tag:blogger.com,1999:blog-16367582759630711532024-03-21T20:06:54.374-06:00And the Band Played OnUnknownnoreply@blogger.comBlogger10125tag:blogger.com,1999:blog-1636758275963071153.post-21002052687112049832011-09-28T10:53:00.003-06:002011-09-28T11:13:21.695-06:00Steal our freedom via disaster? They would never do that, would they?They've already done it on a small scale, and it works.<br />
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On the 4th of July, I wrote a blog post (see "<a href="http://andthebandplayedon.blogspot.com/2011/07/our-next-monetary-system-and-end-of.html" target="_blank">Our next Monetary System and the End of Freedom</a>") that pointed out a way for unscrupulous and power-hungry leaders to use a couple of natural or man-made disasters to take away our freedom and make us veritable slaves of the government. Believe it or not, hundreds, perhaps thousands of U.S. citizens have already had a taste of this, right here in the good old U.S. of A.<br />
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I am personally acquainted with a corrections officer at the <a href="http://corrections.utah.gov/visitation_facilities/draper_prison.html" target="_blank">Utah State prison</a>. This officer told me of a fascinating conversation he had with an inmate there. In 2005, before becoming a convict, this man was living in Louisiana, working at an oil refinery there. When hurricane Katrina struck, the refinery was shut down, and he and his wife and two children were evacuated to a school gymnasium along with 2,000 other refugees. He said that the bathroom facilities were far from adequate and the sanitary conditions were deplorable, and he described how there was never enough food or water for everyone. Whenever the government brought in pallets of food and water, mobs of refugees grabbed as much as they could carry away and hoarded it.<br />
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Ultimately, the government relocated the refugees to a tent city, like this one that the federal government constructed in Biloxi, Mississippi, in the wake of Katrina.<br />
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The corrections officer asked this man if the refugees could come and go as they pleased from the tent city. He said no, they were prisoners there. The place was basically a concentration camp. He said that if someone came from the outside and promised to take care of you and keep you out of trouble, only then were you allowed to leave the camp.<br />
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In this situation, if the federal government had ordered these people to work on government projects in order to receive aid, they would have done it. If the federal government had ordered these people to get ID chips implanted in their bodies, they would have done it. (FYI, the VeriChip has been approved by the FDA for implanting in humans. The company that owns the technology is touting some compelling benefits for people who are implanted with the VeriChip. See <a href="http://www.reuters.com/article/2009/09/21/us-verichip-shares-idUSTRE58K4BZ20090921" target="_blank">here</a>, <a href="http://www.eweek.com/c/a/Health-Care-IT/VeriChip-Sells-First-Baby-Protection-System-in-Talks-with-Military/" target="_blank">here</a>, <a href="http://www.bnet.com/blog/drug-business/verichip-buys-steel-vault-creating-micro-implant-health-recordcredit-score-empire/3455" target="_blank">here</a>, <a href="http://www.antichips.com/is-the-threat-real.htm" target="_blank">here</a>, and <a href="http://www.4verichip.com/testimonials.asp" target="_blank">here</a>.)<br />
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Ultimately, the experiment ended before these people completely forfeited their individual liberty. Some officials from government showed up at the camp and started arranging for the refugees to leave the tent city by giving them a few bucks and assigning them each a place to relocate throughout the country. They give this man and his family $1500 and "suggested" that Salt Lake City would be a good place for them to move.<br />
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As ordered, this man used the money to move his family to Salt Lake. The only job he could find was a minimum wage job at a dog food factory in Ogden. He couldn't support his family on that, so he started forging checks. He was arrested, tried, and convicted, and is now serving his sentence in the Utah State prison. I asked, but the corrections officer did not know what has happened to this man's family.<br />
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Now imagine a couple of disasters that could affect you personally -- maybe a biological terrorist attack that spreads throughout the country and the world. Now imagine in the year following the pandemic that there is a spate of severe weather. We could see winter weather that lingers into spring, severe hailstorms, droughts, etc. After the combination of these two disasters, it would be very difficult for the spring crops to get planted.<br />
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People would get desperate for food. We are just nine meals away from chaos. Without the essentials for people to survive, there would be chaos in the streets, like what happened in New Orleans after Hurricane Katrina.<br />
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Now consider another potential disaster. What happens when people lose their faith in the U.S. dollar? Imagine the widespread chaos that will ensue. Everyone will need food because all commerce will grind to a halt. Everyone will need medical care. Everyone will need clothing. In short, everyone will lack the resources necessary for life, and the only way for them to get the things they need to stay alive will be to move into a camp where government aid is being distributed.<br />
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Would it be possible for unscrupulous and power-hungry leaders to seize power in this way? Well, if a layman like me can see that our current monetary system is destined to collapse, powerful and evil people can no doubt see that as well. They have to know that the U.S. dollar is doomed, so they no doubt have plans in place to capitalize on the collapse of our monetary system and this singular opportunity to seize a great deal of power.<br />
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Preserving your own freedom means never allowing a catastrophe or a chain of catastrophes to put you in a position where you are dependent on the government for your life and well-being.<br />
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We are all survivalists now.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-1636758275963071153.post-42443297638815804052011-09-28T07:34:00.003-06:002011-09-28T09:00:38.997-06:00A Pause Before They Destroy the DollarThere are two ways that the dollar can be devalued: through monetary policy or through fiscal policy. Many people, including me, expected the Federal Reserve (which is in charge of monetary policy) to announce on September 21 that they would inject 100s of billions of new dollars into the economy via a third round of "quantitative easing" (QE3). Ultimately, injecting vast quantities of new dollars into the economy will reduce the value of each dollar. Surprisingly, the Fed is hesitating to do QE3.<br />
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According to <a href="http://www.cnbc.com/id/44610399" target="_blank">this CNBC article</a>, "Bernanke is not the mad inflationista [the Republicans] seem to think he is." Apparently, pausing at the edge before you toss the dollar into the abyss can get you some positive press. Perhaps he is not a mad inflationista, and maybe the Fed actually understands that destroying the dollar will not help the economy. This <a href="http://www.cnbc.com/id/44614708" target="_blank">CNBC article</a>, "Economy in Congress’s Hands As Fed Runs Out of Bullets", posits that the Fed has done all it reasonably can, and "it’s Congress that is on the hot seat now". Hmm. Maybe. Or maybe Ben Bernanke desperately wants to pull a <a href="http://krugman.blogs.nytimes.com/2011/09/05/on-the-inadequacy-of-the-stimulus/" target="_blank">Krugman</a> and flood the planet with dollars, but he just can't get the other members of the FOMC to go along. In any case, the hesitancy of the Fed to obliterate the dollar using monetary policy brings us to fiscal policy.<br />
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Fiscal policy is another story all together -- there is no reluctance to wreck the dollar there. The federal debt is now around $14 trillion, which is roughly the same size as the entire U.S. economy. But various estimates put the federal government's off-the-balance-sheet obligations, such as Social Security, Medicare, Fannie Mae, Freddie Mac, etc, at around $100 trillion -- that's 100 thousand billion dollars. The government is going to have to find those dollars somewhere, and will probably have to print them. As Alan Greenspan so eloquently put it <a href="http://www.cnbc.com/id/44051683" target="_blank">in this article</a>, "The United States can pay any debt it has because we can always print money to do that". Printing $100 trillion will make each dollar worth relatively less, and this will ultimately devalue and destroy the U.S. dollar.<br />
