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The Daily Reckoning | Friday, August 26, 2011
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If Bernanke Shrugged What to Do in the Event of an Out of Control Money System
Reckoning today from London, England...
Bill Bonner
What strange pass have we come to?
The whole world is on the edge of its seat, this morning. Taking short breaths.
People watch. They wait. They listen for a pronunciamiento that could mean trillions in losses...or gains. It could — in theory — push up the world’s growth rate...speeding up economies and bringing millions into the workforce, where they can earn money to pay for their wants and needs.
At the margin, it could make the difference between life and death. Many millions of the world’s people live day to day, hand to mouth, barely getting enough food to eat. A downturn in the world’s economy hits them like a plague in the Dark Ages, pushing them over the edge into famine and death.
And from whom will these precious words come today? They will come from Benjamin Shalom Bernanke, once of Dillon, South Carolina, and lately of the US Federal Reserve Bank in New York.
The headlines tell the story:
“World Awaits Word from Jackson Hole.”
“Investors edgy before Bernanke announcement.”
“World economy rests on Bernanke’s shoulders.”
Who is this man, Ben Bernanke, and what kind of shoulders does he have? Is he a great deep thinker...a renown philosopher in whom the world’s people could have confidence? Is he a captain of industry...a man who has proven that he can lead men and run a profitable business? Is he an investment wizard, like Warren Buffett, with billions of dollars as testament to his understanding of the world of money? Is he even a powerful politician or an acclaimed statesmen, who can at least pretend to solve the world’s problems by threats and force?
He is none of those things. He is a fellow who studied economics and became a university professor. Now he is a quasi-bureaucrat, working as head of a quasi-bureaucracy, whose main function is to make sure bankers make a profit.
“It’s either control or money,” says our friend John Henry. John made a fortune out of a simple insight. If corporations would give up control of their legal problems, they could save themselves a lot of money. John takes on their legal challenges and handles them as commercial matters; he doesn’t particularly care whether they win or lose the case, as long as the net cost is lower. He shares the savings.
“But a lot of companies don’t really care about saving money. They don’t want to give up control. Or, more precisely, their legal team doesn’t want to give up control. So, they end up spending more money.”
Control or money. That is the choice. An economy functions best with no one in control. Central planning doesn’t work. A little bit of it is a drag. A lot is fatal.
But people don’t like it when things are “out of control.” And that’s the problem with capitalism. It is always out of control. At least, it should be.
And that’s Mr. Ben Bernanke’s real role...the service he provides is making people believe it is under control. But the illusion of control is expensive.
He pumped $1.2 trillion into the banking system after Lehman collapsed in 2008. What did he get for it? About 80 cents worth of GDP growth for every dollar spent. A losing proposition; but maybe he can make it up on volume!
And what can he do now? At least in 2008 he still had some ammunition. Now, his big guns are empty. He’s already stuck the Fed’s key lending rate at zero...and pledged to keep it there for two more years. And now we know QEs I and II don’t work either.
Yesterday we got word that housing went down in the last quarter — making 17 straight quarters of losses. Homeowners are down about $7 trillion...and still sinking. New building permits are down to a 15- year low. Sales have not been this low in a generation.
As for unemployment, the numbers are shifty. Most of the improvement in the unemployment rate comes from the feds’ taking people who can’t find jobs off the list of those looking for work. But layoffs are increasing...and it is now obvious that most of these jobs will NEVER come back.
GDP growth itself is near “stall rate.” Most likely, the recession of ’08-’09 never really ended.
And poor Mr. Bernanke. The weight of the whole world’s illusions on those weasely shoulders. An honest man would shrug.
Is this America’s Last Gasp?
A terrible question. But it must be asked — and answered.
This urgent broadcast will do just that.
Tune in now for urgent news on our banks, agencies, retirement accounts — and even our trash collection!
The Daily Reckoning Presents US Government Asset Seizures on the Rise
The Wall Street Journal published a disturbing article earlier this week entitled “Federal Asset Seizures Rise, Netting Innocent With Guilty.”
Simon Black
Senior Editor ofSovereign Man
You can already imagine the crux of the article.
In the United States, there are hundreds of regulations which authorize dozens federal agencies to confiscate private property — homes, cars, bank accounts, gold, company shares, and even personal effects.
Ironically, most Americans still think that they live in a country where you’re innocent until proven guilty. Nothing could be further from the truth, and it’s just another clear example of how the US Constitution has become a worthless piece of toilet paper for the federal government.
The Fifth Amendment states that “No person shall be...deprived of life, liberty, or property, without due process of law.” Tell that James Lieto, a New York businessman who was relieved of $392,000 when the armored car company used by his check-cashing firm was taken down by the FBI.
Lieto was innocent and not implicated in any wrongdoing, but the FBI took his money regardless as it just happened to be in the wrong place at the wrong time.
Last October, another businessman named Raul Stio was suspected of wrongdoing by the Treasury Department. The government seized over $150,000 from his account, yet in the 10-months that followed, Stio has still not been charged with a crime.
According to Justice Department statistics, the total value of confiscated property exceeded $2.5 billion in 2010, more than double from five years ago. The average take per case? $166,000...and the vast majority of cases were non-criminal.
