financial bubble

The massive bubble in US dollars is so obvious in this country

~ admin ~ Leave a comment

South AfricaSimon Black – When I did the math in my head last week, I had to pull out my phone’s calculator just to make sure I hadn’t mentally misplaced the decimal point.

It turns out I was right. My rental car in Cape Town would cost me just $8/day. And that included all the silly taxes and fees and nonsense.

Eight bucks. I imagine that the car depreciates more than that.

The rest of my time here has been filled with similar awe.

Dinner for two at a high-class restaurant along the oceanfront promenade in one of Cape Town’s most luxurious neighborhoods set me back about $30.

And that included wine, multiple courses, taxes, tip, the whole nine yards.

Nearly everywhere I see here is shockingly cheap… when I convert to dollars.

Grocery stores sell giant bags of food—fresh plums and peaches, for less than a dollar per kilo, or about 40 cents per pound.

And of course, one of the reasons I came here to begin with is because Round-the-World flights starting in South Africa are dirt-cheap.

My itinerary has me traveling from here to Australia, Asia, South America, the US, Europe, and back to South Africa, all for about $5,500. In business class. Continue reading →

Train Wrecks Past And Future

~ admin ~ 1 Comment

wreckGary Christenson – Ninety seven years ago in Tennessee a train wreck killed 101 people.  It was shocking, unexpected, and devastating.

In the year 2000 the Tech-Wreck was unexpected, the NASDAQ market crashed, and $Trillions of paper wealth disappeared.   Most investors were shocked and their savings were devastated.

The housing market crash/financial crisis/train wreck of 2008 shocked most people, destroyed retirement plans, and caused $Trillions in paper wealth to disappear.  Many global economies have not yet recovered.

Few people see the train coming that wrecks their financial lives…

Although everyone knows that markets, such as the NASDAQ in 2000, don’t rally forever, most of us are shocked when the crash occurs.  (“No one saw it coming.)

Although everyone should know that real estate prices do not rise forever, in 2006-07 most Americans believed that the real estate bubble would continue inflating.  Politicians, realtors, and Wall Street continually reassured homeowners.  (“No one saw it coming.”)

Between Denial And Delusion Lies A Thin Zone Of Clarity.  In that zone of clarity we realize that train wrecks occur, printing money only increases the wealth of the political and financial elite, our financial leaders have created bubbles in stocks, bonds, and currencies, bubbles always pop, and bubbles do not pop painlessly.

In 2015 most people realize that we can’t get “something for nothing,” but our actions often indicate otherwise.  Examples are:

  • We are currently struggling in a financial crisis largely caused by leverage and debt. The financial and political elite have assured us they will solve the crisis with more leverage and debt.  Denial and delusion!

Continue reading →

Freedom, Where Are You? Not In America Or Europe

~ admin ~ Leave a comment

PaulCraigRobertsWhen the former Goldman Sachs executive who runs the European Central Bank (ECB) announced that he was going to print 720 billion euros annually with which to purchase bad debts from the politically connected big banks, the euro sank and the stock market and Swiss franc shot up. As in the US, quantitative easing (QE) serves to enrich the already rich. It has no other purpose.

The well-heeled financial institutions that bought up the troubled sovereign debt of Greece, Italy, Portugal, and Spain at low prices will now sell the bonds to the ECB for high prices. And despite depression level unemployment in most of Europe and austerity imposed on citizens, the stock market rose in anticipation that much of the 60 billion new euros that will be created each month will find its way into equity prices. Liquidity fuels the stock market.

Where else can the money to go? Some will go into Swiss francs and some into gold while gold is still available, but for the most part the ECB is running the printing press in order to boost the wealth of the stock-owning One Percent. The Federal Reserve and the ECB have taken the West back to the days when a handful of aristocrats owned everything.

The stock markets are bubbles blown by central bank money creation. On the basis of traditional reasoning there is no sound reason to be in equities, and sound investors have avoided them.

But there is no return anywhere else, and as the central banks are run by the rich for the rich, sound reasoning has proved to be a mistake for the past six years. This shows that corruption can prevail for an indeterminable period over fundamentals. Continue reading →

Who Benefits When Bubbles Burst?

~ admin ~ Leave a comment

“Blowing speculative bubbles cannot possibly lead to organic growth because speculative bubbles fatally undermine the real economy.” – C H Smith

CharlesHughSmithAn astute reader recently posed an insightful question: we all know who benefits from asset bubbles in stocks, bonds and real estate–owners of assets, banks, the government (all those luscious capital gains and rising property taxes), pension funds, brokers and so on. But who benefits from the inevitable collapse of these asset bubbles?

If asset bubbles end badly for virtually every participant, then why does the system go to extremes to inflate them? This is an excellent question, as it goes right to the heart of our dysfunctional Status Quo.

Broadly speaking, there are three possible answers:

1. The system has no choice left but to blow serial bubbles.

2. Bubbles are domestic opportunities for Shock Doctrine-type crises that enable further consolidation of power.

3. Those in charge of the Status Quo believe the fantasy that the next bubble will usher in the long-awaited return to organic growth, i.e. expansion that isn’t dependent on central bank stimulus, enormous fiscal deficit spending, ginned-up statistics, etc.

Let’s consider each possible answer more closely. Continue reading →