You are invited to a Special Screening! It's the theatrical premier of FOR LIBERTY, in Tempe, AZ Thursday, December 3 in conjunction with The Freedom Summit.
It's a chance to welcome the documentary's producers and directors, Chris Rye & Corey Kealiher, who will be on hand along with others featured in the film.
Thursday, December 3 5:30 p.m. Location Harkins Valley Art 505 S Mill AveTempe, AZ Donation: $10.00
More information HERE or contact Thomas Costanzo 602-434-1725
During President Obama's high-profile visit to China this week, the most frequently discussed, yet least understood, topic was how currency valuations are affecting the economic relationship between the United States and China. The focal problem is the Chinese government's policy of fixing the value of the renminbi against the U.S. dollar. While many correctly perceive that this 'peg' has contributed greatly to the current global imbalances, few fully comprehend the ramifications should that peg be discarded.
The common understanding is both incomplete and naïve. Most analysts simply see the peg as China's principal weapon in an economic struggle for global ascendancy. The peg, they argue, offers China a competitive advantage by making its products cheaper in U.S. markets, thus allowing Chinese firms to gobble up market share and steal jobs from U.S. manufacturers. The thought is that were China to allow its currency to rise, American manufactures would regain their lost edge, and both manufacturing firms and the jobs formerly associated with them would return. In this narrative, the struggle centers on the United States' diminishing leverage in persuading the Chinese to lay down their unfair weaponry. It's a sympathetic picture, but it tells the wrong story.
While the peg certainly is responsible for much of the world's problems, its abandonment would cause severe hardship in the United States. In fact, for the U.S., de-pegging would cause the economic equivalent of cardiac arrest. Our economy is currently on life support provided by an endless flow of debt financing from China. These purchases are the means by which China maintains the relative value of its currency against the dollar. As the dollar comes under even more downward pressure, China's purchases must increase to keep the renminbi from rising. By maintaining the peg, China enables our politicians and citizens to continue spending more than they have and avoiding the hard choices necessary to restore our long-term economic health. Read the rest... Peter Schiff at LRC
Wall Street is an economic extension of the big banks, which are the government-protected segment of a government-created cartel: the national bank system. The government controls entry into this cartel, thus offering above-market rates of return to those who are approved.
The primary enforcer of this cartel is the Federal Reserve System. The FED provides the fiat money that in turn provides banks with reserves to lend. It also serves as the lender of last resort -- officially, to the government; operationally, to the banks. This keeps the largest banks from having to face free market competition.
We can use this syllogism: As goes the Federal Reserve System so go the big banks. As go the big banks, so goes Wall Street.
Wall Street is hostile to any suggestion that the U. S. government has any legitimate authority to audit its creation: the Federal Reserve System. The government's authority must be limited to enforcing the barrier to entry in banking. Anything beyond this is conceptually and operationally illegitimate. This is the party line of the Wall Street establishment. It has been since before the creation of the FED in 1913. The Federal Reserve was the joint product of a mutually beneficial alliance between the Morgan bank and the largest Rockefeller bank. The story of this alliance is here
The Federal Reserve System has been described as the Temple. That is because, ever since 1914, it has been sacrosanct: above politics and above the law. It has also been the inner sanctum. No unauthorized person is allowed to open its door.
Congressman Ron Paul dared to introduce a bill, H.R. 1207, that would require an audit of the FED by a government agency. The House of Representatives agrees with him. He got over 300 co-signers of the bill. Barney Frank at first tried to bottle it up in committee. Then he tried to substitute a watered-down version. The committee voted for Paul's version last week. This was a palace revolt against Frank. This does not happen often in any committee.
This is the first bill in Paul's long career that has had widespread support. This indicates that the Federal Reserve, for the first time since 1914, has serious opposition in Congress. This in an historic event. The FED can no longer presume that Congress will treat it with kid gloves.
The Wall Street establishment understands the threat. Read the rest... Gary North
BusinessPundit.com: Charles Goyette has spent much of his life thinking about money. He has contemplated how it works, how governments manipulate it, and how it stores value.
Goyette, a radio show host, precious metals pro, and libertarian, shares his views on fate of the US dollar in “The Dollar Meltdown.” In his four-part book, Goyette details where the US economy and dollar are now, how we got here, what might happen next, and how to protect your money.
The topics Goyette presents are necessary reading for anyone wanting a well-rounded perspective on the current US economy.
Even if you don’t agree with some of Goyette’s strong libertarian viewpoints, his colorful writing and factual anecdotes make “The Dollar Meltdown” an interesting read.