It’s truly staggering to think about how much can be taken away from you in the blink of an eye, all without any judicial oversight or right to a hearing.
The reason could be anything. Maybe you violated some arcane, meaningless regulation among the hundreds of thousands of pages of US Code (ignorance of the law is NOT an excuse!). Maybe you were at the wrong place at the wrong time. Or maybe they had no real reason at all other than mere suspicion.
One minute you have money, the next you’re completely locked out of your wealth and livelihood. They force YOU to prove to them that you aren’t guilty, but they take away any means you had to defend yourself.
Look, this is the new reality in America. The entire country has become a nation of criminals — there isn’t a single man, woman, or child alive who is not in violation of some obscure regulation or cannot be ‘suspected’ of wrongdoing.
This is really just a form of cannibalism — a government feeding on its own citizens in order to keep the party going just a little bit longer. They’ll raise taxes, seize assets, take over pension funds, erode freedoms, start wars and send people to die — whatever it takes to maintain the status quo.
I’ve long advocated for an internationalization strategy: diversifying various assetsand interests overseas so that no one single government has total control over your livelihood.
Store your gold in Switzerland. Open a bank account in Hong Kong. Register your company in the BVI. Establish a ‘backup’ residency in Chile. Expand your business in Brazil. Get a better job in Singapore. Obtain a second passport in Malta. Open a brokerage account in the Cayman Islands.
This approach is NOT just for the super rich. In fact, I’ve helped all kinds of people to internationalize, young and old, rich and poor.
Taking some simple steps to protect yourself will give you extraordinary peace of mind. You’ll know that, without doubt, you have some savings socked away that NOBODY can touch. You’ll know that you have a solid emergency backup plan. You’ll know that everything you’ve worked for won’t vanish in an instant.
A few months ago we held a comprehensive, hands-on workshop in Panama that was a sort of ‘internationalization crash course.’ It fed years’ worth of experience and actionable information into a three-day event.
My personal contacts — bankers, residency experts, gold dealers, corporate specialists, trustees, tax attorneys, etc. came from all over the world to teach people how to implement these tactics and maintain full compliance with the law.
Because the event sold out so quickly, we hired the most professional Hollywood film crew we could find to record the event and put together a video series for people who couldn’t attend.
This 12-disc DVD kit contains over 20 hours of footage plus a comprehensive 200+ page workbook with the personal contact information of every single expert who spoke at the workshop. You simply cannot find these solutions or intelligence anywhere else at any price.
The alarm bells are ringing, and only you can choose to listen. Click here to learn more about our DVD Kit while supplies last.
Regards,
Simon Black,
for The Daily Reckoning
Bill Bonner Holding Gold on the Road to Byzantium Is it time to sell gold? Depends... If you need the cash, yes. If not, no.
Is this a bear market in gold? No, it is a dip in an on-going bull market. The bull market in gold won’t end until the price of an ounce of gold intersects the price of the Dow...
..or there is a new world monetary system.
Is gold in a bubble? No, there’s no fever to buy gold. There’s no frenzied rush to get out of paper. Just the opposite. Ordinary people want to trade gold for dollars. Investors want to buy US dollar bonds. We are nowhere near the bubble phase.
Is the bubble phase coming soon? Nope again. We have to pass through the valley of de-leveraging, deflation, and debt-driven depression first. It could take a year...or 10 years; we don’t know.
What will cause gold to take off to the upside again? Ah...a big blow-up maybe. The collapse of the Bank of America, for example, could make investors jittery...scaring them into gold. More likely, we’ll have to wait for the Fed to panic. When the going really gets rough, the Fed will print money. Lots of it. Then...hold onto your hat.
How low could gold go in this dip? It lost 40% of its value during the bull market of the ’70s. A 40% loss today would take it down to the $1,200 range. If it goes that low, don’t forget to buy more.
How high will gold go in the final bubble? Quoth the Daily Reckoning Oracle:
About the turn of the century, two markets turned
*** “Yeah...Europe is on the road to Byzantium. America is going to Rome.”
Gold turned up
Stocks turned down
These major trends will end
Whence they meet
We had dinner at a London pub last night. Our companion was Dylan Grice, an analyst with SocGen.
“Yes,” we replied... “Europe seems happy to sink into a graceful decay. But America is going down fighting. We’ll support our troops...all the way to Hell.”
The subject of discussion was Yeats’ poem — ‘Sailing to Byzantium.’ Whatever Yeats intended, we see it as a farewell to the growth economies of the Western World — including Japan.
They are all ‘fastened to a dying animal.’ In fact, as we mentioned yesterday, they are stapled to a whole herd of them. An archaic social welfare model. Debts that cannot be paid. Promises that cannot be kept. The declining marginal utility of oil. Zombies everywhere — including in education, finance, healthcare, defense and other major industries. De-leveraging in the private sectors. Impending bankruptcies in the public sectors. Insolvent banks. Corrupt and incompetent governments.
And the biggest dying animal of all is the US, with a zombie empire that it can neither afford to keep nor bring itself to shuck off.
Regards,
Bill Bonner
for The Daily Reckoning
Saturday, 27 August 2011
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