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Is your money safe with anyone?
Whom can you trust nowadays? Judging from the flood of comments to MSN Money after the Bernard Madoff scandal broke, the answer may be no one.
Investment advisers, banks, employers and even government can't be relied upon to keep their promises, readers told us.
This was predicted in 1966.
Gold and Economic Freedom (Alan Greenspan, 1966)
In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.
Well, there you have it. Nothing is a safe store of value. Stock up on as much nothing as you can possibly hoard. If all you have is nothing, then you can't actually lose anything. Nothing is therefore a sure thing. Heck, the IRS can't even tax nothing. Further, should inflation eventually rise, the value of nothing will remain a constant. Yes, that's right. Nothing is the miracle asset class!
Dizzying, huh? Perhaps I watched too much Abbott and Costello as a kid.
Real Estate Newsletter Articles this Week: Existing-Home Sales Increased to
4.15 million SAAR in November
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At the Calculated Risk Real Estate Newsletter this week:
[image: Existing Home Sales]*Click on graph for larger image.*
• NAR: Existing-Home Sales Increase...
11 hours ago
8 comments:
Stag,
Nothing is a safe store of value
So true. Someones assets are someones liabilities. And I don't see how many of the obligations can ever be met. That's why I'm sticking to my strategy - long free time and short vanity.
I just can't stand the thought of trading my time for all the false promises that constitute so much of what we call money.
Watching the fed & treasury guarantee $8 trillion in dubious promises only cements my beliefs.
Here's another scary thought that keeps me bearish:
Americans are vastly over paid
If you accept the above, our debt load is even scarier and our situation even more untenable.
IIRC it was Ben Stein's father who coined the economic truism: If something can't continue forever, it won't
American's looking to earn their way out of debt are facing a serious headwind. Especially now that our highest paying industry (finance) has been exposed as a sham.
Additional debt via the Obama R&R plan is not going to help long term either imo. As I see it, we need a lower cost structure (less debt). Deflation via debt defaults would bring about a lower cost structure but we know BerNaNkes's thoughts on deflation. And letting the government absorb the defaults in lieu of the wealthy is idiotic too.
Hey Mr. (Bernanke), what happened to the seeds I've sown. Can you tell me why they haven't grown. - Paraphrased from Bruce Springsteen.
Bah! Next I'll be writing tributes as therapy.
mab,
Americans are vastly over paid
The entire developed world (Americans included) is vastly overpaid in comparison to the billions of workers in China and India.
The entire world (China and India included) is vastly overpaid in comparison the the wages required by automated robots.
August 4, 1993
No Need for More Unemployed College Grads
http://query.nytimes.com/gst/fullpage.html?res=9F0CEFDD1638F937A3575BC0A965958260
"Workers of the World, Get Smart" by Secretary of Labor Robert B. Reich (Op-Ed, July 20) perpetuates the dangerous myth that demand for college-trained workers is limitless. Mr. Reich argues that if we can simply train enough workers with "problem-solving skills," we can have both high wages and high employment.
That's Bernanke's thinking today.
Yet America is suffering from too many college-educated workers. Unemployment of Ph.D.'s is high, college graduates are experiencing the worst prospects for landing college jobs, and the last recession witnessed large-scale white-collar layoffs.
That's my thinking today.
Is your degree worth $1 million -- or worthless?
http://articles.moneycentral.msn.com/CollegeAndFamily/SavingForCollege/IsYourDegreeWorth1million.aspx
You also don't need me to tell you that averages aren't predictive for the individual. You may earn way more or way less in your chosen field, depending on your initiative, the breaks you get and labor supply and demand throughout your working life, among many, many other factors.
I feel the need to tell you, lol.
I watched a news segment on TV the other day that really seemed to understand the big picture. It argued that if you are in the bottom 40% of your class, then college probably isn't going to help you much. In fact, the debt you'd take on could actually seriously hurt you.
The analogy was that you could lock away the top high school graduates for four years and not allow them to attend college. They'd STILL be more successful and make more money over their lives than the "average" college graduate.
This is just another example of how looking at the averages doesn't do much to explain what's going on. When Ben Bernanke looked at average credit and average pay he didn't see much of a problem. Things looked okay on average. He said there was no housing bubble to go bust. Unfortunately, things are not okay and there was a housing bubble to go bust.
