[Money-matters] FW: [Money Matters Newsletter] July 4th, 2010 Update- Truth in What Happened and What will happen.

Sun Jul 4 18:18:56 UTC 2010

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From: Money Management Radio [mailto:marc at moneymanagementradio.com] 
Sent: Sunday, July 04, 2010 11:08 AM
To: bayareaprocess at att.net
Subject: [Money Matters Newsletter] July 4th, 2010 Update- Truth in What
Happened and What will happen.

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Money Matters Newsletter: July 4th, 2010 Update- Truth in What Happened and
What will happen.

Marc's Notes:

Free show update: Should you stop paying your Home Mortgage" Show 86 is now
free for download under the FREE SHOW tab on the right side menu bar. This
was one of my most popular shows so now you can have it free. 
On this special day, I bring you truth and explanations. I wish all of you a
great 4th. 
Today we seek to detail what has happened and what will transpire in the
days and weeks to follow. 
The great transfer of private debt to public debt sails on. With a world
awash in debt in 2007, private entities from banks to homeowners to
businesses find they cannot service the massive amount of owed money and
nature demanded payment or default. Too much debt cannot be paid back and
the world economies start the great deleveraging process. Nature demands
payment and the markets start to deleverage by either default (not paying)
or discounting (selling assets at a discount). This process is the markets
way of clearing out the rot and making way for new growth. Deleveraging on
this scale will cause massive economic pain, with unemployment, defaults,
bankruptcies and human suffering. Unfortunate but necessary because of the
mistakes made in the last 3 decades or more.
World governments refuse to allow this necessary cleansing because of the
misery it will cause so they transfer all private debt to the public through
bailouts, mortgage reductions, free money to the banks and every sort of
program they can think of. 
2008 and 2009 mark the largest transfer of private debt to the public.
Private entitles are relieved of their debt by governments use of taxpayer
money, putting the rest of us on the hook for others mistakes. Simply put,
private debt is transferred to the public: you and I.

Massive deficits are amassed to try and deleverage this debt by transferring
it to us.
Accounting rules are also changed to allow banks to overstate their assets-
"mark to market accounting" is replaced by Enron style "mark to make
believe". The banks immediate mark up their assets to show massive profits
and start paying themselves bonuses again as the rest of us suffer from
their past economic transgressions.

The debt has not gone away however! It has only been transferred to the
public. It is still there! And now we have more debt to boot. Governments
everywhere print money like mad, causing markets to rally temporarily into
2010. The debt now has traveled upstream to entire countries. More deficits
are created to try and stave off these entire country defaults. 
But the debt is still there! Deleveraging has not been allowed. 

In late spring 2010 (now), the bailout money is spent. Very little debt has
been reduced, only transferred to the taxpayer. The repudiation of debt is
still necessary and since it must happen, it will. Economic figures start to
show the fallacy in the bailouts and markets start to deteriorate as
investors realize the fix has not fixed anything, only prolonged the
inevitable but also amassed even more debt in the process. Now the resulting
deleveraging will be that much worse. 

Many listeners comment that my "fix" of letting everything clear is cold and
not compassionate. There is nothing farther from the truth. I just realize
that by the governments trying to "fix" a natural force of debt repudiation,
they will only make things worse and make it worse for so many more in the
end. When banks, and people and governments spend money foolishly, there is
a penalty to pay. Like life, make a bad decision, and suffer the
consequences. By the Federal Reserve trying to stave off a dotcom crash and
further massive social spending, they drop interest rates to low levels,
unnatural levels. These low levels of interest make money too cheap, at a
time when money should have been expensive. After all, when the dotcom
bubble burst, the investing environment became very risky. When risk rises,
so should interest rates, because when investors are nervous, they tend to
want to hold on to their money, or demand more interest for lending it. But
the Federal Reserve lowered rates, the exact opposite of what they should
have done. This artificial cost of money, now being too low, entices people
to borrow money they shouldn't have. Then they speculate with it, on houses,
on new cars, on more credit cards. This causes new bubbles, like housing,
and do so with out ever curing the last bubble. In essence, they create
bubble after bubble, all with more and more debt, until finally the debt can
no longer be serviced as massive debt requires massive interest payments.
This debt can no longer be paid for with private money, there is simply not
enough of it. The governments are then forced to just "create" more money to
pay off all this debt. Bu this created money is really just more debt. So
the debt alligator just gets bigger and hungrier and becomes an even greater
burden on society until a point is reached where society is no longer able
to feed him and he devours everything. 

Our Federal Reserve thinks that depressions and recessions are cured by
amassing more debt and spending it, but like an addict, more of the drug may
alleviate the symptoms for a while, but then they return with a vengeance,
requiring even more of the drug to alleviate the symptoms again. If you look
at the amounts of money now being spent, you realize this is just like the
drug addict. The amounts now are getting ridiculous and it can't continue.
There isn't enough money in the world to pay this all off (it wont be
enough) but the FEDS think they can continue to administer higher amounts of
it, thinking they just didn't spend enough the first ten times. Do you see
the fallacy in this thinking?
The example of the drug addict is EXACTLY the best way for you to visualize
the problem. Money (aka debt) IS the problem, and administering more of it
won't solve the problem. The solution is to PAY OFF DEBT, not make more of
it.

