Time to move off the economy for a rant

Well I went to bed tonight at 10:30... after tossing for 2 hours.. I find myself right back here. So I might as well make use of this late night for ramblings.

For going on sixteen years now my mother has shook her head at my continued mis-spent efforts to be a part of the "democratic process". To quote her "why do you waste your vote?" In a way I guess she is correct I haven't voted for a winning candidate for president in 16 years, in fact my candidate didnt even come in second! Wow, must be a record. But did I really waste my vote, or did she in reality, waste hers; even though she has voted for a winning candidate... Lets delve into it.

My mothers contention is that I waste my vote because I consistently vote for candidates that are neither republican nor democrat, they are, or at least have been, completely "un-electable" owing solely to their non-affiliation with either of the major parties. Well, its true. My candidates never win. Therefore, my vote is pretty much null in the grand scheme of things. Does that mean that her vote then did count? Either she got her parties candidate elected or she at worst negated a vote for the "other" party. Maybe, but lets look at what really has happened.

I have always heard talk of the "two-party system". Now the truth be told, as far as I can tell there is no law nor does the constitution support such. No, the two-party system is a term created by the two dominate parties, who wish to keep all voters in line and voting for either one of the two parties. Its only the two dominate parties that want a two party system. So what does it take to be the winning party in a two party system?  Simple, you have to get more people to vote for your party then vote for the one other party. THAT'S IT.  Whats the best way to do that?  Simple again, appeal to the most people. How do you do that? Simple again, by making sure your party excludes no-one, and is the best at making the most people "happy" with your agenda. Well, how do you do that? Simple again, by maintaining the status quo, and by guaranteeing them mediocrity. So Pine, what does that mean or prove, isn't your momma still right? Nope! And here's why:

In a two party system there is always one winner and one loser... always. So about half the voters didn't get what they wanted.  But! per above, since the only thing that matters to a party is winning, and to do that the winning party MUST move away from any extreme points of view on any and every topic, at least half (or more) of those that voted for the winning party only got about half (or less), of what they really wanted in terms of THEIR agenda. That is to say at least another 25% of all voters while their candidate "won" really didn't get views represented. And that means that for any election, in which either a democrat or a republican won, at least 75% of the voters "lost". Now... who wasted their vote?  

When I cast my vote,  all the candidates (all the world?) can be sure of this: I voted for someone that MOST closely represented MY views. For the past sixteen years, that candidate was neither democrat nor republican. The two parties have both moved so toward the middle, they have both done as much as they could to not offend, to not represent any extreme sentiment, they both promised things they had no ability nor desire to deliver, that neither party in any way shape or form came close to representing me. All the world loves a winner... but I prefer to stand by one who is right, even if it means that for sixteen years.. I have voted for the loser. I therefore must take solace in that, I did not waste my vote on someone that does not and cannot represent my veiws ( and in reality cannot represent ANYONE's views)

To paraphrase one of my favorite authors: "I am not for either side, for no-one is altogether on MY side".

PS: If I have offended any voter that has voted democrat or republican in the last sixteen years, really, I am ok with that! And yes I blame both parties and their system for the last 16 years and the next 8 years at least (yeah I just can't leave the economy out completely).

The begining is at hand

Famous quote: " Everyone has 20/20 hindsight"

Corrolary: "Hindsight gets better over time, or inversely 20/20 hindsight prior to everyone elses hindsight equals foresight"

So last week I watched as the DOW dropped 186 points in one day and on the same day gold rose by some amount that now escapses me. Assumption: investors left the stock market for whatever reason ( profit-taking, bad reports) and needed a place to put that money. They can put it into dollars or they can put it into a nearly equally liquid asset: GOLD. They chose gold. Gold is an expensive alternative to dollars, so why choose gold? Because investors thought that they would "loose less" in gold than in dollars. But dollars are free? Yes..... unless the dollar you stored that night was worth less than what it was the next morning, and by an amount more than the cost to move into gold and back out. Us regular folk might want to consider what that means....

I think non-investor types have a hard time in realizing the the dollar itself has a value that moves in relation to other stores of wealth. Now then today we have BOTH the stockmarket and gold rise! What does it mean???? Its mid week, trading is not over so traders first moved out of the dollars to the market, but something happended.. I am not privey to what, but the dollar began a real slide down... so investors moved even more away from dollars some to stocks and some gold. Money is losing value, the term you need INFLATION.. yes INFLATION. Now many things contribute to the price of an item, but when ALL items raise in price against any one currency ( thats US Dollars) then the ONLY reason is inflation. So last week investors chose to have all options open some dollars, some stock, some gold... today they moved so that they have only a little dollars, more stock and more gold ( and other commodities such as oil). I am also willing to bet a lot of FOREX type moved to euros or any other currency than dollars as well.

