Take a bullion pill in case of an inflation "burp", otherwise hold cash?

The following article is reproduced with the kind permission of The Gold Report:

James Dines Follows His Prediction of a Commodity Crash with Another One the Mainstream Media Is Ignoring

Source: JT Long of The Gold Report (5/3/13)

When the metals markets tumbled in mid-April, The Gold Report reached out to "the original investor bug" and author of The Dines Letter, James Dines, for perspective. He predicted a crash in commodity prices two years ago based on his analysis of a weak Chinese economy. Next, he says, will be a bond market bust once interest rates start to climb. This will lead to "a stampede to get out of bonds like a herd of elephants attempting to exit through a revolving door." How can investors protect themselves? That is Dinesism #38.

The Gold Report: What does it mean that leading stock market averages have been in Uptrends, while commodities markets are in Downtrends?

James Dines: Our "Sell" signal on China's economy in The Dines Letter (TDL) of Sept. 16, 2011, is still stubbornly resisted by the mainstream press, which instead persists in calling for 7.5% growth by China Since we perceive China as a barometer for the commodities markets, it followed that there would be a decline in raw-materials prices.

We find it astonishing that we seem to be the only voice in the world's mainstream press calling commodities markets in the last two years "a crash." Cotton down 70% from its high is merely one example. It's not in the world's headlines yet, but we find it remarkable that virtually all commodities are down, worldwide, even including precious metals, oil, uranium and rare earths. How could leading market averages be in Uptrends, presumably forecasting a business upturn, even while commodities have plunged? After all, to market things, they need to be made, with commodities, do they not? China was the biggest consumer of commodities, so we infer China's economy is in trouble, especially its banks and real estate, as predicted in our 2013 Annual Forecast Issue (pages 26-29; also The Dines Letter of Mar 15, 2013, page 7). So our next "Buy" signal on China will be crucial in attempting to discern the cyclical advent of the next raw-materials upturn.

Because of excessive government interference with interest rates, those desperate for income—including pension funds—have pushed prices of virtually all secure sources to nosebleed heights. When the Fed eventually does raise interest rates, the bond bubble will be pricked and the stampede to get out of bonds should be like a herd of elephants attempting to exit through a revolving door. What to do in such a bond market crisis? Aside from TDL's blue-chip recommendations, we always recommend dispersing assets in several "friendly" countries. Also, diversifying in golds and silvers, including Saint-Gaudens double-eagle gold coins, rather than just keeping capital entirely in fiat currencies.

The world is in what we call "The Second Great Depression," comparable with the first one, in the 1930s. As laid out in my final business book, "Goldbug!," doubling the money supply in 1922 to pay for World War I caused a great inflation that after 1929 was corrected by the First Great Depression, in the 1930s. The similar printing of enormous quantities of paper money, not backed by anything except more paper, has also resulted in the current Great Deflation, still deepening, worldwide. The soup kitchens of the 1930s have been replaced by food stamps, but the resemblance is not coincidental.

Realizing that Keynesian economics failed to end unemployment after the 1932 crash, until World War II began around 1940, enabled us to predict with specific clarity that it would not work these days either. Indeed. Historically, large quantities of printing-press money has failed to reduce the downward trend of Americans with jobs in recent years. Few believed our prediction of "The Coming End of the Age of Jobs," or that it would lead to "The Coming New Social Order," but it is already unfolding. Unemployment in Europe already ranges between 20% and 50%, depending.

It is difficult for investors to protect themselves in this situation, but we cover it as best we can. We have recommended blue-chip stocks that have a dividend yield higher than that of U.S. Treasury paper, because they are proxies for institutions seeking to park their cash in areas other than overpriced bonds. That should end when the Federal Reserve finally allows interest rates to rise, but its fanaticism in continuing to suppress rates despite the Keynesian method not working represents a triumph of hope over experience—and will not end well.

Especially shocking is the delusion that adding inflation to a deflation would somehow cancel each other out, but is in fact the futile attempt to cure a problem with its cause. Overprinting paper runs at increasing risk of an eructation of "hyperinflation"—please note it is a word not used anywhere in the mainstream press these days. Predicting a hyperinflation is so daring in today's environment that we might be mistaken, so we will have to get closer toward the end game to be more confident of it. We hope we are mistaken.

TGR: What will be the next big sector?

JD: We refer you to Dinesism #38, of the 65 that guides our methodology: "Rich or poor it's good to have a lot of cash." And you may feel free to quote us on that. Also, parking some long-term capital in gold and silver, especially during pullbacks, would be useful if a hyperinflation eructs.

James Dines is legendary for having made correct forecasts that were in complete contradiction to the rest of the financial community. He is the author of five highly regarded books, including "Goldbug!," in addition to his popular newsletter, The Dines Letter, and videotaped educational series. Dines' highly successful investment strategies have been praised by Barron's, Financial Times, Forbes, Moneyline and The New York Times, among others.

Want to read more Gold Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.
DISCLOSURE:
1) JT Long conducted this interview for The Gold Report and provides services to The Gold Report as an employee.
2) James Dines: I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions.
3) Streetwise Reports does not make editorial comments or change experts' statements without their consent.
4) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.

Arguments for gun control (1)

E-ink phone: I want one!

The problem: mobile phone visuals are terrible when you use them in a mobile way, outdoors or even in some lighting conditions indoors.

The solution: read them with ambient light, using the same sort of technology as Amazon's Kindle.

