Sunday, February 13, 2011

Why you should not hold your assets in U.S. dollar deposits

As the excerpt below sets out, you will soon discover that Mr Obama is stealing them from you. Inflation is the silent thief. Obama will fund his spending from your savings. The more dollars he prints, the less your dollars will buy. Even the Mexican peso could well hold its value better than the U.S. dollar in the near future.

So? Invest now in the shares of companies not likely to go under in the panic to come. Or spend your money now on something you want: A reliable new Japanese car? An extension to your house? Something income-producing? The Chinese are ditching greenbacks for gold but that's a gamble.

Or maybe in a worst case scenario (galloping inflation COULD trigger an economic collapse akin to the Great Depression) a cellar full of canned food and bags of rice? I could live for a long time on canned food and boiled rice. Canned chili con carne is not great but it makes a reasonable meal when tipped on top of cooked rice. In my student days I once lived for 6 months on a big paper sack of skimmed milk powder. Oats for making porridge breakfasts are cheap and sustaining too. Maybe keep a goat for the milk. You don't even have to cook rolled oats. Just soak it for a while and it becomes muesli.

I myself have always kept a relatively small cash float -- even though I live in Australia and Australian governments have never been as irresponsible as Mr Obama. Australian dollars have already risen substantially against the American dollar as the smarties realize what is happening. Australia is run on the old-fashioned monetary principles that America USED to follow.

The US is hurtling toward out-of-control inflation while the political class tries to convince the hoi polloi that inflation is not a problem. Government-generated CPI data show tame inflation. Federal Reserve Chairman Ben Bernanke claims deflation, not inflation, is the danger to the economy.

Despite government propaganda every shopper knows inflation is already a serious problem. The Financial Times presented annual price increases for various items, which included the following:

* heating oil +41%
* copper +59%
* silver +91%
* palladium +212%
* corn +91%
* wheat +79%
* cotton +143%

These data indicate that inflation is upon us. The magnitude of these numbers suggests hyperinflation.

The effects of inflation are not limited to the US and not limited to rising prices. Spiraling food costs have been cited as a factor in political upheaval in several countries, including most recently Egypt. The US Federal Reserve, although it may be argued to be a primary driver, is not alone as a producer of inflation. As pointed out by the Daily Bell there is plenty of blame to go around:

"Central banks have pumped something like US$20 to US$50 TRILLION into the world's economy to try to reinflate economies that collapsed in 2008".

The divergence between what governments want you to believe regarding inflation and what is painfully obvious grows larger with time. In the US obvious anomalies in government reports, especially unemployment and claims that an economic recovery is underway, make the reports incredible. Few citizens believe that the recession ended 19 months ago. That claim contradicts what they experience every day.

The Federal Reserve has tripled the money supply in an effort to protect the banking system and the economy. Currently, most of this money sits in the banking system as excess reserves which could be lent out, potentially at ten-fold leverage. At some point, these banks will lend these funds out. Then, via the Daily Bell, the Fed must take decisive and rapid action:

As this currency begins, finally, to circulate, price inflation must result, unless such money is quickly removed. Central bankers have continuously claimed that excess currency can be removed from the larger economy before it does its inflationary damage ...

Inflationary damage is already evident as per the numbers above. Unless the removal of these excess funds occurs in a timely fashion, the country runs the risk of hyperinflation.

Mr. Bernanke has stated on many occasions that he is prepared to withdraw these funds before they can create damage. It is not clear what Mr. Bernanke considers damage, but one might think that rising food and energy costs might qualify. Surely uprisings in Tunisia and Egypt should qualify, if in fact they can be attributed to Central Bank policies.

The reality is that Mr. Bernanke is unable to reverse the time bomb he has placed in the banking system. To suggest otherwise reflects either duplicity or unlikely ignorance on the part of Mr. Bernanke. He will not be able to withdraw the funds he put into the banking system



Big price rises starting to filter through at the retail level too

An inflationary tide is beginning to ripple through America's supermarkets and restaurants, threatening to end the tamest year of food pricing in nearly two decades. Prices of staples including milk, beef, coffee, cocoa and sugar have risen sharply in recent months. And food makers and retailers including McDonald's Corp., Kellogg Co. and Kroger Co. have begun to signal that they'll try to make consumers shoulder more of the higher costs for ingredients.