As its cover might imply, “The Dollar Meltdown” isn’t a gentle introduction to the collapse of the dollar. Libertarians and Austrian school aficionados would feel most at ease with this book. Refreshingly, the nonpartisan author implicates both Democrats and Republicans as fiscal and monetary ne’er do gooders.
Goyette says “the body economic is shuddering from the relentless compulsions of meddlers.” Thanks to government intervention in money and markets, the US faces runaway inflation. Between Sept 2008-March 2009, US monetary base grew 199%. Add the domestic dollar supply to foreign dollar reserves—up to half of US dollar reserves are in foreign hands—and you have a potential oversupply.
The country’s debt situation is making holders of dollars, both foreign and domestic, nervous about the value of their greenbacks. Goyette writes that our national debt adds up to $42,000/person for the bailout (March 2009 numbers). On top of that, China owns $767 billion in US Treasury securities. That’s the equivalent of each individual American borrowing $3,300 from people in China.
WASHINGTON ESTABLISHMENT SUFFERS SERIOUS DEFEAT...
Something quite amazing happened yesterday in Congress: the House Finance Committee -- in a truly bipartisan and even trans-ideological vote -- defied the banking industry, the Federal Reserve, the Democratic leadership, and mainstream Beltway opinion in order to pass an amendment, sponsored by GOP Rep. Ron Paul and Democratic Rep. Alan Grayson, mandating a genuine and probing audit of the Fed. The Huffington Post's Ryan Grim has the best account of what took place, noting:
In an unprecedented defeat for the Federal Reserve, an amendment to audit the multi-trillion dollar institution was approved by the House Finance Committee with an overwhelming and bipartisan 43-26 vote on Thursday afternoon despite harried last-minute lobbying from top Fed officials and the surprise opposition of Chairman Barney Frank (D-Mass.), who had previously been a supporter.
Grim details how key Committee Democrats such as Frank -- who spent the year claiming to support an audit of the Fed in the face of rising anger over its secret and bank-subservient policies -- suddenly introduced their own amendment (sponsored by Democratic Rep. Melvin Watt) that would have essentially gutted the Paul/Grayson provisions. Banking industry and Fed officials, as well as the Democratic leadership, then got behind that alternative provision as a means of pretending to support transparency while protecting the Fed from any genuine examination... Read the rest... Glenn Greenwald at Salon.com
PULITZER PRIZE WINNING EDITORIAL CARTOONIST STEVE BENSON
Join Charles Goyette on Tuesday evening at Changing Hands Bookstore, Tempe, AZ, for a special evening. Charles will talk about The Dollar Meltdown and sign books.
And to make the evening more memorable, Steve Benson from the Arizona Republic will be on hand and to draw and sign his inimitable portraits for buyers of The Dollar Meltdown!
The last time Charles and Steve got together, it was a standing-room only event and the bookstore sold out! Most of the book buyers had their caricatures drawn right inside the front cover of The Dollar Meltdown; a couple even had Steve draw a picture of Charles right next to his signature in their books!
The Dollar Meltdown, signed by Charles, makes a great Christmas gift. With your caricature drawn by the famous Steve Benson, it will be a keeper!
Charles will sign every single copy of The Dollar Meltdown. To avoid bottlenecks, Steve has agreed to do provide one signed drawing for everyone who buys two books! (Four books = two drawings, etc.)
Come out for an informative and entertaining event, Tuesday, November 24, 7 p.m., at Changing Hands Bookstore 6428 S McClintock Drive, Tempe, Tempe, AZ. 480-730-0205.
Rights to publish The Dollar Meltdown in Korea have just been purchased.
The rest of the world wants to know what is going on with the U.S. dollar. Do your friends and family know how to protect themselves and profit from a currency crisis?
"With gold soaring and the dollar falling, this will be the introductory text for a lot of suddenly-interested readers. A case of a book matching its times perfectly." Well-Written, Well-Timed: The Dollar Meltdown by John Rubino, DollarCollapse.com
Charles Goyette is a veteran radio guy and sound money advocate who supported Ron Paul before it was fashionable. Now he’s written his first book, The Dollar Meltdown, and from beginning to end it’s a pleasant surprise. Goyette writes as smoothly as he speaks and his perspective is unapologetically libertarian. So he gets it right on both content and delivery. As you’d expect with a talk show host, he’s comfortable with polemics:
America’s national government has moved way beyond a political spoils system. A spoils system leaves the host alive so that a politician’s occasional ne’er-do-well brother-in-law can be put on the payroll. America has become a piñata: everybody gets a crack at it. Presidents and other elected officials pass the big stick around as a reward to those who help keep them in charge of the piñata party. The American media plays the role of the party’s mariachi bank, keeping festive spirits high. And the people in their demographic and interest groups all line up to take a whack at the goodies. America has become a piñata.