And like the Kindle, battery power is used only to change what's on the screen, so a full charge should last a week.

See reviews from the Mobile World Congress in February here and here.

All original material is copyright of its author. Fair use permitted. Contact via comment. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Climate change: the role of ash, and volcanoes

The excessive zeal of some scientists has made it difficult to discuss climate change (which, amusingly, was first headlined simply as global cooling, then global warming). But it's universally agreed (I think) that the Earth has been a lot hotter, and a lot colder, in past millenia. The question is, what's happening now?

Up in Greenland, they're now growing strawberries and potatoes; and last month the albedo of the ice sheet was lower than in any April in the last dozen years, hinting at an even bigger melt than before.

Yet there is still debate over whether Earth's total ice cover is growing or decreasing, as a Dutch study reported last month. It seems that while the Arctic's is melting, the Antarctic is piling on more.

The network of causes and effects is complex: CO2 and high-altitude water vapour (quite a lot from planes, I think) interrelate with air and sea temperature (which vary around the globe). An explanation as to why ice is melting in one place and melting in another is that particulates from burning forests and fossil fuels are settling on Northern glaciers, absorbing energy from sunlight and conducting extra heat into the ice below.

The ash can also come from volcanic eruptions - but the causal connection goes both ways. Another study, published last December by researchers in Germany and the USA, seems to show that as ice cover decreases and sea levels rise over long periods, tectonic plates are warped by the changes in their burden and volcanic activity increases.

And the causes can sometimes oppose each other. I recall how in 2010, when flights over the UK were banned because of the ash cloud from Iceland's Eyjafjallajökull volcano, we saw not grey, cloudy days but brilliant sunshine and chilly, starry nights. I wonder what is the relative importance of hydrocarbon emissions and water vapour?

Enough brickbats have been thrown at those who forgot their professional scientific objectivity in the debate. It's time for both sides to reexamine evidence and hypotheses with open minds.

All original material is copyright of its author. Fair use permitted. Contact via comment. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy.

Greenland: Accelerating ice melt?

Jason Box's Meltfactor blog reports that albedo (ability to reflect light) of Greenland's ice sheet was significantly lower in April than it has been since before 2000.

If there is a self-reinforcing feedback system here we may have to reconsider our scepticism on climate change.

We don't necessarily accept that it's all the fault of humans, though it's still possible (as reported earlier) that the additional melt may be influenced by a light-absorbing darker layer on top of the ice, of atmospheric particles from the burning of forests and fossil fuels.

UPDATE: The Guardian newspaper has caught up with the story (12 June 2013).

All original material is copyright of its author. Fair use permitted. Contact via comment. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy.

UK local election results 2013

UK (Cornwall): Shelterbox

Once a year, the Tregothnan Estate near Truro, Cornwall, opens its gardens to the public. Aside from being being a botanical safe haven for many rare plants and trees, it's the only tea-grower in England. So we visited.

The charity they sponsored this year was Shelterbox. This is a truly brilliant idea, the brainchild of Rotarian Tom Henderson OBE. It's a survival kit packed into a sturdy plastic box, and the stroke of genius was to work backwards from external constraints: what was the most weight two airline baggage handlers would be prepared to carry, and how many boxes could be fitted into a standard steel shipping container.

For £590 a pop, you get this:

Contents can be varied according to need, but the basics include a waterproof tent with raised door (protects against floodwater and creeping creatures), stove with cooking and eating equipment, and most importantly, an ingeniously designed water filter. The filter is to help prevent the outbreak of disease that tends to decimate the survivors of the initial disaster, and it can be flushed out and reused in case of prolonged encampment.

Thousands of these boxes are stored in places around the world, for maximum speed of delivery in emergencies. But the stores need topping up and you can not only sponsor a box but track where it's gone.

Fabulous. I'm contacting them to see if a local Rotarian can do a show and tell for a school; maybe you can do something, too.

All original material is copyright of its author. Fair use permitted. Contact via comment. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy.

UKIP quote of the day

Peter Hitchens:

I think UKIP is not a conservative formation, but Thatcherism in exile.

Don't know if it's right, but it flies off the page.

All original material is copyright of its author. Fair use permitted. Contact via comment. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy.

Daily Telegraph in hysterical fear of conservative policies

Mary Riddell:

So consider, this morning, what a Ukip Britain would look like. it would be a locked-down land, armed to the hilt, where good foreigners were repelled and bad ones expelled, no questions asked. It would be a country concreted over for extra jails (though never for high speed rail lines). It would be a quaint place – an old curiosity shop of matrons and smoking rooms.

It would be a nation of wild spending, of derisory taxes for the rich and – not least because all talk of climate change would be abandoned – a country programmed for ruin.

I don't understand why she's working for the Barclay brothers.

All original material is copyright of its author. Fair use permitted. Contact via comment. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy.

Wealth inequality in the US: a visualisation

Info: http://www.pewsocialtrends.org/2013/04/23/a-rise-in-wealth-for-the-wealthydeclines-for-the-lower-93/

All original material is copyright of its author. Fair use permitted. Contact via comment. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy.

Securing Energy Supply (4) - How Is It To Be Done?

"Safety and certainty in oil lie in variety and variety alone"

The reliable delivery of oil, gas and electricity represents a set of significant engineering challenges – but they have been solved.  However, disruptive and malign political forces are in play.  We have seen that the security and reliability of our energy supply is at the mercy of factors as mundane as strikes, protests and ill-conceived energy policy, as well as the more dramatic interventions of blockade, sabotage and war. A chilling prospect in every sense.