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So, even though I am puzzled by the Fed's sudden lack of reckless abandon in pausing before they destroy the U.S. dollar using monetary policy, we sadly can have every confidence that the U.S. congress will follow through and eliminate the value of the dollar using fiscal policy.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-1636758275963071153.post-5121065550242138212011-07-04T08:38:00.025-06:002011-07-05T13:36:01.125-06:00Our next Monetary System and the End of FreedomOur current monetary system is destined to collapse, and the citizens of the United States won't get to choose what their next monetary system will look like. This new monetary system, which will be imposed on the people of the U.S., is likely to be a totalitarian system that results from acute shortages of essential resources. There are a couple of unconventional things that we as citizens can and must do to keep ourselves free from the entanglements of this new monetary system.<br />
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First of all, the arithmetic behind the collapse of our current monetary system is simple. $14 trillion in on-balance-sheet federal government debt, coupled with over $70 trillion in off-balance-sheet federal government liabilities and obligations, with nothing on the asset side of the government balance sheet other than a paper currency that has no tangible assets behind it and which is nothing more than an empty promise of future payment. There is no way for the federal government to come up with the full value of the $84 trillion that it will need to meet its financial obligations. It is as simple as that. The federal government will be forced to default -- explicitly or through the hyperinflation of its currency -- and either way leads to the destruction of the U.S. dollar and the collapse of our existing monetary system.<br />
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What will replace the U.S. dollar? Perhaps another paper U.S. dollar? After the U.S. government has defaulted on the U.S. dollar, why would anyone be willing to accept another paper U.S. dollar? The answer is that they won't be. The government is going to have to come up with something else. The new monetary system will be born in a desperate environment of extreme scarcity and will be implemented using new technology -- technology which preserves the power of government but which robs freedom from the American people. This technology is based on the simple and seemingly innocuous idea of unique identifiers.<br />
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Unique identifiers are quite useful for keeping track of things. For example, a unique identifier (in the form of a tracking number) enables shipping companies to track a package from its origin to its destination. Vehicle identification numbers and license numbers enable individual cars to be identified and tracked through every transaction, accident, and repair. And each airplane has a unique tail number by which it is identified and tracked in the air and on the ground as well.<br />
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Unique identifiers allow living things to be identified and tracked too. We had a pet ID microchip implanted in our dog so that if she ever gets lost, she can be identified. There is even an ID microchip for humans now. It is called the VeriChip.<br />
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The VeriChip has been approved by the FDA for implanting in humans. The company that owns the technology is touting some compelling benefits for people who are implanted with the VeriChip. See <a href="http://www.reuters.com/article/2009/09/21/us-verichip-shares-idUSTRE58K4BZ20090921" target="_blank">here</a>, <a href="http://www.eweek.com/c/a/Health-Care-IT/VeriChip-Sells-First-Baby-Protection-System-in-Talks-with-Military/" target="_blank">here</a>, <a href="http://www.bnet.com/blog/drug-business/verichip-buys-steel-vault-creating-micro-implant-health-recordcredit-score-empire/3455" target="_blank">here</a>, <a href="http://www.antichips.com/is-the-threat-real.htm" target="_blank">here</a>, and <a href="http://www.4verichip.com/testimonials.asp" target="_blank">here</a>. But IMHO, having a microchip implanted in your body is a colossally bad idea, because by so doing, you will be granting institutions the ability to track and identify you, and exercise a great deal of power over you as an individual.<br />
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To preserve the freedom of individuals, governmental powers must be dispersed, so that broad powers over large groups of people are not contained within a single package that can be seized by unscrupulous, power-hungry leaders. That is why in the U.S., there are checks and balances between the three branches of government (judicial, legislative, and executive) and a separation of powers between the federal government and state governments.<br />
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Microchips implanted in people, used in combination with modern point-of-sale systems, with back-end databases and the connectivity of the Internet, could enable a single institution to control all commerce. Think about that for a second. If people could be electronically identified, modern technology could enable a single institution to control all buying and selling throughout the world. That is a concentration of enormous, unprecedented power, and if that power were seized by the wrong people, well, we are talking Book of Revelation-type stuff, as in, "And that no man might buy or sell, save he that had the mark, or the name of the beast, or the number of his name." (Revelation 13:17)<br />
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Sure, under normal circumstances, most people would balk at the idea of having microchips embedded in their bodies. Unfortunately, it is easy to imagine a set of circumstances in which having microchips implanted in us would be a suggestion that is hard to resist.<br />
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Imagine if there were a biological terrorist attack (<a href="http://en.wikipedia.org/wiki/False_flag" target="_blank">false flag</a> or not). A virus could be released at a few U.S. airports. People would walk through the airport, get infected, board their planes, infect everyone else on their flights, the infected people would board connecting flights, etc., and then 24 hours later, people all over the country and all over the world start dying horrible deaths. To stop the pandemic, everyone across the country would have to hunker down inside their homes for perhaps 90 days or longer.<br />
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During that 90 days, no oil gets refined, no electricity gets generated, no sewage gets treated, no drinking water gets pumped, and many of the technicians who know how to do those things might die from the virus. IOW, the lights would go off and might not come back on for a long, long time. (For a good illustration of such a pandemic's likely impact on our modern society, see <a href="http://www.amazon.com/After-Armageddon/dp/B004M9QNR4/ref=sr_1_1" target="_blank">this documentary</a> from the History Channel.)<br />
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Now imagine in the year following the pandemic that there is a spate of severe weather. We could see winter weather that lingers into spring, severe hailstorms, droughts, etc. There is <a href="http://www.google.com/#hl=en&cp=14&gs_id=53&xhr=t&q=year+without+a+summer" target="_blank">good precedent</a> for this type of weather event -- it has occurred before and seems to follow a <a href="http://www.griffith.edu.au/conference/ics2007/pdf/ICS176.pdf" target="_blank">cycle that repeats every 180 years</a>, so we are due for it to happen again.<br />
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As a result of these two calamities, cars and trucks wouldn't have fuel, crops wouldn't get planted, and grocery store shelves would be emptied quickly. People would get desperate for food. Law and order stays in force only as long as people have access to essential resources. Without the essentials for people to survive, there would be chaos in the streets, like what happened in New Orleans after <a href="http://en.wikipedia.org/wiki/Civil_disturbances_and_military_action_in_New_Orleans_after_Hurricane_Katrina" target="_blank">Hurricane Katrina</a>. (As another illustration, you've probably seen video of people knocking each other over <a href="http://www.youtube.com/results?search_query=black+friday+shopping+riot&aq=f" target="_blank">just to get cheap goods at stores on Black Friday</a> -- imagine how people will react when there is not enough food for them on store shelves.)<br />
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Shortly, I will explain how calamities such as these (biological terrorist attack and severe weather) could lead people to want to have ID microchips implanted in their bodies, and how that could lead to our next monetary system. But these two calamities are not the only potential triggers that could get us there. Natural disasters, such as <a href="http://www.pdc.org/iweb/earthquake_history.jsp" target="_blank">earthquakes</a> and <a href="http://news.nationalgeographic.com/news/2011/01/110119-yellowstone-park-supervolcano-eruption-magma-science/" target="_blank">volcanoes</a> could do it as well.<br />
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Imagine that the entire U.S. or some region of the U.S. has been devastated by a terrorist attack or natural disaster. The people lack essential resources, and are looting and rioting in the streets. The government shows up to restore order and distribute aid. They set up camps to provide shelter and food, like this one in Biloxi, Mississippi after Hurricane Katrina.<br />
<div class="separator" style="clear: both; text-align: center;"><a href="http://www.katrinadestruction.com/images/d/18419-3/17kd195-fema-temporary-housing" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="212" src="http://www.katrinadestruction.com/images/d/18419-3/17kd195-fema-temporary-housing" width="320" /></a></div><br />