So what does it all mean? Well, in 1981 I was graduating High school, just as my daughter is doing this very week. Back then we had a democrat in the white house....er just like now, and gold was at $1000 per ounce...er just like now... and intrest rates were 12% on a house, 18% on a car, and 25% on a credit card. Everyone had money, but because prices kept changing it never bought much, we saw minimum wages get raised up every year or two to try and keep up ( but it never did) and getting a job was hard.... hmmm I wonder what we are in for now?

I can't paint a more clear picture. Inflation is comming. It's 1981 all over again. Get ready or be bowled over. You read it here first.

Take that CHASE!!!!

Ok... today is a good day.
So I have 3 credit cards ( or did!):
Credit Union Visa @ 9.9% Had since 2006
Chase MC @ 12.24% Had since 1986
American Express I have no idea Had since 2001

Well the AE.. I never use it. They sent me a new card to replace the old card... but you have to verify it from your home phone.. but I forget.. so its been like 6 months. I think I used the original one time...

I had called Chase last month and said they needed to lower the rate or else. So my rate went from 16% to the current 12.24%. Today I got my Credit Union card ( which is the card I use mostly anyway) and saw the rate was 9.9%. OK how can a tiny CU in no-place Mississippi charge so much less that the titantic CHASE .. a CC I have been with for OVER twenty years! I was pissed. So I called CHASE again and said: "I need you to drop my rate and it needs to be no more that 8.9%." The lady said that I was at thier lowest rate already. I simply said in that case I need to cancel my card.
Done.
20 + years and Chase and I are ready to call it quits. No begging, no sales... just bye.

It took me 3 minutes to find a shredder and shred thier card. Truth be told I never liked them. They are like wolves feasting on carrion. If Chase with all thier wealth cant/wont beat EVERYONE else then the truth is out. Chase is a bottom feeder. They only want high risk card holders.. those that they can gouge... trick ... sucker. They are prefectly fine cutting loose low risk card holders. As a low risk card holder ... I am equally happy to be rid of them.

I challenge everyone to drop one credit card this month!

and keep doing it until you only have 1!

Man this feels great!

Quick followup

I just wanted to do a quick follow up. I found this 2002 article on the web. I still can't find the particular Federal law change I am looking for, but this gives some very good information About how and why Credit card issuers have been able to thwart state laws. 

http://www.bankrate.com/brm/news/cc/20020320a.asp

PS: I have no idea if it is good form to comment on ones own post, but I think this read is worth it. 

Pay now or pay for ever

So Obama wants to protect us from the evil doings of Credit Card Companies ( aka big banks) at least that is what the web is abuzz about...
http://news.yahoo.com/s/nm/20090514/pl_nm/us_financial_creditcards_obama_7

Well that is all well and good, and indeed I hope he succeeds. But twas but a year or so ago that the Credit Card Companies drove a stake through a long held state power - they usurped the usury laws powers. Usury? Need a refresher?
http://en.wikipedia.org/wiki/Usury

So usury law as commonly practiced in the USA, is where states decide at what point interest rates are so extreme as to be criminal. Ahhhh, had I but written this 9 months ago... well actaully I did, just not is such an open forum. So many readers then laughed.. "interest? the credit card companies are throwing cards at me with rates as low as 4%! What do I care what the laws says, as long as rates are low in an open market". No one noticed then, and no one cared. Even now few realize just what the federal law did... but now... now I think a few more may care!

Pre-(the unamed law CC god law) The federal government did not set nor enforce any usury law, nor did they prevent any state from doing so. It was rather like religion. Each state figures out what they like. In the state of Mississippi the legal limit was 24.99%. Does that number look familiar? Yep, thats the rate one is used to seeing as being the maximum rate charged by Credit Cards. And it was limited by the state. However, there is now a new Federal law that now over-rides any state law. The new state law imposes the same limit... 24.99% so what is the big deal? The big deal is that the Federal law now adds the US prime lending rate to the limit. So if the US prime lending rate is 1% then the max that can be charged by a Credit card is 24.99% plus 1% for a total of 25.99%. OK so the Credit cards can make a little more money .. no big deal you say. Wrong! you see the prime lending rate is an arbitrary number. It is used by the US to manipulate the economy in hopes of keeping the economy strong. It is not meant to be used to determine interest rates on private debt. If the government determines that a high rate of interest is needed to protect the economy,, there is no limit on how much the prime lending rate can change. Its just as easy to make it 50%.. or 60 % as it is 2%. Its a tool for a specific purpose. But for banks its a sure fire way overturn all state laws, make a hefty profit, and make sure that from now on, no matter what the Fed does to the prime lending rate... banks win.

