-- Posted Wednesday, 20 May 2009 | Digg This Article
| | Source: GoldSeek.com
Next to inflation, majority rule is the most ingenious scheme ever contrived by government. Most people have never dared to question the basic morality or logic in the assumption that the majority should have power over the minority. A majority of the people in the South once believed in black slavery. Did that make it moral? A lynch mob is majority rule stripped of its fancy trappings and its facade of respectability. In a community where homosexuals outnumber heterosexuals, should the majority have the right to outlaw sex between married partners of the opposite sex? In a community where atheists outnumber non- atheists, should the majority have the right to outlaw the practice of religion? ... a dictatorship allows only a small number of people to interfere with the rights of others, a democracy makes it possible for great numbers of people to impose their will on others -- through the force of government. Is an act of aggression more right if carried out by the majority than by a dictator? Since approximately half the eligible voters vote this means that approximately 75% of the people are ruled by 25% of the people.
Robert J. Ringer
American Writer
This article by no means deals with all the events that could, might or should unfold if and when we enter a period of hyperinflation; one could literally write a book if one dealt with all the potential scenarios. We have chosen to briefly focus on a few areas and our intention is to deal more with the remedy than spend endless time talking about the problem.
We have spoken about this issue many times in the past so this topic should come as no surprise to most of our subscribers. We knew that hyperinflation would strike all we were waiting for was for a clear cut signal, and we have finally received that signal. What is this signal you ask? The Fed’s decision to invest in treasuries to loosen up tight credit markets, they have openly stated they plan on pumping 1 trillion dollars into this dumb and idiotic venture. This is called monetization of the debt, one branch prints treasury certificates and the other branch buys these certificates due to lack of outside demand. This is what countries that are in trouble normally do; this is exactly what Zimbabwe is doing, what Argentina did before it collapsed and what a host of other nations whose currencies lost up to 90% of their original value have done in the past.
The markets greeted this news with joy, and so did the bond markets, but note that bonds have not been able to even trade past 130, let alone test their recent highs in the 142 ranges. In the short term it is even possible that bonds go on to put in new highs, but it will slowly dawn on long term investors that the US dollar is being diluted at an incredibly rapid rate, and they will then start to sell their long term holdings (20 year treasury notes and 30 year bonds), this will in turn force the feds to increase rates as this will be the only way to keep these investors happy- hence a vicious cycle will suddenly come into play.
For a long time now, we have advised our subscribers to have some of their money in another country for it never pays to have all one’s eggs in one basket. If you have not done so, then it would be a good time to consider doing so now. For example, one can open up offshore accounts, and they can be denominated in multiple currencies. The main idea though is to have some money outside and in an account that allows you to easily switch between currencies.
For those who absolutely cannot travel, then the last option is to open an account with pay pal and activate the currency option in the account. Pay Pal allows you to invest in several currencies for a small fee; so far, you can invest in the Pound, Swiss Franc, Japanese yen, Euro, etc. Another last option strategy would be to invest equal portions in the currency ETF’s that have recently hit the markets such as FXY, FXE, FXF, etc., We will provide recommendations via our currency and bullion portfolio when the time is right.
Why this hyperinflationary cycle is going to be different?
Prices of commodities and anything that needs to be grown or dug out of the ground is going to increase in price significantly, but at the same time this credit crunch has destroyed the economies of many nations and the net result is that millions of individuals have lost their jobs on a worldwide basis; the overall job outlook in not going to improve. While we are going to have inflationary forces kicking into full gear in the commodities' sector, deflationary forces will kick in (at least at the beginning) in terms of salaries (reason too many workers, too few jobs). This means that those that did not prepare are going to be in for extremely painful experience; it also means that those that were prepared are going to be able to pick up incredible bargains; again this will be the initial stage, once we enter the hyperinflationary stage, expect everything to rise in value. We will not be surprised one day if used cars start to sell for more than their original sticker value; this often occurs in third world countries due to inflation.
Certain sectors will offer lucrative employment.
Anything to do with nuclear energy will pay very well in the years to come. Also the alternative energy sector will provide a pretty good source of employment; we think the two best sub sectors that will perform well are solar and geothermal power.
