Where will capital flow during a time of a systemic crisis? Since 1971, capital has moved up this chart. Now it is reversing. Capital will flow into government bonds , treasury bills, physical cash, and ultimately its final home , gold. - via ZeroHedge
Alexander the Great, tutored by Aristotle, perhaps the richest and most powerful man in the world before the age of 33, was interred in a gold sarcophagus and solid gold casket filled with honey and transported by a solid gold chariot to a solid gold mausoleum in Memphis. It did not take long for various Ptolemy successors to steal the gold and move the body to Alexandria to put it on display under glass, with gold thefts every time it was moved or displayed.
Practically every war included the surreptitious movement of gold from the vanquished to the conquerors, providing stories of Chinese, Indian, Mesopotamian, Egyptian, Israel, Knights Templar, Arabic, Spanish, French, Revolutionary, Civil War, Philippines, Nazi, Korean, Vietnamese and Iraqi gold hoards accompanying inflation.
Since gold is ultimate money and power, is it any surprise Mercantilist Bankers and Treasurers tried for many thousands of years to get or control it?
*Monday December 5th, 2005 was a dark day at shaping bays and in surf shops around the country. Orange County-based Clark Foam -- far and away the world's largest supplier of surfboard blanks -- shut its doors after over 45 years in business due to a series of ongoing environmental and safety concerns.
*It's estimated that 90% of the world's blanks came from Clark Foam. Sure, there are other blank manufactures in Australia and a few here in the US, but no one is prepared to deal with the huge gap left by Clark Foam's closure. Surfboard prices will go up overnight and shapers still aren't quite sure what will happen next.
*Some folks think Clark Foam's closure is the beginning of the end.
*Grubby Clark, sole owner of Clark Foam and its patents, could throw in the towel on his long-standing battle with the EPA, effectively starting the board-building Great Depression. Can you say Black Monday?
*“This could be the surfboard industry’s H-Bomb,” says Randy Adler “I can’t even imagine how many people this will affect.”
*“This is going to affect everyone,” says a stunned Bob Hurley, of Hurley International
*Even those more apt to look for silver linings are having a tough time with this one. Overnight, the careers of hundreds of shapers and glassers across the globe are effectively over.
These were just some of the stories coming out that day in December 2005. The surf world had come to a stand still. Clark foam, the too big to fail in the surf industry had been pressured to shut its door by the United States Environmental Protection Agency. It was a shock to the system for sure, overnight the prices of surfboards had doubled and tripled, there was a panic from the industry. The future of surfboard building was uncertain, how was the industry going to survive?
In 2005 the economy was booming (bubbling), life was good, and the government did not bail out companies/industries that went out of business, especially the ones that were forced to quit by the government. Clark invented the polyurethane foam and blank designs used by surfboard shapers worldwide, in what was estimated to be a $200 million dollar (USD) industry in the U.S. alone. How could we allow a $200 million dollar industry to be so effected without the help of the government? If it was 2009, and we treated Clark Foam like the to big to fail companies of today, we the tax payers would give money to restructure, re-innovate and create something new and environmental friendly, whatever it took to be viable.
Well, government never stepped in and Capitalism roared it strength in the early first half of 2006 when shock gave away to opportunity. Diverse groups of entrepreneurs and suppliers quickly adapted and filled the void. Not only did new polyurethane companies step up, but alternative technologies popped up at a recorded setting pace. The surfing industry today is still seeing new technologies, which has pushed the sport to new levels. If you do not believe me read this article, excerpt from article:
“In the four months following the Clark closure, startup Just Foam (San Clemente, Calif.) grew from 3 to 26 employees and from 25 to 150 blanks produced daily on the strength of founder/president Scott Saunders' proprietary hybrid-TDI chemistry, which reportedly meets environmental regulations with unusually low VOC emissions.”
“In one of the more unusual developments, researchers at Sandia National Laboratories (Livermore, Calif.) are marketing TufFoam, a low-density, water-blown, modified MDI/polyether urethane foam.”
Gary Linden, now operations manager of Walker Foam (Wilmington, Calif.), a long-time Clark Foam competitor, admits that Clark's were some of the best engineered blanks in the world, but believes that Walker's TDI-based polyether urethane is denser, with better cell bonding.”
These are just a few of the examples...