But he also does a good job of laying out the substantive argument for a currency crisis. Readers, for instance, find out that with the explosion of government borrowing and unfunded liabilities, U.S. debt now totals $1.3 million per family of four. And that the Fed is in reality a cabal of global banks that tricked the U.S. into giving it control of the money supply back in 1913. The chapters covering the history and function of money introduce concepts like fractional reserve banking and recount some of the past episodes of hyperinflation. And the quotes Goyette uses to illustrate his points are well-chosen, ranging from Austrian economists to Fed governors. This one from Ludwig von Mises introduces the “crack-up boom”:
They become suddenly aware of the fact that inflation is a deliberate policy and will go on endlessly. A breakdown occurs. The crack-up boom appears. Everybody is anxious to swap his money against “real” goods, no matter whether he needs them or not, no matter how much money he has to pay for them. Within a very short time, within a few weeks or even days, the things which were used as money are no longer used as media of exchange. They become scrap paper. Nobody wants to give away anything against them.
In case anyone needed another big move in gold prices to confirm the coming currency crisis, there is was Monday with gold at $1,140 (and even a few dollars higher in after- hours trading). Oil prices, which have doubled since lows at the end of 2008, inched ahead Monday as well, while the dollar continued its slide.
For the ancient Greeks it was the three fates that spun the destiny of life, measuring and finally cutting it short. Now, highlighted by events of the past few days, the unmistakable hands of reserve currency, monetary, and fiscal fates can be seen in the dollar’s latest unraveling.
The dollar’s deepening woes and gold’s ascent coincide with President Obama’s visit to China. I can find no reports of Obama having made smooth promises to the Chinese that the dollar’s value will be maintained. This allowed his hosts to maintain a courteous decorum. It would have been unseemly for the president to provoke the outright laughter that greeted Treasury secretary Tim Geithner last summer in Beijing when he made assurances about the safety of Chinese dollar investments. Not to be ignored is the significance of gold striking new highs with Obama in China, a reflection of the market judgment that long-term Chinese funding of U.S. debt remains at increasing risk.
Federal Reserve chairman Ben Bernanke played his part Monday in foreshadowing the dollar’s grim future. He offered the hollow assurance that the fed was “attentive to the implications of changes in the value of the dollar.” Such benign neglect whispers the truth: impotence in the face of impending misfortune.
On the fiscal front were the first deficit numbers for the new accounting year. To say the Obama administration is merely off to a bad start is to tempt fate. The October deficit of $176.4 billion annualizes to well over $2 trillion for the year. It is unsustainable. The dollar meltdown is underway.
Perhaps it is the gods who have made America’s governing classes mad. The Chinese and other foreign creditors’ warnings about the consequences of America’s fiscal behavior go utterly unheeded. Meanwhile the monetary officials who thought nothing of the housing and credit bubble as it grew, acknowledge their powerless with words unspoken in the face of a ravaged economy and a collapsing currency. And as federal debt grows at a rate that can only be described as metastasizing, the Washington party debates adding still more red ink.
Indeed, there will remain only massive dollar inflation to fund the growth of America's debt. But that is why the Fed exists. Except for money printing, U.S. fiscal and monetary authorities have no contingency whatsoever to replace foreign holders of our debt as they begin to begin to show aversion to its certain risk.
If, as was said, that not even mighty Zeus himself could be spared his destiny at the hands of the three spinning fates of Greek mythology, can dollar holders avoid an implacable fate? The best that can be hoped is that some individuals, recognizing the finality of economic reckoning, will chose to untie themselves from the dollar’s fate with time-tested strategies for safety and even profit during a currency crisis.
Just in Case You Missed It Yesterday: CNBC Considers 3.7% Annualized Inflation "Tame"
I won't bore you with the full analysis, since it's virtually the same as for yesterday's PPI figures.
So the quick version: The CNBC main page blurb says "Housing Starts Drop; Inflation Tame," yet the actual story is that (seasonally adjusted) CPI rose 0.3% from September to October.
So with rounding, that's an annualized increase of 3.7%. Is that really "tame"? And for the record, during the ten months from December 2008 to October 2009, the unadjusted CPI rose 2.8%, which translates to an annualized 3.4% inflation rate. Again, I'm not saying it's time to get out the wheelbarrows for your daily wages, but at what point are people going to stop saying we're on the edge of a deflationary cliff? If 3.4% (annualized) year-to-date inflation is tame, at what inflation rate is Bernanke going to say, "OK now we need to start doing something about rising prices"? Bob Murphy's blog
Jack Benny made a fortune with his radio persona: the tightest of tightwads. "Your money or your life," says a robber in Benny's most famous joke. Silence. "I said, your money or your life!" Benny replied, "I'm thinking. I'm thinking."
