What Is A Market? How Does One Define A Market By Wayne N. Krautkramer

A recent article, POP GOES THE REAL ESTATE WEASEL! PART 2, generated a number of comments, questions, and complaints from my readers.

Before we go further, let me state that we are going to be talking about real estate as an investment vehicle, not just the once in a lifetime purchase of a home to live in, raise a family, and then to retire in a condo of choice on the beach in the Costa del Sol, Spain, or Puerto Vallarta, Mexico .This is a lifestyle choice, not a scheme to get rich flipping condo’s and houses during a bull market.
The main issue was the definition of a market! I stated that Real Estate is not a real market, because you are unable to buy and sell at the market. When you sell at the market in real markets, you will usually be filled (the transaction is completed) in a matter of minutes. I am referring to the Stock, Commodity, and Bond markets.

I further said that when you sell in Real Estate, the question is to who? Certainly not to the appraisers, or the brokers. When you put Real Estate "on the market", all you are doing is letting the salespeople know that you interested in selling! When, to whom, and at what price is unknown, and may be unknown for a long period of time.

The first and biggest problem you encounter in Real Estate is price. What is X property actually. worth? Both the potential buyer and seller are working in the dark. So proper valuation becomes paramount in the analysis. Rarely does the occasional home buyer have the experience to judge the truth of what they are being told.

The Real Estate brokers will always try to sell a "live one", always claiming that this is the time to buy, and that the prices always go up! "They aren’t making any more land" is their big mantra. Using this argument as a basis, properties in Rome and Greece should be selling in the billions, as they haven’t made any more Greece, or Rome, in the last few millenniums.

The other sales claim is that this property is unique. Another very dubious argument in a world of tract housing, and mini malls. I personally love to hear them use this argument in Phoenix and Las Vegas, where even the land is just one huge desert.

And Real Estate agents do work on a sales commissions, which is based on the selling price. Yes, the more you pay, the more they make! There are fixed commission brokers, but too few to mention here! So reliance on brokers for the accuracy of prices is a dubious premise.

Real Estate appraisers have now become notorious for overapprasials But then they do work for the Real Estate Agents, and the Mortgage Bankers, not you. When you listen to an appraiser’s report, just ask "Is That An Offer? Watch the story shift!

Real markets don’t have this problem. You want to know the price of corn, wheat , unleaded gas, crude oil, IBM, Google, Microsoft, General Motors bonds, or US bonds, just look at the large number of quote services available. In many cases, you can even see 10-25 years of price history, complete with a price chart that is based on actual exchange prices.

So you know with absolute certainty what people are paying for that stock, commodity, or bond.

Quotes are not subjective appraisals.

Of course these prices change over time. But you do know the real price right now. In real estate, you are speculating on both now and the future. That’s too many variables for me. No equation can be solved unless there is a least one known (fact) in the equation.

We don’t need to get this sophisticated to refute real estate as a market.
Let talk about supermarkets. Imagine a supermarket where there are sales clerks and clericals waiting for your visit to get a list a what you want, and then calling their friends to see they have any items that they want to sell. Then they get back to you, and tell you what’s available, and how much they want for it. Of course, none of this is guaranteed by this supermarket.

I don’t know about you, but I go to markets where they have an inventory of food for sale, and all I have to do is agree, or disagree with their price. They are a making a market in food. We would all starve to death if we were waiting for some hookup contact to get back to us.

Real people, in a real building, having an inventory of real products, that they purchased with real money, with returns and refunds available for dissatisfied customers is my idea of a market. This is an idea whose time has come.
This real estate market concept would be funny if they didn’t charge so much in hookup fees. According to my sources, the national average as of this month for real estate commissions is 5.1 percent of selling price. That’s some $12,750 USD for a hookup fee on a $250,000 house! This is funny. It does explain why every 3rd person I meet is "in real estate". This has to be the most expensive bulletin board service in the known galaxy.

Let’s address that $12,75O USD commission. It is the admission price to buy a $250,000 USD house.

But what would it pay for in a real market?

At the average commission rate ($15.00/contract) in the commodities business, that would be the commission to buy 850 futures contracts
In the case of Gold, assuming a closing price of $550/oz, that $12,750 USD would pay the commission for $46,750,000 USD of Gold.
Another way of looking at this is say that the commissions for $250,000 Gold would be 4.6 contracts of Gold for a commission cost of some $68.20 total
Do you feel like you’ve been had yet.? But wait! We have more "you’ve been had" for you!

In the case of Crude Oil, that commission would cover 850,000 barrels of Crude Oil worth some $51,850,000 at today’s prices

The commission cost to by $250,000 worth of Crude Oil in the futures markets is $60.00 at today’s crude oil prices.

In the case of Google, that commission is the admission price to buy some 1,275,000 shares through Ameritrade. Google had a verified closing price of $369.00 USD on 2/17/2006. The market value of that many shares of Google is some $470,000,000.

The commission cost to buy $250,000 worth of Google stock is approx. $10.99 through Ameritrade.

And in real estate, this only gets you a measly $250,000 house in a market that has no liquidity, no accurate quotes, and no exchange guarantees to force the performance of the broker. And let’s not forget all those other costs, such as closing costs, insurance, and the biggest selling point, the negative dividend! You call this maintenance, and property taxes. Sure, you get a tax deduction! Otherwise, no one in his right mind would ever buy residential real estate.
I must have a vision problem, because I just don’t see what you get for this ridiculous hookup price in real estate!

From an economic point of view, it’s a disaster. The transaction costs are too high to "trade" real estate. And the other problem is, what if your wrong on your forecast? You can’t just turn around and say sell me out "At the Market" to your local real estate hookup network. There is no market for real estate. If there is a real estate exchange that makes a market in houses and condo’s, please e-mail me immediately. Inquiring minds want to know!

This is the part of this article where we can have some fun exploring alternative scenarios for your hard earned money.

Alternative Scenario # 1
You take the $12,750 commission that you were just about to pay to the Real Estate Hookup Network. Take the money and place with a commodity broker. Buy, or sell, 37 contracts of corn, as that is how much margin you have in your account. Sell out your position when you have a 15 cent profit. Take your profit of $27,750 and go on vacation! Then take the original $12,750 and give it to the Salvation Army. This way you won’t feel guilty about all those former Real Estate Hookup Network employees who are now living on the streets. The soup kitchen will always feed them, and they will receive an uplifting sermon about the evils of chasing money while they are eating.

Alternative Scenario #2
You take the $12,750 commission that you were about to throw away, give it to you commodity broker, Sell a few Bond contracts short, and watch all you friends lose their houses as their VAR mortgages begin to increase as the interest rates rise. After this has happened, take your profits, and buy their foreclosed houses with the profits. Then have them over for a barbecue in their prior residences to show them your appreciation for giving their houses to you.

