No More Greek Miracles ?

Many times in recent months, Greece was supposed to run out of money, but then, at the last minute, found a few billions to pay the bills. Now though it seems that this incredible streak of luck is at its end and a hard landing may be imminent.
How to profit ? It's very hard to profit from any bankruptcy. In the very short term, the liquidity implications drag all asset prices down. Soon though, money creation will go into overdrive and again benefit mainly gold and silver prices.

Confidence

Faith, trust, confidence are some of the main ingredients needed to plan and invest for the future.
Now take the financial affairs of this fictional family: 
Their income is $25,000 a year, they're spending $37,000 and their debt stands at $150,000. Obviously, they are in trouble and the head of the family agrees. To get out of it, he decides reduce the annual deficit from $12,000 to only $11,950.
Would you take your own, hard earned money and lend it to them ?

The numbers correspond to the federal budget (after taking off several zeros). How does anyone believe that the government can act recklessly and instill confidence at the same time ?

If you were to advise this fictional family, you'd likely recommend bankruptcy. It may very well be too late for the government to avoid this fate, but any honest attempt to avert it, must start by slashing spending.
I know, some people would argue that you just need to raise income. But how ? What happens when you raise the price for any product or service ? People buy less of it. This is also true for taxes. When they go up, people will find ways to avoid them.

Trust and confidence can only be restored when reality is dealt with. Absent that, this "financial crisis" is only getting worse.

Public versus Private

Violent versus Peaceful
Coercive versus Voluntary

We have reached an inflection point: Whereas governments were able to "magically" deliver more than they collected, promised more than they were asked to deliver, they are now overwhelmed by the resulting debt. If you'd like to know how that bankruptcy manifest, look at South America 1980 - 1992, or the collapse of the Soviet Union

Gold Standard Lunatic ?

According to these statements by Dr.Nouriel Roubini, people who advocate a return to the gold standard are "Lunatics and Hacks".


http://finance.yahoo.com/blogs/daily-ticker/roubini-supporters-gold-standard-lunatics-hacks-181958239.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+DailyTickerRss+%28Yahoo%21+Finance%3A+The+Daily+Ticker%29

He has a point: before 1913, the USA were not on a gold standard, but gold was indeed money. The Dollar was a defined unit of gold itself and Dollar bills had language on them that allowed their redemption into gold at any time.
The introduction a the gold standard, by inception of the Federal Reserve and its vast expansion of the money supply, made the redemption of paper Dollars into gold impossible.
Sure, the illusion of redeemability  was upheld to cover up that the Fed had in effect stolen the gold from the people. When it finally came to a situation that people wanted to redeem their paper, thereby rendering the Fed bankrupt, the government simply declared ownership of gold illegal.

Roubini is right: Only gold is money. Government promises on the other hand have a long history of not being honored.

Give Everyone A Million Bucks ?

Just did some cold calling on behalf of the Ron Paul campaign. Came across a guy who identified himself as a Democrat. He suggested what I made the headline.
The magnitude maybe exaggerated, but really, if the Fed can print up 2 trillion and hand it to the government, why not take that 2 trillion and cut every taxpayer a check for $20,000 Dollars ?
If the Fed would have done just that, would the economy still be in the hole ? Would there be any "danger" of deflation ?

Meltdown Of The Eurozone

When the bubble burst in 2008, I was bullish on the Euro. I believed that the agreements that created it were strong and would prevent unlimited money printing by the ECB to bail out member countries.
Instead, so I thought, member countries would be forced to display fiscal sanity or face bankruptcy.
Of course, I was wrong. With politicians, you can make as many agreements as you like and can always bet that they will be broken.
Greece had a small problem in 2009: The government had cooked the books. Well, of course, all governments do that, but Greece really didn't even have an idea how much they owed. Turns out, they owed much more than they can hope to repay.
In our normal world, if a company finds itself in such a situation, the prosecuting attorney would examine what happened, identify and bring to court those responsible. In normal world, this would likely produce quite a long list of perpetrators and many people would be incarcerated and obligated to pay restitution. The company itself likely would end up in bankruptcy and creditors get a fraction of what they're owed.

What happened instead:
Leaders of the other Eurozone countries decided that bankruptcy of Greece would be unacceptable. Debt at that time stood at about $350 billion. Those same leaders decided instead to give Greece more money and "bail it out".
Now, tow years later, Greece owes about $430 billion, the Greek economy has cratered, private creditors have agreed to forgive 50% of what they're owed ("voluntarily" - another little joke in this story !) and Greece is still worse off that they have ever been.

What was a minor problem, distraction, has turned into unmitigated disaster.
Greece, of course, is not the only country with problems, but the pattern in which manageable problems are turned into armageddon, looks like this:
1. There's a problem
2. It is ignored
3. It is not corrected, but amplified (Too much debt ? Add more - Too fast ? Go faster - Slobbering drunk ? - you get the picture !)
4. Friends come in to bail out
5. Since the problem has never been addressed, and the friends themselves are not in their best shape, it now also gets those friends in trouble

End result: Everyone involved ends up bankrupt.

Income Tax

According to propaganda, income taxation taxes the rich. Then why are the rich so demanding to tax themselves by increasing the tax rate and even, like recently in Washington State, spend millions in trying to establish a state income tax ?  
Why are so many people who are staunchly opposed to income taxes clearly much, much lower on the income scale?
Washington State does not have an income tax, but plenty of multi-millionaires who want one. Amongst them: Bill Gates Sr. who spent millions of Dollars of his own money to put a proposal to enact it on the ballot.
Although, the word "income tax" was judiciously avoided, the measure was soundly rejected by the unwashed masses.
Actually, the original title of the measure is truly something to behold:
"An Act Relating To Education, Health Care And Fiscal Reform" !

That mouthful was successfully challenged by Tim Eyman, who had some tax cutting initiatives of his own on the ballot.

In the end, the measure lost by 65% to 35 %.

Perhaps Washingtonians know the truth: Income taxes are a tax on labor, not on wealth. Further, they delegate the burden of laying the tax on the taxpayers themselves. In other words (to the taxpayer): "You do your own bookkeeping according to our arbitrary rules, then YOU figure out what you should pay and send us a check. Then, if we should find something that we don't like in your calculations, we can take your property or put you in prison."

Sooo much better than having to send out tax statements and having them challenged by taxpayers !