Medical sector
This sector as we have already stated is going to implode; hospitals and doctors are simply charging way too much for mediocre to crappy services. In the end, the United States for all its so called high tech medical gadgetry is still one of the sickest nations in the world. In the US individuals are now doing what the rest of the world has been doing for a long time, they are finally gravitating towards preventative and natural medicine in contrast to brute force medicine, a field that is controlled and dominated by the drug manufactures. Drug companies are the real drug dealers in this world; they have a legal licence to create, and sell toxic matter to the public. Before this sector crumbles and falls to pieces, the government will deploy billions and possibly trillions of dollars trying to save it and in the process drive us into the hyper inflationary phase even faster.
Commercial real estate
A few weeks ago we briefly mentioned this topic; over 500 billion dollars in mortgages are going to re set to market rates. Corporations purchased these mortgages at teaser rates and just like the residential sector imploded when the mortgages there started to re set to market rates in 2006 and 2007, the same will occur here. Super malls could be a thing of the past, and many so called franchises will have to seriously scale down as they over leveraged themselves during so called boom times. Once again, the government will try to come to the rescue and in doing, so they will create even more money; they might have to create another trillion dollars to deal with all the after effects from this sector.
Conclusion
We will continue with this next week and culminate with several suggestions as to how one can best position oneself so that one is, for the most part insulated from the side effects of this upcoming disaster. This disaster is going to happen whether you keep your eyes open or closed. It would be far better to keep your eyes open and prepare for it, so when it hits you are ready and waiting and not sitting down with your trousers on the floor and your rear exposed to hot flames.
Remember that a disaster is nothing but an unprecedented opportunity in disguise, the trick is to keep your eyes open and not flee to the mountains with your eyes closed and driven by panic.
It is impossible to calculate the moral mischief, if I may so express it, that mental lying has produced in society. When a man has so far corrupted and prostituted the chastity of his mind as to subscribe his professional belief to things he does not believe he has prepared himself for the commission of every other crime.
Thomas Paine
1737-1809, Anglo-American Political Theorist, Writer
Part II
Often a noble face hides filthy ways.
Euripides
BC 480-406, Greek Tragic Poet
Maintaining and upgrading the power grid is another sector that will provide many good paying jobs. Utilities are running low on qualified field personnel who are able to install and maintain power lines and when the US decides it’s finally time to upgrade their dying and aging power grid, the demand for already scare labour will soar even more. Virtually, anything with electricity will do well, for some positions such as those of an engineer, degrees are required but for those chaps that work in the field, repairing and installing new power lines, degrees are not required, the pay at times is upwards of $50 hr.
There are many reasons why this hyperinflationary cycle is going to different and possibly even more vicious than previous cycles. We listed some of them in the March 24th update.
One of the main reasons things will be worse has to do with the individual; today’s individual has become too used to credit to used to buying something they cannot afford and to used to believing that they deserve the lifestyles of kings with the earnings of a soldier at best and a beggar at worst. In the old days, it was considered very foolish to buy something you could not afford, today it’s seen as being cool to buy anything and everything on credit. This kind of mentality can only be broken and disrupted through brute force and extreme pain and this is exactly what is going to occur in the years to come. For those who lived within their means or took our advice and practised living 1 or 2 standards below their means, the transition will be relatively easy, and they will have many chances to deploy this extra money into mouth watering plays, for the rest it could potentially turn out to be their worst nightmare.
Anything that needs to be dug out or grown or created from scratch will start to rise in value. Thus owning a piece of land might not be such a bad idea in the long run. We are not talking about a farm but lots from ½-5 acres in size.
Companies will continue to lay off long after the economy starts to improve; they always acts slowly, they only started to fire when the situation went from bad, to worse to extremely unbearable; they should have started cutting back expenses the moment the outlook started to look dim. This system of mass lay offs creates a domino effect, 5000 workers fired in one city, means that fewer will go out to eat, thus many restaurants might close up or cut the size of their work force down to compensate for the drop in business, this in turn will affect the car dealer and the dry cleaner and so on, thus the total loss is much larger. During moments of fear the reaction is much stronger than during moments of euphoria, thus when companies fire, they fire twice as fast as they were hiring when times were good. This does not mean the situation is going to be dire and there is no light in sight. Think of the situation like this, when you buy a car, you know that one day you are going to have a problem like a flat tyre, or something worse. Now you can sit down and do nothing, or you can make sure that your spare tyre is inflated, that you have the tools to change the tyre etc. for other problems you can take out road side insurance, thus if you break down the towing fees will be free or very low. You can also always have the mechanic check your car before you go on a long trip, etc. Now, even if something goes wrong you are prepared for it, while the other chap who is not prepared is going to be in a lot of trouble. In the same manner, this hyperinflationary phase that is going to hit us should not be viewed as a disaster but as monumental opportunity for those that are prepared; meet it with your eyes wide open and not sealed, and you will be amazed at what opportunities you will spot in the years to come.