Alternative Scenario #3
You take the $12,750, put the money into a good discount stock broker, sell short the 2-4 biggest capitalization housing stocks, and wait. Then take the humongous profits that you have made, and buy a failing Real Estate Brokerage operation. This way you have all remaining suckers paying you the Real Estate Network Hookup fees. Then you hire a really hard ass high performance manager for the business, and then move to the Costa Del Sol, Spain, or Puerto Vallarta, Mexico. As Oprah would say "It’s all good".

We could go on forever with this scenario generator, but it’s time to close the article

We hope you had as much fun reading the article as we had in writing it. We’ll put the Real Estate Hookup Network to rest with that famous California Valley Girl exit line, "See Ya, Wouldn’t Want To be Ya!"

Wayne N. Krautkramer

http://onlypill.tripod.com/factsthebrokersandfinancialreporterswonttellyou/
Prior Real Estate articles are found below:

http://onlypill.tripod.com/generaleconomics/id26.html
http://onlypill.tripod.com/factsthebrokersandfinancialreporterswonttellyou/id37.html

Peak Water? By Mish

Not only are risk preferences such that people are willing to speculate heavily on home price appreciation, they also seem willing to take a gamble on water supplies at the same time.Please consider Vegas builder's Mohave County plan stirs worries:

If Arizona lawmakers want a reason to rethink the state's rural water laws, Earl Kemp figures he's stuck dead center in the middle of Exhibit A.Kemp watches daily as earth-moving equipment rumbles past his home in rural Golden Valley, near Kingman, pushing aside dirt and desert scrub as a Las Vegas developer prepares to build the first of more than 130,000 homes. It's an eye-popping plan that, when the final shingle is nailed in 20 or 30 years, will leave behind a city the size of Mesa in a 40-mile radius.The developer, Jim Rhodes, assembled ample land and promised to build roads, parks, schools and shopping centers. What he couldn't promise, not with certainty, was that he could provide enough water for all the people, a failing Kemp thought would doom the project....

to be continued: http://globaleconomicanalysis.blogspot.com/2006/02/peak-water.html

I’ve been thinking about the Chairman By Fred Cederholm

TH*NK*NG (the CHAIRMAN) Column for on/after Feb 19th, Fred Cederholm)

I’ve been thinking about the Chairman. Actually I’ve been thinking about the Fed, Bernanke, Greenspan, interest rates, savings, tightropes, and Russian roulette. The Chairman and the Governors of the twelve Federal Reserve Banks (who run/administer Uncle $ugar’s central banking system) impact our lives as much as the Chief Justice and Justices of the US Supreme court, and eminently more-so than the President and the Congress combined. But… they, like the Supreme Court Justices, are appointed to their offices, not elected.

You see, Ben S. Bernanke succeeded Alan Greenspan as Chairman of the Fed on January 31, 2005. He is eminently qualified and holds a “platinum” resume for the job. Last week, Bernanke addressed Congress for the first time as Chairman and his words were clear and well received by the financial markets. Controlling inflation will be a priority; meaning we can expect more interest rate increases in the near term. We also know from earlier writings and speeches that he greatly fears deflation – the situation where the price of goods/services drops because consumers are not buying. They just do not have the funds, and they cannot get them.

Alan Greenspan is also a brilliant man. But… during his tenure as Chairman, we saw the unprecedented growth of our National Debt and money supply (the printing of money). BOTH more than doubled! While blame for the recent explosion of the Budget deficits rests with a profligate Congress, and a President who has yet to exercise ONE Presidential veto; Greenspan sought to keep the global economy rolling by taking interest rates effectively to zero for years. It is the Chairman and the Fed Governors who “create” and regulate the funds available. By a series of 14 quarter-point increases, rates are back in the neutral zone.

Zero interest policies did not work for Japan throughout the 1990’s, and have not worked for US/us in the past ten years - either. Cheap money kept Americans consuming/spending, but building McMansions, acquiring the latest technological toys, and driving SUV’s did not lay any foundation for future growth and prosperity. Greenspan’s “solutions” only compounded our underlying problems. We’ve had the party, now Bernanke must keep financing it.

The US is presently “thriving” only because of the largesse of foreigners. The Japanese, the Chinese, the Euro Zone, and the Arab OPEC’s now hold over 45% of our outstanding privately held (national) debt. Our record trade deficits are sucking up approximately two BILLION dollars a day in additional foreign “investment” to keep Americans consuming goods and energy at present levels. Our national saving’s rate has been running near zero for some time now. In 2005, it was FINALLY admitted our saving’s rate was negative – meaning we consumed more than our incomes and capital appreciated - combined. We, as a nation, are “eating our seed corn” and selfishly deferring the pain and belt tightening to future generations.

The Fed and its policies can make or break an administration. Their monetary and fiscal policies provide the financial “lubricants” for the American (and global) economies. How they manage the buying power of the US dollar by controlling inflation and preventing deflation has worldwide implications. But… so many factors which will impact the buck and the future of interest rates are now beyond our borders and the Fed’s real control.

Bernanke will face challenges that go far beyond walking a tightrope. He will be playing Russian roulette with five bullets in the revolver’s chamber. Instability in the Middle East is a bullet. The escalation of energy demand and resultant price increases is a bullet. The levels of outstanding consumer and mortgage debt are a bullet. The twin deficits (budget and trade) are a bullet. The record level of the foreign holdings of our debt and our reliance on the huge daily infusions of additional foreign capital are a bullet.

Chairman Bernanke and the Governors of the Federal Reserve Bank face truly hard decisions. Will they do what is necessary in the best/long term interests of this nation’s survival, or will they do what serves current political/financial expediency merely deferring and compounding the problems? I hope and pray they make the right choice. I’m Fred Cederholm and I’ve been thinking. You should be thinking, too.

Fred C. asket@rochelle.net

Copyright 2006 Questions, Inc. All rights reserved.

To “audit” this column and to learn more about the subjects discussed, please check out:

Transcript of Bernanke’s Testimony before Congress Wednesday, Feb 15th, 2006 http://www.washingtonpost.com/wp-dyn/content/article/2006/02/15/AR2006021501367. html

A Dangerous Game of Global Poker
http://baltimorechronicle.com/020105Cederholm.shtml
Who Will Hold, Who Will Fold, Who Will Up the Ante?
http://www.vheadline.com/readnews.asp?id=25144

Is the Housing Market going to Crash?
http://baltimorechronicle.com/020105Cederholm.shtml
Home Ownership was a Central Component of the American Dream.
http://www.vheadline.com/readnews.asp?id=29256

In a effort to smooth out the Crests and Troughs…
http://www.vheadline.com/readnews.asp?id=46219

Perspectives, Background, Time Deposits, Investments…
http://www.vheadline.com/readnews.asp?id=46319

A Forensic Accountant Knows Better than to Believe This and Now so do You
http://www.vheadline.com/readnews.asp?id=46415

Invariable Rules By SB Kayser

From the rants and observations series

Several times and while discussing the world events, I have been asked if I knew the Truth. My knowledge being limited, I sincerely have sincerely no clear idea as how to define the Truth but surely can describe what "It" is not, based on 6000 years of history ... So here we go:

Why Does History Repeat itself?

