Cartoon courtesy of Deesillustration.com
The Federal Reserve is the new robber as they perpetrate the transfer of wealth from the hands of the capable to the hands of the inept. Financial stimulus, bailouts, subsidies, et al, is the process of giving those enterprises that failed the wealth that was generated by those who are successful.
The bailouts of the banks has effectively ring fenced the disease known as incompetence and as long as it remains protected from the real world it remains a threat to economic recovery. These incompetents should have been eradicated by a free market allowing them to fail. Upon failure the assets would have been transferred into the hands of the more capable entrepreneurs who would rebuild the businesses.
Enter the dragon! Governments all over the globe are playing follow the leader in that they are slashing interest rates and printing money in order to ease the liquidity problems, As we have said before these are problems of insolvency which cannot be rectified by giving more money to what are effectively bankrupt enterprises. As we see it the financial sector has learned nothing since the days of Nick Leeson and the demise of Barings Bank and neither have our political leaders.
Successful enterprises and successful people will be taxed mercilessly and the worker bees will see their hard earned cash diluted as the inflation of the money supply dilutes their spending power. Spare a thought for those on fixed incomes such as the elderly who are trapped in a lifestyle that will spiral down to the poverty level and below as each currency is devalued by the establishment’s race to the bottom.
If you can find the time we think it is worth listening to both Peter Schiff and Jim Rogers on YouTube as their views on the current situation are clear and their opinions are candid. Peter Schiff in particular attracts a lot of negative criticism from other financial pundits who have referred to him as Doctor Doom etc, but don’t let that put you off. We tend to go along with his watchwords of ‘work and save rather than borrow and consume’ as a recipe of economic recovery. Jim Rogers is a legendary investor with a very interesting and successful career to date who has now relocated from the United States to live with his family in Singapore as he sees Asia as the future and the United States Dollar as busted flush.
We remain sceptical over the issue of our governments being able to come up with solutions and would prefer that they did not interfere with the economy. Our feet are firmly planted in the gold bugs camp as we see it as the only possible defence against the meddling of such organisations as The Federal Reserve for the next few years.
Have a good one.
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