With Clark Foam, polyurethane was roughly 90% of what surfboards were made of back then. Since the collapse, polyurethane has become more environmentally safe. Other new technologies including polystyrene, expanded polypropylene, compression molded, hollow(using aerospace composite technology), carbon fiber, and polyfoam have all come to the forefront in 4 short years. Each bringing with them lighter, stronger, and more durable surfboards, not to mention better performance, including Firewire—my preference in surfboards.
Unfortunately for America we have missed this opportunity for capitalism to step in. We have missed out on smaller, more innovating companies coming to the forefront and leading us out of this recession. To take us into new heights, producing new and better technologies. We have missed out on those same smaller companies to grow and to expand, to create new jobs for the unemployed. Instead we are stuck with the same companies that have made bad business decisions after bad decision while producing bad products. Now that they have the government on their sides they are "supposedly" starting to change their act, this time with the unlimited backing of us, the taxpayers.
Capitalism is a beautiful thing when is it given the opportunity to flourish. It is a shame that we are at a place which is a total distortion of capitalism. This is just the beginning, from here on out, it is going to be even harder. With the greed on wall street, the media, and the **sheeple that will hang onto Michael Moore's new movie "Capitalism", which will distort it even farther. I am sure that he will twist the movie to show that capitalism caused the economy to collapse. I believe he will not speak on that crony capitalismwas the reason.
Please understand...Capitalism is not perfect, but it by far the best economic system we have and it is not an opinion, a theory, or hope. Captain Capitalism says it best:
Our ideology is based in truth. What makes us capitalists, and free-marketers, is the fact that our belief in capitalism is not a belief at all, but rather a knowledge, a knowing that capitalism is the best system. And it is because the truth forms our ideology, that capitalism will always surpass socialism and communism as economic systems.
Please pass along to anyone who has any doubts about capitalism and the theory of "To Big To Fail", as they obviously do not know America and what has made this such a great country.
**Sheeple - It is often used to denote persons who voluntarily acquiesce to a perceived authority, or suggestion without sufficient research to understand fully the scope of the ramifications involved in that decision, and thus undermine their own human individuality or in other cases give up certain rights. The implication of sheeple is that as a collective, people believe whatever they are told, especially if told so by a perceived authority figure believed to be trustworthy, without processing it or doing adequate research to be sure that it is an accurate representation of the real world around them.
For three decades, Rep. Ron Paul has waged a lonely battle in Congress to abolish the Federal Reserve. But he has more foot soldiers across the nation today, particularly after the financial crisis, who are leading the drive for wider congressional audits of the central bank.
What would a world without the Fed look like?
You’d go back to the day that if you wanted to borrow money to build a house, somebody would’ve had to save some money. You wouldn’t have zero savings and all the credit in the world. That’s just a total distortion of capitalism. Capital comes from savings. The part you don’t use for everyday living which you have left over, you reinvest and you save or you loan it out. We were living with something absolutely bizarre that had nothing to do with capitalism. We had no savings whatsoever yet there was all the credit in the world.
So without the Fed, there wouldn’t be as much credit.
Yeah, it would be different. If you were selling me a car and the car was worth $10,000 and I didn’t want to pay cash, you could take credit from me. You’ve got to have something to measure it by. What is a dollar? We don’t even know what a dollar is. There’s no definition for a dollar. There’s never been a time in law that said a Federal Reserve note is a dollar. That’s the basic flaw. There’s no definition for money. We’ve built a worldwide economy on a measuring rod that varies every single day. That’s why it was fragile, and that’s why it collapsed. There was no soundness to it. So that’s why you have to have a stable unit of account.
If you live in a primitive society, you’d trade goods. And if you wanted to advance, then you would trade a universal good, which would be a coin. But we’ve become sophisticated and smart and say, ‘Oh, you don’t have to go through that. We’ll just print the money. And we’ll trust the government not to print too much, and distribute it fairly.’ That’s often just a total farce. People are realizing that it is.
Don’t you think the Fed has moderated the business cycle over the past century?
Yes, I think they did smooth things out. The market’s always demanding the correction of the malinvestment and the excessive debt. … Since Bretton Woods broke down, I think every recession has been moderated by the Fed. That’s why the trust kept being built. That’s all a negative. You have to get rid of the mistakes. Moderating it means that we have slowed up the correction. The fact that they have been successful is probably the worst part about it. They’re moderating the rapidity of the crash and the correction by holding the mistakes in place.