Because we always repeat the same mistakes, that's as simple as that. It is pure intellectual masochism to come up with excuses such as:

"there will always be someone to take over"…

"the world will never change, masses are sheeple but the task of the government is making sure that everybody gets the minimum educative requirements"…

"without gov'ts' intervention, there would be chaos"…

"previous empires collapsed, right, but this time it is different" ...

"Humanitarianism must be enforced otherwise more than half of the world would be in deep poverty by now"...

"Man is fundamentally evil"... etc.

So let's consider some of the most important "Invariable Universal Rules"

• The fate of societies will always depended on Man's abilities to overcome linear thinking. Man too often projects himself into the future with his contemporary views while neglecting that Evolution is exponential. It is then very easy to always fall short and blame other factors. Alas forgetting the "exponential side effect" may well lead to Judgment Day. Lies and fallacies which are not addressed will require additional lies and fallacies to hide the previous ones, and so on, until saturation is reached. Pop goes the bubble of cherished delusions!!!

• Man' self-interest, own survival and pursuit of happiness are ultimate invariable rules. The human nature has not changed since the beginning of Mankind. Not acknowledging this will doom whatever forecast. When people are hungry, forget about spirituality and responsible behaviors. So from there, the only conclusion is that everything is linked to economics, thus:

Everything is a matter of supply and demand.

• Improving ones's intellect and fast is necessary because of competition itself. Laziness will always be punished, one way or another and in due time. Sometimes it may take generations to come true though. Curiosity and intellectual stagnation are antagonists. Centralization of power (by a gov't or whatever monopoly) prevents people from thinking straight because instead of thinking for themselves citizens must choose among their own gov't' s proposals. And since Elites always make the rules for themselves...

• There is no such thing as giving particular rights to *some* humans or entities because of the self-interest of Man. Socialism and Corporatism are deceptions. Today corporations are sponsored with taxpayers' money, so workers can get a job they are said. Alas when times are bad, cartels happen to mass-lay off quickly. Corporatism today comes down to Corporatocracy. "Fascism should more properly be called corporatism because it is the merger of state and corporate power." Feudalism at its finest. As for socialism, it is a system that authorizes the legal plunder by its citizens. Socialist beacon Sweden collected an awesome 63% of GDP in taxes. How long can it last? Socialism is a political system that denies the validity of property rights. Under socialism and corporatism, in other words Collectivism, Man loses his sovereignty.

• However global corporatism is on the brink: in January 06 we'd read in the the times.uk that "fake goods" explosion may reach $2,000bn within 20 years. Twenty years is an optimistic scenario considering the exponential factor. Nevermind, now let's take a look at the real situation: first corporations take over the world with "fake money/loans", relocate in China & Co where they exploit sweat shops, all of this while eating the biggest pieces of pie of the world economy and thus killing the competition... counterfeiters who follow the path of the least resistance and envy the success of those world famous brands unleash their knock-offs whose money is being laundered into the system, just like the money linked to the war on drugs.

• Most of the people do not cope well with "rationality" because of the so many fallacies taught as "conventional wisdom". Rationality is everything that can be proven with "sound" numbers and the help of logic and reason. Logic and reason often (if not always) agree with the ethics of self-esteem but also self-interest and therefore seem to be an obstacle in our Judeo-Christian societies. Because of the Natural Laws Of Unintended Consequences, logic and reason harm much less humans/societies. There is no free lunch, Mother Nature wants us to be fully self-responsible ultimately. And turning a blind eye to this fact is debasing Nature. Humanity ought to adopt mathematical thinking as soon as possible considering the merging of physics, philosophy, spirituality and economics which is currently taking place. Everything in the Universe is ruled by mathematics and our intellect ought to follow that very model.

• Demand and supply are balanced when consumers know the "truth" and the meaning of sound economics, why currencies must be backed by an intrinsic value. Today we've a worldwide mix between socialism and capitalism: mixed-economy is a sign of intellectual chaos. People often blame capitalism and free market theories while ignoring that central banking is the 5th plank and taxation is the 2nd plank of the Communist Manifesto. Our current financial system is in fact mainly inspired by collectivism. Free market is just an appearance.

• Knowledge is power and infinite, hence certainties DO NOT exist. A perpetual objective stance and open mindness ought to be adopted toward everything, If you wish to believe in something that cannot be verified rationally/empirically, keep it at home but do not force it on people (ie: religion/faith)

• If You Expect a Nation to be Ignorant and Free, You Expect What Never was and can Never be Jefferson once said. Intelligence will forever rule ignorance, directly or not. Conclusion: ignorance is the root of all evil. Existentially the challenge will always be **Man vs Himself**.

• Violence does not and cannot exist by itself; it is invariably intertwined with the lie" is a very famous quote by the dissident Alexander Solzhenitsyn.
  

• Free Speech is the only tool to gain/access knowledge/Freedom. Free Speech and Knowledge are the nemeses of Power. When everybody "knows", nobody can take over.

• It is thus in the self-interest of "The Powers That Be" to keep you in the dark, poor and stupid. Power is addictive. Power corrupts and absolute Power corrupts absolutely. All empires have collapsed, remember? So why supporting them any further? Too much power is always a sign of (hidden) abuse and crimes. Did you ever see a "fat lion" in the wilderness?

• So why letting oneself rule by professional liars? Wars and financial crises are gov'ts' failures, yet the gov'ts always get away with it. All those endless reforms are the proofs that the gov'ts always fail. Can you name one gov't program which has worked out? Look at the UN for example. More than 50 years of failure. This infamous organization has not been able to solve poverty, corruption, famine and genocides.

• From there it only takes one step to conclude that masses are afraid of freedom. They'd rather choose tyranny and slavery instead. How rational is that very fear?
  
• So masses condone the use of force and coercion, say nothing when their gov't kills foreigners/dissidents at home or abroad… the problem is that preferring coercion over freedom calls for many double standards, all of which causes social disruptions and is the root cause of military conflicts. For example, is it okay to say: if you're my friend, you can have nuclear weapons?. Considering the nature of Power itself, why not abolishing the concept of standing armies once and for all?