How, then, do prudent policy-makers go about securing our energy supplies ?  There are several tiers of defence and we will conclude this series by surveying the field.

Some reliability measures are put in place primarily against ordinary contingencies such as plant failure, extreme weather etc.   They may also serve against more sinister forces.

Over-capacity:  if one power plant in 20 is statistically liable to be out of order at any one time, there is a natural argument to have 21 or 22 plants in service.  Engineers being people who like building plants anyway, this solution to unreliability is very congenial to them, and when possessed of monopoly powers as many energy utilities used to enjoy, are inclined to follow this approach to excess.  Liberalisation of energy markets is characterised by reductions in the margin of over-capacity when economic factors start being given proper consideration: some assert this can go too far, a thought which we return to at the end of this piece.

Storage:  holding a strategic inventory of a vital commodity is as old as Joseph’s advise to the Pharaoh on how to prepare for the seven years lean.  This is easily organised for oil and coal; less easily for gas; and with currently-available technology near-impossible for power on any scale (aside from pumped-storage of water for hydro-electric generation where geology and geography permit).

Diversification:  as Churchill knew (see the quotation above), ‘variety’ or, as we would say, diversification of sources, is a key measure against insecurity of supply.  A century ago he was addressing the problem for the British Fleet, newly converted from coal-burning to oil, and relying almost exclusively on supplies from distant Persia.  Whatever the reason for having concerns about the reliability of any one source, it is a good idea to have several.  

The UK is among several European nations that have achieved a good measure of diversification in energy supplies, but several instances of risky concentration can be identified.  France is hugely reliant on its vast nuclear sector for electricity, and if there were to be a systemic problem (perhaps a catastrophic design fault) that caused their reactors to be closed, they would be in significant difficulties.  Famously, a number of eastern European countries are heavily dependent on Russia for their gas.

Interconnection:  when supplies are interrupted from one source it is important to be able to access as many other sources as possible.  For this purpose it is obviously best to be connected to as many other supply-chains as economically possible (a concept we shall return to below).  For oil this is generally very easy, as ships and trucks can easily be re-routed.  For coal it can be slightly more problematic, as there are many different types of coal, and coal-burning plant are often configured for specific grades.

Gas and electricity are restricted to largely static infrastructure.  Switching to an alternative supply route can be difficult, and is rarely possible unless inter-connections for the purpose have been built in advance of problems occurring.  The EC actively promotes developing new cross-border gas and electricity connections, and uprating existing ones, and European interconnection is improving all the time.

Free trade and other regulations: closely bound up with diversification and interconnection, anyone wanting to access an emergency source of supply (other than one they already own) needs to be confident that they can buy what they want from those who have it – provided they are willing to pay, of course. 

This requires a market to exist – which shouldn’t be an issue; but in gas and electricity, it cannot be taken for granted.  Even oil and coal have at various times not been fully tradable.  Gas and electricity were historically, though erroneously, viewed as ‘natural monopolies’, and anyone needing to buy (or sell) at short notice might have had nowhere to go.  In western nations, gas and electricity ceased to be statutory monopolies well over a decade ago, but in some areas there are distinct deficiencies in the workings of the ‘market’ – generally because of blocking actions by former monopolies who have lost little of their de facto dominance, and none of their overbearing arrogance.

Even where markets are working well on a good day (e.g. most of Europe), there can be issues when problems occur.  For example:  French regulations on ensuring the security of supply of La France used to be what many would deem to be irrationally strict; so that when a perfectly ordinary practical problem arose in the UK gas grid, even at a time when supplies were ample on the other side of the Channel, French operators would declare ‘problem ahoy’, and would start paying any price to fill their already well-stocked storage, safe in the knowledge that the regulators would endorse them passing through the costs of this fatuous operation to their customers.  What should have been a simple matter of UK spot prices rising to attract surplus gas from France and elsewhere, became a more serious problem than objectively necessary. 

Resolving this issue, while at the same time respecting every nation’s right to take legitimate security measures, has required harmonising regulations.  This can work well at levels where fairly effective supra-national bodies exist – the EU being one example.  Whether entities such as the WTO are genuinely effective for such purposes remains to be seriously tested.

Of the above measures, we can say that all of them are useful in times of purposeful external threats to security of supply, as well for dealing with run-of-the-mill contingencies.  Yet further steps may be contemplated against sinister possibilities.

Hardening infrastructure:  energy commodities being highly combustible and generally dependent on large, static infrastructure, they are perennially vulnerable to outright attack.  Most nations mandate at least some level of high security for these facilities, as inspection via Google Earth will readily confirm.  Since 9/11, ‘resilience’ measures have been stepped up considerably.

Diplomacy:  avoiding conflict always helps.  More positively, securing alliances designed to improve secure access to commodities is a major pre-occupation for many nations: the USA in the Middle East, and China in Africa come readily to mind.

Multi-national contingency plans:  following the AOPEC oil embargo of 1973-4, the International Energy Agency was given powers to mandate the holding of strategic oil stocks in OECD nations, and to direct the use of these stocks in emergencies.  The IEA’s direct interventions to allocate oil supplies during the embargo, coordinated in practical terms by Exxon, saved the targeted nations (in particular Holland) from even greater economic trouble than they suffered in the event.  