As part of this persona, he was said to have a vault full of money in the basement. No one was allowed to go into it with him. It was his hideaway.
In 1938, the whole country wanted such a hideaway.
Scrooge McDuck also has a basement money vault. But Uncle Scrooge has it right. It is filled with gold coins. (Many of the stories in the 1970s were written by Vic Lockman, a gold standard cartoonist who once wrote a cartoon booklet on the Federal Reserve System, "The Official Counterfeiter.")
The curious thing was that Benny and Uncle Scrooge were regarded as lovable if eccentric characters. They were not hated by the public. Yet they were clearly money hoarders. The adult listeners and the pre-teen comic book readers would have liked to have a vault filled with money.
Benny and Uncle Scrooge were productive. The public knew this. They were both entrepreneurs. They both knew how to make money. Although they had basements full of money, this did not keep them from making more money. They were not recluses. Uncle Scrooge was always doing deals. He was Donald Trump for pre-teens, but without the weird hair or the wives.
Keynesian economists hate Uncle Scrooge and everything he stands for. He knows how to make lots of money. He stores up gold. He is the essence of the non-consumer. He is an anti-Keynesian – in thought, word, and deed... Gary North at LRC
Since we are living through one of the most historic increases in the interventionist-welfare state in the last hundred years, we need to remind ourselves of the dangers from this massive expansion in the political plunder machine.
The modern state may use the illusionary rhetoric of "social justice," but the reality of political paternalism is a further loss of our individual liberty, a huge growth in political coercive power, a weakening of the independence and charactor of free men, and a massive expansion of government debt, taxes and likely inflation that threatens to stiffle the prosperity of Americans for decades to come.
It is taking us further down a new road to serfdom, in which a political and special interest elite plan and control our lives, while expecting us to be their serfs producing the wealth they want to steal.
An old farmer walked into a rural branch of Washington Mutual to open a savings account. Being a conservative sort, he asked, “What happens if Washington Mutual goes broke?”
“Well,” said the branch manager, “in that case I suppose we’d be taken over by somebody like Chase Bank, and they’d make sure you got your money back.”
“But what happens,” asked the farmer, “if Chase goes broke?”
“In that case,” the manager answered, “you’d get your money back from the F.D.I.C.”
Not satisfied, the old farmer asked, “And if the F.D.I.C. doesn’t have enough money?”
“Then your money would be covered by the United States government.”
“And if the government is bankrupt?” he asked suspiciously.
“Then the Federal Reserve would just print you up some new worthless dollars.”
“But what if the Federal Reserve is finally put out of business?” asked the old man.
“Well, in that case, you’d lose all your money,” said the manager. “But really, wouldn’t it be worth it?”
... Thursday night at Barnes & Noble Bookstore in Scottsdale. I had a chance to speak for a few minutes about the economic mess the governing classes have made of America's prosperity, answer some questions, and sign some books.
And a chance to see some old friends and make some new one!
It was a standing-room-only event! The bookstore even ran out of copies of The Dollar Meltdown and had to rush to borrow more!
It was an especially good time for me because I was able to announce that the publisher of The Dollar Meltdown, Portfolio/Penguin Group, less than two weeks after the book's release, had just ordered a second printing! And that the major chains had all placed big, new orders! By one popular tracking measure, it was the #1 investment book in the country - and spent much of the week in the top 20 overall!
But wait there's more! I was also able to announce that the rights to publish The Dollar Meltdown in China had been purchased!
So it was a good evening all the way around. But to make a good evening even better, my friend Steve Benson, the Pulitzer prize-winning editorial cartoonist from the Arizona Republic showed up and drew and signed his inimitable pictures for the book buyers! Most had their caricatures drawn inside the front cover; a couple even had Steve draw me right next to my signature in their books!
People found the evening to be both fun and informative. If you missed it, please come to my next The Dollar Meltdown book-signing. It's the Tuesday before Thanskgiving, 7 p.m., November 24, at Changing Hands Bookstore in Tempe. Go HERE for more information.
And we'll see if Steve Benson won't come to this one, too!
Bob Murphy writes: Long-time readers know that I am second only to Bill Anderson in my constant criticism of Paul Krugman. Indeed, I quite recently defended the gold standard from Krugman's ridicule.
Given this context, I am very surprised to confess that Krugman has convinced me of the virtues of currency debasement. As I was reading his blog post on the tragic fate of Ecuador, I applied Krugman's lessons to my personal life, and suddenly everything became clear. In a flash, all of my household's financial stresses were solved.
Please allow me to share Krugman's tale — and my own personal salvation — so that you too may be freed from the bondage of creditors and scarcity...