• Double standards allow some wars to be called "genocides". But all wars are genocides. All wars are about racket and power. All wars are immoral therefore and above above all delusions - because lawmakers on both sides of the conflicts never tell their citizens the truth. As long as there will a majority of people unaware of the true nature of power, there will always be someone dreaming of becoming the master of the Universe.

• Remember, the ultimate value is "survival". Man is capable of perfection but if you make sure to keep him busy fighting for his own survival while teaching him irrationality, you will morph him into a beast (or a sheep) eventually.

• When gov't fear the people there is liberty, when the people fear the government there is tyranny is a famous quote by Thomas Jefferson. Lawmakers live in anarchy among themselves and always make the rules for themselves, hence more transparency and caution are required. The bigger the centralization of power, the bigger the threat. Any monopoly is the wolf in sheep clothing.

• Man is not fundamentally evil but extremely gullible. He believes that force and coercion are the only way to solve problems. But violence and coercion beget more violence. One of the best examples today is the so-called "war on drugs".

• There is no such thing as a group enforcing Human Rights. Human Rights start with human sovereignty and thus self-responsibility, free speech and free will. There is no free will without Knowledge but barbarism. There is no such thing as a forest. All we can see is many trees. It is impossible to save all of them. Failures must be seen as an existential experience.

• Don't ever trust a majority because it is trendy/secure or seen as conventional wisdom. Knowledge never stagnates but evolves constantly. Masses' opinions are like killing highways.

• Democracy is the rule of the Majority. Democracy is potentially the most dangerous of the political systems. All political parties have been infiltrated by powerful lobbies and are now corrupt to the core. The Elites use the word "democracy" to enforce "divide to rule/conquer" … Plato once said: all democracies descend into despotism. Socrates abhorred democracies too by the way. Democracy works only for a small entity, such as a village. On a large scale it is the mob rule. Even The Founding Fathers knew about the democratic evil. This is why they made America a Republic. If democracy were so good: why is America a 72TN credit bubble ready to explode? Why do we have a global war on terror which might last longer than the Cold War?

• The ultimate conclusion is that people must stop seeing the gov't as an entity which can solve all problems and above all redistribute wealth. It cannot. Because every human being follows his own instinct of survival - and his own visions of pursuit of happiness. Principle of Liberty Goes Along With Self Ownership (slide show)

• Only the supply and demand can rule Man' survival when "free speech" is available and truly enforced by societies. Dissenting is the task of any Freedom Lover. In the early 1550s, Etienne de la Boetie already questioned the system when he wrote The Discourse of Voluntary Servitude.
  
• There are only two political systems: collectvism (central govt planning) and individualism (empowerment of human sovereignty). Individualism protects the common man from powerful corporations.

• Central gov't planning always lead to fascism because Power is only self-interested in growing bigger and a fundamentally corrupt concept... Don't let yourself fooled by the the lesser evilism. Unless a theft or a killing is at stake, intervening in the others' lives by enforcement is morally wrong. Taxation is unethical because everybody cheats on his taxes when possible. In the long run taxes always increase and become an unbearable burden. Not to mention that they do not achieve their goal: if they were how can we explain that 10 trillions of dollars of dollars didn't help eliminate poverty in America. Taxes for social programs are morally wrong because they put communities into a deep debt-black hole eventually. They are never enough because of Man' self-interest and natural path of the least resistance. Programs help plunder societies, transfer wealth in the hands of a few and corrupt the voting process. Gov'ts do not sponsor wars but the citizens. Taxation is the power to destroy.
  

• Charity: everything that is not voluntary and benevolent is doomed to fail. Enforcement of humanitarianism is a deception: 20% of the aid actually goes to the poor! Natural laws punish the enforcement of "good intentions" that do not take into account logic and reason. This is why charity only works extremely locally. Taking care of the poor in one's neighborhood is key. There is no such a thing as saving the world. To act globally, act first locally.
  

• The business of lending money called usury is unethical but accepted by our "want-it-now-culture". For lenders everything is alright as long as consumers do not forget their minimum monthly payments. Usury has been denounced by almost every major spiritual leader and philosopher of the past three thousand years. Plato, Aristotle, Cato, Cicero, Seneca, Plutarch, Aquinas, Jesus, Mohammed and Moses are just a few. "What do you think of murder?" Cato asked when referring to usury. There are more debt-slaves today than four centuries ago the National Geographic revealed in 2005. How many citizens from the so-called rich West know that Foreign aid from rich to poor countries totals $50 billion annually while $500 billion in dirty money flows from poor to rich? Despite the facts, many economists claim to have an ethical arguments defending usury, it goes without saying that their cherished delusions (ie: plots to enslave the world) do not know any boundaries... If you knew that piling on debts was bad for your country and beloved ones in the long run, would you still be looking for loans to live beyond your means?
  

Ignorance not bliss: It has been a quite long while that I have spent some time to warn people around me, told them about the economic hit men. Most do not seem to care. Though, let's not throw stones at them too quickly, such a stance is easy to interprete: after all why should they bother, the gov't right now seems so good to them, doesn't it? Why accusing some of plundering the world when we, in the West, live so richly and seem to have the "right leaders" who seem to have everything under control...

Err, by the way a headline said Feb 06 that the US on track to hit debt ceiling mid-Feb. Do you hear the ticking bomb? When the system will fall apart - implode completely - just remember that the problems always were " the centralization of planning along with dishonest money and usury" the culprits. "Free Market along with honest money and sound economics" are the root of all good. Alas it is something "they" fail to teach us.

Are they stupid or do they do they have a plan?

One last word: In order to undo what the Elites have done since millennia we ought to believe in the fundamental smartness and creativity of Human Beings. We ought have the courage to debamboozle history. We ought to comprehend that there is no race/culture more evil than another one in the end: one needs to be two to tango. We ought to acknowledge that we all have equally suffered. We ought to understand that the first step toward a change will demand the reform our global monetary system because only honest money can help Man think straight ... everything being a matter of demand and supply, remember?

If Tyranny and Oppression come to this land, it will be in the guise of fighting a foreign enemy. – James Madison. ....... "We know in the not too distant future, a half dozen corporations are going to control the media. We took this step (merger) to ensure we were one of them"--Time Warner spokesperson...... What luck for rulers that men do not think. -- Adolf Hitler (see our quote page for more...)

previous: Hypno$i$ , A Short Story About Billions and Trillions

The elitist economic boom By Joost van Steenis

Bangkok, February 12 2006

Dear reader, this is the 68th Letter of an Autonomous Thinker

The Asian elite benefits in the first place from the the Asian economic boom.
"China is trying to sweatshop its way to success through low wages and the exploitation of a workforce." (Bangkok Post 1-1-2006)

The poor working masses have hardly any prospect on a better life, the rural masspeople are even worse off.

