Thursday, November 08, 2007

Fractional truths

The U.S. Government, federal reserve and the world banking elites have finally run out of wiggle room and a drastic rewriting of the norms of fiscal culture about to happen.

Over the last few years there have been voices in the wilderness who have seen this coming and have been ignored, sneered at, decried as cynics, doomsayers, depressed, unpatriotic but rarely acknowledged as being correct. A few of the notables are

David Walker Comptroller General of the United States who has been railing against the debt and unsustainability of the U.S. financial system.

Dr. Doom aka Peter Schiff, stockbroker, analyst, writer and uber bear, president of Euro Pacific Captial

Ron Paul, U.S. congressman, libertarian, Republican Presidential hopeful, strict constitutionalists and one of the few people in modern U.S. Government you understands money and economics.

The list is huge and includes the people behind so many websites, blogs and newsletters that could not gain access to the mainstream media yet have been telling the truth and helped to make people's investment choices safer and more lucrative in recent years. The bottom tier is people like me who after wasting their time NOT convincing their friends and family to protect themselves turned to the Internet out of communal duty

I think this segregation between truth and spin is about to be broken. Over the few months the severity of the housing crunch could not longer be hidden and mainstream new outlets have daily housing gloom stories. The large financial entities have had to report huge losses and write downs related to bad commercial paper, mortgages and this is all before the true destructive power of derivatives have been demonstrated.

The real jeopardy of a U.S. dollar crisis is in the offing and when newspapers like the Globe and Mail state blatantly Greenback on the Brink you know the days of ignoring or hiding the problem are over.

Frational truths

So if reporting the problems is suddenly becoming Vogue when will we see answers and strategies coming from the mainstream media?

My bet is no time soon. The media is part of the system and the system is run by banks, investment houses, brokers, industrialist who want you to do several things which are not necessarily best for you. This is what will happen in my opinion. Remember as long as you stay in the market the big boys can make money on both the up and down ticks of the market as well as hefty commissions

They will continue to tell you "the worst is over", "we've hit bottom", "recovery is imminent", the same as they did during the crash of 29, and the entire first year of the U.S. housing bust.

They will lobby and pressure the Governments to do what is best for them, not average investors.

The Government will lowering interest rates, legislate bailouts, and inflate away their debts by destroying your savings.

Canadian and Europe Banks will lower the interest rates and join in the U.S. dollar's race to zero value for the sake of saving industrial jobs that would likely become irrelevant in the later stages of peak oil anyways.

How this will unfold cannot be predicted 100% by anyone. Once panic and desperation shows up it will be chaotic and unpredictable but I so believe there are a few safe decisions to make.

Shed debt, downsize, delay major purchase and increase savings.

Investment money should be moved away from the most dangerous currencies, U.S. dollar and probably the Sterling(which I believe is also headed for a break). This includes cash, bonds, equities priced in the risky currencies.

If you must play in equities such as a self directed pension fund, stick to commodities, food, energy, metals, maybe infrastructure, water, consumer staples. Tech(non energy), electronics, auto,banking, aerospace, luxury goods are all destined to be losers.

Precious metals, real money that cannot be devalued to nothing, something that will reactive inversely to the destruction of any particular currency, something that cannot be counterfeited.

If you have the option acquire productive land. Be it currency crash, depression, unemployment, peak oil etc the greatest asset one can have is even a few acres and the will and ability to feed oneself. Despite my belief that silver and gold are a great investment, it is just that, an investment and one you cannot eat. The ultimate asset is productive land, while silver might buy you food, it only works until you run out of gold. If you have land too garden on you can save your precious metals for property taxes, medical treatment or other emergency purchases.

So while the sickness has been diagnosed I don't think the mainstream media will ever tell us the solution. If main steet media ever tells you anything like I have that will be the signal that it's be nearly over and it's far too late for you to jump in. Don't wait, make what ever changes you can. If you wait for frational truths to become complete truths, you'r sunk!


Unknown said...

I've been reading your blog, fascinating stuff, but I do have a question... If the US economy does collapse, say right after the elections, what will happen to interest rates, in particular Canadian interest rates, surely they can't keep dropping? Will there be in your opinion a bottom from which interest rates will jump up to 1980 levels?

Carter Apps, dabbler of stuff said...

It all depends what Canada does in response to the U.S. moves.

If the U.S. follows its current path of slash interest rates and hand our stimulus money then it appear they would be heading for a inflationary sprial like we all had in the 80s.

Under the Volker Fed high interest rates were imposed to freeze the economy and stiffle the run away inflation. At this point there is not sentiment in the U.S. to curb inflation because they are eroneously reporting inflation as much too low.

The current crowd has no "sound money" ideal and is very likely to inflate as a method of discounting the U.S. Debt. This at least is my belief.

Canada has two choices, lower rates in kind, fan inflation and lower the value of the Canadian dollar for the sake of maintaining export jobs dependant the U.S. or we keep money tigher and face a recession now.

I'm of the opinion that the sooner we face the pain the better, and if we do inflate with the U.S. eventually we will have to rein it in with extremely high interest rates like the 80s.

So the answer is I don't know, if we don't cut aggressively with the states we will have a lesser chance of needing big interest later but will face a bigger recession now.

If we do cut and stimulate, inflation will destroy your savings, inflate asset prices and eventually it will need to be dealt with and interest goes up.

Have you ever seen a politician deal with today's problem if they can leave it for the next generation?

If you answer the way I did you can bet on the inflate now, delate later model that would peak interest into the high teens or beyond.

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