In defense of the misery to come, keep in mind that during the 1930's,
charitable donations from individuals actually reached record levels, so
those with money can and do help when things get bad. It may not be all that
is needed, but it does help. The difference is when the private sector (you
and I) donate money, we donate earned money, but when the government does
it, it is just more debt.

What will follow is more negative news as the world again starts to
deleverage. That will prompt the government to again try and "fix" the
problem with ..more debt. 

Since interest rates are now close to zero, and since they tried to pull
back on their spending programs, they will again try and reinstate many of
these programs yet again, amassing more debt. You may see the symptoms ease
once again and markets start to rise again if and when they announce more
bailouts and programs, but by now you know it will only be temporary. When
THAT spending runs out, we will again find ourselves right where we are now,
right where we were in 2008, only with even MORE DEBT.

It's a vicious cycle and will continue as these guys just don't get it. The
end result will be the "crack up boom" foretold by Ludwig Von Mises, 20th
century economist. Read about it here. (Link).http://mises.org/daily/4016

The governments will continue to create more money through a variety of
programs and what they call "quantitative easing". Read about it here (Link)
http://faculty.chicagobooth.edu/john.cochrane/research/Papers/fiscal2.htm
and pay close attention to the paragraphs entitled "end game".

For now, look at the increasing bad news on housing, unemployment, and other
economic fundamentals that will deteriorate. The market will follow this
negative news with a downward bias. Then look for a new plethora of
explanations and remedies from Washington, all which will cause them to
reinstate past programs and initiate new ones. Look for more unemployment
extensions, more jobs programs, new bank programs and perhaps more
aggressive programs to get money directly into the hands of the public.
More money will be spend, all through the accumulation of more debt, but
just like now, temporary rallies will falter as each new money injection
wears off. 

You will see inflation creeping in slowly. Sandwiches will continue to rise
in price, food will likely creep up, coffee, medical costs, college
tuitions-everything will slowly creep up. In the midst of this, look for
more "for lease" signs, emptier restaurants, falling hotel rates and airline
fares, service industries will suffer, contractors and builders will see
their business slow once again. Those of you with cash will see great buys
on vacations, cars, and other discretionary items. Those on the fringe will
find themselves slowly slipping even farther into the abyss. Dismal?
Unfortunately yes, but don't shoot the messenger.
This was and will be brought upon you by failed economic beliefs of the
economists and policy makers in Washington. The underclass will clamor for
even more to be done to try and "fix" things, as many are uneducated in the
way money works. Read about it here in the piece "The Deliberate Dumbing
Down of America" (link).http://www.deliberatedumbingdown.com/pages/book.htm

There will be and must be survivors so we can help America recovery and it
will take those with money to accomplish this. This is why you and I and
everyone we can educate must hold onto your money. Don't let them take it
from you, or we will all join the food lines. Defend yourself and don't lose
hope. The times ahead will be the most trying of your life. You will see
unbelievable machinations unfolding, and the US CONSTITUTION will be trashed
(as it already has been) and your rights will be slowly taken from you under
the guise of "for the good of the system". The economically ignorant will
demand you "pay your fair share". The wealthy and those who have worked hard
for their future will be villanized as capitalistic pigs. Much like Nazi
Germany, you will see more government intervention then you would have
thought possible. The poor will revolt and officials will tremble at the
sight of pitchforks. But all this now must happen to awaken the great spirit
of the free man. It is too late to turn the tides I fear. The amounts are
now too great, the momentum towards socialism too powerful. But I have hope
the free man will prevail again. It is always the same. So explained by
Alexander Tyler, a Scottish history professor at the University of
Edinburgh, who had this to say about the fall of the Athenian Republic some
2,000 years earlier:
"A democracy is always temporary in nature; it simply cannot exist as a
permanent form of government."
"A democracy will continue to exist up until the time that voters discover
they can vote themselves generous gifts from the public treasury."
"From that moment on, the majority always vote for the candidates who
promise the most benefits from the public treasury, with the result that
every democracy will finally collapse due to loose fiscal policy, which is
always followed by a dictatorship."
"The average age of the world's greatest civilizations from the beginning of
history, has been about 200 years."
"During those 200 years, those nations always progressed through the
following sequence:
1.    From bondage to spiritual faith;
2. From spiritual faith to great courage;
3. From courage to liberty;
4. From liberty to abundance;
5. From abundance to complacency;
6. From complacency to apathy;
7. From apathy to dependence;
8. From dependence back into bondage"

I only hope my children will witness the first one again when they grow into
adulthood.

Keep the faith, educate yourself and everyone you know. Copy the Money
Matters shows and give them away. Have more people read these newsletters,
and talk with your family, friends and neighbors about how we can help. Be
compassionate but not foolish with your money. Don't believe what comes out
of Washington and instead read the signs all around you. Look for truth. It
is out there and will always prevail.

Marc

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Where I buy some of my gold: What I call "Possession Gold". 

Monex Deposit David Feldberg x 2216
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