About three billion people live in Asia. Hedrick-Wong describes in the Bangkok Post of 30-12-2005 ( www.bangkokpost.com) the Asian middle class as those who earn more than $ 5000 a year:
"As many as 80 million people in China, 15 million in Thailand, 12 million each in India and Indonesia, 9 million in Malaysia and 6 million in the Philippines make the grade by that measure.

Another 200 million or so in India now have an annual income above $ 1500 and are buying shampoos, toothpaste, bicycles and other basic consumer goods."

The policy of the Asian elite is however determined by only one rule: how can we increase our own wealth and power. Masspeople get some crumbs of the economic pie when they are able to work long and hard.

Elderly, sick, incapable, farmworkers, poor women etcetera do not profit form the economic boom.

The leading paradigm in our society is the improvement of the life of elitepeople, what happens to other people is secondary. That a relatively small middle class also benefits from the increasing affluence of the elite is accidentally, something that is called collateral damage in wars. It has no influence on the development of the eliteworld. The differences between the life in the eliteworld and in the massworld are immense and growing. The two worlds are even drifting faster and further apart in times of economic booms.

The leading paradigm should change to the idea that all people should have equal status., that all people should have the same possibility on decent housing, good health care, clean water, adequate education etcetera as the elite has.

But change happens only when masspeople show that they also have power, that they can invade the privileged eliteworld just as elitepeople carry out a controlling invasion in the massworld.

yours truly, Joost van Steenis
http://members.chello.nl/jsteenis
Ways to increase masspower

How can the dollar collapse in Iran? An explanation By Rudo de Ruijter

The facts below explain why and how the new euro-enominated oil bourse (opening on March 20, 2006 in Tehran) will cause the collapse of the US-dollar.This is a far more important issue, than the US' allegations about an Iranian nuclear threat. These allegations may well appear to be a smoke-screen.Take 60 seconds to understand the key of the real issue.

1. How, since decades, does the US succeed to import more than it exports?

2. How Saddam spoiled the game?

3. How would the dollar collapse in Tehran?

... to be continued: http://www.moneyfiles.org/deruiter01.html

Pop Goes The Real Estate Weasel (Part 2) By Wayne N. Krautkramer

WHY FORECASTING THE END OF THE HOUSING MARKET BOOM IS FUTILE!

All attempts at forecasting the end of the housing boom are doomed from the git go! Rational analysis can’t be applied to an irrational process.

WHY IS RATIONAL ANALYSIS OF THE HOUSING BOOM DOOMED?

We must reduce the problem down into its basic components to solve the equation!

The first problem is one of demand. Demand must be broken down into theoretical demand, and effective demand.

Theoretical demand is the sum of all the population who would like to have the product. Almost the entire population would like to have a new house/condo.
Effective demand is the number of people who can afford to buy and maintain the product.

This is where rational analysis first goes wrong. The real estate market is heavily subsidized by the government. The primary hurdle to home ownership used to be the down payment. Mortgages also used to be paid off, so home ownership costs dropped to maintenance and taxes at some point.
One of the reasons the government started subsidizing home ownership through tax deductions was to make sure that many people would own their home in their later years, thereby removing the threat that they would be burdens on the state. But that was then, and this is now!

Real estate tax deductions quickly became institutionalized, and part of Americana (sacrosanct).

Real estate developers soon arose to exploit the demand for the tax deductions to the owners.

Rather than risk the political consequences of a slowdown in the housing market, the politicians created a number of additional devices to "keep the party going".

In 1934, during the depths of the Depression, Congress passed the National Housing Act to strengthen a deeply troubled housing market. An important element of this legislation was to make mortgage funds available to more Americans by protecting lenders from the risk of default.

The bankers were already accustomed to risk free government money because of this act. In the 1970’s the Congress created the Government Sponsored Enterprise, Fannie Mae.

"For more than 30 years, Fannie Mae’s mission has been to provide products and services that increase the availability and the affordability of housing for low-, moderate-, and middle-income Americans. The corporation accomplishes this mission by operating in the secondary rather than the primary mortgage market. Fannie Mae purchases mortgage loans from mortgage lenders such as mortgage companies, savings institutions, credit unions, and commercial banks, thereby replenishing those institutions’ supply of mortgage funds. Fannie Mae either packages these loans into Mortgage-Backed Securities (MBS), which it guarantees for full and timely payment of principal and interest, or purchases these loans for cash and retains the mortgages in its portfolio.""Fannie Mae obtains the funds to finance its mortgage purchases and other business activities by selling debt securities in the international capital markets. Fannie Mae is one of the world’s largest issuers of debt securities. As Fannie Mae’s funding needs are so significant and constant, it is important for the corporation to consistently deliver value to its investors by creating securities that meet investors’ needs and adapting its funding approaches to meet the evolving demands of the marketplace. Fannie Mae puts considerable effort into maintaining the integrity of the markets in which its debt is traded.""This publication is intended to give the investor an overview of Fannie Mae debt securities that are issued to support portfolio growth and thus achieve Fannie Mae’s mission of providing capital for low-, moderate-, and middle-income housing."

The law of unintended consequences has now interfered, and all standards for mortgage qualification have gone out the window, yet the taxpayer may be on the hook for all these losses.

The bankers became mere paperwork processors long ago, as that is how they make their living (origination fees). So there is no one investing their money in these mortgages, as they are investing everybody’s money (the taxpayers).
This is some variation of the public property analogy! Just who can use it, and who owns it?

We are now facing an almost infinite demand curve as a consequence of the ridiculous financing standards in use. We could theoretically forecast an infinite price for real estate, but that is an absurd conclusion unless you are a real estate broker!

The second problem in forecasting the end of the housing boom is the commitment of the government to full employment. Construction is a means of creating jobs. These jobs are not just the construction workers, but include all the related activities, including mortgage brokers, real estate sales and related clerical, building materials suppliers, home furnishings including appliances, etc.

The government is legally bound by the full employment legislation to put maximum stimulus into all sectors of the economy. Monetary policy has nothing to do with this problem. It’s fiscal in nature! Ebenezer Scrooge running the FED couldn’t solve this problem.

The third problem is the financial system. All this questionable debt will severely impact the banking system, including the pension funds who hold large amounts of the GSE’s paper in their portfolios. The interesting part of this fiasco is the assumption that these money managers made when they bought all the GSE paper. These geniuses assumed that the GSE’s were guaranteed by the US government. Sir Alan said otherwise, and Fannie Mae agrees with Greenspan!

