Jun 09
8
How the US Consumers Have Bilked You and I.
Consumer incredibelus first appeared in the USA circa 1950's and managed to rapidly propogate it's commonly heard cry of hunger “I want, I need AND I’m stacked with plastic” (credit cards not “plastique”,
C4) throughout the rest of the US
satellite states.
Australia
through its Trade Treaties has become one of those satellite states by default. We are used to the concept of satelite states and often joke about New Zealand
(our closest geographical trading partner) being our seventh state.
There is another homily that is oft joked about; If you loan
a gypsy $50.00 bucks, you have a problem, in which case you would do well to
pass on the risk of the Gypsy by borrowing fifty million, then the lender has the problem
of both you and the Gypsy.
In the US
this neat little trick has been achieved since 1987 by the issuance of discounted
long bonds.
In 2001 I noticed that US long bonds (TIPS)
were being offered at a 15% discount.
Anyone with an NPV button on their
calculator can very quickly see that a five year bond paying fixed rates at 7%
on a 15% discount in a 3.15% PA CPI
environment is financial suicide for the issuer.
I wondered why the US
had to depreciate the future value of their currency in this manner.
Some would call it whoring. I would call it, selling your
mother, wife, mistress and daughters at the local market to enable you to play
the pokies on Friday night.
Pokies are fun, but who’s going to wash the dishes on
Saturday?????
The concept of selling ones own currency short for a
specific period, to assist in a large export negotiation is not a new meme. The
mechanism has been used for hundreds of years (since the UK Wool Board).
In 2002 I noticed the discount increased and continued to,
yearly, without respite till 2007. Every year the Government issued investment
bonds were offered at a higher discount than the previous year. But it’s OK said the bankers, were secured
against this policy flying south with the ducks, we have home mortgage paper to
offset the shortfall.
And we had Yen.
The Japanese Postal Bank stopped paying interest to their
account holders about the same time the US
brokers started short selling their own US Dollar.
Every financier worth his salt was suddenly borrowing
billions of Yen at .005% interest and re-lending at higher margins.
Where did the money get lent to? The Home mortgage market which
needed a way to offload even more “loan funds”.
Let me put it this way, if you had four credit cards and only
used one of them to purchase goods with, reserving the other three to make the
credit card payments when they fell due, how long would it be do you think
before you considered seriously the concept of
personal bankruptcy.
Fortunately for the Bankruptcy register, not many people do
that. They only use their credit cards to pay for important items like GST and
the banks, being oh so accommodating have introduced the home loan draw down
option.
“That’s OK Mrs. Smith, of course you can have a new kitchen
with the Italian marble hand hewn tiles. We’ll just add it to your mortgage.
You’ll hardly notice the difference in repayments, – look, see I just worked it
out on the calculator, over 40 years it’s only eighteen dollars per month on
your current (low fixed rate for the first three years) home repayments”.
Mrs. Smith unfortunately didn’t realise that the interest rates
increasing by 1% would add $3486 in interest payments alone for her $8640
kitchen.
Hah! You say, “consumers arnt that dumb”!
Oh no?
Well if consumers can work that out – then how come the
world couldn’t.
How come the world couldn’t work out that the worlds largest
capitalist economy was writing an interest cheque on it’s own future that the
world would eventually have to make good through holding a pile of paper on a
currency that has depreciated to lees than half of it’s 1999 purchasing power
parity value.
Make no mistake.
ACTA, is not about protecting intellectual property. ACTA is
about ensuring that the cheque for interest will never have to be cashed.
Think Ponzy scheme.
Think Pyramid selling
Now think US Government.
President Obama inherited a flock of sheep that have no wool;
the American people having been fleeced by previous generations of Presidents
paying lip service to money hungry industrialists with ever deepening pockets
Any economist will tell you that in times of financial
strife, the country just needs a good war to pull it out of the doldrums. .
But it doesn’t matter, Americans are used to going to war. We’ve
had the war against the Nazis, the war against the communists, the war against
terrorists. I guess the only war left to wage is the war against the people.
Err, by the way, in case there’s any doubt, that’s you and
me.
Sarbannes
Oxley ? Ha! What a joke.
I want to know what protects you and I from Politicians
continuing to run legal Ponzi schemes with your money. Yes – your taxes today
and lack of jobs tomorrow – your money.
Think about it.
Talk about it.
Blog about it.
Twitter it.
Digg it.
OK OK – for the older readers out there, that actually still
remember what a newspaper is, – if it makes you feel better, write a letter to
the editor……..
Or if you just have a few minutes and cant be bothered with writing
long political rants to all your friends, then just go out and vote for the
Pirate Party.
Well you might as well, at least their lack of a wide
ranging policy manifesto may well mean that they are the only Political Party in the World that
doesn’t have a “VE VILL CONTROL ZE VORLD AND ALL ZE MONEY, nya hah haaaaaa”
mentality.
Parting Shot.
Oh yeah – market tip #2. Any minute and down fast.
My last market tip was the same prediction for the fifth of
May. I got it wrong. I’m not a licensed investment advisor, so you should
probably ignore me.