How Freedom is Lost

How does one lose one’s freedom? First of all, lets consider this from an individual level: a man loses his freedom when he commits a crime, fails to defend himself, runs out of money, or joins an organization which requires the forfeit of certain freedoms. These are major reasons why people around the world do not have freedom. Prisoners do not have the freedom to go where the choose, eat what they want, or simply live how they want to live. The reason for this in most cases is that the prisoner has done a crime and is paying for it with time behind bars. A person living without a gun or weapon in a crime ridden street has no chance to defend himself and will have to forfeit either his life or his worldly goods in the case that someone who overpowers him enters the house. A person who runs out of money must live their life paying back loans and possibly even joining the first category of prisoner. A person who joins a secret organization such as an intelligence agency forfeits his right to go to the countries of his choosing, hanging out with certain types of people, and sharing certain types of information.

How do these things apply to a country? Exactly the same, except the consequences are not always direct and imminent. When a country habitually commits crimes against humanity, other countries will decide based on whether or not it is politically, strategically, or economically beneficial, to intervene against the rogue government. This has happened in recent history against Hitler’s Germany, Facist Italy, Imperial Japan, Vietnam, Korea, Kosovo, Somalia, Afghanistan, and Iraq. The leadership of these countries except Vietnam and Korea ultimately had to give up power. Examples of countries which failed to defend themselves span the centuries and all share the common trait of no longer being sovereign. Corsica, the island in the Mediterranean Sea shaped similarly to the United States, is owned by France. Hawaii, a neutral nation ruled by Chieftains, was annexed into the United States in the late 1800’s. The Cherokee Nation, and all other American Indian tribes excluding the Inuit, were forced into reservations by the United States. Countries, unlike individuals, do not lose their national power when they run out of money. In fact, the people of those countries lose power and must cede it to their government as money is printed by the ton to make up for the lack of real value. As the government can spend as much as it wants with its fiat currency, the people must bear with making wages that drop in value in the double digits in the span of weeks! See Zimbabwe, which boasts yearly inflation in the millions(%)! There was a point at which Zimbabwe’s currency doubled every 1.3 days, and the bank has printing 100 trillion dollar notes (see photo) Zimbabwe 100 Trillion Dollar Note. Countries also lose their freedom when they join multinational organizations such as the United Nations, the World Trade Organization, etc. I will not go into the details today of how come countries cheat the WTO by putting trade protection on certain exports yet subsidize others.

Another point about freedom that must be stressed is that once a freedom is threatened by violence and hence not performed, that freedom is lost.

Forcing Yuan Re-valuation May Yield Negative Results for USD

Obama has recently been attacking the yuan and its low value relative to the dollar, in essence what he aims to do is to increase the yuan/dollar ratio so that US debt to China actually decreases in a real sense. This is also aimed at increasing US manufacturing competitiveness towards Chinese customers and the world.

However, the low value of the yuan which is pegged to the dollar actually supports the dollar’s value and is a buffer against inflation. By allowing the yuan to freely float Obama invites hyper-inflation sooner rather than later.

Admittedly, there simply aren’t enough jobs in only the high-tech and service related industries to keep every American employed. Manufacturing jobs are also crucial to national defense, and are these industries are often at the heart of great inventions and improvements to quality of life.

For Those on Fixed Incomes, Government Bailout a Scam

Those people who get by month by month on a fixed income should know that the way that the economy is being restored will, in fact, help corporations and banks and get things back in order. However, the way the bailout is structured simply leaves no doubt behind that your dollars will be worth less in a short amount of time.

Think about it like this, banks are going under because of speculation on the prices of real estate, and the easy ways people had of acquiring loans and mortgages, all the while not being able to actually pay them back thanks to a variety of reasons. Money, which traditionally held value thanks to actually backing in gold and silver, can now be easily created using a press of a mouse button. The Internet has also created an easy way to shop, where consumers can spend money they don’t have easily and conveniently from the comfort of their own home. The average savings was abhorrently low, and most people were barely getting by on each pay check.