Stater Bros. has seen the prices it pays for cereal rise 5% in recent months. The chain has passed about half the increase on to consumers while making up for the rest by trimming other expenses, such as what it spends on cell phones and delivery truck tires.

Kraft Foods Inc., Sara Lee Corp. and General Mills Inc. already have said they'll raise prices on certain items. Starbucks Corp. backtracked on an August announcement that it would hold coffee prices steady, saying in September it would boost prices of larger and hard-to-make drinks. This week, cereal maker Kellogg hinted that it will be raising prices, without disclosing specifics.

Grocery chains Safeway Inc. and Kroger have said they'll pass supplier increases along to consumers.

Domino's Pizza Inc. is letting consumers decide whether they're willing to pay more. The company is offering two medium, two-topping pizzas for $5.99 each but has recently offered the option of converting one of them to a premium pizza, with more toppings, for an extra $2—a price increase, in effect.

At BJ's Restaurants, a casual-dining chain, prices early next year will be 2.5% higher—but only after upgrading its table settings and decor. "In this business, you can't just raise prices without improving the overall dining experience," BJ's Chief Financial Officer Greg Levin said in October.

Food prices are rising faster than overall inflation. The consumer price index for all items minus food and energy rose 0.8% over the year to September, the lowest 12-month increase since March 1961, the Bureau of Labor Statistics said. The food index rose 1.4%, however. The U.S. Agricultural Department is predicting overall food inflation of about 2% to 3% next year.

Worries aren't all on the low-end. Gibsons Bar & Steakhouse, a three-unit chain in the Chicago area, said that in the last four months, the price it pays for a New York Strip steak rose to $23 per pound from $19 per pound. It's reluctant to pass that cost along. "I think there's a ceiling on how much people are willing to pay for a meal and for an individual piece of steak," said Gregg Horan, Gibsons' director of operations.

Ken Harris, a consumer foods-marketing consultant with Kantar Retail, said some food makers are targeting specific, low price points at retail—such as $1—and reconfiguring package sizes and products to fit the price.

That can backfire when commodity costs rise swiftly. Early this year, Ben Tabatchnick, founder of Tabatchnick Fine Foods Inc., a maker of high-end frozen soups, decided to release a new line designed with a suggested retail price lower than his other products. The 11.5-ounce soups, which started appearing in stores nationwide in October, are smaller than his typical 15-ounce Tabatchnick-brand products and carry a price tag of $1.99.

But in the last two months, Mr. Tabatchnick says his costs for vegetable oils, sugar, dried beans and other ingredients jumped 20% to 30%. "It's going to reduce the [profit] margin dramatically on the product," he says. "We're stuck."



He hasn't got a clue

Think back a long time ago. Stretch your mind, and go all the way back to January 21st, 2011. On that day, the President of the United States spoke to an audience at a General Electric plant in Schenectady, NY and said, among other things: "We're going back to Thomas Edison's principles… We're going to build stuff and invent stuff..(thunderous applause)."

Yes, President Barack Obama said that. And never mind that one of Thomas Edison’s most profound inventions, the light bulb, is about to be outlawed by the Obama Administration. In a rather uncharacteristic moment of enthusiasm and support of for-profit American enterprise, the President made an appeal to American ingenuity and ambition and seemed to conclude that right now we need more of both.

But fast-forward a bit to last Monday, February 7th. That’s when the President addressed an audience of the U.S. Chamber of Commerce (again) and had a rather different attitude towards American success.

Speaking of the improving balance sheets at many American companies, President Obama stated: “The benefits can’t just translate into greater bonuses and profits for those at the top. They have to be shared by American workers, who need to know that expanding trade and opening markets will lift their standards of living, as well as your bottom line…”

“Share the profits” in 2011 sounds eerily like “spread the wealth around,” circa 2008. In both cases, the President was speaking the language of economic collectivism – “socialism” being the more loosely defined term of choice for this type of rhetoric – and it should be disturbing to every American.

Barack Obama is, of course, facing enormous pressure from the American electorate over the high unemployment rate. After all he’s done to try and “fix” the economy – an $800 billion economic “stimulus” bill, the “Making Home Affordable” mortgage fix, a credit card “reform” law, and of course his landmark healthcare “reform” law – unemployment still remains unacceptably high, even by his own assessment.

