Currency Balloons

Given the state of most media reporting, it’s sometimes tough to know whether to laugh or cry. Here’s a story from last week about a surge in gold bullion purchasing in Germany in August and September:

     German Bullion Dealers Report Major Increase in Sales

Christian Brenner, Chief Executive of Philoro Edelmetalle GmbH: “Already in August we noticed an increase on orders compared to the previous months, but September… September beats it all. From a German viewpoint it’s the strongest month of 2014.”. At their head office in Austria they also register an “overproportional high level” of revenue.

At the end of the article, there is a stumbling attempt to explain the recent surge with no mention of its real reason. Here’s a chart of the Euro showing it losing over 7% of its “value” in August and September, in the context of a 10% loss since May:
Euro2014107

It would seem clear that at least some people in Germany and Austria noticed that someone was letting the air out of their Euros and decided to convert to real money.

It was the same for the Japanese in August and September, but much worse overall since the Japanese government has been hellbent on devaluing the Yen for two years. Here’s a chart showing the loss in “value” of the yen of more than 31% in the last three years:

Yen20141007Since these losses in “value” are measured against the biggest balloon of them all, the US Dollar, this is the source of what you may have been hearing lately about the “strong Dollar”! In other words, the “strong Dollar” is simply the result of other major governments succeeding in intentionally letting air out of the balloons known as their currencies.

They are doing this in an attempt to create inflation! Unlike regular people, who like it when prices drop and they can get good deals, governments, being the largest debtors on the planet, want inflation so that their debts can be repaid in cheaper and cheaper currency as time passes. In case you haven’t noticed, that’s a form of grand theft: I’ll borrow money from you today, and pay it back with cheaper money later.

Well so what, you might say. If they are all doing that, what’s the big deal?

The big deal is implied above in my placing the word value in quotes. How does one figure out the value of anything that carries a price when the yardstick of value, our money, is made of rubber, if the yardstick itself can be stretched and shrunk at will by bureaucrats and traders? Do you really think it’s normal for real estate prices to gain 100% or lose 50% in a few years? Or company stocks to do the same over a few weeks or a few minutes? Is that real estate really “worth” twice as much or half as much as it was just a couple of years back? This is almost all because the system of money itself is a fraud.

When these currencies gain and lose “value” with respect to one another, traders work to profit from these variations. More than $4 Trillion per day changes hands in the currency markets. They say that 10% of that has to do with payment for trade in goods and services. The other 90% is speculative trading! The amount of trading in currencies dwarfs trading in bonds and stocks.

And herein lies the real problem. When real value becomes relatively unimportant, more and more human resources are dedicated to playing games with this fake money. Who are those most revered on our planet these days? It’s the people who are the best at playing games with money. If the head of Doctors Without Borders called a press conference, how much media coverage would that get if there were no ebola crisis? But if Warren Buffett called a press conference, the media would grovel, politicians would all take note, thousands, millions, would want to know whether the “Oracle of Omaha” was saying something that would impact their own game playing in stocks or bonds or real estate. How much human effort and intelligence is now spent playing games with money? How different would the planet be if the so-called “best and brightest” were working to solve humanity’s problems rather than working on Wall St?

This is the real problem with our bloated system of fake money. People progressively move away from producing real value for their fellows toward financial games. Many hospitals now focus more on profits than patient care. Companies that produce consumer goods also have huge departments to manage their currency trading and how much interest they can “earn” in the overnight markets. People and companies can’t just have savings, no, that’s not good enough, money has to “work” for people 24 hours a day. Of course, people can’t really be blamed for this when they know for sure that if they simply hold their currency as savings for a few years, it is guaranteed to be worth less and less in terms of purchasing power.

It used to take generations for the next financial bubble to form. People would remember the lessons of the Tulip Bubble or the South Sea Bubble for generations and no one would be so stupid as to fall for a new bubble for a long time. Now we get a new bubble every several years and in each bubble it is claimed that yes, everyone now understands that the previous bubbles were bubbles, but that whatever they are falling for this year is not a bubble. This chart from the free weekly commentary of excellent stock market analyst John Hussman captures it perfectly for the stock market, showing what are now recognized as obvious bubbles in 2000 and 2007 compared with the attitude today:

Bubbles

Wall St and the City of London have worked hard to turn every aspect of life into a casino bet in the Quadrillion (that’s a thousand Trillions) dollar derivatives market:

     Feel Like Betting On Life Expectancy? There’s A Derivative For That

Part of the problem, of course, is that the emotional flames of greed and jealousy are easily fanned by 24 hour real time quotes on just about anything with a price. We can now check the price of anything on our slave smart phones, at least between bouts of rapid typing with our thumbs. This has contributed to an impatience that robs perspective and often leads people to feeling left out of the latest price trend craze. Most people have at least a dim recollection of the the collapse of Lehman Brothers that is the poster child for the 2008 portion of the financial crisis. The sixth anniversary of that collapse was September 15, 2014. This headline shows results for some major markets over that six year period:

     Happy Birthday Lehman Bankruptcy: Silver +71%, Gold +61%, S&P +58%

What’s that? Metals have done better than stocks over that six years? From all of the grumbling one hears about metals prices and the exuberance of those who own stocks, you’d never know that such is the case. And if one is “supposed to” buy low and sell high, then what would you rather own right now? Stocks and bonds which are at or near all time highs after mega rallies (see that stock chart above)? Or metals which have been beaten down for awhile?

The overall point here is that we are in the greatest bubbles of all time in assets driven by the massive production of paper currencies since the late 1960’s. This includes stocks, bonds, real estate, and the paper currencies themselves. Buying and holding those assets now with the hope of financial gain is very high risk behavior. The prices of these assets have ballooned due to the greatest Ponzi finance scheme in the history of this and maybe any of the other trillions of planets. Be careful before the air starts coming out of these balloons because, to badly mix metaphors, that sound of air escaping may actually be the very first sound of a flush. Everyone on Wall St thinks they have a plan to get out ahead of everyone else. As was amply demonstrated in 2008 and 2009, only a very few get out of the exit unscathed when all run for that exit at once. But Wall St thinks they’ll be bailed out. I’m guessing you realize there will be no bailout for me or you. Bail-ins to save Wall St with your money are more likely.

This is not a claim that stocks will crash this week or that the gold price can’t go lower. These markets are heavily manipulated and prices can go crazier. What I am talking about is the bigger perspective. What I am talking about is sleeping at night.

When everyone wants what’s unreal, it’s time to be real. It’s best now to be considering community, precious metals, gardens, water, food, electricity, warmth, health and your real abilities in the inner and outer worlds.

2 thoughts on “Currency Balloons

  1. Pingback: Currency Balloon Madness | Thundering-Heard

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