Income Inequality and the Great Equalizer
The income gap continues to widen between the rich and the poor, but in another way, inequality is shrinking when it comes to the quantity, quality and variety of goods and services. The marketplace provides quality products and services at all levels of income.
Cars: the wealthy buy a Mercedes Benz Italian or Lexus; the middle class buys a Toyota, Buick, Kia or Chevy. Note that they all have power steering, air conditioning, drive well, hold up well and a good sound system. In fact the lower brands often hold up better
Hotels: the rich go to a Ritz Carlton; the middle class to a Hilton or Marriott; the poor to a Best Western or Motel 6. Note that they all have good beds, heating and air conditioning and internet service.
Restaurants: the rich go to Ruth’s Chris; the middle class go to P. F. Chang’s; the poor go to Chpoltles, McDonalds or Taco Bell. There’s quality food at all of these restaurants. In fact, I’ve seen people of all income levels go to fast food restaurants, which now offer mostly quality food at a decent price.
How about the Superbowl? The wealthy fly on a private jet and have good seats to the Superbowl; the middle class watch it on a big screen at a local bar or restaurant; but the poor have it best — they have a big party at their home watching the Superbowl on a wide HD television.
Compare the lifestyle of a very wealthy man 200 years ago to a lower middle class person today who had many more comforts and a longer, healthier life. In the 18th/19th centuries people had minimal plumbing, no electricity, no air conditioning, etc.
In sum, free-market capitalism has done wonders to level the field when it comes to goods and services.
‘The Great Equalizer’
Cell phones have been referred to as “the great equalizer.”
This single item, the smart phone, has replaced something like 50 products — the telephone, calculator, the watch, the camera, the alarm clock, the compass, the dictionary and encyclopedia, the road map, books, DVDs and more than 50 items.
The cellphone even offers a four-year college degree opportunity for free through such educational services. The first to do so was the Khan Academy. Now, dozens of colleges and universities offer free online education.
With a smartphone, you hold in your hand all the world’s knowledge and expertise.
It’s democratic capitalism at its best.
‘Cheaper and Better’
The slogan of democratic capitalism is “cheaper and better” — and more affordable. Today, almost everyone has access to a cellphone, even those who are on welfare or live in public housing.
It’s democratic capitalism at its best.
by Robson Taylor
Jack Ryan, Shadow Recruit, Rescues
World Currencies
I just saw Jack Ryan Shadow Recruit (derived from work by John Clancy). Interestingly the plot deals with a plot to collapse
world currencies. Jack, a CIA agent on Wall Street, gets suspicious when
fundamentals predict the US dollar should be going down but instead it is going
up. He uncovers a pump and dump currency scheme.
Russia is buying up trillions of weak dollars (the pump) and plans to dump all its inventory onto the market at once, timed with a truck bomb on Wall Street, causing the American dollar to collapse. It would hurt China as well because of that country's dollar holdings, and so the goal is to trigger a new world wide Great Depression with the Russian currency coming out on top of it all. The scheme is within minutes of working.
Russia is buying up trillions of weak dollars (the pump) and plans to dump all its inventory onto the market at once, timed with a truck bomb on Wall Street, causing the American dollar to collapse. It would hurt China as well because of that country's dollar holdings, and so the goal is to trigger a new world wide Great Depression with the Russian currency coming out on top of it all. The scheme is within minutes of working.
Prophetic? Many stocks and
commodities (eg silver) have been manipulated with pump and dump schemes (see
Wolf of Wall Street which is based on a true story), so why not currency?
The only difference is that currency values are so high it would take a rich country
to manipulate the values rather than just a large brokerage firm.
In case you missed Wolf of Wall Street,
It is based on the crooked broker Jordan Belfort
who during the 1980s and 90s lavished in unlimited wealth taken from buying and selling fraudulently
inflated stocks.
It
seems that currency and financial manipulation has reached a high level of
public awareness. It is odd when such a relatively boring subject as currency trading
becomes the subject of popular entertainment.
The Founding of Wall Street
There are varying accounts about how the Dutch-named "de
Waal Straat"[13] got its
name. A generally accepted version is that the name of the street was derived
from an earthen wall on the northern boundary of the New Amsterdam settlement,
perhaps to protect against English colonial encroachment or incursions by native
Americans. A conflicting explanation is that Wall Street was named after Walloons—possibly a Dutch abbreviation for Walloon being Waal.[14] Among
the first settlers that embarked on the ship "Nieu Nederlandt" in
1624 were 30 Walloon families.