(Incidentally, in the mid 1990’s the IEA made a major study on how Europe would fare if ‘the single biggest source of supply’ – viz Russia – were to interrupt gas supplies for 6 months.  Even in those pre-market days, it concluded that with multinational coordination, no European nation would face complete ruin.  More than 6 months might have been a different story …)

Armed forces:  sometimes, passive and political measures are not enough, and the military may need to be deployed.  The navies of the trading world are, for example, constantly working against piracy in the Indian Ocean and elsewhere. More spectacularly, Western military interventions in Iraq have been attributed to the USA’s extended Middle Eastern oil policy – perhaps more easily asserted in the case of the first Gulf War than the second.

=   =   =   =   =   =   = 

The foregoing is a fairly pedestrian listing.  A more interesting line of enquiry stems from a simple classification of the various measures into two categories:  those which build towards self-sufficiency, and those which seek to make possible a system of mutual dependency.  In the former we would place over-capacity, storage, diversification, hardening, and armed forces:  in the latter, inter-connection, free trade, diplomacy, multi-national contingency plans and (to the extent we are part of military alliances) also armed forces.

There is a school of thought that values self-sufficiency above all other types of security.  In some spheres it may not be possible: for example, Belgium enjoys no indigenous natural gas resources whatever.  But in cases where it is possible, why would it not always be the solution of choice ?

The answer is that it might be much more expensive than mutual dependency – perhaps prohibitively so.  We hinted at an economic cost-benefit trade-off when speaking of desiring to be connected to as many other supply-chains as economically possible.

If there is an economic trade-off to be made, how might one decide an optimal degree of self-sufficiency ?  This important question is reserved for another day, concluding here with the observation that we need our politicians to make their judgements on security of energy supplies carefully: for civilisation is energy-intensive.

 

All original material is copyright of its author. Fair use permitted. Contact via comment. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

UK: is inflation and national ruin inevitable?

See the Broad Oak page for "The Quiet Collapse of the Pound."

The quiet collapse of the pound

 

The forces ranged against the British pound may be so powerful that the government is in no position to offer inflation protection to savers.

 

I show above what has happened over the past five years. Nominally, UK inflation has advanced by 17 or 18 per cent, depending on how you choose to measure it.

 

Gold has soared, and had already done so for some time before 2008, but it had been at a low point for a long time during the years of the phoney boom. I still feel that, bearing in mind the amount of extra money pumped into the economy, gold is fairly valued. But compared to other assets it's a small market and so more volatile and subject to manipulation, so for the active trader it's full of traps:

 



So let's return to the first graph and look at the currency market instead, to get a feeling for our relative performance and a hint about the future.

The euro has risen 8% over the period - not dramatic, but the EU has its own large problems.

The US dollar has risen 29% and although it is an ailing giant, the dollar is still the world's major reserve and trading currency, so when crisis hits there may be a flight to USD. Longer term, the US economy is out of kilter, like that of the UK and EU, so all three are in a quandary - the choices appear to be painful deflation and social unrest, monetary inflation with all that attends it, or debt defaults and forgiveness (which powerful creditors are determined to prevent).

My feeling is that the UK will pursue the first course until it's politically impossible, then the second (by which time the smart money will have got out, as happened in a different way in the Cyprus bank debacle).

The orange columns (except for Saudi Arabia) show the progress of the six currencies tipped for 2013 by the Money Morning website. I have no idea whether their recommendations are good. And again, I'm not one of these nimble traders that draw lines all over their charts and make references to the Fibonacci series, tramlines, head and shoulders etc. Like all professional gamblers, they're terrific until they get to the point where they sell their binoculars for one last punt. Good luck to them but I haven't got their nerve.

What I'm looking for - and what was available for 35 years in this country, until the Coalition took over in 2010 - is something for the humble saver. Something safe that will simply hold its value in spending terms, after inflation and taxation. In short, something that makes saving worthwhile, instead of a form of slow financial suicide. I don't see why the cautious, prudent saver has to choose between losing to the pickpocket of inflation, or alternatively to the croupiers in the marble-halled casino of stocks and bonds.

But we may have gone beyond the point of finding the right bank for our safe haven; we could be at the stage of backing the right country. There's a stealthy run on the banks going on now - not only in Cyprus, but capital flight from the Euro area; soon enough, I fear, there'll be a sort of run on countries.

In which case, I'd be looking for one that is politically stable, balances its budget, is strong enough to defend itself (and isn't near a psycho state like North Korea), doesn't feel obliged to join in competitive devaluation to maintain its exports, doesn't have porous borders or an over-generous welfare system, and has what other countries will still want once the international disaster is over.

Australia, with its industry-relevant natural resources? The USA, with its high arable land-to-population ratio?

Wish I knew. Perhaps I should back all the best horses in the race. But one thing seems clear to me: the UK is not one of them.

All original material is copyright of its author. Fair use permitted. Contact via comment. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Fighting the Government for savers and against inflation (2)

This series is a report on my attempts to get questions raised in Parliament about the Government's failure to protect small savers against inflation, taxes and theft by banks. Part 1 is here.

The latest news that should (ought to) turn up the gas under this issue is Matt Taibbi's article for next month's edition of Rollling Stone magazine (htp: Jesse) detailing another gigantic price-fixing swindle by banks who have previously been exposed in the Libor scandal. As Taibbi reports, not only has the door opened to reveal that virtually all markets are rigged (against us, the ordinary people), but - astoundingly - an American court has accepted defendants' argument that nobody expected the interest rate market not to be fixed.