The President’s frustration with unemployment is understandable. But his contemptuous tone for American businesses is counterproductive, even for his own pursuits. “Start hiring, or else” is not the way to incentivize businesses to assume financial risks and liabilities (and hiring new workers entails risks and liabilities). It doesn’t incentivize anybody to “build stuff and invent stuff” either, yet President Obama seems not to understand this.

But even if one does not try to see things from the business owner’s vantage point, consider how different the President’s language is in this instance, from the common language of the marketplace. For the record, American workers generally don’t just “get some of the profits” from their employer. Workers perform certain tasks for an employer, and in return workers receive a wage. Employers benefit from the labor of a worker, and in return pay the wage. And investors, those who freely choose to take risks with their money to allow a business to try and grow wealth with it, are paid a dividend if and when the company is profitable.

Historically, Americans have celebrated the fact that in our economic system one can “move up.” If you work hard and produce for your employer, it is likely that you can garner opportunities to earn more (either that or take your skills and talents to another place of business that can offer you a “better deal”).

President Obama, however, seems to assume that those at the top of a business enterprise - the managers, the executives, the owners- have necessarily achieved their position of authority by unjust means and they need to be punished for their achievement. This, by the way, is very similar to the economic views of our President’s father, Barack Hussein Obama Senior, who while working in the communist government of Kenya once proposed a 100% taxation rate for the “richest” in his country.

But his “share your profits” and “start hiring or else” moment aside, just days before his speech to the U.S. Chamber of Commerce our President took the hostility towards business owners to an entirely new level. In what has been described as an “unprecedented” and “controversial” maneuver, the White House set up a program earlier this month with the U.S. Department of Labor and the American Bar Association, wherein workers who feel they have been treated wrongly by their employer can call a toll-free number, and get assistance from an attorney who will represent them against their employer on a contingency basis.

Some people, including our President and Vice President, see this as a pathway to “justice” for middle class workers, yet to believe this one must assume that every “complaint” against an employer is legitimate. Interestingly, the Obama Administration does not appear prepared to offer this same kind of “free legal help” to business owners- which again takes us back to the President’s very hostile assumptions about business owners and leaders in the first place.

“Share your profits” and “sue your boss” are not policies for economic growth. As long as this kind of hostility continues to emanate from the White House, the President’s need for more hiring will likely go unfulfilled.



Obamacare Waivers Mount, Still

Why does anybody need a waiver to a law that’s been ruled unconstitutional? We don’t know; ask the Department of Health and Human Services. On Wednesday, HHS updated its Web site to show that it has now granted 915 waivers to Obamacare’s requirements on benefit limits in health insurance plans. The waivers allow employers to continue offering plans with annual limits on the dollar amount of benefits provided. These so-called mini-med plans are an affordable option for many workers, but they would become unavailable without the waivers.

The waivers are certainly good for the 2.4 million folks who still get to choose an affordable insurance plan, but what about the other 99 percent of Americans with private insurance? If it’s generally acknowledged that this provision makes health insurance more expensive, why not let all consumers have the option of getting mini-med plans?

The answer, of course, is that if everybody could escape from government-designed health insurance, then everybody would. And besides, the HHS Web site explains, “Annual limits waivers are temporary. In 2014 annual dollar limits will be prohibited and mini-med plans will no longer be necessary.” Viola. Since they’re prohibited, nobody will want them anymore.

At National Review, Philip Hamburger notices that the practice of giving favored constituents waivers to burdensome laws bears a striking resemblance to the granting of dispensations during the Middle Ages. This practice once belonged to popes and kings, but was restricted heavily following the English Revolution of 1688. Further, notes Hamburger, the U.S. Constitution “did nothing to authorize delegation of the suspending power to the executive” which raises the question of whether such waivers are even constitutional.

Of course, Judge Roger Vinson in Florida recently ruled Obamacare unconstitutional over a different provision of the law (the individual mandate), and if that ruling holds up on appeal, then nobody will need a waiver anyway.



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The Big Lie of the late 20th century was that Nazism was Rightist. It was in fact typical of the Leftism of its day. It was only to the Right of Stalin's Communism. The very word "Nazi" is a German abbreviation for "National Socialist" (Nationalsozialist) and the full name of Hitler's political party (translated) was "The National Socialist German Workers' Party" (In German: Nationalsozialistische Deutsche Arbeiterpartei)


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