The government is likely to find that the people in these camps are unruly -- they are taking more than their share of government food, leaving camp and looting the surrounding area, committing crimes, etc. So, the government says, "Let us implant this ID microchip in your arm. That way we can make sure that you are getting the food that you need, we can give you the medical care you need, and we can generally take better care of you if you have this microchip." If you are starving, and if getting a microchip implanted in your body is the only way for you to get food and medical care, it would be easy to think that getting that microchip is a good idea. That decision would be a no-brainer for lots of <a href="http://en.wikipedia.org/wiki/Sheeple" target="_blank">sheeple</a>.<br />
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Even with the microchip, people might still come and go from the camp to loot and commit crimes. In an effort to restore order in the surrounding area, the government might start logging people's comings and goings from the camp, to help identify suspects of crimes committed in the area. The government would probably institute a curfew for the camp, and they might "temporarily" detain people in the camp while the authorities work to restore order in the region. Running camps such as these would be a huge expense, so the government might insist that the people in the camps put in some labor on government work projects. The camps would basically devolve into concentration camps, and people's desperation would give the government complete control over their lives.<br />
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If things get desperate enough across the country, the population of the U.S. could be easily "motivated" to get ID microchips implanted in return for government food and medical care. Through calamity, the government could not only preserve its power, but could expand governmental power to a terrifying degree. As soon as the U.S. population has been chipped, an unprecedented degree of power will be concentrated in one neat package that could give a single institution the power to control all commerce. Once that power is in the hands of the wrong people, citizens can say goodbye to freedom and liberty. And all that would be needed to bring this about is a few disasters.<br />
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Is there a widespread disaster that could be facilitated or be allowed to happen in order to get this ball rolling? Yes, tragically, there is. What happens when the federal government defaults on its financial obligations and everyone loses faith in the U.S. dollar? Imagine the widespread chaos that will ensue. Everyone will need food because all commerce will grind to a halt. Everyone will need medical care. Everyone will need clothing. In short, everyone will lack the resources necessary for life, and the only way for them to get the things they need to stay alive will be to move into a camp where government aid is being distributed and ID microchips are being embedded in people.<br />
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Is it possible that in an office somewhere, someone is designing a new monetary system that will be based on human-embedded ID microchips and on governmental or institutional control of all the production, distribution, and consumption of scarce and essential resources? I think it is quite possible, even likely. If a layman like me can see that our current monetary system is destined to collapse, powerful and evil people can no doubt see that as well. They have to know that the U.S. dollar is doomed, so they no doubt have plans in place to capitalize on the collapse of our monetary system and this singular opportunity to seize power over vast populations.<br />
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But what about gold and silver? Won't citizens owning tangible assets that can be used as money bring about a new, sound money-based monetary system? Unfortunately, a non-totalitarian monetary system would function only if the citizenry has ready access (outside of institutional control) to the resources necessary to sustain their lives. IOW, if there is not enough food for everyone, and if those people and organizations under government power are the only ones who can get any food, then I am afraid that gold and silver alone won't save the freedom of the U.S. people. Totalitarian institutions are likely to gain control of whatever limited food and resources are available, and will distribute aid only to those people who submit to the edicts that the institution in power dictates.<br />
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So, a big secret to preserving your personal freedom is to have your own supply of food and other essentials. If you have a supply of food for your family for a full year or two, then in the face of disasters and calamities, when the government comes along and offers you aid in return for having a microchip implanted in your arm, you can tell them, "No thanks." Of course, if you are in debt with a government-backed mortgage on your home, then they might be able to take away your shelter. But if in addition to food you also have some gold or silver, you might be able to use a few ounces of your precious metal stash to pay off your mortgage debt in devalued U.S. dollars.<br />
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Here's our situation in a nutshell. The U.S. dollar is doomed. Its collapse will likely be hastened by natural and man-made disasters. Once our existing monetary system collapses, there will be profound and prolonged scarcity of food and other resources essential to sustain people's lives. Resource scarcity will of necessity result in a new monetary system and power structure that is based on a <a href="http://en.wikipedia.org/wiki/Planned_economy" target="_blank">command and control economy</a>. Having ID microchips implanted in people will make a lot of sense to sheeple everywhere. The resulting ability to assert control over all commerce will offer an unprecedented chance for evil institutions to exercise totalitarian power over vast populations. There are things that we can do to preserve our individual freedoms, but those things are rather unconventional (food storage, gardening, precious metals). In closing, let me provide some links to ideas along those lines.<br />
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The ability to pay off dollar-based debt is important. Pay off your debts today if you can. If you can't, at least get your retirement funds out of dollar-denominated assets and into tangible assets such as precious metals. I have found <a href="http://www.apmex.com/" target="_blank">APMEX</a> to be a reliable place to buy precious metals.<br />
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Food storage is vital -- one year of food for your family is essential, but two or more years of food would be better. <a href="http://beprepared.com/default.asp" target="_blank">Emergency Essentials</a> is one source of food stuffs, but you might be able to find less expensive sources if you look, such as <a href="http://www.costco.com/Common/Search.aspx?whse=BC&topnav=&search=wheat&N=0&Ntt=wheat&cm_re=1_en-_-Top_Left_Nav-_-Top_search&lang=en-US" target="_blank">Costco</a>.<br />
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The fact is that you won't be able to go it alone. You will need to find communities of like-minded people with whom you can share resources and expertise. If you are willing to consider advice from the Mormon church, their <a href="http://www.providentliving.org/" target="_blank">Provident Living web site</a> can be quite helpful, and includes information on <a href="http://www.providentliving.org/channel/0,11677,1706-1,00.html" target="_blank">home storage</a> and <a href="http://www.providentliving.org/content/display/0,11666,6637-1-3427-1,00.html" target="_blank">gardening</a>.<br />
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People who are active in the Mormon faith should find the risks and the scenario that I describe in this blog post quite easy to believe, because of various passages from their <a href="http://lds.org/scriptures/" target="_blank">canon of scripture</a>. For example, <a href="http://lds.org/scriptures/dc-testament/dc/45.31?lang=eng#30" target="_blank">this passage</a> speaks of a desolating plague that will sweep the land at some point, perhaps in the near future. Here is a <a href="http://www.providentliving.org/pfw/multimedia/files/pfw/pdf/111371_PPSocialDistancing_pdf.pdf" target="_blank">document</a> from the church about how to survive a pandemic. This <a href="http://lds.org/scriptures/dc-testament/dc/29.16?lang=eng#15" target="_blank">scripture passage</a> warns of severe weather events that will destroy the world's crops, perhaps in the near future. And this <a href="http://lds.org/scriptures/dc-testament/dc/89.4?lang=eng#3" target="_blank">passage</a> warns of conspiracies by evil and designing men. This <a href="http://lds.org/ensign/1974/01/prepare-ye?lang=eng" target="_blank">address given by one of the leaders of church</a> over 30 years ago advises the storage of essential resources. And <a href="http://lds.org/new-era/1976/07/gods-hand-in-the-founding-of-america?lang=eng" target="_blank">this one</a> warns of the dangers that will befall the U.S. constitution and offers some hope for the survival of free principles and liberty.<br />
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May God grant that those among us who love freedom will be blessed to preserve it through the trying times that lie ahead. God bless America.Unknownnoreply@blogger.com2tag:blogger.com,1999:blog-1636758275963071153.post-25306418989349710682011-06-02T08:32:00.000-06:002011-06-02T08:32:44.275-06:00Laying the Groundwork for QE3?Gauti Eggertsson of the NY Fed has a piece on their blog titled <a href="http://libertystreeteconomics.newyorkfed.org/2011/06/commodity-prices-and-the-mistake-of-1937-would-modern-economists-make-the-same-mistake.html">“Commodity Prices and the Mistake of 1937: Would Modern Economists Make the Same Mistake?</a>” Its bottom line is "that it is unlikely that a modern economist transported back in time to 1937 would have preemptively tightened policy on the scale that policymakers did at the time."<br />