What if, years from now, we see that the Fed has returned its balance sheet to its old size and pulled that money back from the system? Would that not be a validation of its approach?
There has only been one time that I know of where they have done that significantly, to withdraw anything of significance. That was after the Civil War. They withdrew greenbacks to a degree, they quit printing greenbacks, and they balanced the budget. I don’t think you can find any other time in our history and probably the history of the world. Because it’s an addiction, and the withdrawal is always much more serious than the continuation. The immediate problem of continuing the inflation is always more acceptable than withdrawal symptoms. Politically there will be continued inflation until it self-destructs.
So you don’t think it’s possible to pull it off?
They might try a little bit. With a weak economy, they’ll say it’s better for the economy to have low interest rates. If we didn’t have a Federal Reserve today, interest rates might be market driven. A lot of people would go bankrupt, but it would benefit the people who save. Capitalism is supposed to benefit the people who save. Even though they’re cheating the people who save, they’re cheating those on fixed income and the elderly, they will not quit inflating. The pain will be too great. They’re smart enough to know? They weren’t smart enough to know when they printed. They created the bubble. All of a sudden they’re going to get smart enough to know when to withdraw this? There’s not one chance in a million that’s going to happen.
But if the Fed were to pull this off and return its balance sheet to a normal size, where would that leave you?
If they were able to shrink their assets by 50%, to a trillion dollars or so … I would say it would challenge a lot of people. But I think the economic laws are in place. It’s only going to be temporary. It’s not going to happen. The only way you could do that is what I’ve been advocating for these last several years. You’ve got to cut spending, you’ve got to balance the budget, you’ve got to stop fighting these wars, you’ve got to bring our troops home, you’ve got to quit expanding the welfare state here at home… But I just don’t think the conditions exist. In theory you could, but if you do that without shrinking the size of the government and shrinking the deficit, it will be disastrous. It won’t work.
How would an audit lead to ending the Fed?
It’s a stepping stone. I think what’s going to lead to the next step is the destruction of the dollar, just like economic events moved further ahead than my legislative process. I wasn’t getting anywhere. But the economic events demanded that we look into it. So even if this bill passes and we have more information and we’re talking about monetary policy reform, I don’t think that’s the way this system is going to be ended. I think it’ll be ended when it’s a total failure and then it’ll have to be replaced by something. It could be replaced with a more authoritarian government, a more socialistic government.
Do you think the Fed will be abolished during your career?
I always thought the day would come… This economy is going to get worse and this dollar is going to get a lot worse. It’ll take care of itself. My real goal is educating people to the nature of money so that when this system fails, that they’ll know what to do and not just say ‘Well, we need a better manager.’
“I quit when medicine was placed under State control, some years ago,” said Dr. Hendricks. “Do you know what it takes to perform a brain operation? Do you know the kind of skill it demands, and the years of passionate, merciless, excruciating devotion that go to acquire that skill? That was what I would not place at the disposal of men whose sole qualification to rule me was their capacity to spout the fraudulent generalities that got them elected to the privilege of enforcing their wishes at the point of a gun. I would not let them dictate the purpose for which my years of study had been spent, or the conditions of my work, or my choice of patients, or the amount of my reward. I observe that in all the discussions that preceded the enslavement of medicine, men discussed everything – except the desires of the doctors. Men considered only the ‘welfare’ of the patients, with no thought to those who were to provide it. That a doctor should have any right, desire, or choice in the matter, was regarded as irrelevant selfishness; his is not to choose, they said, only ‘to serve.’ That a man who’s willing to work under compulsion is too dangerous a brute to entrust with a job in the stockyards – never occurred to those who proposed to help the sick by making life impossible for the healthy. I have often wondered at this smugness with which people assert their right to enslave me, to control my work, to force my will, to violate my conscience, to stifle my mind – yet what is it that they expect to depend on, when they lie on an operating table under my hands? Their moral code has taught them to believe that it is safe to rely on the virtue of their victims. Well, that is the virtue I have withdrawn. Let them discover the kinds of doctors that their system will now produce. Let them discover, in their operating rooms and hospital wards, that it is not safe to place their lives in the hands of a man whose life they have throttled. It is not safe, if he is the sort of man who resents it – and still less safe, if he is the sort who doesn’t.”