"The stated intent of the Congress is to use the housing-related GSEs to provide a well-established channel between housing credit and the capital markets and, through this channel, to promote home ownership, particularly among lower-income families. Although prospectuses for GSE debt are required by law to say that such instruments are not backed by the full faith and credit of the U.S. Government, investors have concluded that the government will not allow GSEs to default, and as a consequence offers to purchase GSE debt at substantially lower interest rates than required of comparably situated financial institutions without such direct ties to government.2 Given this advantage, which private competitors are not able to fully overcome, the housing-related GSEs have grown rapidly in recent years."

When the mortgage market blows up, there will be massive losses in the already severely under funded pension funds. Fortunately, all those public sector pension funds are not covered by the US taxpayer protection. It’s almost funny to see how many of the public sectors pension funds that hold big portfolio positions in Fannie Mae, Ginnie Mae, Freddie Mac, and Sally Mae.
In case of severe financial problems, the local government will just skyrocket property taxes to make up the shortfall. So this just is a local issue for the property owners foolish enough to own property where there are too many government workers who will need feeding.

Nevada is one of those states. As of June 30, 2003, Nevada PERS assets had a market value of $14 billion, but actuarial liabilities of $19.5 billion. To generate a meaningful index allowing comparisons between states, Wilshire then divided each state’s unfunded or overfunded liabilities by the dollar amount of the state budget. A value of 100 percent would mean a state’s pension plan is underwater by the full amount of the state’s annual budget. Nevada PERS percentage is a whopping 269 percent –a slight deterioration from 2002 when the percentage was 267 percent.

No other state pension system can match the magnitude of Nevada PERS underfunding in relation to its state budget.

The fourth problem is rising interest rates. Fixed rate mortgages have gone the way of the horse and buggy. When the VAR’s begin ratcheting the interest rates up, the sales of painkillers will rocket.

We’ll have defaults everywhere as this works through the system. First, housing sales will increase dramatically. This will lead to falling prices, which will lead to real estate incomes dropping, which will lead to Realtors defaulting, which lead to office building income dropping, which will lead to- I believe you’ve gotten the picture by now!

The fifth problem is the problem of objective data. There is no such thing as a real estate market, in the sense of the stock, bond, or commodity market. Reliable data is difficult to find, as the government, or real estate sales/trade organizations provide most of the information. Both these sources have an agenda.

The problem is further complicated by nature of valuation used in Real Estate. The appraisers are paid a percentage of appraisal price, so they are motivated to increase their income by inflating appraisals. As they are so fond of saying, each property is unique!

Applying the word "market" to real estate only misleads the buyers into complacency. A real market is a place where buyers and seller meet/communicate to transact business on an ongoing basis. To call some salesman who will start advertising/looking for a potential buyer is not my idea of a market.

There is no liquidity to real estate because there is no real estate market! Let’s see you sell at the market! What market? Sell To Whom? How can one ever really know the price of thing without confirmed prices?

The sixth problem is what I call border spill over. This is defined as all the money that has been invested in other countries financed by mortgages secured by US housing! Many other countries do not have mortgages, or they are very difficult and expensive to secure.

We know that people have been taking out mortgages, and even second mortgages to buy properties in countries such as Mexico, Panama, and Costa Rica.

We are faced with the absurd problem of the GSE’s financing foreign properties without their knowledge, or consent!
Once either the foreign property market, or the US property market heads down, there will be a probable default on the US property, as the foreign property is beyond legal reach.

In Mexico, many American’s have bought in a third party name’s provided by the locals. Ownership is totally concealed, so there can be no recourse, other than to act against the person in the US. Naturally, these people have already planned to abandon the US, and live in their paid for homes (by the lenders) in their new countries. Houses for free paid for by Fannie Mae!

People who have used this technique to buy rental properties in Costa Rica, Mexico, Panama, etc. will find their anticipated income dropping as the US property market heads down, due to lack of American tourists. This will further pressure the US property market as these people default on their US properties.
One can only speculate how big a liability this might be, as hard data is impossible to find! I only know that the taxpayers are soon to pay for the party!

GIVE US A SIGN!
Matthew 16:4 "But he answered and said unto them, An evil and adulterous generation seeketh after a sign; and there shall no sign be given to it, but the sign of the prophet Jonas:"

Whales are scarce these days, but we might have a substitute for you! By all logic, we should leave you in the hell of your own creation, but compassion is our weakness, and we will give you a guide!

When the DJ US Home Construction Index has a monthly close below it's October 2005 monthly low, pain is in the forecast! This assumes that Real Estate is breaking when the home construction industry collapses. Should real estate not break after this, there is something seriously wrong with the data we are using!

THE MORTGAGE BANKER STOCKS AS AN REAL ESTATE INDICATOR!
One might think that the best indicator should be the mortgage brokers , as they have been the group that has gotten the lion’s share of the Real Estate boom’s wealth.

Some of the few mortgage broker firms that are listed are already in bankruptcy. There is no practical, safe way to use these vehicles to forecast real estate. Some of the major stocks are discussed below.

American Business Financial (ABFIQ) is in bankruptcy.

Fannie Mae (FNM) caved so long ago that it has proven that it does not correlate to housing prices

New Century Financial made is final top in December of 2004, and is in a major bear market.

Countrywide Financial has split their stock so many times that it will take forever and a day for the stock to start functioning normally. Yes, the laws of supply and demand do apply to stocks. All those splits added a lot of supply!
The mortgage banker stocks are in a major bear market, but real estate is still going up!

Greenspan informed the world that the GSE’s, who have been financing the boom, are not guaranteed by the government. Yet real estate still goes up!
The mortgage bankers have been laying off, but real estate keeps going up!
We must look elsewhere for the indicator, other than the sign we have already given.

We know that the mortgage broker industry is in rout, and still no admitted breaks in real estate!

Perhaps admitted breaks in real estate is the key! They might all be lying through their teeth.

The mortgage banker/broker industry is primarily composed of nomads, who will move on to the next hot market. There is reason to believe that many have already set up their tents in the Forex marketing arena.

An article, FOREX FOREVER, in the current issue of Futures, February, 2006, (pg.74), asked, "Has the growth on retail forex gotten out of hand? We’re not sure but an indication may be when brokers start using approaches usually received for college students offering help or trying to unload used furniture".
Meanwhile, back to the housing boom analysis How does one analyze group social behaviour? That is what this problem is all about!

Congress might rush a bailout plan to save whoever from the coming whatever! They always seem to be saving someone from themselves. All situations are caused by an untreatable syndrome (by definition). Therefore, that we must accept, and assist because we believe in compassion! Occasionally, one must wonder if compassion is not the truly untreatable syndrome!

SUMMARY!
Some of the elements that are effecting, or will effect the real estate markets have been touched on in this article. There are other factors, but the main issues have been discussed.