In the 1640s, basic picket and plank fences denoted plots and
residences in the colony.[15] Later,
on behalf of the Dutch West India
Company, Peter
Stuyvesant, using both African slaves[16] and white colonists,
collaborated with the city government in the construction of a more substantial fortification, a strengthened 12-foot
(4 m) wall.
In 1685, surveyors laid out Wall Street along the lines of the
original stockade. The wall started at Pearl Street, which was the
shoreline at that time, crossing the Indian path Broadway and ending at the
other shoreline (today's Trinity Place), where it took a turn south and ran
along the shore until it ended at the old fort. In these early days, local
merchants and traders would gather at disparate spots to buy and sell shares
and bonds, and over time divided themselves into two classes—auctioneers and dealers.[18] The rampart was
removed in 1699.[14]
In the late 18th century, there was a buttonwood tree
at the foot of Wall Street under which traders and
speculators would gather to trade securities.[21] The
benefit was being in proximity to each other.[21] In 1792,
traders formalized their association with the Buttonwood Agreement which
was the origin of the New York Stock
Exchange.[22] The idea of the agreement was
to make the market more "structured" and "without the
manipulative auctions", with a commission structure.[18] Persons
signing the agreement agreed to charge each other a standard commission rate;
persons not signing could still participate but would be charged a higher
commission for dealing.[18]
In 1789, Wall Street was the scene of the United States' first
presidential inauguration when George Washington took
the oath of office on the balcony of Federal Hall on
April 30, 1789. This was also the location of the passing of the Bill Of Rights.
In the cemetery of Trinity Church, Alexander Hamilton,
who was the first Treasury secretary and "architect of the early United
States financial system," is buried.
In the first few decades, both residences and businesses
occupied the area, but increasingly business predominated. "There are old
stories of people's houses being surrounded by the clamor of business and trade
and the owners complaining that they can't get anything done," according
to a historian named Burrows.[24] The
opening of the Erie Canal in
the early 19th century meant a huge boom in business for New York City, since
it was the only major eastern seaport which had direct access by inland
waterways to ports on the Great Lakes. Wall
Street became the "money capital of America".[21]
Generally during the 19th century Wall Street developed its own
"unique personality and institutions" with little outside
interference.[18]
J. P. Morgan created
giant trusts; John D.
Rockefeller’s Standard Oil moved
to New York.[23] Between
1860 and 1920, the economy changed from "agricultural to industrial to
financial" and New York maintained its leadership position
In 1884, Charles H. Dow began
tracking stocks, initially beginning with 11 stocks, mostly railroads, ...
We've come a long way in a short time since the wooden wall around Wall
Street and trading at the border under the buttonwood tree, but will future
generations look at our brief century of the "Dow" as equally antiquated, perhaps even like the stone age?
It is interesting, perhaps ironic, that the Dutch, who created the first
economic bubble (ie the Tulip Craze) also founded de Waal Street.
by Dr. Robson Taylor
Revaluation of World Currencies
by Dr. Rob Taylor
Under a proposed IMF (International Monetary Fund) plan, backed by international Basel I, II and III agreements*, every currency under IMF and World Bank control will be valued based upon their assets. This means physical assets as well as the country’s ability to make future profits from such areas as oil extraction, mining, refinement, fishing, forestry and agriculture.
The more jobs a country can create to produce tangible goods, the higher the currency value. Around the world the outlook is a positive one. In countries where currencies are revalued to the higher intrinsic standard, the people will benefit from the ability to improve their lifestyles based on the value of their current and potential production.
For example Africa will see water wells drilled, irrigation systems installed for crop and livestock production to help produce exportable commodities. Many of the third world countries standards of living will rise considerably.
Gold and precious metals and any resources in a
basket of commodities used as the basis of a currency will, in concert, revalue.
The price of gold and silver could move up 50% or more relative to first world
currencies.
The chairman of the IMF, Christine Lagarde, recently
said at The National Press Club that there will be global currency
reset soon and referred to a “…forthcoming asset quality and stress tests
that will take place in 2014.”
A global currency reset was again confirmed in her speech at Davos World Economic Forum… “We need a reset in the way the economy grows around the World”.
A global currency reset was again confirmed in her speech at Davos World Economic Forum… “We need a reset in the way the economy grows around the World”.
The IMF is telling you what they want to do.
Definitely keep an eye out on what the IMF is saying.
*(See
our separate analysis of Basel III regulations)
BASEL III: How it Affects Banks, Gold and Currency
The new International Basel rules are expected to raise gold bullion's status
to a Go-To Asset for banks. Recent trends suggest bullion is indeed making strides to
regain its status as a monetary metal. For example, in a major about-face,
central banks are buying, not selling, their gold as the global race to debase
fiat currencies gains steam. Furthermore, big clearinghouses such as
LCH.Clearnet and CME Clearing Europe have begun accepting gold as collateral.