In a late October blog post titled "Fixed Rates and Protectionism, 2009 Edition," Krugman explained that the horrible trade wars of the early 1930s were the fault of — you guessed it — the gold standard. Herbert Hoover, for example, had no choice but to sign into law the Smoot-Hawley Tariff, because he stubbornly refused to let the US dollar depreciate against gold. I'll let Krugman explain:
Barry Eichengreen and Doug Irwin have a new paper challenging the conventional wisdom about protectionism in the 1930s. It wasn't about economic ignorance, or at least not about microeconomics; it was about the attempt to escape the "golden fetters" of the exchange rate. The most protectionist countries were those that tried to keep their peg to gold.
Fortunately in our times, no government foolishly pledges to pay a certain weight of a commodity in exchange for the pieces of paper it prints up and gives the force of legal tender. We've long since left behind that bit of "economic ignorance." (Phew!)
Alas, just as you kill one superstition about "hard money," another rises to replace it. For example, apparently a bunch of developing nations with histories of volatile paper currencies try to inspire faith by linking their own money to the US dollar. Read the rest... Bob Murphy at Mises.org
Join Charles for a discussion of The Dollar Meltdown and a book-signing, Thursday evening, November 12 at 7 p.m. at Barnes & Noble, Shea and Loop 101, Scottsdale, AZ.
This is a chance to learn about the global shift away from the dollar and what you can do to profit and protect yourself!
You don't have to be the victim of decades of governmental irresponsibility!
"In 1991, the Communist Party lost control of the Soviet Union, the culmination of a process that had started in 1980 in the Polish shipyards: Ten million eventually joined Lech Walesa's Solidarity movement and signaled the beginning of the end for Soviet-style communism.
In People Power, eyewitnesses tell the story of how the Communist system that dominated post-war Eastern Europe collapsed as they remember the extraordinary weeks that preceded and followed the fall of the Berlin Wall; Poland's fight for solidarity; Czechoslovakia's "Velvet Revolution;" the struggle for power in the Soviet Union, and more.
The people remember: 1980 Gdansk, the role of the Church, Solidarity movement, martial law in Poland, Czechoslovakia, Hungary, the Berlin Wall, Romania, Mikhail Gorbachev and Boris Yeltsin, the dissolution of the Soviet Union." Watch this video about the evils of collectivism.
I had the pleasure of reading a final finished copy of The Dollar Meltdown by Charles Goyette this past week.
Congressman Ron Paul offers an opinion on the front cover to which I certainly concur: "Goyette does a great job explaining why America faces a looming financial crisis and outlines commonsense strategies for individuals to protect themselves and their families. This book truly is a must read."
Before publication, I read a preliminary copy which explains this quote on the back jacket "The Dollar Meltdown is the definitive guide to where we are, how we got here, and what the best investment opportunities are looking ahead, regardless of one's personal views on the raging inflation/deflation debate" - Mike "Mish" Shedlock
Others on the back jacket endorsing the book include Jim Rogers, Lew Rockwell, and Peter Schiff.
Step by step Goyette outlines Where we are, How we got here, and What to do. The book is a nice blend of facts, humor, and practicality. It is easy reading and very difficult to put down.
Each chapter begins with a few thought provoking quotes on which Charles expounds. Here is the kickoff to Chapter 7, How It Comes Down.
"Don’t ask me where we’re going to find the money. I’m going to get it where Paulson found it”. - Charles Rangel, House Ways and Means Committee Chairman
Today was Presidents’ Day. Congress commemorated George Washington’s throwing a dollar across the Potomac by throwing $780 billion down a rat hole. - Jay Leno, The Tonight Show
Chapter 8, Toppling the Dollar, Your New World Order Is Waiting! begins with the following quotes for discussion.
"We have in many ways humiliated ourselves as a nation with some of the problems that have taken place here." - Henry Paulson, U.S. Treasury Secretary
"I think there is a question mark over the durability of any power that relies as heavily as the United States on importing capital and borrowing from abroad." - Niall Ferguson
I started to write more excerpts but the problem was I ended up with pages from every chapter.
Doug French writing for LewRockwell.Com had this to say:
"Charles Goyette provides a roadmap for survival with his newly released book, The Dollar Meltdown: Surviving The Impending Currency Crisis With Gold, Oil, And Other Unconventional Investments. The former Phoenix radio talk-show host has learned from some of the brightest minds in economics and investing. It's the rare book that engagingly teaches sound economic theory, provides the history of how we got in this mess and then provides solid investment advice that considers the precarious times we live in. As ambitious as this sounds Goyette's fast-paced book gets it all done."