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The idea behind the article is that tightening by the Fed and the administration choked off the nascent recovery in 1937 and caused the the economy to turn down in 1937-38. The article speaks in glowing terms of "core CPI", which ignores food and energy prices. By using core CPI and ignoring food and energy prices, the article says that economists today are not misled by "temporary" price spikes into premature tightening of monetary policy. According to the article, ignoring food and energy prices is good, and maintaining a loose monetary policy in today's circumstance is good too.<br />
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So, while the Fed has not yet given any clear indication of QE3, in this piece they seem to me to be saying that they definitely won't be implementing any contractionary policies. Based on this piece, I conclude that the Fed won't tighten monetary policy, will keep the current easy monetary policy in place, and is perhaps laying the groundwork for further easing. In an article that appeared on <a href="http://www.businessinsider.com/commodities-and-the-mistake-of-1937-2011-6">Business Insider</a> and on <a href="http://seekingalpha.com/article/272881-commodities-and-the-mistake-of-1937">Seeking Alpha</a>, Cullen Roche refers to this as a "very good piece". If the intent is to get people thinking about easy monetary policy in positive terms, it seems to be succeeding.<br />
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QE3 anyone?Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-1636758275963071153.post-80520121860670956382011-06-01T12:51:00.003-06:002011-06-01T13:13:27.676-06:00A Brief but Terrifying Description of Credit Default SwapsMountain climbers frequently rope themselves together, so that if one slips, the other members of the group can arrest their fall.<br />
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<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhbdFJdjFEEQnBJASetfzfLcfC5FZOjFCQBcwnZKN7c2r7tnlzwSJbJFYY8U_XNgTFjWZYsR6IvfBp_zSNWoefz4eZXXNawGrQ50FICRDNut6zi_829dg04bAclr_cXgbJy7DfqPb3uWq8/s1600/RopedTogether.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhbdFJdjFEEQnBJASetfzfLcfC5FZOjFCQBcwnZKN7c2r7tnlzwSJbJFYY8U_XNgTFjWZYsR6IvfBp_zSNWoefz4eZXXNawGrQ50FICRDNut6zi_829dg04bAclr_cXgbJy7DfqPb3uWq8/s320/RopedTogether.jpg" width="320" /></a></div><div class="separator" style="clear: both; text-align: center;"><span class="Apple-style-span" style="font-size: xx-small;">Source: <a href="http://www.everestnews.com/Summitclimb2005/sherpatrainingpict11052005.htm">http://www.everestnews.com/Summitclimb2005/sherpatrainingpict11052005.htm</a></span></div><br />
The idea is to transfer risk from one individual who is momentarily slipping to a group of stable climbers. This strategy often works well. But what happens if another person in the party does not have a sure footing at the moment that one member slips? Then we see tragic headlines such as this: <a href="http://www.nationalparkstraveler.com/2009/06/roped-together-climbers-die-fall-mount-mckinley-denali-national-park-and-preserve"><span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;">Roped-Together Climbers Die in Fall On Mount McKinley in Denali National Park</span></a><br />
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This is not unlike a credit default swap (CDS), in which the risk of credit default is transferred from an individual creditor to a group of stable creditors. The danger, however, is that a default might occur when the rest of group does not have a sure footing. If that happens, the entire group goes down.<br />
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With CDSs, the debtor does not need to default in order for the group to go down. It could be something as simple as one member of the group going bankrupt for some unrelated reason. The risk that that member of the group had been shouldering is now transferred to the remaining members of the group. Another member of the group might not be in a position to take on that added risk, and that might pull them over the brink, which would transfer even more risk to the group's remaining members. With that, the entire group could go down.<br />
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(With this in mind, I am still trying to figure out how CDSs are supposed to make markets more stable, like the financial geniuses and their followers have been telling us.)<br />
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<span class="Apple-style-span" style="font-size: large;">The Invisible Bubbles of Mass Destruction</span><br />
CDSs are traded over-the-counter (OTC), in the absence of clearing houses. So CDS "market" has no regulation or visibility. As Ron Hera points out in this <a href="http://seekingalpha.com/article/204440-otc-derivatives-failed-banks-or-failed-nations">article</a> for Seeking Alpha:<br />
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<span class="Apple-style-span" style="font-family: 'Courier New', Courier, monospace;">In OTC markets, counterparty default risk generates a network of interdependencies among market actors and promotes risk volatility. The resulting emergent property of the financial system is systemic risk, which became apparent in 2008 when Lehman Brothers Holdings, Inc. (LEHMQ.PK) failed.</span><br />
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It is not that derivatives caused Lehman's collapse, but they sure made a mess afterwards for those firms who were tied to Lehman. That is why we see headlines like this from Business Week: <a href="http://www.businessweek.com/magazine/content/08_42/b4104000160047.htm"><span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;">Lehman: One Big Derivatives Mess</span></a><br />
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No wonder that the boring, old finger wagger from Omaha called derivatives "weapons of mass destruction".<br />
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In order for a financial bubble to form, you need three things:<br />
<ol><li>Financial innovation -- such as the creation of mortgage-backed securities, for example</li>
<li>Widespread adoption of that innovation -- the innovation goes "mainstream"</li>
<li>Leverage -- purchase multiples of these innovations on margin</li>
</ol>It is difficult for bubbles to form in the physical precious metals market, because when you are buying physical metal, there are no financial innovations (gold is just a barbarous relic, after all), and thus there is no widespread adoption of financial innovation. You can use margin when buying physical metal (that is what the Hunt Brothers did), but if you want to use some real leverage, you need to be buying paper, not metal. In fact, for some real adventures in leverage, try buying paper on top of paper and then transfer portions of the risk amongst a group. Now we are talking bubbles on a planetary scale.<br />
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<div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><span class="Apple-style-span" style="font-size: large;">Credit Event Horizon</span></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">The emergent danger of CDSs explains why the International Monetary Fund and the European Central Bank are so insistent that Greece must not default. They are desperately trying to avoid a credit default swap trigger. The default of a relatively small member of the European Union has the potential to pull banks and nations over the brink with it.</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">The solution that the financial elite proffer, of course, is to have the IMF and the central banks rush in with loads of money that they conjure out of thin air and loan to any financial institution or nation that is teetering. This costs nothing (because the principal was created out of nothing) and enables the financial elite to enslave the institution or nation under mountains of new debt. Kinda makes the protests in Ireland, Spain, and Greece take on new meaning, doesn't it?</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-1636758275963071153.post-55109322940471426512011-05-31T13:53:00.006-06:002011-05-31T19:53:59.684-06:00The Federal Reserve and Mission CreepHere is a video of Ben Bernake talking about the Fed's impact on the stock market.<br />
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<object height="445" width="540"><param name="movie" value="http://www.youtube.com/v/_-Jkgaehkwo?fs=1&hl=en_US" /><param name="allowFullScreen" value="true" /><param name="allowscriptaccess" value="always" /><embed height="445" width="540" src="http://www.youtube.com/v/_-Jkgaehkwo?fs=1&hl=en_US" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true"></embed></object> <br />
<br />
Here is a video interview between James Turk and Jim Grant that discusses, among other things, the mission creep by the US Federal Reserve, in which the Fed has taken upon itself the additional mandate of levitating the price of equities in the US stock market.<br />
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<object height="445" width="540"> <param name="movie" value="http://www.youtube.com/v/1VcN_Z6L0jM?fs=1&hl=en_US" /><param name="allowFullScreen" value="true" /><param name="allowscriptaccess" value="always" /><embed height="445" width="540" src="http://www.youtube.com/v/1VcN_Z6L0jM?fs=1&hl=en_US" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true"></embed></object> <br />