Methods to protect or hedge oneself against the upcoming hyperinflationary phase
Solution 1
As we stated last week one of the simplest and easiest methods would be to open
An option for those who cannot or do not want to travel will to invest via currency ETF’s
FXY= Japanese Yen FXF= Swiss Franc, FXE= Euro FXC= Canadian Dollar
FXA= Australian Dollar FXS= Swedish Krona
Finally, the last option would be to open a Pay Pal account, fund it and then activate the currency option feature. Right now they offer the Euro, Canadian dollar, Swiss Franc and British Pound.
Asia; here we favour the Chinese Yuan and the Singapore and Hong Kong dollar
Europe; our main choice was the Swiss franc but the Swiss National banks decision to weaken the Swiss Franc has us a bit worried; this could possibly be the beginning of a new trend, where each nation starts to devalue its currency in order to make its exports more affordable, something we spoke about several times in the past few years.
Swiss National Bank decision this week to weaken the Swiss franc has raised fears that other central banks will follow suit in a wave of currency devaluations.Since the financial crisis began two years ago, currency intervention from a major central bank had been seen as unlikely because foreign exchange moves were too low a priority to merit attention, much less a consensus among global policymakers. “The Swiss have broken the glass on beggar-thy-neighbour exchange rate policy,” said John Normand, global head of currency strategy at JPMorgan.
The SNB, faced with the prospect of deflation, said on Thursday the Swiss franc’s strength was an “inappropriate tightening” of monetary conditions. The SNB said it intervened to prevent any further appreciation. Full story
Thus instead of having one strong main choice, we now have to lean towards the Euro and the Franc with equal intensity. To be quite honest we would be more open to putting this money into the Australian and Canadian dollars then investing in the Swiss Franc or Euro.
North America; the Canadian dollar, with its resource based economy it will do very well when hyperinflation hits the world.
Solution 2
Put some money into Gold, Silver and Palladium bullion or any other hard assets such as farm land, antiques (you should know what you are doing when it comes to antiques or work with someone who does otherwise you could be taken for a ride), etc. One can invest in precious metals via the following ETF's.
Gold= GLD
Silver= SLV
Palladium= an ETF is in the works but until it appears, investors can purchase shares in SWC.
Once again individuals should not put all their money into bullion but only a portion of it.
Another option to consider is to deploy a small bit into old valuable coins that are selling close to the price of bullion; examples are Austrian 100 Coronas, $20 St Gaudens, etc; these coins will slowly but surely start to rise in value significantly faster than Gold bullion; at the peak, we believe the differential between bullion and Numismatic coins could be as high as 500%.
Solution 3
A portion of your funds should be deployed into stocks, primarily those in the commodities' sector. Stocks in oil, uranium, natural gas, Gold, Palladium, Silver, etc, sectors will one day trade to dizzying heights, and we are sure it will create many more new millionaires.
We have offered 3 solutions, as we are expecting hyperinflation to be the order of the day in the not very distant future, holding onto cash will not be a wise thing and thus the least capital should be deployed into solution 1, more of one's money should be deployed into solution 2 and 3.
Trends
In times of extreme hardship, people want outlets, and we believe that recreational drug usage will start to take off again. The drug ecstasy will probably make a strong come back or a new equivalent or potentially stronger drug might hit the markets. Generally speaking usage of all drugs will start to rise in the years to come as individuals look for a means to escape reality. We are considering putting out a new index and calling it the recreational drug index, we have been privately keeping tabs on the situation for the last 9 months, and it appears that we might be at the crux of a new trend. To date, we have pioneered 4 new indices (the religious provocation Index, the Poverty index, the Adult index and the Asian Edge Index; each of these indices has provided incredibly valuable info that if used could have provided handsome returns).
Universities and colleges
With the cost of education rising and with not too many job prospects out there because most are looking in the wrong fields, the old days of easy money in the fields of Law, investment banking and soon to join them the medical sector will be a thing of the past. Thus expect many colleges to severely cut back on the courses they offer, start to squeeze more students per class room, etc, all in a bid to cut down costs. We suspect that many universities will be forced to shut down also.