All the more reason why you might look at the Move Your Money website.

Here are some of the newer email exchanges between myself, my MP and his researcher:

MP to me - March 3, 2013:

I am happy if you wish to work with my researcher on written parliamentary questions on this issue.

(N.B. note the "written")

Researcher to me - March 12, 2013:

[...] I understand you wish to ask ministers about maintaining the value of savings vis a vis inflation and purchasing power parity of the pound against other currencies – it would help if you could give me an indication of exactly what you would like to ask or if you could draft a question I could amend?

For instance, I’m not sure if you would like to simply ask a question along the lines of ‘ To ask the Chancellor of the exchequer what steps he has taken or plans to undertake to maintain the value of savings against increased inflation and devaluations of the pound’ -- or alternatively you might want to ask the Treasury if you have a particular scheme or strategy you would like them to adopt?

Don’t worry about phrasing, I can amend a question so that it will be accepted by the table office.

We can table a written parliamentary question to any department with ease and departmental oral questions in the house occur every few weeks, I am sure we could arrange for John to ask an oral question if his diary allows – Questions to the Prime Minister during PMQs on a Wednesday are more tricky – you can put in written Questions for oral response or try to catch the eye of the speaker if you are a member, but demand is, obviously, high and this would require John to both be in the chamber and willing to use what is an infrequent opportunity to gain significant publicity for a cause, on this issue. That’s not saying he would be unwilling to do so but I don’t know if he has an issue he does want to raise at PMQs and it might take a few months before that opportunity presents itself.

A written or oral question to the Treasury would be most feasible with a reasonable turnaround on a response.

 

Me to researcher - March 12, 2013:

[...] I have some ammo to use in framing questions, the idea being to get govt to accept that there is a moral case for protecting the value of savers' money and in fact there's a couple of passages in Hansard that strigly  [sic; intended "strongly"] indicate that acceptance in the year that NS&I Index-Linked Savings Certificates were first introduced.

It may well be true that the financial situation is serious, as your boss says - in fact I've been blogging about it since 2007 and warned of the banking crash both there and in the letters pages of the Spectator - but there is absolutely no justification for making the prudent pay the cost, or for forcing them to gamble with their money just in order to try to avoid losing it to inflation.

I wd very much like your help in framing Qs that will make the ministers, Chancellor and PM bloody well squirm.

 

Researcher to me - April 18, 2013

 

I’ve still got this on my list of things to do – You suggested you would be back in touch, but I do not seem to have a follow up email from you since the one below

Could you confirm if you have a question in mind, or if the more general one I suggested below would suffice? [The question was omitted from his email]

Me to researcher - April 21, 2013:

Sorry, been away a few days.

I don't see the general question you refer to, but since Cyprus I have two serious worries - which should apply to many of my ex-clients and people generally:

1. How to set aside money and preserve its spending value, without being eroded by inflation and taxes and without being forced to accept any kind of investment risk;

2. How to be sure that no portion of savings below the deposit insurance ceiling will not be seized in some form of bank bail-in or pseudo-tax, but be payable in the form and to the schedule expected by the saver.

I understand that Tam Dalyell was feared as a Parliamentary questioner because his questions were short, to the point and allowed no room for irrelevant waffle in reply. Do you think you could frame questions on that model?

Also, should they not be asked as PMQs rather than handed off to get some dusty reply from the Treasury? My experience of the latter pretty much destroyed my confidence in getting anything other than fluff and party political twaddle.

 

No reply received before my next email to him - April 27, 2013:

 

Further to my last email of 6 days ago, perhaps you could spare the time to look at the latest article by Matt Taibbi in Rolling Stone. It may give you some idea of why I now (as a former IFA of 23 years' experience in the financial industry) regard the whole bank and trading shebang as irredeemably systemically corrupt. Any government that wishes to retain its claim to authority needs to protect the life savings of the little people.

http://www.rollingstone.com/politics/news/everything-is-rigged-the-biggest-financial-scandal-yet-20130425

Do please let me know how you are getting on with framing appropriate questions as previously discussed.

Best wishes

All original material is copyright of its author. Fair use permitted. Contact via comment. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Fighting the Government for savers and against inflation (2)

This series is a report on my attempts to get questions raised in Parliament about the Government's failure to protect small savers against inflation, taxes and theft by banks. Part 1 is here.

The latest news that should (ought to) turn up the gas under this issue is Matt Taibbi's article for next month's edition of Rollling Stone magazine (htp: Jesse) detailing another gigantic price-fixing swindle by banks who have previously been exposed in the Libor scandal. As Taibbi reports, not only has the door opened to reveal that virtually all markets are rigged (against us, the ordinary people), but - astoundingly - an American court has accepted defendants' argument that nobody expected the interest rate market not to be fixed.

All the more reason why you might look at the Move Your Money website.

Here are some of the newer email exchanges between myself, my MP and his researcher:

MP to me - March 3, 2013:

I am happy if you wish to work with my researcher on written parliamentary questions on this issue.

(N.B. note the "written")

Researcher to me - March 12, 2013:

[...] I understand you wish to ask ministers about maintaining the value of savings vis a vis inflation and purchasing power parity of the pound against other currencies – it would help if you could give me an indication of exactly what you would like to ask or if you could draft a question I could amend?

