Oh the Spin

Wow has it really been that long?
Sometimes all it takes is a look “out the window” to get one all wound up yet again. So it was that I clicked on a link from friend and ended up reading about the woes of the economy, with all its spin on conspiracy and such. I don’t need conspiracies to frighten me, reality does that plenty!

If you watch something long enough, you just might make out a pattern.
Way back in 2004, 2005, and even up to 2006. I wanted to play with the gold market. Well ok, the silver market, as I can’t afford the gold market. Doing so introduced me to GATA ( http://www.gata.org/ ). GATA is a group of gold “investors” that felt they were being rooked by a rigged market. They joined forces to find out just what was happening. One of the things they were convinced was that a few banks were being allowed to “lease” US gold at ultra low rates, and then sell that onto the market. This provided the US government with a means to continuously lower the price of gold relative to the dollar thus making it appear that “inflation” was a non-issue. It also let the US reap a meager profit on what otherwise is a costly item to store. The bank, on the other hand, was guaranteed and endless supply of gold, in just the right measure to maintain or even lower the price the gold. After all, they had a lease only. What-ever they took eventually had to go back. I do not recall what the eventual outcome was over an mis-deeds. Neither the US nor the banks are willing to let any information see the light of day. Fast forward to yesterday when I read a story about JPMorgan settling a lawsuit. It seems that JPMorgan decided to pay nearly 5 million dollars to patrons of their gold EFT. Their patrons found out that the gold vault at JPMorgan was all but empty, which is fine, except that JPMorgan was charging patrons storage fees on the patrons gold. Yeah the patrons got very unhappy for fees on gold that did not exist. The lawsuit surprisingly harkens back to 2005 through 2007. Odd that it is just now being news-worthy. By the way, JPMorgan insists they did nothing wrong (of course) and that no-one ever went un-paid. I am sure they are correct. Pretty easy to pay, when your collecting on a service that your are not actually providing.

I have never read anything that puts these two issues together. But they do seem to fit, do they not? Add in that gold is sitting at over $1100 per ounce, and its easy to see why JPMorgan couldn’t hold gold in both places, even as far back as 2007.

Well enough on that … Why I dwell on gold is beyond me. However, it was reading through that, that I hit on another essay, one that has little to do with gold and everything to do with our pocketbooks.

So money… or more exactly, the US dollar as money. Ever since Gdubya, gave away trillions to Wall Street, I have been on pins and needles about inflation. I was vocal about it as soon it occurred certain they we were headed for 1981 all over again. But Ihave to give credit, throw enough money at it, and problems will go away. For a while. But like a hungry lion that has been feed a small chicken, sooner or later they come back looking for more. So in the essay I read, the writers consternation was that as the value of the dollar fell the US government would be happy to point out that import/export imbalance would swing the other way. After all our dollars would not buy as much stuff from overseas, and conversely our stuff would be cheaper to those over seas. However, the writer’s contention was that this would be only marginal. The reason? The US has already exported the means to produce anything.
Truth: I can guarantee that zero Chinese will be buying US made TV’s, stereos, carpets, or underwear. I win the bet because the US doesn’t make any of those things. Too low tech you say? Not enough profit? Ok – the US doesn’t make computer motherboards either… and not even 50% of the memory chips. What do we make? We make some cars (great big gas guzzling SUVs mostly)and lots of movies (unless they are filmed abroad). So to be perfectly clear, The US government is going to print money … lots of money.. excess money. That money will have no production to back it up. When that happens, then the value of money already in existence must go down. Your money in your wallet, in your purse, in the bank, pension fund… all of it.. will be worth less and less. The good news is that exports will be cheaper for others over seas. The bad news is everything will cost more right here at home.

I know I know, where’s the spin? Well, it came on last night. I am looking at the news right now:

http://www.wapt.com/money/24166394/detail.html

See that? Obama is proud to announce that his New Export Initiative is off to a good start. In fact its up 17%, and he expects to double that in 5 years. How? Well you read the story… nary a word about increasing inflation .. but that is how its done. Always. So want a crystal ball on the future? No magic, Obama will double exports in 5 years, he can do this by reducing the cost American goods .. and that is done by reducing the value of your money. Welcome to spin.