Financial Markets

Consumer spending is rising eight times faster than income, says the latest report from Bloomberg. And every day, the United States spends $2 billion it doesn't have. Each day, the government adds about $1 billion to its debt. And each day, consumer spending outpaces consumer incomes by about another $1 billion.

And everyone seems think this can go on forever. That the Government and Central Bankers will hold up the economy in the interests of the citizenry. Like they are really concerned with the welfare of the people.

A man is able to buy a house he cannot really afford, as a result of artificially low interest rates - counting on it to go up in price so he can "cash in on his inflated equity ." The bank that lends him the money immediately gets rid of this "dubious paper" to a financial institution that packages it as a derivative, which is then sold to another financial institution.

Everyone makes money - the homebuilder, the bank, the finance company, the insurance company, the suppliers and furnishers. And all up and down the financial food chain, people count on it for retirement, insurance pay outs, investment rates of return and so forth. And yet, the whole transaction was based on a lie - artificially low lending rates...and a belief that they will stay low permanently.

No one wants to face the future. Denial is not just a river in Africa. The homebuilder made money, but the losses on unsold inventory will eat up his profits will the bubble bursts. The banks made money, but when the bubble bursts, the value of the collateral they are holding on outstanding loans will dissolve and they will become insolvent. The finance company made money, but when the bubble bursts and the number of defaults soars, they will become upside down, and out of business. Insurance companies will tank, and all of the creditors of all these companies will go unpaid.

According to the Bank of International Settlements, there are about $250 trillion worth of derivatives in the world financial system - most of them resting on the same impossible dream...that this can go on forever. Nothing lasts forever.

The end of every age must come with the same sort of mass delusion. All that matters is what is happening here and now. We have become conditioned to want no more from life than instant gratification. Damn the consequences. Full speed ahead.

For the first time since World War Two, the overall income of Americans decreased for two consecutive years after the Internet stock market bubble burst in 2000.

The total adjusted gross income on tax returns fell 5.1 percent, to just over $6 trillion in 2002, the most recent year for which data is available, from $6.35 trillion in 2000. Because of population growth, average incomes declined even more, by 5.7 percent. Adjusted for inflation, the income of all Americans fell 9.2 percent from 2000 to 2002.

The recession that hit the economy in the Spring of 2000 has not gone away. New information shows that its continued effect on Americans' incomes, particularly the wealthiest, has been much more severe. IRS reporting methods, which don't take into account the ravages of inflation, have turned out to be grossly misleading. Duh!

Recent trends have caused many more ordinary employees to join high-level executives in having at least part of their compensation dependent on stock options and bonus plans. This dependency, given the increasing volatility of the stock market, does not bode well for the reversal of the direction that incomes have taken.

As a country, we are getting poorer by the day.

Transfer you equity into commodity stocks.

On the war front

Putins Russia, while surrounded by al Quida, is also pitting itself against America. Through the manipulation of the international oil markets, he is playing an economic card through his control of Russian oil giant Yukos. Putin on Monday proposed measures that would enhance his own power and the Kremlin's political control of the country, arguing that stronger state authority is needed to fight terrorists in the wake of a school hostage crisis earlier this month.

In televised remarks to Cabinet ministers, top security officials and regional leaders, Putin said he would soon submit to parliament a draft law giving him the power to appoint the top leaders of the 89 regions that make up the Russian Federation.

Power corrupts. Absolute power corrupts absolutely

Meanwhile, back in the self made quagmire we call the Middle East, our forces are being strung thinner and thinner...

Precious Metals

This week I am going to initiate a rant that you, as my readers, will be hearing about from now on. I will be forever imploring you to purchase physical gold and silver bullion. In reality, there is so little bullion available for purchase, that a concerted effort on your part could send the value of gold, and more importantly silver, to the moon.

Besides enriching ourselves through this exercise, will can passively bring about change in the only way that can really make a difference. As the price of bullion subsequently rises, more and more people will begin to recognize and appreciate precious metals for what the really are; money.

Although the monetization of gold and silver is the last thing the Central Bankers of the world want, it is the only way to defeat the fiat currency debacle, and return our country to its Constitutionally mandated money system.

If one half of one percent of Americans went out and bought ten ounces of silver apiece, that would amount to 14,000,000 ounces of silver. There is much less than 100,000,000 ounces of silver available. That much buying pressure would have an explosive effect on the price.

Consider it your moral imperative.

Buy silver.

Speaking of Energy

Through the repo pool, the Fed, working along with the Secretary of the Treasury, has been artificially supressing the price of oil and gasoline. The inherent pressures associated with this reckless behavior will soon react violently. If they can maintain this display of smoke and mirrors until the election, I will be surprised. After the election, look for the price of both oil and gas to rise precipitously.

$2.50 per gallon gas by New years...

The Fed

Smoke and Mirrors...

Financial Survival

The American automotive industry is showing signs of breakdown. The maket is glutted with new and used vehicles.

Mercedes sales are off 12%. GM is beginning to cut back on production and has begun to layoff workers. Ford has begun to do the same. All three companies have grossly underfunded pensions, and the worst is yet to come. Along with the failure of the airline industry, this will certainly be one of the dominos that starts the chain reaction.

Fasten your seatbelts, this is going to be a bumpy ride...

Check out Sterling Mining (SRLM.PK)

For those of you who are in a quandary over your portfolios, I have repeatedly suggested that you get out of general equities and into commodities, like energy and precious metals. I can add to your choices by suggesting that you take whatever cash you have and convert it to Yen. Over the next twelve months I believe that the Yen will appreciate substantially against the dollar. Remember, the sun does not go down, the horizon moves up. Prices are not going up, the dollar is going down.

What else can you do?

First of all, wake up! Either you support freedom with laissez-faire capitalism,
an economic doctrine that opposes governmental regulation of or interference in commerce beyond the minimum necessary for a free-enterprise system to operate according to its own economic laws, or you support a statist/collectivist ideology that believes in taking the production of a person and placing it out of their control. Your choice is regain your freedoms or or suffer encroaching slavery.

There is a huge difference between the ideologies that support liberty and democracy. The ideology of Liberty suggests and implies that people should choose to be benevolent and productive, as part of God's moral code. That society will create for itself non-governmental organizations to deal with social needs, that government is established by society to sustain and defend the unalienable (God given) rights of the individual, and limited only to this function. Political power was to remain within the individual and his society.

Then why do so many of our politicians and teachers keep trying to shove this concept of democracy down our throats, as if freedom naturally followed? Maybe it's because majority rule sounds legitimate and moral on its face. Consequently, the majority of Americans have shown their willingness to give up their liberties in exchange for a handout.

Understand what is happening and "Spread the Word".

Higher oil prices should stimulate people to add insulation to their houses...or to buy a more energy-efficient automobile. It may also cause a lot of folks to become desperados. You might consider getting into the burglar bar business

Keep you eyes open about any news that has to do with the delivery of fresh water. If you don't already have control over some fresh water, get some. Go out into the country about sixty miles from the city you live in and buy five or ten acres of property with the water rights. Dig a well. You will be amazed at the peace of mind you will gain by this action.

If you are depending on Social Security, stop.

Get out of debt. Figure out ways to conserve. Take up gardening. Sell everything you don't need.

Follow the course opposite to custom and you will almost always do well...

Its not what you don't know that will screw you up, it's what you know that is wrong. The spin you hear from the mainstream media is intended to mislead you. Open your eyes and face the future. If you leave your head in the sand and ignore it, you are only leaving your butt exposed for the world to kick. This all may sound like gloom and doom, but when you get a handle on what is going to happen, you will have a future filled with opportunity. Fortune favors the Informed.