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110th Street

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  1. There was a similar article a few months back on goldseek.com (sorry to use the yellow metal in a post on HPC! ) by Rick Ackerman. His view was that due to 24hour media, and instant access to accounts and trading, this could indeed happen in hours. Bill Bonner described current QE as being akin to water filling up behind a dam. The money doesn't get into the system like it should, it's all bunged up. However when it does, it's like the dam bursting as it floods those downstream. JP Morgan Chase, Blackrock, Goldman Sachs. The Association of Finance Professionals stated that their members have over 50% of their funds in cash (compared with 23% 6 years ago). ECB, Swiss bank were also mentioned. Here's the link: http://www.adamsmith.org/blog/economics/cash-piles This whole financial fiasco reminds me of the sand mountain theory. To cut a long story short, Some academics tried to determine why, if you drop one grain of sand on top of another and then create a 'mountain', then after some time one of three things happens when you drop subsequent grains of sand: 1. nothing (most common by far), 2. a small contained avalanche (rare), 3. half the mountain falls away (extremely rare). They wanted to predict which grain of sand would cause the avalanche and why. The conclusion was that it wasn't the grain of sand, but the underlying stability of the mountain. If there were regular but rare small avalanches then the mountain would be stable (creative destruction anyone?), however if the mountain did not collapse and the unstable areas started to link together, then you had a catastrophic failure. So if we apply that to today's financial world, we have money clogged in the system, ready to be put to use at a moments notice, govts carrying the can for banks and not allowing failure. Transference of risk between govts. So, although only a small chance of happening, and it could take years to play out. If/when it does go, it could be a big one. I don't believe it would be the end of the West or anything like that (I don't believe that finance is as important as governments believe it is), I do believe that it could wipe out millions of peoples savings/assets overnight. What to do, what to do!!??
  2. Right now there's loads of money just sat around doing nothing - the Adam Smith Institute Blog has just written an article about this. Their view is that the smartest financial minds in the world would rather sleep on a lumpy mattress then invest in the future. They would rather lose some of this money through mild inflation than take the risk of investing it. This then got me thinking about Bill Bonner's (from Daily Reckoning fame) view that re the debate between inflation or deflation (what will it be?) his answer was a simple 'yes'. We'll get both. Deflation, followed by inflation. I'm now starting to believe that there will be some kind of inflection point (maybe quite minor) when these people with their hundreds of billions, no longer want to keep it in cash. It then gets unleashed on the market. This could happen over a period of a few years, or more likely over days/weeks (or in a massive panic, hours??) Will we then get a spike in the velocity of money, whereby no-one wants to hold on to it due to increased inflation? A self fulfilling cycle?
  3. Thank you. Greatly appreciated Back in the day - circa 2007, I really used to like HPC. Now it seems to be full of bitter people who like to rant. Shame really.
  4. It's not about them being self-sufficient now, it's about their capacity to be self sufficient when they need to be.
  5. China needs an export market far more than the world needs China to export. So what if China refuses to sell to the States. Yes, everyone will become poorer, but the US will be the least worst off. The US is not an indispensable nation, not at all, but what they are, is fully self-sufficient. Yes, living standards fall due to them not getting cheap imports (assuming China refuses to sell to them), but that is far from the 'implosion of the US' that everyone here goes on about. If the dollar collapses, it is not the US that is in trouble, it is the non-US dollar holders. $ = debt. US debts are effectively paid off, and they start again with a new currency.
  6. People will trade with America once the Amero is issued. International money markets don't hold grudges. If China refuses to sell to the states then their economy simply implodes. The US is completely self sufficient for food, fuel and military equipment (they buy high tech weapons from themselves). The Chinese are not innovators, they are copiers who do it cheaper. The US can make and buy their own chips. $20/gallon fuel means nothing when US citizens are using a different currency and buying domestically.
  7. I agree with Peter Schiff on this one. I do think that the dollar will have an overnight collapse, however I don't think that will effect things in the US for more than a month or so. What they will do in my opinion is put in currency controls, and then say; if you are a foreign holder of US dollars, sorry, your currency is worthless, if you are a US citizen who has kept dollars offshore to avoid paying tax, your dollars are worthless. If you are a US citizen with dollars held in the US, you can swap them 1 for 1 with our new currency, The Amero (written about by The Economist in 1998). About 1/3 of Americans are already on food stamps, so the govt bridges the gap for that month by sending people food stamps so that they can eat. Pretty soon the US has a currency with no debt and will then start to borrow on the international bond markets (Iceland already are). I don't think that this will cause a 'collapse' of the US at all. I think that it simply means that millions of non-US people have spent years working for nothing - they just don't know it yet. China anyone? The dollar collapse will happen like a dam breaking, and although no-one can predict how or when it will happen, the trick is to be mostly out of USD from here on in. Being a bit thick it took me about 2 years to understand exactly what is money. I came to the conclusion that it is 'a future claim on someone else's labour, property and/or intellect.' Value (as in money has to be a store of value) is not inherent in the item, but in the mind of another person (i.e. a house is only worth what someone else is willing to pay for it). When the value of the dollar crashes, so do these future claims. I'll not mention the yellow stuff that dare not speak it's name!