For instance, I’m not sure if you would like to simply ask a question along the lines of ‘ To ask the Chancellor of the exchequer what steps he has taken or plans to undertake to maintain the value of savings against increased inflation and devaluations of the pound’ -- or alternatively you might want to ask the Treasury if you have a particular scheme or strategy you would like them to adopt?

Don’t worry about phrasing, I can amend a question so that it will be accepted by the table office.

We can table a written parliamentary question to any department with ease and departmental oral questions in the house occur every few weeks, I am sure we could arrange for John to ask an oral question if his diary allows – Questions to the Prime Minister during PMQs on a Wednesday are more tricky – you can put in written Questions for oral response or try to catch the eye of the speaker if you are a member, but demand is, obviously, high and this would require John to both be in the chamber and willing to use what is an infrequent opportunity to gain significant publicity for a cause, on this issue. That’s not saying he would be unwilling to do so but I don’t know if he has an issue he does want to raise at PMQs and it might take a few months before that opportunity presents itself.

A written or oral question to the Treasury would be most feasible with a reasonable turnaround on a response.

 

Me to researcher - March 12, 2013:
 

[...] I have some ammo to use in framing questions, the idea being to get govt to accept that there is a moral case for protecting the value of savers' money and in fact there's a couple of passages in Hansard that strigly  [sic; intended "strongly"] indicate that acceptance in the year that NS&I Index-Linked Savings Certificates were first introduced.

It may well be true that the financial situation is serious, as your boss says - in fact I've been blogging about it since 2007 and warned of the banking crash both there and in the letters pages of the Spectator - but there is absolutely no justification for making the prudent pay the cost, or for forcing them to gamble with their money just in order to try to avoid losing it to inflation.

I wd very much like your help in framing Qs that will make the ministers, Chancellor and PM bloody well squirm.

 

Researcher to me - April 18, 2013

 

I’ve still got this on my list of things to do – You suggested you would be back in touch, but I do not seem to have a follow up email from you since the one below

Could you confirm if you have a question in mind, or if the more general one I suggested below would suffice? [The question was omitted from his email]

Me to researcher - April 21, 2013:

Sorry, been away a few days.

I don't see the general question you refer to, but since Cyprus I have two serious worries - which should apply to many of my ex-clients and people generally:

1. How to set aside money and preserve its spending value, without being eroded by inflation and taxes and without being forced to accept any kind of investment risk;

2. How to be sure that no portion of savings below the deposit insurance ceiling will not be seized in some form of bank bail-in or pseudo-tax, but be payable in the form and to the schedule expected by the saver.

I understand that Tam Dalyell was feared as a Parliamentary questioner because his questions were short, to the point and allowed no room for irrelevant waffle in reply. Do you think you could frame questions on that model?

Also, should they not be asked as PMQs rather than handed off to get some dusty reply from the Treasury? My experience of the latter pretty much destroyed my confidence in getting anything other than fluff and party political twaddle.

 

No reply received before my next email to him - April 27, 2013:

 

Further to my last email of 6 days ago, perhaps you could spare the time to look at the latest article by Matt Taibbi in Rolling Stone. It may give you some idea of why I now (as a former IFA of 23 years' experience in the financial industry) regard the whole bank and trading shebang as irredeemably systemically corrupt. Any government that wishes to retain its claim to authority needs to protect the life savings of the little people.

http://www.rollingstone.com/politics/news/everything-is-rigged-the-biggest-financial-scandal-yet-20130425

Do please let me know how you are getting on with framing appropriate questions as previously discussed.

Best wishes

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Australia: Alternative Economics

 

I was born in Manchester England in 1950. My mother a housewife, my father a salesman in an engineering company but steadily rose to high management. He was quite conservative but could entertain any idea and judge its merits, and he liked to debate. He was quite willing to be devil's advocate and would make a spirited defense of ideas he didn't adhere to. That was when I began to question just about everything and started my career as a rebel.

 

I failed the 11+, a single test at age 11 which purported to determine if a child has academic potential. Somehow, in my last couple of years at school, I got sent to an age-old part-boarding grammar school. It was super conservative and the teachers still wore gowns and mortar boards. It reeked of tradition, privilege and snobbery. This was where I honed my and hardened my rebellious streak. I was in the headmaster's office at least once a week. At university (mech eng), I toyed with joining the Socialist Society which was the most radical group, but they said and did such silly things, so I joined the Peace Society and got to do demonstrations (peaceful of course) and started to pick up some flower-power, hippie ideals of sharing and caring, love and peace man! I began to see how unfairly money is distributed in a country and around the world. It still is, worse perhaps.

 

I managed to do enough work to graduate with honours, but did not want to get my nose to the grindstone of a career, so worked a couple of months in a warehouse stacking boxes and headed off on the overland hippie trail to the the antipodes. A couple of years and many adventures later I found myself in Australia. I was now an expert on living on a shoestring and out of a backpack. Suddenly, due to a genocidal maniac called Ida Amin in Uganda, the Commonwealth changed all the immigration rules. By immense good luck, I was entitled to be a permanent resident of Australia, just by being in the right place at the right time. It has been very difficult to come to Australia since that time.