Autumn came a little earlier for me this year, August was the first down month I have had since April and only the second month this year I haven't seen growth. August just seemed to have a lot of cool and expensive weekends along with purchasing a new TV and piece of furniture for the TV. The major loss came in my 401k which I found was an accounting mistake by me. You might have noticed as well that I added "precious metals" under my assets because I am planning on buying some silver and some gold here. I will start small and see how it goes. It will not be a investment to make money but more of a way to start protecting and creating wealth.
Lets break it down:
Cash & Savings: This is mostly because I purchased a TV which we paid cash for and a new piece of furniture for it. I also had a long weekend in Chicago for a bachelors party where the money flowed like it grows on trees. Either way I still was able to save a few hundred so I cannot complain! This bracket holds the funds for my down payment on house(which is currently on hold again), engagement ring, insurance, auto maintenance, Roth IRA(before I max it out), and vacation. This is why it can be a little deceiving, it also holds my monthly budget in it. It has about 16-17k sitting around as savings the rest are funds that are going to be used at some point over the year. The rest is used on a daily bases for covering expenses, rent, food, auto, etc...
Stocks/Brokerage: This saw steady growth and I went to sell my my past employee stock and my account has a hold on it based of updating address and such from moving. I will be cashing out on that this month along with buying a few hundred dollars of FAZ (shorting the financial stocks) even though I have lost a bit with it.
Retirement 401k: As I have been saying if the dow hits 10k or end of september I will roll half of my old 401k into an IRA and let it sit in cash until we see a major pullback. When I went to transfer it to my Vanguard account, I saw where my actual amount was smaller than what the account said, based of not being fully vested with my old company. Not sure why it was showing me the fully vest amount, but it was and that was a $3000.00 difference, ouch!
Retirement IRA: Finally got over the $5000.00 mark! This should jump next month once I rollover my old 401k. Besides that nice steady growth is what I like to see.
Debts and Liabilities - Vehicle and Credit still high
Credit Cards: Most of this is still the engagement credit card with a 12 month 0% APR, I am not going to put much of a dent into this debt until the 12 month, when I will pay it off in full. I have that money going straight into my saving account creating a little interest off of it till I pay it in full. There was a little jump in debt but it is sorta in between stage, we purchased flights up to NYC and the furniture is on the credit card but all will be paid in full before interest is assessed.
Car Loan: Same story as last month...think I have stopped thinking about selling it.
So overall August was a bad month, but in the grand scheme of things, I like where I am at. September is already shaping up to be an expensive month. I have managed to lower my rent and get my cable bill reduced, so hopefully that will help slightly. I look to be on track the next couple of months and gain in my net worth if the stock market it can hold up. We will see next month!
As many of you know, I am a huge fan of Ayn Rand and especially Atlas Shrugged. This book changed my life in so many ways* when it comes to politics and government intervention. The events in the book are being played out everyday with our government. We live in an extraordinary time and right now is an amazing time to read/re-read this book to understand what all is happening. I am giving away one new copy of Atlas Shrugged to readers who leave a comment below. See how to win below...
*one which I do not agree with Rand is complete objectivism(religion), I lean more toward neo-objectivism based on my Christianity beliefs.
If you are not sure you want to read Atlas Shrugged, check out the Quote of the week section and see if it would be something interesting for you to read. It is over thousand pages and you have to read it slow to absorb everything, trust me you don't want to read it fast!
I am honored that a publicist from the The Ayn Rand Institute reached out to me and gave me a copy to give away to a lucky reader. She has been awesome with sending me articles and asking me if I want any interviews or editorial needs. You can find out more information on the The Ayn Rand Institute by clicking here.
To Win all you have to do is leave a comment and let me know why you are intrigued by Atlas Shrugged and why you would want to read it.
Please leave only (1) comment below
Contest will run for week and half till the weekend of Sept 12th, 2009
Check back on 9/13 to see if you have won (I will also e-mail)
Make sure your state allows you to win free prizes
Please tell your friends to check out the site and leave a comment
The opinions expressed by My Money Shrugged and those providing comments are theirs alone, and do not reflect the opinions of any financial advisor. My Money Shrugged is not responsible for the accuracy of any of the information supplied. Please seek the advice of a professional for any real advice. Thanks!
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