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Thanks for propping up stock prices Ben , but we the people never asked you to do that. You have now managed, to some degree, to decouple the stock market from the health of the underlying economy.<br />
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High stock prices, like inflation, are <b>symptoms </b>of a healthy economy -- stock prices and inflation are <b>not causes</b> of a healthy economy. When you use quantitative easing to levitate stock prices and to try to induce, as you said on 60 Minutes, a 2% inflation rate, you will not get a healthy economy. Instead, you will get artificially high stock prices, more inflation than you bargained for (a year or two later), anemic GDP growth, persistent unemployment, and a growing number of people on food stamps. Which is precisely the situation we find ourselves in today.Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-1636758275963071153.post-92197755855999288632011-05-30T21:20:00.000-06:002011-05-30T21:20:56.479-06:00Stop asking questions, and just let me handle it.Can you imagine Captain Edward John Smith's reaction the day before the Titanic hit the iceberg if a steerage passenger had asked him, "Um Capt'n, I have to wonder if steaming past these icebergs at flank speed is a good idea"? At best, the Captain would have been dismissive of the passenger's question.<br />
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Can you imagine if you could speak face to face with Fed Chairman Ben Bernanke, and were to ask him, "Is devaluing an unbacked paper currency really a good idea"? Based on how dismissive Mr. Bernanke is of <a href="http://www.youtube.com/watch?v=0AebNGgBVUk">U.S. Congressmen's questions</a>, I think we can assume he would likewise dismiss anything you and I might ask him.<br />
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I have asked several experts in the financial field, "Aren't we going to face another financial crisis because we haven’t solved any of the things that caused the previous crisis"? They have been quite dismissive of my question.<br />
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I find that strange, especially when people inside their own industry are talking about another financial crisis as a real possibility. For instance, according to <a href="http://www.bloomberg.com/news/2011-05-30/mobius-says-fresh-financial-crisis-around-corner-amid-volatile-derivatives.html">Bloomberg</a>, "Mark Mobius, executive chairman of Templeton Asset Management’s emerging markets group, said another financial crisis is inevitable because the causes of the previous one haven’t been resolved."<br />
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The people in charge of the financial system apparently don't see any risk on the horizon that they can't handle. Their unabashed confidence has me worried.<br />
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<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiOmZSqtJRXW-h1fMUAegjw39qX7ZK69lUV5bY3fNdeQUZtyBsweaUqfY8WQIcZxpI4Zmcs8HnH2RDVM0kbSO73VzKuhfLCJG4qetZI3S5tvnlSakaPeKJkyJgeHicJt3h1dotTpHKuKao/s1600/titanic-hitting-an-ice-burg1.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="256" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiOmZSqtJRXW-h1fMUAegjw39qX7ZK69lUV5bY3fNdeQUZtyBsweaUqfY8WQIcZxpI4Zmcs8HnH2RDVM0kbSO73VzKuhfLCJG4qetZI3S5tvnlSakaPeKJkyJgeHicJt3h1dotTpHKuKao/s320/titanic-hitting-an-ice-burg1.jpg" width="320" /></a></div><div style="text-align: center;"><span class="Apple-style-span" style="font-size: x-small;">Source: <a href="http://www.photosfan.com/titanic/">http://www.photosfan.com/titanic/</a></span></div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-1636758275963071153.post-48054775030973999282011-05-29T17:53:00.006-06:002011-05-29T21:14:59.728-06:00Buying Silver for All the Right ReasonsHere is the text of an email I sent to two of my relatives a few weeks ago. I decided I should not keep this a family secret any longer. :-)<br />
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<span class="Apple-style-span" style="font-family: arial; font-size: x-small;"></span><br />
<span class="Apple-style-span" style="font-family: 'Courier New', Courier, monospace;">-----Original Message-----</span><br />
<span class="Apple-style-span" style="font-family: 'Courier New', Courier, monospace;">From: lynrobison</span><br />
<span class="Apple-style-span" style="font-family: 'Courier New', Courier, monospace;">To: Ron, Carl</span><br />
<span class="Apple-style-span" style="font-family: 'Courier New', Courier, monospace;">Sent: Fri, May 6, 2011 4:25 pm</span><br />
<span class="Apple-style-span" style="font-family: 'Courier New', Courier, monospace;">Subject: I'm buying silver next week</span><br />
<span class="Apple-style-span" style="font-family: 'Courier New', Courier, monospace;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: 'Courier New', Courier, monospace;">Hi Ron and Carl,</span><br />
<span class="Apple-style-span" style="font-family: 'Courier New', Courier, monospace;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: 'Courier New', Courier, monospace;">I've attached two charts that show the price of silver since March of last year. The first chart looks like a build-up to a peak followed by a rapid fall. It looks like silver climbed to a high and now is declining to its normal lows. This is what the "silver has peaked!" crowd sees -- a chart that they assume will end up looking like Mount Fuji. These people are believers in the US dollar and Keynesian economics. They think that the economy is going to return to normal, the dollar will strengthen, and those pesky and weird precious metals will drop back down to obscurity where they belong.</span><br />
<div id="AOLMsgPart_2_dd291746-f9bf-4807-ac70-364be5e6c894"><div><div id="AOLMsgPart_1_e00f0f38-f25a-4ab8-a3e2-2fb9fae1a188"><div style="color: black;"><span class="Apple-style-span" style="font-family: 'Courier New', Courier, monospace;"><br />
</span></div><div class="separator" style="clear: both; color: black; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgJ21Q8WSiOTTrWzt-KPp64R9lmdTqUU9xeHfPFvBPs6N6TNPcePQvSnUR247lvitFpbaJMidMBNXJg7QYfYqgYZG293GXEhf1UuBT2oG83L0D_-dcRcQBoQvqe519WzigZQOOIriSHxdU/s1600/Silver+Chart.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><span class="Apple-style-span" style="font-family: 'Courier New', Courier, monospace;"><img border="0" height="190" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgJ21Q8WSiOTTrWzt-KPp64R9lmdTqUU9xeHfPFvBPs6N6TNPcePQvSnUR247lvitFpbaJMidMBNXJg7QYfYqgYZG293GXEhf1UuBT2oG83L0D_-dcRcQBoQvqe519WzigZQOOIriSHxdU/s320/Silver+Chart.jpg" width="320" /></span></a></div><div style="color: black;"><span class="Apple-style-span" style="font-family: 'Courier New', Courier, monospace;"><br />
</span></div><div style="color: black;"><span class="Apple-style-span" style="font-family: 'Courier New', Courier, monospace;"><br />
</span><br />
<div style="clear: both;"></div></div><div><div><span class="Apple-style-span" style="font-family: 'Courier New', Courier, monospace;">The second chart is the same chart, but I added a trend line that shows silver's growth. The growth of silver's value has been steady, but you can see that the market's perception of that value has not been even or steady. In January and February, the market's perception lagged the growth of silver's value. Recently, in April and May, the market's perception exceeded silver's value as lots of speculators jumped on the silver bandwagon. </span></div><div style="color: black;"><span class="Apple-style-span" style="font-family: 'Courier New', Courier, monospace;"><br />
</span></div></div><div class="separator" style="clear: both; color: black; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiNlAI_o30ZOOkTOd_xBnwVFLbcKBC6f7P00l5iXgKGPLlSJfaGXYzX_XSerdnFohcbnvh8yhNY6Z5laPpBVmMN5Pb2Dmhmznrawyx-Zqe1roTTv1agf3XuQDmWfuMOx8ecLjrCv_O0EO0/s1600/Silver+Chart+with+Trendline.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><span class="Apple-style-span" style="font-family: 'Courier New', Courier, monospace;"><img border="0" height="190" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiNlAI_o30ZOOkTOd_xBnwVFLbcKBC6f7P00l5iXgKGPLlSJfaGXYzX_XSerdnFohcbnvh8yhNY6Z5laPpBVmMN5Pb2Dmhmznrawyx-Zqe1roTTv1agf3XuQDmWfuMOx8ecLjrCv_O0EO0/s320/Silver+Chart+with+Trendline.jpg" width="320" /></span></a></div><div style="color: black;"><span class="Apple-style-span" style="font-family: 'Courier New', Courier, monospace;"><br />
</span></div><div><div><span class="Apple-style-span" style="font-family: 'Courier New', Courier, monospace;"><br />
</span></div><div><span class="Apple-style-span" style="font-family: 'Courier New', Courier, monospace;">The growth of silver's actual value is steady because the growth of the federal debt has been steady. You can see the price of gold vs the federal debt in the third attachment. The smooth white line is the federal debt and the jagged yellow line is the price of gold. </span><br />
<span class="Apple-style-span" style="font-family: 'Courier New', Courier, monospace;"><br />
</span><br />
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi0_mN6bmBoXyHjI8Q13zZJpBDKMNuULKIcssWwdtbTjb7548h4YioW7c4zgg3aeRssw7g5LAKUniQ7uFhm967LMtRx4tVf-sszWFWOhM2zqcvx4WUKeSEwAqa5HVYJ915gM9qefcIaLe8/s1600/Gold_price_vs_us_public_debt_outstanding.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><span class="Apple-style-span" style="font-family: 'Courier New', Courier, monospace;"><img border="0" height="229" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi0_mN6bmBoXyHjI8Q13zZJpBDKMNuULKIcssWwdtbTjb7548h4YioW7c4zgg3aeRssw7g5LAKUniQ7uFhm967LMtRx4tVf-sszWFWOhM2zqcvx4WUKeSEwAqa5HVYJ915gM9qefcIaLe8/s320/Gold_price_vs_us_public_debt_outstanding.png" width="320" /></span></a></div><span class="Apple-style-span" style="font-family: 'Courier New', Courier, monospace;"><br />