Just out of curiousty? what is the current rate on your card?
How many invitations for new low rate cards have you gotten this month?, last month? the month before?
Want to make some sure fire high dollar money? Pay off that Credit card... NOW!

Grrrr- innocense lost, Dow tumbles and AU ??

Just a quick note today:

The big news today is that all markets in the US dropped at one point the DOW was down 184 to 8284.89.. Gold meanwhile began correcting early on, but rallied as the DOW fell. Standing at 925.90 @ 3.17 CST. Silver however, made its correct along with Gold early, but did not follow going up nearly as much as it followed going down yielding a loss for the of .22 @ $14.00.

So what does this mean?

Well... it does mean one thing. Those people who do play the market still consider GOLD a tool to be used as it always has been, a hedge against inflation. Is gold money? No, but it is a tool to be used when investors feel they have little other options. Silver on the other hand should be considered or actually .. it just should not be considered. The only ones buying silver are investors that have not figured out that silver is not Gold.

Sadly... when I look at these numbers.. I do not see gold going up in price... instead what I see is the US dollar droping in value. To see it clearly simply look at other currencies and how they have faired over the same time frame. The percent change in US dollar verus all others shows that the world moved away from US dollars and went.... well went to anything else including GOLD. In fact I would say that if I had $1000 in the bank this morning (which I do) then this afternoon that $1000 has lost value to the same extent that GOLD has risen. So lets say my $1000 is now $997.... in one day.... per thousand... and everyone who has US dollars lost that... around the world. So if you had say... 1 million US dollars what would YOU do??

Gold is not money.. but it is a tool.

PS: Platinum has done noting but dropped. For some reason Plat is only being seen as a commodity like copper or oil. Its value is what the market demands via its use (mostly in automobiles). Since the auto industry is on extremely hard times... the need for plat is down thus the value of plat is down.. ie it is logically following demand. So like silver, plat has not been seen as a store of wealth. Perhaps my gold fever should consider golds big brother.

PPS: I read on Kitco:
Gold should top out at $1200 and retreat to $1100
Silver should top out at $20 and retreat to $11

Given those... I think there is too little room to play with Gold, and silver is certainly off my list until it returns to norms of $11 or even $9. World supply of silver is high right now.

Oh no ... must resist..... Gold bug!!!

Dernit...

Dabnabbit!!!

I am following gold again, and silver, .. and .... oh ok and Platinum. I swore I would never do it again. But I am weak. I can't help myself. The dollar is sooooo weak right now. And gold is.... sooooooo shiney!!!!

Truth is, as far as I can tell silver is the only thing I have never lost a dime a on.  Yet still, silver is like playing mumbly peg, sooner or later someone is gonna get stabbed. It all started for me back in 1981. Gold prices and silver, were soaring, but then so was everything else; milk, bread, gold.  So I dropped by this little shop that had opened in a vacant bank building and bought 3 ounces or so of silver. It was shiney! It clanked! I liked it!!! A few months later I was bored with it, and sold it un-ceremoniously for about 10% profit. Whoa, a whole $27 worth! Yeah I wasn't impressed then myself. 

Years later, and the bug hit again. I bought coins on ebay, and sold some at a slight profit ( got rid of the culls) and then I found Kitco. Kitco is evil like chocolate is evil. A bottomless pit to throw money you thought you had at.. only to squirm while you watch KitCast all day at work.  Somehow, in early 2000's I invested as much as $100 in silver... and yeah broke even getting out. In all truth through, if you have the bug... none beat Kitco. 

So once again I am watching the precious metals market. Looking to jump in a "pool" of gold or silver or even the big dog.... PLAT! Yet even as I look.. my head says "nooooo.... stay away!!" For now you know the folly... the gold market is rigged.. silver is a fools game and PLat is for the big boys with deep pockets. 