At first glance it may seem that Goyette's opinion and mine on the US dollar are dramatically different. However, I would like to point out that he gives no timeline for the collapse, only that a collapse will eventually occur if the US stays on this economic path. That is an idea I hope everyone agrees with.
Monday Night, 10 p.m. PST. Charles will be on Coast to Coast AM George Noory to discuss his book and the coming currency crisis. The program will be broadcast live in every major city in the country. Please click here for a list of Coast To Coast Affiliate Stations.
"My entire life has been lived during a period of declining American living standards."
From the Ron Paul news and information site DailyPaul.com, read Michael Nystrom's very moving review of The Dollar Meltdown:
The Dollar Meltdown puts America's decline it into a sweeping context that makes our collective outcome impossible to ignore: Plunging living standards, a steadily eroding currency and massive inflation in a nation that has lost its industrial base. If you think things are bad now, they're only going to get worse. To quote Goyette: (p.9)
Gold's recent advances signal that we are in a period of major transition now. The American dollar's role as the world's reserve currency is inherently unstable and the signs of a breakdown are all around. Just as the monetary authorities have been unable to reinflate the high-tech bubble or the real estate bubble, when the dollar bubble is finally burst, no other paper currency will be able to take its place.
MONDAY NIGHT! - THE DOLLAR MELTDOWN GOES COAST TO COAST!
Monday Night, 10 p.m. PST. Charles joins George Noory on Coast to Coast AM to discuss protecting yourself and profiting from the coming currency crisis!
Both the price of oil and the price of gold confirm that at US dollar crisis has gotten underway. Find out what happens in a currency crisis, how the government reacts to problems of its own making, and how it impacts you and your financial security.
A currency crisis is not a pleasant event. But you do not have to be victimized by decades of governmental irresponsibility.
Don't miss the discussion about The Dollar Meltdown with Charles Goyette and George Noory.
Interest rates. The Fed does not need slinky women in plunging necklines to peddle money. All it needs is low interest rates. When rates are pushed lower than the rate of inflation, the Fed provides a subsidy for borrowing. This is not as hard to grasp as it sounds. If I offered to give you $1.00 for very 90 cents you gave me in return, you would buy as many dollars from me as you could. The Fed operates the same way. It generates market activity by creating incentives for borrowing. Borrowing leads to speculation, and speculation leads to steadily rising asset prices. This is how the game is played. The Fed is not an unbiased observer of free market activity. The Fed drives the market. It fuels speculation and controls behavior by fixing interest rates
When Lehman Bros flopped last year, markets went into freefall. A sharp correction turned into a full-blown panic. The bubble burst and trillions of dollars in credit vanished in a flash. Trading in exotic debt-instruments stopped overnight. A global sell-off ensued. Markets crashed. For a while, it looked like the whole system might collapse.
The Fed's emergency intervention pulled the system back from the brink, but the economy is still wracked with deflation. Billions in toxic waste now clog the Fed's balance sheet. The dollar has fallen like a stone.
When the financial system blows up and credit is sucked down a capital-hole, the economy goes into a downward spiral. Businesses slash inventory and lay off workers, workers have to cut back on spending and credit. That creates less demand for products, which leads to more lay-offs. This is the vicious circle policymakers try to avoid. That's why Fed chair Ben Bernanke wheeled out the heavy artillery and launched the most aggressive central bank intervention in history...
Everyone who watches the market has noticed the inverse correlation of stocks to the dollar. When the dollar fades, stocks soar. And when the dollar strengthens, stocks plunge. Eventually, the dollar will reverse-course and stage a comeback, probably when Bernanke stops his printing operations. That will trigger the next severe correction which will burst bubbles across all asset classes.
Bernanke's success in reflating sagging asset prices has depended entirely on interest rate manipulation and liquidity injections. There's been no effort to patch household balance sheets, increase production, or strengthen overall demand. It's a clever trick by a master illusionist, but it has its costs. When the dollar rallies, markets will crash. And Bernanke will be responsible.
Rising demand for physical gold is a threat to the dollar because it signals a growing loss of confidence in the paper currency. It is also key to understand that gold prices aren't rising because of the changing fundamentals of gold, but because of the changing fundamentals of the dollar. In other words, gold isn't rallying, THE DOLLAR IS FALLING. Gold is history's oldest and most stable currency. Its utility is simply that it is rare, and for 5,000 years people have used it to store value for the future. All the gold that has ever been produced would fit in a solid cube of about 19 meters on each side, and this cube is only expanding by about 12 centimeters a year (2%). Since the value and supply of gold itself are fairly constant over long periods of time, the main driver of gold price fluctuations is the ebb and flow of confidence in paper currencies. Rising gold prices are, therefore, a signal of a weakening currency, which is why governments hate them and try to suppress them.