We’re not dealing with a real market, and we are not dealing with real economics here. We are not dealing with reality at all! The problem is political!
The fiscal policies of the US government are driving the real estate boom.
Countries such China, who do not subsidize real estate, are already seeing a turn for the worse in their property markets.

As the problem is political/cultural, we may be forced to accept the worst economic scenario, but the most probable social/political solution! That is a long, slow period of always decreasing prices, accompanied by rocketing property taxes. It’s sort of a very slow, painful, expensive economic death, as we prey on each other to survive! Economic cannibalism in the extreme. Share the pain and talk about it in the group. How therapeutic and bonding!

You have voted for the legislation to prevent the market from pricing to economic reality, and only you can demand that your Congress vote to repeal that legislation. The Congress is too comfortable with the current situation to do it voluntarily!

Wake up, people! The Age of Heroes is over!
You created it, and you’ll have change it. That’s
called Democracy!

POP GOES THE REAL ESTATE WEASEL! PART 1 CAN BE FOUND AT
:http://onlypill.tripod.com/generaleconomics/id26.html

Wayne N. Krautkramer onlypill@cox.net http://onlypill.tripod.com/factsthebrokersandfinancialreporterswonttellyou

What Is Real Gold? By Wayne N. Krautkramer

You have fight wars for it. You have overthrown governments for it. You have sold your soul for it through some very strange political treaties, and associated alliances.

No, it’s not that yellow, inert substance that’s listed as AU, #79 in the atomic chart.

It’s smelly, very toxic when contaminated, and very black in raw form. It’s clear to honey colored in its most refined forms. In fact, it’s not even listed in the atomic chart.

Yes, it’s Crude Oil or Black Gold. Oil is one of the most necessary commodities in society, being second only to food. In fact, Oil is the very basis of your civilization.

You might be able to supply your home with power and hot water with solar panels, depending on where you live (hours of available sunlight). Don’t live where you will need air conditioning. Running the transportation and manufacturing systems of a country is another story altogether. And it’s manufacturing and logistics that create the wealth that you spend. You may sell products for a livelihood, but someone had to make those products, and they have to be shipped from the supplier to your customer.

Your transportation cannot function without oil, gas, or electric power. You need gasoline, diesel, or electric to provide power to the engines. Yes, it’s true. Electric cars require some form of hydrocarbon to be consumed to provide the fuel for the turbine (generator) that creates the electrical current to charge the battery for your non fossil based transportation system.

Oil and Gas are used for much more than fuel. Every time you brush your teeth (nylon bristles), drink milk or soda from a plastic container, or play a plastic CD, you use hydrocarbons. Then there are all those extraneous things like the tires and components on your car, the housing case for your TV and cell phones, the gaskets and seals on your refrigerators, freezers, and automobiles! Let’s not forget all the synthetic fibers used to make stuff like your clothes, sports equipment, etc.

Remember the hospitals that you are so dependent on. Running a hospital on solar power is impossible! Then there are all those police cars, fire trucks, ambulances, and other commercial vehicles that you expect to respond in emergencies! Don’t forget the airlines. Solar powered airlines. What a concept!
Suffice it to say that Crude Oil and Natural Gas is like, you know, really cool to have. Personally, I never leave home without it!

You say that you are going to use an electric car, and save fuel. You will be using a very inefficient method of powering your vehicle. It also requires power to create the batteries that you are charging. You could not make that battery without plastic for the casing, and you must use hydrocarbons to create the plastic used for the casing!. The battery plates used energy to heat the lead. Lets not forget all the plastic that is used for insulating the wires used in electrical power transmission.

If electric cars become prevalent, you probably won’t be allowed to charge the batteries whenever you want. " And charging will have to be strictly controlled. Let anyone charge their electric vehicle when they want to -- like just when they get home at night -- and you’ll need more power stations to provide the juice. Electric vehicles suddenly don’t seem so cheap, or so emissions- friendly, when you’ve got to build and fire up huge oil, gas or coal fired power stations to keep them going. "

There is no free lunch in nature!

Crude Oil based lubricants are mandatory for the engine, transmission, and other related components. Stop changing the oils, greases, and other mandatory lubricants demanded by your transportation, and see what happens next.
OK. You are saving fuel by lightning the vehicle using plastic parts. You are still back to Crude Oil or Natural gas to create the plastics. Remember that it also takes power to create the plastics! More Crude Oil!

But wait! You will use aluminum on the vehicle. Problem! Aluminum production uses enormous amounts of electricity. And aluminum is not repairable for the most part. Bummer!

Try to run your big trucks, railroad locomotives, and cargo ships on battery power!

I can’t wait until someone tries to power a steel mill with windmills.
Better yet, let the Southern California pinheads blow on pinwheels to create power. Like what a really cool idea, and like it could help harmonize your prana with your karma when you are doing, like you know, yoga, and stuff!
Time to get real and deal with it!

Black Gold (Crude Oil) is mandatory. This is real wealth.

WHAT ARE THE FUNDAMENTALS OF BLACK GOLD (CRUDE OIL)!
For starters, the International Energy Agency is forecasting crude oil usage at 83.48 million barrels /day. If one applies the price of $60USD/barrel, we arrive at a daily cost globally of some $5 billion USD/ per day/. At $70USD/barrel, we arrive at some $5.8 billion USD/day. This results in an average yearly bill of some $2 trillion USD. This is what I call a very big number.

In the US, 21.93 million barrels/day of oil was used in 2005. That’s some $1.3 billion USD/day at $60USD/barrel, or $480 billion USD/year.

320.5 million gallons/day, or 3700 gals/second were used in the US in 2005.

The Crude Oil, Gasoline, and Natural Gas markets have got to be the most analyzed markets in the world, with a wealth of information available daily/weekly/monthly. You want data, you’ve got it! Even the UN provides information on the world’s oil supplies!

There is no mystery in the energy markets. Here we see the laws of supply and demand working out their marvelous patterns as the economic inputs change. Change the input, and watch the price change immediately. Cause-Effect, or poetry in motion if you prefer!

Crude Oil and Natural Gas companies are drilling, storage, and transportation operations. Even the exploration to locate the products is a drilling operation!

The American Association of Petroleum Geologists maintains the most incredible web site for research on the subject of Crude Oil and Natural Gas. The data below is from their site

Exploration Statistics
You can find history going back to the 1940’s with these statistics!