What I didn’t know about money in the USA

I distinctly remember watching a “cartoon” that explained about money in the USA. The cartoon was probably made in the late 1940’s to early 1950’s. In the cartoon, it explained how when the public put their money in the bank in savings, the bank would in turn, either loan the money to business’s or to investors that in turn loaned money to businesses. It stressed very clearly how, in order for business to expand, investment was needed from the public via savings. Of course, the public could side-step the bank and invest directly, but that wasn’t the norm in 1947. The moral seemed to be that banks needed the money saved by its patrons in order to make loans. About two weeks ago, at the age of 46, I learned that it was not true. Banks do not loan out the money they take in from savings. Tied to that reality then, is just how money is “made” in the USA these days. Before I go on too far, understand that I am still figuring this all out in my head, I am not in finance for a living. My advice is to read this and look elsewhere to see if it can be disproved.

The Federal Reserve System
The Federal Reserve System is a “tightly held” private corporation. In order to become a part owner you must be a nationally chartered bank. In reverse then: the US Federal Reserve is OWNED by banks. The Federal Reserve or “The Fed” is broken up into twelve districts; banks in each district then determine the money supply for their district. Before we go much further we need to mention the US Treasury. The Treasury actually “prints” or “coins” the cash money. The Treasury is run by the US government. Banks make a request to the Treasure for money, and the Treasury supplies the cash money. But estimates are that only 2% of the US money supply is in “cash”. So where is the other 98%???

Banking 101 in 2009
For a bank to be a member of the Fed they must put up capitol, a pool of money deposited with the Fed. The bank earns 6% interest on that money and they are then allowed to loan out 9 times the amount held at the Fed. Its that “9 times” bit that caught my eye. First question to ask is; in a time that banks are loaning money at 5.5% interest for houses, why would they do that when they can get a guaranteed 6% with the Fed with zero risk? They wouldn’t and they don’t. The banks want to keep as much cash as possible on deposit with the Fed so that they can multiply its effects by that 9-times figure. Well if a huge percentage of their patron’s money is itself on deposit with the Fed, then where does the money come from that banks loan? Basically thin air. The bank is allowed to loan money it does not have, up to 9 times what is on deposit with the Fed. The money does not exist until a potential borrower comes in to borrow the money. When the loan “go through” the borrowers account is credited with the amount of the loan. If need be the bank simply calls up the Fed, and asks for some paper cash. The Fed charges a small printing fee (7 cents per bill) and the money is sent to the bank. But the real “money” does not exist or if it does then it exists “as debt”. Welcome to the new world. Money = debt (of someone else). Now for myself, I think they went too far, but here is what I understand their thinking is.

The money supply (available credit) should be equal to the current money supply plus productivity for some period plus some percentage (lets say 2%). So when you hear the nightly news tell that the US government has declared that the US productivity has risen by 2% for the last quarter (three months) that means there was 2% rise goods and services. Banks then can loan what is already out plus 2% plus 2% or four percent, as long as it is under the 9 times factor that any one bank has on deposit at the Fed. What does it cost the bank to loan money? As far as I can tell NOTHING. (Not entirely true, the member banks must give 3% of revenues to the Fed) A 5% loan is means a 5% (100% of the 5%) profit on whatever amount was loaned. Given that, a bank would be stupid to loan out money that patrons put in savings! Instead it deposits that money with the Fed and loans out free money available to it via Fed rules.

I would doubt all this, except how would one explain that banks loan out money 5%(risky) at less than what the Fed will give 6%(zero risk) and that banks will only pay 1% or 2% on deposits. There is no way that deposits equal loans in the US. All this makes for certain results. For example, in good times when there is productivity, the money system can supply all the money needed to continue to fuel a robust and growing economy. But when productivity shrinks the system does not work so well. It does not like contractions, or even non-growth. With out borrowers, the money supply cannot grow. This is why congress agreed to borrow the money. Borrowing money “creates” money, and experts hope to “jump-start” the system by having the government itself borrow money. Unfortunately for the tax payers, we have to pay it back plus interest.

The system also creates inflation. My understanding is that the experts seem to think that a small amount of inflation is a good thing. This is probably because the looseness of the money allows for even only marginal businesses to try their hand in the market. From what I have read if inflation is equal to productivity then you’re pretty much at a wash. 2% inflation for 2% growth would mean you simply stayed in the same place economy wise. But for those holding on to money any inflation means you lost purchasing power of your money for that time period. Only if your productivity rose by as much as inflation would you make any gains. By having a 9 to 1 ratio and by allowing loans to exceed money supply by 2% inflation is guaranteed. The scary thought being that those number may be determined by the Fed, and thus I assume they can be changed also!

And then the housing bubble came...