Lawyers, Doctors, investment bankers, and many of those related to the financial sector (Auto dealers, auto salesman, high end stores, etc).
Individuals in these sectors are going to get hammered if they have not already been hammered. The days of the big law firms are numbered, law firms who lived like parasites by making a living of suing individuals and companies will find that they will suddenly run out of clients. Hospitals used to raping patients will find that less and less are willing to pay; the biggest threat is going to be medical tourism. Right now the average person can get the same treatment overseas at 1/10th to a ¼ of the cost back home and the service is at minimum 2-3 times better.
Conclusion
It is said that individuals need to be taught a hard lesson in order to appreciate what they have and to prevent them from ever repeating the mistakes that got them into this mess in the first place. This might be true for say perhaps one generation and maybe if you push it to the extreme two generations. The majority is ruled by greed and fear and will continue to be for the foreseeable future. We had so many boom and bust situations, some extremely bad, some mediocre and some in between, but despite this, humans continue to repeat the same mistakes again and again. The current disaster and the coming hyperinflationary disaster will at most teach only those that experienced it a lesson, unless off course parents sit down and carefully explain to their kids what occurred and teach them the value of saving and living within their means; some will do this but the majority will not.
Thus do not waste time or energy in thinking that this or any disaster will bring about long term change; it will not. In the end, we can only change ourselves, but most think they have the capacity to change another without even trying to work on themselves first. Changing oneself is a very hard task, trying to change another without understanding ones self is a mission destined for monumental failure. The reason humanity has not learnt anything from its past lessons is simple (the message, here is esoteric, one needs to take the time to understand it, for simply handing it out will be of no use, remember nothing good comes easily, if it does, it was not worth much in the first place) is because humans fail to understand one thing; this one thing is that the majority can do nothing. What do we mean by this?
In order to do one must see, in order to see, one must know what to look for, so how can one do when one does not see, worse yet even when one thinks that they know the answer, they are usually looking a the wrong picture for they have no concept of what they should be looking for. Thus trying to do without knowing what you are looking for, or what you are looking at results in nothing. If every individual took the time to truly understand how they function, they would in turn gather valuable data in terms of how others function. A life time is spent just telling others what to do, very little is spent on telling oneself what to do and how to do it.
To show you how incapable we are of doing anything; make a list of everything you will like to do next week and then try to do it, 99% of the time you will find that you have a very hard time fulfilling even half of everything you put on that list. Another interesting task is to sit down and attempt to remember in detail what you did the week before; here 100% will fail, unless they have a photographic memory, for most the whole week will have been just a blur and all the upcoming weeks will also be blurred. Thus one can push things even more and ask the question, are we really living or alive? If we were truly alive why don’t we remember in detail what we have done for just one week of our lives; we must stop here because we are now opening up another can of worms.
To conclude life in the next 3-6 years is going to be filled with unprecedented changes; note how fast the world’s economies crashed, one moment everyone was partying and having a good time, the next minute almost everyone was broke. Russian billionaires were lighting cigars with 500 euro notes in 2007 and early 2008, those same chaps are now crying tears of blood. Extreme extravagance always results in extreme pain. When you spend money, spend money not to show off but to please yourself, pretend nobody is watching when you are spending, and if you are not happier than you are faking it. Most spend to impress others, and thus they get trod upon by these very same people when they fall down and bite the dust.
As we spot changes, we will notify our subscribers of these impending changes and what measures can be taken to protect ones self and ones assets. Right now it would be very wise to have some money in another country. Individuals should also be investing a portion of their funds into bullion (Gold, Silver and Palladium) and finally some money should be put aside and invested in stocks that primarily are in the commodities' sector.
As we stated last time a disaster is nothing but an unprecedented opportunity in disguise; the trick is to keep your eyes wide open and not allow fear to seal them shut. It is when the streets are flowing with blood that one finds the biggest and greatest opportunities of a life time. Continue to live 1-2 standards below your means and try to get rid of as much debt as possible.
There are plenty of good five cent cigars in the country. The trouble is they cost a quarter.
Franklin P. Adams
1881-1960, American Journalist, Humorist
-- Posted Wednesday, 20 May 2009 | Digg This Article | Source: GoldSeek.com