  8. Surely the textile industry was automated a couple of hundred years ago? Tens of thousands of workers were made unemployed. But the system didn't crash, their kids became skilled in other areas and found work there. Yes, it took a generation for this to happen - allegedly many of the unemployed textile workers never recovered, but the economy moved on. Why? clothes became cheaper, so consumers had more money to spend elsewhere and different businesses sprung up. Th
  9. For the past 6 months I've been doing the P90X routine at home. All I need is a yoga mat, dumbells, a pull up bar and press up bars. Best fitness regime I've ever done. Far cheaper than a gym!
  10. I've thought about this a lot over the past 3-4 years esp with regards to interest rates. My issue has been that interest rates (as they stand at the moment) punish the prudent by lowering the value of sterling - essentially devaluing savings and wages. Morally wrong in my view. However, let's say the coalition government forced the BoE to raise interest rates to say 5 or 6% which is arguably where they should be. Well there would be an almighty housing crash, bankruptcies, v high unemployment initially. But after 3 years of hell, we'd actually have a very good base to build a decent economy from. However, any government doing the above in a democracy with universal suffrage is bound to lose the next election by a landslide, just as the economy is picking up, leaving Labour to come back in, and destroy the economy again. I can see no realistic scenario where a British government will take the tough decisions necessary, and hence we'll meander down this road of mid level inflation, on again off again recessions & possibly a decade or two of economic malaise. What does this mean for me? We'll, until interest rates in the UK start to rise (can't see this for another 3 or 4 years at least!) then it has to be the shiny metal for me - if only to ensure that my savings don't lose ground. Maybe we've reached the end of 'perpetual growth' and now we need another model to follow???????
  11. I believe I can tell you how we got here and you've alluded to the answer in your thread. Unfortunately it all started with universal suffrage. Having every person in the country having an equal vote meant that over time politicians could get elected by making promises they couldn't afford. Key to being able to do this however is an 'elastic' currency i.e. staying off any form of gold/commodity/legal standard. I'm not saying that we should restrict voting, however over the years, the austerity that was required in order to purge the system of malinvestments was political suicide - so politicians took the easy route and expanded the money supply, and government debt. There are some who argue that the Western system of welfare government is doomed as it is completely unsustainable (due to demographics and increased life expectancy). So we are looking at either; a. we accept a decade or two of harsh austerity (which most people won't as that would essentially ruin their entire productive life), or we face some kind of economic collapse (depression then hyperinflation?). Post this, then we may either start all over again having learned nothing.............or enter into post-democracy (whatever that means). In conclusion, after this is all over (2025 give or take 5 years?) we would need to insist on some form of legislation capping government spending, debt and money supply over a time period (say 5 years). We would need governments who live within their means and are not perpetually in debt - which would also mean that they would want approx 1/2 - 1% deflation over the long term, rather than 5% inflation (which is really 8%) which stiffs everyone other than those who have early access to the money supply (govts and banks).
  12. I'm interested in alternative investments, and have been for the past few years. My reasoning is that money (as in the £) is not the only transferable asset, so have looked at gold, art, fine wine, classic cars and even forestry as a way that a person may preserve their wealth over the long term. Recently I've been called out of the blue by 2 companies I'd never heard of before. The 2nd one was a wine merchant - a rather new one I think. I told them that I have researched fine wine, and that I'll buy when 2 things happen. 1st, my consultancy business I'm setting up starts to actually work and enable me to live on my earnings (so I don't need my savings as a buffer), and 2nd when China crashes (as it has been propping up the fine wine market for the past 3 years or so). I told them to call me back in Feb 2012 and we could talk some more. I received a call from a chap a couple of hours ago from the above company. He was desperate to sell me a 2006 case of Lafite. His argument over and over was that it had been going up 40% per year so I'd be a fool not to buy. I explained to him about China and my business, but he simply said that I needed to 'pull my finger out' and buy now. He also suggested that I work from home to save money on my business so that I could buy this wine. After the call, I thought about everything he said (including that my strategy for buying in a bull market was to buy on dips was wrong!) and came to the conclusion that he sounded more like a desperate, pushy estate agent rather than a fine wine broker. It was very much in the line of 'wine only ever goes up'. Hmmm heard that one before. So are ex-estate agents now pushing fine wine???? And before anyone asks, no I didn't think to ask the obvious question. If it is such as great investment, then why is someone selling it now. As an aside, I've been reading on some financial (not mainstream) web sites that China is about to have an economic hard landing. One site in the States stated that a lot of Chinese elite know what's going on so have shipped their family and money to the West. It talked about the amount of Chinese families living in the authors area, but with the father/husband still working in China. It got me thinking, that the new build block where I've recently moved to is about 50% oriental people, with basic English.....but I've not seen a single 'father' just women with young children.
  13. Yes, agreed. Surely Sir Terry Leahy had something to do with it? Rather than being a Jewish conspiracy?? Surely the fact that we have a minimum wage discourages employers from employing people for their 1st job out of education. There is always a risk of employing someone on their first job, as you are in effect dealing with an unknown quantity. That risk is increased partly due to the minimum wage i.e the employer asks if they will get more 'value' from the employee than they pay to employ the person. As a result they go for the risk averse approach and avoid hiring young people, and instead go for the older ones. I'm not saying don't have a minimum wage, but am saying that there are surely unintended consequences from having one - reluctance to hire our youth being one.
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