</span></div><div><span class="Apple-style-span" style="font-family: 'Courier New', Courier, monospace;"><br />
</span></div><div><span class="Apple-style-span" style="font-family: 'Courier New', Courier, monospace;">The point is that the federal debt is steadily growing, but the market's perception of the danger it poses is not steady. The price of silver is more volatile than the price of gold, so it is at the mercy of mis-perceptions in the market. So, the silver price is often whipped to low lows and high highs. </span></div><div><span class="Apple-style-span" style="font-family: 'Courier New', Courier, monospace;"><br />
</span></div><div><span class="Apple-style-span" style="font-family: 'Courier New', Courier, monospace;">The price of silver is being whipped low right now, but the steady danger of the federal debt is still present and growing. As soon as the market perceives that threat again, the price of silver will be whipped up to new highs and I believe it will rebound way past $50. Several very smart analysts are predicting that the silver price will grow to be several times 50 dollars. When the silver price gets whipped above the trend line again, I plan to either exchange a portion of my silver for gold (whose price is more stable), or I will sell a portion of my silver and pay off my mortgage, or some combination of both. </span></div><div><span class="Apple-style-span" style="font-family: 'Courier New', Courier, monospace;"><br />
</span></div><div><span class="Apple-style-span" style="font-family: 'Courier New', Courier, monospace;">I sold about a third of my silver when it was at $48.41 per ounce. I will use part of those proceeds next week to buy more silver. </span></div><div><span class="Apple-style-span" style="font-family: 'Courier New', Courier, monospace;"><br />
</span></div><div><span class="Apple-style-span" style="font-family: 'Courier New', Courier, monospace;">That's my plan. I thought you guys might be interested.</span></div><div><span class="Apple-style-span" style="font-family: 'Courier New', Courier, monospace;"><br />
</span></div><div><span class="Apple-style-span" style="font-family: 'Courier New', Courier, monospace;">Lyn</span></div><div style="color: black;"><span class="Apple-style-span" style="font-family: 'Courier New', Courier, monospace;"><br />
</span></div></div></div></div></div><br />
----------<br />
FYI, I did indeed buy some more silver the week following that email. I sent that email on May 6. Since then (today is May 29), here is what the silver chart is doing.<br />
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<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhQ9lvUAFhohqJ0ZfuSzrOkcIoVVwYK3c9btokbqY6ypxijtfoyzWzf7gNPH4CwsrOvpDJGPVcamNyLLHDm-mRkt3Q7jZ40jAAkPul9f3kbnmvICrqQiO-awuY_L28_SmyCQnCk9rqZGO8/s1600/Silver+Chart+with+Trendline+20110529.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="178" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhQ9lvUAFhohqJ0ZfuSzrOkcIoVVwYK3c9btokbqY6ypxijtfoyzWzf7gNPH4CwsrOvpDJGPVcamNyLLHDm-mRkt3Q7jZ40jAAkPul9f3kbnmvICrqQiO-awuY_L28_SmyCQnCk9rqZGO8/s320/Silver+Chart+with+Trendline+20110529.jpg" width="320" /></a></div><br />
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I am not a professional investment advisor, but to me, it looks like the silver price has found a bottom for this trough, and is rebounding. Time will tell.<br />
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In any event, I have made the mental leap from measuring my wealth in dollars to measuring my wealth in ounces of precious metals. I am using the dips and peaks of the silver price to 1) gain dollars with which to pay off personal debt and 2) to accumulate more ounces of metal for a fixed number of dollars.<br />
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I suspect that the prices in the commodities complex might take a dive at some point in the future. This could happen when QE2 ends if there is no immediate announcement of QE3. Or it could happen as part of some larger collapse of the stock and bond markets (the end of QE2 and a stock/bond market collapse may or may not happen at the same time). But I would love to see such an event cause the silver price to plunge again. That would be the time to buy more silver!Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-1636758275963071153.post-35598864459777488212011-05-27T23:42:00.002-06:002011-05-29T21:28:51.878-06:00Titanic Financial MisgivingsIn my day job, I am an IT industry analyst. I am a Research Director for a large Research and Analysis firm. Back in November, I started doing research for a report that was to be entitled "Lessons in Data Management from Leaks, Spills, and Meltdowns". That report was going to detail the computer system problems that may have contributed to the 2008 financial market meltdown, as well as explore the data management implications of the BP oil spill and the WikiLeaks phenomenon. I started my research by looking into the 2008 financial meltdown, and stopped there. This topic turned out to be too big to fit within a single report.<br />
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I had merely to scratch the surface of the 2008 financial crisis to realize that the root causes have in no way been addressed, and have merely been papered over. Not one of the perpetrators of the 2008 financial fiasco, which very nearly caused our entire financial system to meltdown, have gone to jail. No imprudent or corrupt leaders in the financial world were fired -- indeed, I was shocked to realize that several have been promoted into leadership roles in the federal government. Most of the companies that should have been taken down by market forces were instead propped up with unimaginably huge stacks of Dollars that the federal government created out of thin air. It did not take long to realize that this financial crisis can and will recur, and the encore threatens to take the US Dollar down with it, because the federal government has all but guaranteed to backfill any holes that the too-big-to-fail banks might dig for themselves and fall into in the future. <br />
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Having realized all of this, I had to acknowledge that we actually face several potential economic outcomes. Perhaps I am wrong about all of this (because I am just an IT guy, after all), and maybe we are on the path back to prosperity. Or maybe we will merely have a double-dip recession. Or maybe Japan-like deflation is our destiny. Or perhaps the US Dollar will be brought down by the collective weight of the massive misdeeds of the financial power-elite. And maybe that will bring down our entire modern civilization. I could not be sure, so I set about to discover which outcome is the most likely.<br />
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Each of the potential outcomes has its proponents: the bulls, the bears, the deflationists, the hyperinflationists, the anti-globalists, and the survivalists. On the web I found that these various proponents do lots of analysis work and write lots of articles about their preferred outcome. In my day job, I read a lot of analyses, because I lead a team of IT industry analysts in my role as Research Director. After doing this job for several years, I know good analysis when I see it. So, I decided to see which group of proponents are writing the best analyses, and reasoned that the best analysis will point me to the most likely economic outcome.<br />
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The best analysis is performed when the analyst considers all of the relevant facts in an unbiased, open-minded manner. The analyst must be a detective and simply follow the evidence, wherever it happens to lead. Following the facts and the evidence will indeed lead the analyst to the proper conclusion. Unfortunately, conclusions that are reached in this manner often are unpleasant, and usually violate some dogma or orthodoxy or misconception that the people in power hold dear. That is certainly the case this time.<br />
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I found the bulls' analyses simply assume that the existing financial system is a solid, never-changing foundation -- a rock on which all manner of financial edifices can be eternally built. The same with the bears' analyses. They whistle past the graveyard, kick the can down the road, and extend and pretend, because in their minds our economic system "has always worked in the past" (even though it hasn't always). Guys, do you realize that the government, not the free market, is now picking winners and losers? Capital is being allocated and distributed not to the best run companies, but to the best connected companies. <a href="http://www.gata.org/node/6242">There are no markets any more, only interventions</a>. Also, can you not see that "too big to fail" also means "too big to jail"? The big banks now find themselves above the law, they possess unrivaled power and wealth, and they can act with complete impunity. Don't you think it is just a little strange that the big banks have been showing <a href="http://www.zerohedge.com/article/one-trading-loss-day-q1-between-goldman-jpmorgan-and-bank-america-combined">no losses on any trading days</a>? In this market, why do you put so much faith in traditional watchdogs? Don't you remember how well Arthur Anderson policed Enron? And how about the rating agencies' glowing praise of mortgage-backed securities? And how can you be so casual about counter party risk? Do you think that conspiracies are only for tinfoil-hatters? Ever heard of <a href="http://www.amazon.com/Cigarette-Papers-Stanton-Glantz/dp/0520213726">the cigarette papers</a>? And why do you think all of the <a href="http://en.wikipedia.org/wiki/Whistleblower">whistleblower laws</a> are needed? And what about all of those <a href="http://www.amazon.com/s/ref=dp_srsubj_entry?ie=UTF8&index=books&field-keywords=Global%20Financial%20Crisis%2C%202008-2009">books</a> about systemic and widespread corruption in the financial industry? (You won't see a collection of books like that about the IT industry, btw.) Based on my training and experience in implementing advanced computer systems, I know what sustainable systems look like. And when I look at the current financial system, a sustainable system is not what I see. Based on the moronic analyses I have seen from the bulls and bears, I have to say that the term "sheeple" is far too kind.<br />