The gut does pretty well though. It doesn't care about averages. It cares about seeing 20,000+ payday loan centers spread out in many of our nation's strip malls, even though the average person does not use their services. The gut cares about sending our jobs to China. The gut cares about trillion dollar deficts to prop up a failing economy. But most of all, the gut can figure out what would happen if every worker had a college degree. We'd still need someone to pick up the garbage once a week and it is highly unlikely we'd pay him extra for having a degree.
The gut also thinks that working smarter is not going to create more jobs. The gut actually thinks that working smarter will have the opposite effect.
The ultimate in working smart is a fully automated factory. The workers never bicker. They never go on strike. They never call in sick. In fact, there aren't any workers at all. The ultimate in working smart would therefore lead to the "Ultimate Depression" once demand for factory goods dried up.
Bah! Next I'll be writing tributes as therapy.
You could always start with a wacky web tale.
http://www.eduplace.com/tales/content/wwt_095.html
The Sky Is Falling!
Each spring, the sky turns black. Giant drops of cash fall from the sky. All this cash helps the grass and the economy to grow, but it can make things really prosperous too.
Some places get so much cash, that rivers flood into the streets. Driving can be tricky when this happens, so some people put special insurance on their cars.
And when the cash is falling, don't forget your wheelbarrow. Otherwise, your feet might get sore if you stand in puddles!
After all the cash has fallen, the skies begin to darken. If you are lucky, you might see a huge helicopter stretched across the sky.
Great therapy! My mind is completely off of the economy now, lol.
Stag,
That's Bernanke's thinking today.
If you look at MZM, Greenspan and Bernanke clearly thought the world would be a better place if they provided some extra "play dough."
Funny thing, that extra "play dough" made the majority poorer. Not just poorer, broke really. Or more accurately really broke.
And now that the majority are broke, that "play dough" has become "play D'oh!"
Play-Doh is non toxic, unfortunately "play dough" is lethal. But hey, it was great for the pay day loan industry.
http://en.wikipedia.org/wiki/Play-Doh
mab,
And now that the majority are broke, that "play dough" has become "play D'oh!"
Play-Doh is non toxic, unfortunately "play dough" is lethal. But hey, it was great for the pay day loan industry.
The payday loan industry will eventually fail if the jobs completely vanish though. There won't be any pay.
That's where Silly Putty comes in. It isn't intended to solve any problems, but it does wonders on the symptoms.
Silly Putty
http://en.wikipedia.org/wiki/Silly_putty
Though primarily used as a toy for children the material is also used therapeutically for stress reduction.
Stag,
The payday loan industry will eventually fail if the jobs completely vanish though. There won't be any pay.
That's the end game. Mutually assured destruction of borrower and lender.
Isure looks like Bernanke is pushing on a "silly string." You can't bailout the lenders and load up the borrowers with more debt and expect balance. It's a positively silly notion.
http://en.wikipedia.org/wiki/Silly_string
Check out the high tech military use of silly string in Iraq.
mab,
Silly String and similar products have long been used by American and British forces to detect tripwires for explosive booby traps.
That explains a lot. Nervous bankers sprayed me with silly string the other day after I made the mistake of telling them that I was a saver and didn't actually owe them any money.
That whole paper by Greenspan was worth the read!
“The excess credit which the Fed pumped into the economy spilled over into the stock market, triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result, the American economy collapsed. Great Britain fared even worse, and rather than absorb the full consequences of her previous folly, she abandoned the gold standard completely in 1931, tearing asunder what remained of the fabric of confidence and inducing a world-wide series of bank failures. The world economies plunged into the Great Depression of the 1930's.”
How ironic that Greenspan would later take the helm at the Fed only to trigger another “fantastic speculative boom” leading us to collapse such as we haven’t seen since the Great Depression! He seems far away from what he was with that paper. Great paper.
“There is no safe store of value.”
Thinking about that I couldn’t keep my mind from wondering beyond the world of finance. I started to imagine my life being safely frozen and stored away in a vault somewhere until a futuristic time when an anecdote for death is found. I’m thawed to live again, my life saved! I started thinking: I can try to make the short term a little better by investing wisely today. I can try to make it better for future generations, for my kids. But all I have is a short time and I sure would like to live a lot longer than that time is. There is a lot about being alive that I really like. Ultimately, there is no way to protect myself or my future, with or without the gold standard. My greatest investment opportunity would be a way to save my life, and all the money in the world won't accomplish that.
Anonymous,
That whole paper by Greenspan was worth the read!
Yeah, I'm probably a bit biased though. My favorite author is H.P. Lovecraft, lol.
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