The result was what we now call the credit crunch, as money had vanished as speculative wealth was evaporated as prices readjusted after the bubble had popped. Some banks went under, but most major banks were given bailouts, large sums of money (in the billions), and the government decided to buy out bad assets. The burden of this bailout was placed on the taxpayer and an increase in the money supply to help alleviate the credit crunch. Interest rates were lowered to about zero, and wild programs such as ‘cash for clunkers’ were hurriedly enacted.

The problem with all this spending and the bailout plan is that the exit strategy is flawed. They plan to simply remove capital (cash) from the system after it recovers. How exactly are they going to do that? Instead, we will see a great increase in prices of oil, food, and other commodities as what more any more seems like ‘play money’ is injected into the system.

How do you protect yourself from this? As the old saying goes, if you can’t beat them, join them. Most of the people making these policy decisions have more than average savings and investments. Investments in the stock market especially in banks would be particularly lucrative as they are the ones that are being handed literally tons of cash, other investments include oil futures and commodities. It causes those who earn mediocre salaries that do not allow for savings to be at a disadvantage, as they are being left out on the beneficial side of inflation and government hand outs and instead on the disadvantageous position of slowly learning less real value per month.

As John Maynard Keynes puts it,

By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens…. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.

Who is Responsible for our Financial Crisis?

Who I ask is responsible for the financial crisis of 2008? (If you don’t feel like reading this post but have your own notions of who is responsible then please feel free to comment without reading the below).

This is a very hard question to answer, and I for one certainly do not have a definitive answer. I can, however, provide some clues as to what put us in this situation. The average American consumer saved 10% of their annual income in the 1970s, now the average consumer saves 0%. The national debt is over $10,600,000,000,000!

Going back to personal savings if Americans were able to save 10% of their income and avoid going into debt we would not be experiencing depression today. But going back to the root problem, if rates weren’t so low then people wouldn’t be so enticed to borrow so much. However if rates weren’t raised (which they were before the mortgage crisis) most likely most homeowners would be able to make their house payments.

 

Where to Keep Your Assets

As we have seen in the past few months we know that the dollar is currently at an artificially high value, and meanwhile company stock values have plummeted to record lows. As the saying goes, buy low sell high. Now is obviously the time to buy.

If you are still too wary to put your money into stocks, may I suggest buying gold or silver as they are to me only waiting to spring back up in price once the bailouts take full affect on the credibility of the US treasury and dollar.

Most importantly, you want to be debt free of course. After that, you may consider investing in some promising stocks (I definitely would not suggest short selling at this point).

So in short:

  1. No Debt
  2. No US Dollars
  3. Invest in precious metals, emerging markets, or good stocks

If you decide to buy precious metals, be careful who you buy from. Stay clear of goldline.com because they will charge you if you’re not careful 30 to 40 percent above spot price for a coin they call “collectable”. In all reality, these coins that they tout can be easily bought at price that holds a trivial spread.

Precious Metal Option

It’s better to buy at kitco or perhaps at your local coin dealer/ pawn shop for gold coins.

If you are going for silver, better buy in bulk as it is heavy and costly to ship. Again, your best choice would be to buy at a local dealer.

Emerging Market Option

Although I only have a rudimentary grasp emerging markets in general, I have done some research and experienced real growth in China. I still believe it is a good route to invest in the Chinese economy or currency. Others may suggest India or Easter Europe, but I have not looked into it at present. There are a few mutual funds out there that tap into emerging markets.

A few I can name of the top of my head are:

  • Matthews China Fund (Symbol MCHFX)
  • Matthews Asia Pacific (MPACX)
  • Matthews India (MINDX)

Good Stocks Option

I’m not going to list any stocks here, because these days you won’t find a very stable one and I don’t want to be held liable (legally or emotionally) for any losses. Do your homework and find your own.

Good luck securing your assets for the future.