I then put in the longest period of work by far in my life. Two whole years! Doing exploration work in central Western Australia. With one other guy, or sometimes on my own, I did 4-6 week projects in some of the most open and deserted landscape on the planet. The job paid labourer's wages, but food and swagroll was provided, and there was nowhere to spend money. Great way to save. I spend the money to buy an empty block of land at the other end of the country. From flat, desiccated, blistering desert to hilly lush rainforest in far north Queensland. 156 acres of cloud-forest on top of the great dividing range. Now to really become a self-sufficient hippie recluse, maybe even start a commune! No money left, no knowledge of how to build, grow anything, live etc, no road in, no tools ........ no problem. I invested my last few dollars in a machete so at least I could get to the place. I worked a couple of months out in the bush to buy a 1962, 3 geared Toyota landcruiser for $750. The exhaust valves were blown and many other things wrong but got it going again. I got stereoscopic aerial photos centered on my block and used skills I had acquired doing exploration to see the land around in 3D so I could spot a possible route in. 4kms long and totally unmade, it went mostly through a neighbouring farm.

 

I started building a house with very little money, no idea how, no plans, not even a sketch on the back of an envelope, no power and of course no council permission because it didn't even occur to me. I used a considerable amount of discarded scraps from local saw mills, bush poles for free, secondhand doors and windows, scrap fencing from the tip to reinforce the concrete stumps, discarded 1 inch thick boards from 3 inches wide to 20 inches. They were used in two layers for the outside cladding and cost $10 per ton on average. A local planing mill sold reject packs of planed wood such as floorboards at a fraction of the retail price. So I built myself a house of 90 sq m for $1400 complete with plumbing, wood stove etc etc. A third of the cost was the tin on the roof. 35 years later it is not only still standing but has not required any maintenance beyond a bit of paint. You can check it out if you like at www.possumvalley.com.au . It is now called Blackbean Cottage.

I built a hydro-electric system utilising a 20m high waterfall and knowledge I acquired at university. I built a water system to provide water to the house utilising a smaller waterfall and a ram pump to deliver what most take for granted:- water coming out of taps. I built sewerage systems to deal with the stuff most don't even want to think about. I enjoyed all my successes at the most menial things. I love getting things to work.

 

I got married, have 2 daughters, started doing wood craft and carving to sell at local markets, and whenever I required money, dug spuds for the local farmers. Hard work I can tell you. Anytime the farmer looks round and sees anyone on the digger with any time to spare, he finds another gear until everybody is flat out. Tractors have a lot of gears. When I started digging, spud bags had a nominal weight of 70 kgs. They mostly weighed 75 kgs as they were packed by volume and hand sewn with twine and a 6 inch needle. It was quite a skill as they mustn't leak spuds in all the handling on the way to market. On average they were filled, compacted, sewn and stacked in 11 seconds. I liked it though. It was satisfying. There is no product more important than a potato. There are products of equal value like an avocado or a cup of rice, but the humble spud is my personal favourite.

 

So at last, I get round to the subject in the title. Alternative economics. At 63 years of age, I can now analyze my chosen path in life for its economic and social benefit. I have worked for wages perhaps a total of 4-5 years. I have paid tax in only two years when I did exploration. I have also worked as a builder's labourer, a carpenter building a school in Darwin (which got flattened 6 months later by cyclone Tracy), and perhaps the best was as a ski lift operator in New Zealand. Great.... the spell-check has never even heard of New Zealand. I still don't earn enough to pay tax. I now use two houses to earn a living at B&B. It is to my great personal satisfaction that people mostly have a wild and real experience at my rainforest retreat.

 

I have mostly worked directly for myself, building things I need without the overheads of tax on what you earn, other taxes, fees, insurance, travel, profit and other costs which multiply when you employ someone to build your house etc. And of course interest on the mortgage you require to get started. So my strategy has been not to go into debt. If you haven't got the money, don't do it. I have always valued my freedom and debt is the antithesis of freedom. I have maintained my financial freedom throughout my life by being debt free which enabled me to pursue many opportunities. Of course having children is a lifetime commitment with no remission, and which I undertake gladly. So I am not free of obligation or responsibility. Please, if you escape the rat-race don't think you will have freedom. It will just morph your responsibilities onto a different landscape. Perhaps a better landscape, where your concerns are family and friends rather than money and debt.

 

My income for the last twenty years has come from 2 fully self-contained cottages. I don't provide meals so the work is servicing, maintenance and washing linen and towels. I work perhaps a few hours in the day. It is a small non-taxable income but I have no debts and few non-business payments. I have few expenses, generate my own electricity, and the biggest bill every year is the rates. So I have a small income but nearly all of it is disposable at my whim.

      

It had been my idea decades ago, to opt out of the money paradigm altogether, but I soon found that is not practical. Most of my life I have had very little or no money, arriving in Australia with US $11 and knowing no one. It never bothered me. I have lived on rice alone for weeks. Now I live surrounded by a beautiful tropical rainforest with the nearest neighbour 5 kms away. I stay at home and other people come here, give me money and go away again with a large percentage returning. I have plenty of time to do just what I want. I have done many interesting things in about 70 countries around the world. My alternative economics has served me well.
_____________________________________________

Paul's Possum Valley blog and website are here.

All original material is copyright of its author. Fair use permitted. Contact via comment. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy.

Anuta

Anuta tempts the philosopher and moralist. Its 300 Polynesian people live on the smallest inhabited island in the South Pacific and sustain themselves by carefully harvesting their natural resources. Fragile, precious, beautiful life in utter isolation - a metaphor for planet Earth in a universe where we may still turn out to be alone.