<br />
The deflationists examine a few vital facts that the bulls and bears take for granted, and based on those additional facts, the deflationists seem to reach their conclusion: deflation! They readily acknowledge the corrupt nature of the political and financial elite. But the deflationists seem not to consider that the political and financial elite might somehow break the economic tool that they are currently abusing: the US Dollar. The power-elite are in charge of the US Dollar, they are intentionally abusing it in a race to debase it against other currencies, the Dollar is backed by nothing but people's faith, the Dollar has lost most of the purchasing power it had a few decades ago, and yet deflationists believe that the Dollar will remain the absolute king of the financial world (I guess by virtue of the <a href="http://www.amazon.com/Exorbitant-Privilege-Dollar-International-Monetary/dp/0199753784/ref=sr_1_1">exorbitant privilege</a> afforded by its world reserve currency status). Nothing lasts forever guys, and faith is a fickle and fractured foundation. I am not inclined to bet my life on a paper currency whose efficacy its custodians are now actively trying to destroy.<br />
<br />
As someone who critiques analyses all of the time, the best analyses I have seen within the financial world, in which the analysts give open-minded consideration to all of the relevant facts and evidence, come from the hyperinflationists and the gold and silver bugs. The anti-globalists provide some excellent analyses too. (The survivalists aren't much into analysis, and prefer to concentrate on active preparation for a very grim future.) I will provide more background on these assertions in future blog posts. <br />
<br />
In short, I am an outsider looking in at the financial industry. And as an unbiased outsider, when I look at the financial industry, I have titanic misgivings about the future of the financial system.<br />
<br />
Yeah, someone could say, "You're an IT guy! You don't even know what you are talking about! Leave the financial stuff to the financial experts!" In fact, experts in the financial world have already said that to me. However, I couldn't resist pointing out to them that their financial industry remains intact only because the government bailed it out to the tune of $700 billion. The IT industry has never needed a bail-out like that, so maybe the "experts" in the financial world should back off and take their arrogance down a notch or two.<br />
<br />
They have steered the financial Titanic into the iceberg, and even though the band is still playing, the ship is going down.<br />
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<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEimkgFpZj5CqnRTsf5UR4xGWXGYwdGzvNrS5XTp5xw9EFQXaLc6KkzUnnQavnFa6FX5tdPwoUO1sBZTYCW5M9Vf8FqTyDaSXQc64O2lwy_be75nke3z6YjZqDZ45KLPQz5khERCaEs1siA/s1600/Titanic_sinking.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="210" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEimkgFpZj5CqnRTsf5UR4xGWXGYwdGzvNrS5XTp5xw9EFQXaLc6KkzUnnQavnFa6FX5tdPwoUO1sBZTYCW5M9Vf8FqTyDaSXQc64O2lwy_be75nke3z6YjZqDZ45KLPQz5khERCaEs1siA/s320/Titanic_sinking.jpg" width="320" /></a></div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-1636758275963071153.post-66067552735731049792011-05-27T14:21:00.009-06:002011-05-29T20:56:33.601-06:00Handy Guide to the Philosophy behind Financial WebsitesEach financial blog and web site conveys its own particular messages and ideas. The ideas vary from site to site, and one blog or web site will usually contradict the advice that another site is giving. To understand why the authors of financial sites say what they say, it is helpful to first understand what their philosophy is, what assumptions they are making, and what perspective they are using for their view of the world.<br />
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If you can identify your own financial philosophy, assumptions, and perspective, you can use this handy chart to find those financial blogs and sites that will give you the type of financial guidance you are looking for.<br />
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<div class="separator" style="clear: both; text-align: center;"></div><div class="separator" style="clear: both; text-align: center;"></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiytxv7tMedP8G4Z80GmI_okrQeAwwm56dYzUbgz0MRX1xuXAwbu8RvivUzI7lKUqkoceWfisLJ4KmwJHD9qQqkMiVWaSHCKJJ0HeMijTDhqSYEuMOatU-sD_gEjYxCosX-PGAc-2ReVHQ/s1600/HandyGuide.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="230" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiytxv7tMedP8G4Z80GmI_okrQeAwwm56dYzUbgz0MRX1xuXAwbu8RvivUzI7lKUqkoceWfisLJ4KmwJHD9qQqkMiVWaSHCKJJ0HeMijTDhqSYEuMOatU-sD_gEjYxCosX-PGAc-2ReVHQ/s320/HandyGuide.JPG" width="320" /></a></div><br />
<div class="separator" style="clear: both; text-align: center;"></div>The chart categorizes financial sites in two broad categories: “Mainstream” or popular sites are in blue, and “Edgy” and lesser-known sites are in olive green.<br />
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The Y-axis shows the degree of “community” that surrounds each site. News/Link aggregators have the least community feel to them. Sites that provide analysis without any comments from readers are next. Sites that offer analysis with reader comments have a relatively stronger community feel about them. And of course, the dedicated online communities are the most communal.<br />
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The X-axis shows the economic outlook of the authors of each site. The various outlooks are:<br />
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<ul><li><b>Bull </b>– an optimist who believes the world economy is returning to prosperity now.</li>
<li><b>Bear </b>– an optimist who believes the world economy will muddle through a recession for a few years, then return to prosperity.</li>
<li><b>Deflationist </b>– a catastrophist who believes there will be a catastrophic asset and commodity crash, localized civil unrest, no economic recovery for a decade or longer; that financial and political leaders are inept/corrupt; and that the US dollar and US treasuries will remain viable stores of wealth.</li>
<li><b>Hyperinflationist, Gold/Silver bug</b> – a catastrophist who believes that there will be a catastrophic asset and commodity crash, a US dollar crisis and fiat currency crash, widespread civil unrest; that a new economic system will emerge based on sound money; that the US dollar and US treasuries are no longer viable stores of wealth; that financial and political leaders are inept/corrupt; and that it might be a good idea to find a quiet place to live outside the US.</li>
<li><b>Survivalist </b>– a catastrophist who believes that there will be an apocalyptic collapse of civilization, that the power and utility grids will cease to function, that law and order will break down completely, and that the economic system will be based on barter and precious metals for a long time to come.</li>
<li><b>Anti-Globalist</b> – a catastrophist who believes that there is a world-wide conspiracy of powerful elites who conspire to usurp power over the general population and over the nations of the world, and that financial and political leaders are either puppets of the conspiracy or complicit in it.</li>
</ul><br />
I describe each of these outlooks as either "<b>Optimist</b>" or "<b>Catastrophist</b>". Here is a comparison between optimists and catastrophist:<br />
<br />
<b>Economic and Political Philosophy</b><br />
Optimist -- Keynesian, interventionist<br />
Catastrophist -- Austrian, Libertarian<br />
<br />
<b>General Outlook</b><br />
<div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Optimist -- Believes the current economic and financial system is safe from any catastrophic crash</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Catastrophist -- Believes the current economic and financial system faces imminent collapse</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div><b>Disparaging Descriptions</b></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Optimist -- Sheeple, Polyanna, Victim</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Catastrophist -- Tinfoil hatter, Conspiracist, Chicken Little</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><b><br />