Right now, there is unprecedented worldwide demand for physical precious metals. As a result of this surging demand, gold futures have experiencing backwardation, a rare market condition where gold futures trade under spot prices. It is a signal that gold prices are headed higher and that confidence in our currency is fading quickly. When gold prices break above 1,000 again, the event should be recognized for what it is: the herald of a dollar collapse. Read the rest...
India’s central bank, Reserve Bank of India, announced on Nov. 2, 2009 a purchase of gold from the International Monetary Fund (IMF):
"The Reserve Bank of India (RBI) has concluded the purchase of 200 metric tonnes of gold from the International Monetary Fund (IMF), under the IMF’s limited gold sales programme. This was done as part of the Reserve Bank’s foreign exchange reserves management operations. The purchase was an official sector off-market transaction and was executed over a two week period during October 19–30, 2009 at market based prices."
By my calculation, the bank disposed of about 2.3 percent of its June 30, 2009 foreign currency assets or about $7 billion worth, expressed in dollars. These assets grew tenfold between 1998 and 2007, and by only 20 percent since then. RBI’s gold reserves, at market value, were 3.85 percent of the total foreign currency assets before the purchase. They jumped by 60 percent. They become about 6.3 percent of the new lower amount of foreign currency assets.
We don’t know how many dollar assets RBI disposed of as compared with pound and euro assets. It’s likely to have been a large amount.
This transaction has a significant meaning that goes well beyond the dollar amounts involved, which are not that large. It means that a major central bank has actually disposed of dollar assets and prefers gold instead. It means that it regarded its dollar holdings as excessive. There are more central banks in the same position. They may do the same. China had been suggested again and again as the potential buyer of the 403 tonnes of gold to be offered by the IMF. India’s purchase was a surprise. Read the rest... Michael Rozeff at LRC
The Dollar Meltdown, arrived in bookstores yesterday. It describes the next and most difficult phase of America's financial turmoil -- the coming currency crisis. Charles Goyette will be our guest today (4:00 pm EST).
If you’re reading this, you already know that the dollar is in trouble and that a lot of people with a good track record of being right on major economic matters are predicting a further disastrous fall in its worth straight ahead. One of them is legendary investor Jim Rogers, who warns of a major currency crisis sometime in the next couple years. His latest thoughts are available here.
Congressman Ron Paul says it’s time to prepare for the worst. He says the large-scale government intervention in the economy won’t have a happy ending. But, even believing that a vastly devalued dollar looms, most of us wonder what we can possibly do about that. How we can protect what we have accumulated in wealth from being destroyed.
Former radio talk show host Charles Goyette, whose name you might remember from the stories about his firing for failing to support George W. Bushes war of choice in Iraq, has been what one might call an alternative investor for some years now. He’s written a book, The Dollar Meltdown, that explains how the current financial crisis evolved and, more important, how we as individuals can best protect ourselves and our families in the trying times to come.
You’ll learn some simple steps to take toward financial survival in a world shaken to the core by the worldwide credit crisis, government bailouts, “stimulus” spending, and the socialization of bad banking debts. The resultant skyrocketing of the national debt, much of it hidden, but so enormous that it can never really be repaid, leaves the average family of four saddled with $1.3 million as its share. You can see why this can never be repaid and why Ron Paul says our current situation cannot end well.
What does Charles Goyette recommend? He’s a hard assets kind of guy, believing in gold as a true storehouse of value and in the wisdom of investing in real things, not fiat currency which is being cheapened by our rulers at an accelerating rate, all the while insisting that wealth can be created by printing more money through assuming more and more debt. He agrees with Jim Rogers that natural resources, such as agricultural commodities represent a good investment these days. The world’s population continues to grow and these billions of people will need commodities of all kinds to sustain themselves. He recommends particular mutual funds designed to profit from this reality.
Charles Goyette has been a champion of freedom for a long time. We look forward to talking with him in the second hour of the show this afternoon. As Jim Bovard says, “The Dollar Meltdown is a whole lot cheaper than filing for bankruptcy.”
The current investment climate is more perilous than ever. The Federal Reserve’s balance sheet continues to grow stuffed with the dubious paper purchased from the too-big-to-fail banks that are now wards of the state. The music stopped and there were no chairs, but the Fed and the Treasury snapped their fingers and trillions of dollars later the chairs appeared, the band played on and the banks live on. The taxpayers are now the not-so-proud owners of AIG, General Motors, Fannie and Freddie and dozens of banks. Where did the money come from? Out of thin air.
Every paper currency in history eventually reaches its intrinsic value – zero – and the Fed’s Ben Bernanke is doing all he can to see that the dollar becomes worthless sooner rather than later. As Marc Faber told an investment conference crowd recently, Zimbabwe’s serial inflator Robert Mugabe is Bernanke’s mentor.