Basel III marks another step toward asset backed valuations. The next
logical step might be to base all the world’s various currencies on physical
assets and production potentials. See our analysis of the IMF currency
proposals under Revlauation
of the World Currencies
Much like the Basel III requirements for banks to back their money with 4 to 6% of reliable assets, could we be moving to a world where the value of a currency is based on what we may want to refer to as Tier I assets? This would mean that if a country has say 1 trillion US dollars worth of oil reserves, it’s currency (using a 5% asset backing formula) should be valued at 20 Trillion USD. Thus, if the country’s money supply is 20 trillion units, each unit would be worth $1 usd.
With a uniform currency valuation system, all of a bank’s deposits would by definition become asset backed allowing a higher amount of lending.
BASEL CAPITAL STANDARDS
Under Basel III, banks will to hold top-quality capital -- known as "core Tier 1" capital, and consisting of equity or retained earnings -- worth at least 4.5 percent of assets.
They will also have to build a new, separate "capital conservation buffer" of common equity; this will be 2.5 percent of assets, bringing the total top-quality capital requirement to 7 percent. If they draw down the buffer, they will face curbs on the bonuses and dividends which they can pay out.
The Tier 1 capital rule will take full effect from January 2015, with the capital conservation buffer phased in between January 2016 and January 2019. Some analysts said this showed regulators were caving in to the banks.
RE-MONITIZING GOLD TO MEET BASIL III REQUREMENTS
The new rules being adopted by top banking regulatory agencies around
the world suggest that gold's status as a monetary metal is not just an
antiquated tradition or "barbarous relic," but indeed a necessary
anchor to global financial stability. These so-called Basel III rules could
help elevate gold back to its lofty place in the global monetary firmament --
while potentially driving bullion prices significantly higher relative to many
major currencies but perhaps lower for certain undervalued currencies.
In order to prevent another 2008-style financial crisis, the Basel
Committee on Banking Supervision, which is part of the Bank for International
Settlements, has issued new liquidity and capitalization standards for global
banks deemed too big to fail. Under the Basel III rules, banks would be
required to keep a larger stash of safe assets on hand and much more in liquid
assets to weather another crisis like the one that erupted when Lehman Bros.
crashed and burned.
So how does gold come into play? Tier 1 capital is the core measure of
a bank's financial strength from a regulator's point of view. Under the Basel
III rules, gold's status would be changed from a Tier 3 capital asset to a Tier
1 asset -- making it officially a top safe-haven asset. That means gold would
enjoy a 100% risk weighting instead of the 50% weighting conferred by its Tier
3 status. So, whereas a bank's Tier 3 gold holdings would have been discounted
by 50% of their current market value, now those holdings can be counted at 100%
of their value under the Basel III rules. Thus, banks that hold gold will get
more "bang for their buck" from those assets.
As noted, large-scale gold purchasing by central banks has been a game
changer for bullion prices during the bull market of the past 12 years. Now,
under Basel III rules, the behemoth commercial banks might have to follow the
lead of the central banks to meet capitalization requirements. That means,
theoretically, that mammoth, household-name institutions like Citigroup, Royal
Bank of Scotland, and HSBC could be shopping for gold very soon -- with
market-shaking ramifications.
Gold analysts, including Blanchard and Company, Inc., have long said
that once gold again enters the mainstream, once it regains the prior level of
allocation in global and institutional portfolios that it has historically
enjoyed, its price will rise exponentially.
These Basel III rules could be the catalyst that starts that golden
snowball effect.
Blanchard and Company, Inc. agrees with Butler that "this will be
an important step in the remonetization of gold and, other factors equal,
should be strongly supportive of the gold price, both outright and relative to
that for government bonds, the primary beneficiaries of the most recent flight
to safety."
U.S. Rep. Ron Paul, R-Texas:
"Do you think gold is money?"
Federal Reserve Chairman Ben Bernanke: "No. It's a precious metal."
Paul: "Even if it's been money for 6,000 years? Somebody reversed that and eliminated that economic law?"
Bernanke: "Well, you know, it's an asset. Would you say Treasury bills are money? I don't think they're money either, but they're a financial asset."
Paul: "Why do central banks hold it if it's not money?"
Bernanke: "Well, it's a form of reserves."
Paul: "Why don't they hold diamonds?"
Bernanke: "Well, it's tradition. Long-term tradition."
Paul: "Some people still think it's money."
The above widely publicized exchange above occurred during a hearing of
the House Financial Services Committee in July 2011.
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