</b></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><b>Wealth Strategy</b></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Optimist -- Use paper assets such as stocks and bonds to accumulate paper currency</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Catastrophist -- Trade paper currency for physical ounces of precious metals and other hard assets</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div><b>Strategy for Wealth Growth</b></div><div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Optimist -- Own stocks</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Catastrophist -- Hold physical silver</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><b>Strategy for Wealth Preservation</b></div><div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Optimist -- Own bonds</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Catastrophist -- Hold physical gold</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div><b>Financial Faith</b></div><div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Optimist -- Believes in fiat currency, paper promises; fully trusts typical counter-parties</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Catastrophist -- Distrusts paper currency, distrusts paper promises, distrusts typical counter-parties</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div><b>Overall Financial Goal</b></div><div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Optimist -- Wealth growth</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Catastrophist -- Wealth preservation</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div><b>Opinion of Conspiracies</b></div><div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Optimist -- Considering evidence of conspiracies is for tinfoil hatters only</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Catastrophist -- Ignoring evidence of conspiracies is for sheeple</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div><b>Opinion of Mainstream Media (MSM)</b></div><div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Optimist -- The MSM outlets are the only sources of reliable information</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Catastrophist -- The MSM outlets are puppets of the corrupt and conspiring political and financial power-elite</div><div><br />
</div><div>Here is a rundown of each site</div><div><br />
</div><div><a href="http://dollarcollapse.com/"><span class="Apple-style-span" style="font-size: large;">DollarCollapse</span></a></div><div><ul><li><b>Catastrophist</b></li>
<li><b>What they seem to be saying to me:</b> Use these articles to learn what is actually happening in the world economy, then do yourself and your family a favor and divest yourself of paper-based assets and move to rural Idaho.</li>
</ul><div><div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><a href="http://www.gold-speculator.com/"><span class="Apple-style-span" style="font-size: large;">gold-speculator.com</span></a></div></div><div><ul><li><b>Both</b></li>
<li><b>What they seem to be saying to me:</b> Here are links to useful articles on gold and silver, stocks, and mining enterprises.</li>
</ul><div><br />
</div></div><div></div></div></div><div><a href="http://www.kingworldnews.com/kingworldnews/King_World_News.html"><span class="Apple-style-span" style="font-size: large;">King World News</span></a></div><div><ul><li><b><span class="Apple-style-span" style="font-weight: normal;"><b>Catastrophist</b></span></b></li>
<li><b>What they seem to be saying to me: </b>Listen to what highly intelligent and perceptive money managers and precious metals investors are saying and doing right now to preserve wealth.</li>
</ul></div><div><br />
</div><div><a href="http://dailyreckoning.com/"><span class="Apple-style-span" style="font-size: large;">Daily Reckoning</span></a></div><div><ul><li><b><span class="Apple-style-span" style="font-weight: normal;"><b>Catastrophist</b></span></b></li>
<li><b>What they seem to be saying to me:</b> This is where you will find the story behind the story, where truth and insight can be found.</li>
</ul></div><div><br />
</div><div><a href="http://thedailybell.com/"><span class="Apple-style-span" style="font-size: large;">The Daily Bell</span></a></div><div><ul><li><b><span class="Apple-style-span" style="font-weight: normal;"><b>Catastrophist</b></span></b></li>
<li><b>What they seem to be saying to me:</b> The rich and the powerful in the world are all saying the same, deceptive things. Read our blog and see how easy it is to recognize and decode their subliminal messages and free yourself from their servitude.</li>
</ul></div><div><br />
</div><div><a href="http://www.runtogold.com/"><span class="Apple-style-span" style="font-size: large;">RunToGold</span></a></div><div><ul><li><b><span class="Apple-style-span" style="font-weight: normal;"><b>Catastrophist</b></span></b></li>
<li><b>What they seem to be saying to me:</b> Debt-based, fiat currency is a barbarous relic. The current economic contraction will cause the value of all paper-based assets to evaporate, and here is why. There are new approaches to sound money that are far superior to debt-based, fiat currency.</li>
</ul></div><div><br />
</div><div><a href="http://www.safehaven.com/"><span class="Apple-style-span" style="font-size: large;">Safe Haven</span></a></div><div><ul><li><b><span class="Apple-style-span" style="font-weight: normal;"><b>Both</b></span></b></li>
<li><b>What they seem to be saying to me:</b> Read our blog to learn how to preserve your capital. Sometimes we say that precious metals are the way to do it because of inflation/hyperinflation, but sometimes we say precious metals are not the way to do it because of deflation.</li>
</ul></div><div><br />
</div><div><a href="http://www.businessinsider.com/"><span class="Apple-style-span" style="font-size: large;">Business Insider</span></a></div><div><ul><li><b>Both</b></li>
<li><b>What they seem to be saying to me:</b> We cover the gamut of business news and events. In addition to bearish news, we will occasionally report inflation, deflation, and bullish articles as well.</li>
</ul></div><div><br />
</div><div><a href="http://www.zerohedge.com/"><span class="Apple-style-span" style="font-size: large;">Zero Hedge</span></a></div><div><ul><li><b><span class="Apple-style-span" style="font-weight: normal;"><b>Catastrophist</b></span></b></li>
<li><b>What they seem to be saying to me:</b> Look at the incontrovertible evidence of the endemic corruption in the existing financial system. This system is not sustainable and will not last, and it is likely to come to a violent end.</li>
</ul></div><div><br />
</div><div><a href="http://kiddynamitesworld.com/"><span class="Apple-style-span" style="font-size: large;">Kid Dynamite’s World</span></a></div><div><ul><li><b>Optimist</b></li>
<li><b>What they seem to be saying to me:</b> Everyone relax. Precious metals have a bright future, but the existing financial system will be fine. SLV is completely safe -- just look at these reports from their auditors. Can you believe how stupid/crazy those tinfoil hatters are over at Zero Hedge? Here, look at what ZH is saying now...</li>
</ul></div><div><br />
</div><div><a href="http://globaleconomicanalysis.blogspot.com/"><span class="Apple-style-span" style="font-size: large;">Mish</span></a></div><div><ul><li><b><span class="Apple-style-span" style="font-weight: normal;"><b>Catastrophist</b></span></b></li>
<li><b>What he seems to be saying to me:</b> A deflationary collapse is the obvious outcome.</li>
</ul></div><div><br />
</div><div><a href="http://gonzalolira.blogspot.com/"><span class="Apple-style-span" style="font-size: large;">Gonzalo Lira</span></a></div><div><ul><li><b><span class="Apple-style-span" style="font-weight: normal;"><b>Catastrophist</b></span></b></li>
<li><b>What he seems to be saying to me:</b> A hyperinflationary collapse is the obvious outcome.</li>
</ul></div><div><br />
</div><div><a href="http://dont-tread-on.me/"><span class="Apple-style-span" style="font-size: large;">Don’t-Tread-on-Me</span></a></div><div><ul><li><b><span class="Apple-style-span" style="font-weight: normal;"><b>Catastrophist</b></span></b></li>
<li><b>What they seem to be saying to me:</b> Our personal freedom and liberty are in danger. Wake up, think about it, and assert your rights.</li>
</ul></div><div><br />
<div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><a href="http://maxkeiser.com/"><span class="Apple-style-span" style="font-size: large;">Max Keiser</span></a></div></div><div><ul><li><b><span class="Apple-style-span" style="font-weight: normal;"><b>Catastrophist</b></span></b></li>
<li><b>What they seem to be saying to me:</b> With the Hunt Brothers purchasing silver in 1979, silver began to threaten the monetary viability of the unbacked US Dollar. The Comex raised the margin requirements on silver to the point that the Hunt Brothers could not meet the margin call, and silver crashed in 1980. Today, Max Keiser's Silver Liberation Army is buying physical silver (without margin) in a broad-based assault on the US Dollar and the corrupt institutions behind it.</li>
</ul></div><br />
</div><div><a href="http://www.economist.com/"><span class="Apple-style-span" style="font-size: large;">The Economist</span></a></div><div><ul><li><b>Optimist</b></li>
<li><b>What they seem to be saying to me:</b> Here is the back story on why you should be bearish/bullish. Yeah, a deflationary collapse might happen, and it would be terrible if it ever did, but let's not get crazy and actually consider whether a collapse is possible!</li>
</ul></div><div><br />
</div><div><a href="http://www.fool.com/"><span class="Apple-style-span" style="font-size: large;">Motley Fool</span></a></div><div><ul><li><b>Optimist</b></li>
<li><b>What they seem to be saying to me:</b> Try these can't-miss stocks!</li>
</ul></div><div><br />
</div><div><a href="http://www.google.com/#hl=en&sugexp=ldymls&xhr=t&q=financial+sites"><span class="Apple-style-span" style="font-size: large;">Mainstream financial press</span></a></div><div><ul><li><b>Optimist</b></li>
<li><b>What they seem to be saying to me:</b> We're more bull (ahem) than bear. The worst is behind us. Here's how to play the stock market!</li>
</ul></div><div><br />
</div><div>Even though you perhaps can already infer where my personal preferences are, I will outline my own financial philosophy, assumptions, and perspective in <a href="http://andthebandplayedon.blogspot.com/2011/05/titanic-financial-misgivings.html">tomorrow's post</a>, so you can better understand the context of my view of these sites.</div><div><br />
</div><div><br />
</div><div><br />
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