wealth. The middle class would grow, while the poor and rich classes would shrink.

The alternative that Michael suggests to get rid of capitalism would result is even more money pooling at the top and more government control and corruption. The world already has a nation like that, it’s called Russia.

This week I participated in several blog carnivals

They did an excellent job and as usual, there are tons of great articles. If you have the time, I highly suggest you skim through this week’s carnivals.

Carnival of Money Hackers

81st Carnival of Money Hacks

Carnival of Personal Finance; Live from Monticello

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The Reason the Rich are Getting Richer is Because Inflation Pushes Money Up and Inflation is Accelerating

Fri, 18 Sep 2009 21:57:00 GMT

Michael Moore has produced a new movie titled, “Capitalism, A Love Story” in which he suggests that Capitalism has caused 1% of the population to gain 90% of the wealth, while the middle class has been pushed into poverty.

I must admit I have not seen the movie, only read the reviews. From my understanding, Michael believes that capitalism is the cause for global poverty and therefore all nations should turn to socialism. Nothing could be further from the truth.

Michael believes that capitalism is the reason that the rich are getting richer and the poor continue to get poorer.

The rich are getting richer; there is no question about that. The question is why are the poor getting poorer? Michael lays his case against capitalism based on the decrease in labor wages and the increase in CEO incomes.

The Real Problem

The real problem that causes the poor to remain poor is not capitalism, but government central planning that does not allow capitalism to function and instead plays an active role in trying to force the market to distribute money in ways that it would not normally do.

The real problem is the current economic system, which Michael believes is capitalism – when in reality it is only partially capitalism and partially government central planning.

The redistributions of money from government central planning causes the market to react in such a way that it results in very bad investments (like in companies that build more cars and houses then the market can purchase) and a much larger amount of leverage available to the rich.

In which, capitalism can appear to be the culprit while the real problem is the wrench in the system - otherwise known as government central planning.

Inflation is the wrench in the system that causes the poor to get poorer, yet the government continues to accelerated inflation because they benefit from inflation in so many ways.

This is the primary theme of Senator Ron Paul's new book, "End The Fed".

Central Planning Distorts the Market

When the government takes money away from working taxpayers and gives it to the poor, through a humanitarian policy like the sub-prime mortgage policy that the Democrats created with Freddie Mac and Fannie Mae, the poor end up bankrupt.

In this case, people that couldn’t afford homes were encouraged to purchase homes with zero money down and ultra low interest rates. The result pushed up homes prices across the nation, causing a bubble in home prices that began to deflate in late 2006.

Freddie and Fannie went bankrupt and the government was forced to bail them out and add the losses to the national debt for the next generation of middle class taxpayers to pay for. This example shows how these policies distort the market and eventually result in everyone getting poorer.

Bad Policy Makers

The people that couldn’t afford homes are now bankrupt and the middle class taxpayers are stuck with the bill. We need to understand that policies like these that are proposed by politicians who claim to be helping the poor under the disguise of a humanitarian need don’t actually help the poor. They actually result is hurting the poor.

It is more humanitarian to vote against these policies then for them, but that takes an understanding of how these policies distort the market and an unselfish look at what is best for the national economy long-term.

Many politicians are willing to ignore the long-term damage in exchange for short-term prosperity and getting reelected. They take advantage of the poor financial education of the public to buy votes with their policies that appear to be in good nature.

Non-profit groups like ACORN that support these far left-policies believe they are helping, when they are actually hurting the very people they are trying to support. ACORN played a major role in getting Obama elected, by convincing many of the poorly educated to support Obama’s far-left agenda, without realizing that the long-term effects of the far left-policies are the source of the economic crisis.

Politicians like to hand out money because anyone who argues against them looks like they are not willing to help the poor, which results in a sure way to secure votes and build a political career.

The late Senator Kennedy is another example. A lot of people are convinced that Senator Kennedy helped the poor with many of his policies to increase welfare and provide low income housing. People who oppose his policies realize that he only made the poor poorer. The uneducated poor don’t understand how the economics plays out and therefore they vote for the wrong guy that impoverishes them even more.

Every policy that hands money to the poor ends up costing the poor more money than they had in the first place. The result is that giving money to the poor without increasing their financial education or creating inflation in the process only makes them poorer.

The only way to help the poor is by increasing their education or by giving them money from your savings (not by printing or borrowing money) and showing them how to invest it wisely to get out of poverty.

The current government polices don't do this and therefore they are the cause of poverty in America - not capitalism. If Capitalism was allowed to function, our nation would be increasing wealth and everyone would benefit from it - mostly the middle class and poor.

Michael Moore doesn't realize that the current social policies of redistribution and inflation are the cause for the distortion in the market and are the source of our troubles. Socialism is always destined to fail.

This discussion has gotten longer then I originally intended and therefore I’m going to continue another day with part 2. Here is part 2.

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