Investors live in the here and now. We can’t pick what our investment climate will be. If only we could live our lives with the market deciding what money is and 100-percent reserve banks protected our money on deposit. No such luck. The financial waters are treacherous and we must navigate them.
Charles Goyette provides a roadmap for survival with his newly released book, The Dollar Meltdown: Surviving The Impending Currency Crisis With Gold, Oil, And Other Unconventional Investments. The former Phoenix radio talk-show host has learned from some of the brightest minds in economics and investing. It’s the rare book that engagingly teaches sound economic theory, provides the history of how we got in this mess and then provides solid investment advice that considers the precarious times we live in. As ambitious as this sounds Goyette’s fast-paced book gets it all done.
The author brings the reader up to speed writing about the bailouts and the nation’s debt. After explaining why gold has been the market’s choice for money for thousands of years, he writes about every saver and investor’s nightmare – inflation – using the modern example of Mugabe’s Zimbabwe, a once prosperous nation reduced to a Stone Age economy with the continuous printing of paper money. Everyone is a billionaire but nobody can buy anything.
Goyette looks to Murray Rothbard to explain the history of America’s Federal Reserve and fractional reserve banking, and to Ludwig von Mises to see what the crack-up boom might look like. He makes the poignant point that hyper-inflation is not just something engendered in banana republics. Israel experienced triple-digit price inflation in the late 1970s and early 1980s. Every once in a while dissatisfaction with the dollar makes the news, most recently with super model Gisele Bündchen demanding to be paid in euros rather than dollars. But the Brazilian bombshell was not the first. Goyette writes that Bette Midler demanded gold Krugerrands to perform overseas in the 1970’s. No doubt the Devine Miss M was influenced by then manager and boyfriend Aaron Russo.
Ultimately inflation leads to a state-controlled economy and America is headed that way, evidenced by Washington picking which businesses survive and which are left to fail, not to mention how much executives – high level and low – can be paid. So what’s a person to do? There is no academic hemming and hawing with Goyette and don’t be looking for stock tips. The author suggests investing in real things and he especially likes the yellow metal. What’s especially valuable is the primer he provides for buying physical gold – something that many people ask about.
All the other ways of investing in gold are addressed along with a separate discussion about silver. Goyette knows the whole energy independence chatter is nonsense and spends a chapter discussing what the world will not be living without in our lifetimes – oil.
Specifics are provided on how to invest in other commodities and what to invest in to take advantage of the coming bond market crash. Goyette’s explanation of how volatility can eat up an investment in leveraged funds is especially helpful as well as his tip about TIPS.
For readers who want more information, the author’s suggested readings at the end of the book will arm investors with ongoing market and economic knowledge.
At the book’s end Goyette’s sadness of America’s loss of liberty is evident. He worries what will become of this country’s prosperity and freedoms. But he doesn’t waste time urging his readers to write their congressmen or elect the right people. It’s too late for that. Protect your assets, get out of the dollar.
Many thanks to Prof. Steve Horwitz for this generous review of Meltdown that appeared in The Freeman, the publication of the Foundation for Economic Education. Gene Epstein of Barron’s has been insisting I put together a documentary based on the book. An English-language producer at Al Jazeera is already doing one that features Meltdown heavily.
What is most impressive about Meltdown, though, isn’t anything I’ve done — it’s what Mises and Hayek have done. Their business cycle theory explains so persuasively what’s happened to us: central-bank intervention discombobulated the capital structure and gave us an unsustainable boom. An observer unfamiliar with Austrian business-cycle theory might claim housing isn’t a “long-term project” and thus doesn’t fit into the Mises-Hayek story, but that would just underscore his lack of acquaintance with the Mengerian framework in which Mises and Hayek operated. Housing is a long-term consumer durable, interest rate sensitive, that is time-consuming to build and is very capital intensive.
Bob Murphy puts it this way: “E.g., seeing a laser light show in the planetarium versus watching a street musician are both non-durable consumer goods (services); the enjoyment they provide to consumers is fleeting. But obviously to produce the planetarium show takes a much longer investment of factors of production, etc.”
The fact that people took out home-equity loans to finance consumption also fits perfectly into the Mises-Hayek framework, certainly in the Garrisonian rendering of the theory that finds both investment and consumption expanding simultaneously and incompatibly during the boom.
When I spoke at the University of Connecticut School of Business last week alongside the president of one of the largest insurance companies in the world (he took the opposing view), I was stunned at the response — faculty and deans wanted more about Mises and Hayek. “You make an extremely persuasive case,” said a 20-year veteran of the school.