The BBC sent ex-Royal Marine Bruce Parry there in 2007; he said afterwards, "If I had to pick one tribe to go back and live with permanently — and I hate doing this, it’s not a contest — it would be the people of Anuta [...] It’s got white beaches, blue seas, good food and gentle, friendly people who have a wonderful philosophy of sharing." The communal ethic is calleed "aropa" in their language.

In 2009 the BBC returned to include the story in their stunningly-shot series "South Pacific", contrasting Anuta with Easter Island, where the tribes' competition and reckless exploitation of their ecology led to catastrophe. (The Easter Islanders are the starting point for Belgrano whistleblower Clive Ponting's 1991 book, "A Green History of the World: The Environment and the Collapse of Great Civilizations", reissued in 2007.)

BBC reporter Huw Cordey was part of the 2009 visit and made a radio programme for the Nature series, called "Anuta - An Island Governed By Love". He found that even in Anuta there are discontents, like anywhere else.

Yet we're still haunted by the myth of the happy land. As the poet Elizabeth Jennings says, "Sickness for Eden was so strong."

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Gold market crashes!

Chart: The Real Asset Co

All original material is copyright of its author. Fair use permitted. Contact via comment. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Mrs Thatcher and inflation: a letter to the Spectator

Republished from the Broad Oak Blog - original post dated 16 January 2010 (N.B. BoE M4 data from 1963 - 1981 has recently been redacted, without explanation):

Sir;

Sir Peregrine Worsthorne (Letters, 16 January) may have been right to support Mrs Thatcher for confronting the unions, but I believe he is wholly mistaken when he says she tackled inflation. Thanks to the opening up of global markets, consumer prices have been lowered by cheap foreign labour, indirectly by the importation of goods, and directly by the deliberately uncontrolled immigration of low-paid workers. However, behind the scenes there has been massive long-term monetary inflation, the woeful consequences of which we are now merely beginning to suffer. Economics may seem rather dry, but its implications are correspondingly fiery and so I hope your magazine will allow room for explanation.

Comparing GDP with (M4) bank lending figures from the Bank of England’s website, which gives data from 1963 on, we see that annual increases in lending almost always outstrip increases in GDP, but sometimes far more so than others. The worst was in 1972, when M4 increased by 35% (GDP grew by only 12%); the fear of monetary inflation and its potential effect on exchange rates may have been a major factor in OPEC’s decision to hike oil prices in 1973, which triggered years of high price inflation in the UK and the humiliating IMF rescue in 1976. Lending increases dropped below GDP between 1974 and 1977, then resumed ascendancy, though not in time to rescue James Callaghan’s premiership.

But inflation did wonders for Mrs Thatcher. The average annual excess of M4 growth over GDP in 1964-79 was 2%; from 1979-1990, the “Thatcher years”, it averaged 8% (and about 4% p.a. thereafter). The results have included overspending on luxuries; the loss of jobs and industrial skills; the export of machinery and tools; and a huge exaggeration of property and stock valuations. Worse, we now have a large class of economic dependants, both home-grown and recently imported, whose support costs cannot be externalised as easily as our manufacturing capacity.

Sir Peregrine may not divine in Mr Cameron the architect of our rescue, but I fear the situation may now have developed well beyond any man’s power to amend without reform on a scale that may not be entirely possible in a democratic society.

Mrs Thatcher and inflation: a letter to the Spectator

Republished from 16 January 2010 (N.B. BoE M4 data from 1963 - 1981 has recently been redacted, without explanation):

Sir;

Sir Peregrine Worsthorne (Letters, 16 January) may have been right to support Mrs Thatcher for confronting the unions, but I believe he is wholly mistaken when he says she tackled inflation. Thanks to the opening up of global markets, consumer prices have been lowered by cheap foreign labour, indirectly by the importation of goods, and directly by the deliberately uncontrolled immigration of low-paid workers. However, behind the scenes there has been massive long-term monetary inflation, the woeful consequences of which we are now merely beginning to suffer. Economics may seem rather dry, but its implications are correspondingly fiery and so I hope your magazine will allow room for explanation.

Comparing GDP with (M4) bank lending figures from the Bank of England’s website, which gives data from 1963 on, we see that annual increases in lending almost always outstrip increases in GDP, but sometimes far more so than others. The worst was in 1972, when M4 increased by 35% (GDP grew by only 12%); the fear of monetary inflation and its potential effect on exchange rates may have been a major factor in OPEC’s decision to hike oil prices in 1973, which triggered years of high price inflation in the UK and the humiliating IMF rescue in 1976. Lending increases dropped below GDP between 1974 and 1977, then resumed ascendancy, though not in time to rescue James Callaghan’s premiership.

But inflation did wonders for Mrs Thatcher. The average annual excess of M4 growth over GDP in 1964-79 was 2%; from 1979-1990, the “Thatcher years”, it averaged 8% (and about 4% p.a. thereafter). The results have included overspending on luxuries; the loss of jobs and industrial skills; the export of machinery and tools; and a huge exaggeration of property and stock valuations. Worse, we now have a large class of economic dependants, both home-grown and recently imported, whose support costs cannot be externalised as easily as our manufacturing capacity.

Sir Peregrine may not divine in Mr Cameron the architect of our rescue, but I fear the situation may now have developed well beyond any man’s power to amend without reform on a scale that may not be entirely possible in a democratic society.