To be continued: http://onlypill.tripod.com/theblackgoldwatcher/id9.html

Peak Oil posts' quicklinks By Agric

Peak Oil posts' quicklinks

This post contains direct links to all the previous Peak Oil items in this blog, it's just a convenient way of navigating to them in order. I'll replace it with an updated copy when necessary.

http://theslide.blogspot.com/2005/12/peakoil-1-what-is-it.html

http://theslide.blogspot.com/2005/12/peak-oil-2-but-why-worry.html

http://theslide.blogspot.com/2006/01/peak-oil-3-where-youre-at.html

http://theslide.blogspot.com/2006/01/peak-oil-4-crucial-links.html

http://theslide.blogspot.com/2006/02/peak-oil-5-big-when-1.html

http://theslide.blogspot.com/2006/02/peak-oil-6-about-your-head-where-youre.html

also see:
http://www.theoildrum.com/story/2006/2/4/4015/39115

http://www.cyberjournal.org/cj/rkm/Apocalypse_and_NWO.html

Thinking About Cartoons By Fred Cederholm

Column for on/after Feb 5th

I’ve been thinking about cartoons. Actually I’ve been thinking about imagery, political correctness, caricatures, God, Rushdie, and Islam. The state of our present global conflict has entered a new dimension. The publication of depictions of twelve comic representations of the central figures of Islam by the Danish newspaper Jyllands-Posten and their republication globally have triggered worldwide riots and other acts of violence.

You see, images are so often used to covey a point of view, a frame of reference, or a mind set. They fire the spirit/soul and make a point. Imagery is accomplished graphically, photographically, and verbally. I am a vividly visual person who uses words to convey my thoughts and to get my point(s) across. Anyone who reads my columns should know that.

Traditionally, all is fair in love, war, and politics; or, is it? Or, should it be? In recent years we’ve seen the buzz phrase “politically correct” float to the surface. Talk about the ultimate in oxy-morons and hypocrisy. Just what has ever been correct about the exercise of politics carried to the “nth” degree? At the very core of it all, winning is everything and the limits of decency and decorum so often are abandoned to achieve the desired end.

Caricatures are a hybrid of cartoon imagery. In this form, an unflattering stereotype or physical attribute is graphically exaggerated to undercut the opposition. While outwardly funny, caricature representations can frequently cross the line to become hurtful and hateful. Next time you find yourself in front of a mirror, TH*NK about how you, or someone you love, might be portrayed in a caricature. What would be your reaction?

As a Christian of the Lutheran persuasion, I don’t have an over-riding problem with pictorial presentations on the Deity and the figures so central to my religion. It helps me in my understanding. The Bible tells us that God created man in his own image. I frequently visualize God in a nude reclining position on a cloud with an outstretched hand extending the spark of life to an equally naked Adam on Michelangelo’s Sistine Chapel ceiling. I “see” the beauty of God in a single flower, or a butterfly. I often “see” the love of God in the faces of parents as they watch their children across a room.

I visualize Jesus the Christ from the oil painting of Him praying by the rock in the garden of Gethsemane which hangs in our church sanctuary at St John’s. I visualize Christ’s “from the cross view” of His feet and the planet Earth below from the Dali painting and TH*NK how He died for this. When I “see” the actor Charlton Heston, I TH*NK “Moses.” I know I’m not alone in this association. The actor Matt Damon once found himself standing next to Heston in the men’s room at an awards’ ceremony. Poor Matt was so shaken by the experience that he said he wasn’t physically able to complete his mission until “Moses” had left. These Moses metaphorical images, while funny, are in no way meant to be sacrilegious. This current cartoon thing is a whole lot different.

Political cartoons are meant to be provocative. Should the editors/publishers/cartoonists have realized what havoc they would reap from this so-called exercise of free expression and free speech? You’re damned right they should? One need only look to the 1988 publication of Salman Rushdie’s Satanic Verses to know this. Rushdie was under a death threat for over a decade. A Japanese translator of the book was stabbed to death in 1991, an Italian translator was severely injured, and the Norwegian publisher also survived an assassination attempt.

The central question one should ask is how do the devout followers of Islam depict Allah and the Prophet Mohammed in their mosques worldwide and at the holy places of Mecca and Medina? The answer is simple, they don’t depict them at all. Graphic images (or portrayals of them) are forbidden as are images of all of God’s living creations. They are regarded as too sacred and too holy for such representations. While I personally do not understand this, I do respect it. We are told this conflict is against terrorism and is not a war of religions. Is it really? I’m Fred Cederholm and I’ve been thinking. You should be thinking, too.

Copyright 2006 Questions, Inc. All rights reserved.

Hypno$i$ By SB Kayser

From the rants and observations series

People like to show their knowledge in every occasion. It doesn’t take long to notice that opinions abound, but also differ. The strongest minds, seeking approval of the group or several persons by trying to take over the conversation, is a rule as old as humanity. The second old rule is that attention span plummets when common interests among participants are lacking, or when topics go against political correctness, or simply do not belonging to what is called conventional wisdom.

Conventional wisdom generally refers to theories endorsed by societies as irrefutable truths or axioms. That which comes immediately to mind is the necessity to view one’s borrowing ability as ace in the hole to prosper. These days "conventional wisdom" has stretched this reality so far that if one doesn’t have any credit history, one is not deemed trustworthy enough to be considered as a "potential client." Yes, let me repeat it one more time: having no credit history can be as much of a problem as having a bad credit history.

Nowadays, the only recognized criterion used by lending institutions is the clients’ commitment to avoid late and overdraft fees. This is the ultimate trick they have come up with to turn masses into debt junkies. Another form of conventional wisdom is the incentive to sell adolescent’s credit cards, hoping they will learn to manage their assets later in life… While institutionalizing the "I want it now and live richly" culture.

Because booms and manias have dotted human history, we can conclude sadly that conventional wisdom operates just like hypnosis -- and not only in the realm of economics.. Honestly, I do not criticize hypnosis, but refer to this technique which can be used for the best and the worst. The Elites have achieved a great deal at furthering their conventional wisdom platforms, especially over the last 300 years.

Let’s stick to the monetary field for the time being. From the South Sea and Mississippi Bubbles to the Dutch Tulipmania and the Dotcom Debacle, conventional wisdom has trapped so many that it still has die-hard adepts because it gives the perception that a casino economy is an inescapable but profitable truth -- in times of boom. Here the conventional wisdom rather dictates acts of pure greed using the *pump and dump stock mentality*.Conventional wisdom ignores boundaries; its only task is to provide (our) brains with the chemical reactions -- kicks - they like the most to continue their self-hypnotic trances. The more evidence that surfaces against conventional wisdom, the more psychic resistance. Persuasion does not stand a chance. Persisting in attempting to break the models created by conventional wisdom is viewed as a self-defeating tactic, the equivalent of intellectual suicide.

Don't believe me? Just try it and I guarantee that you will end up banging your had against the wall quite quickly.

Let's consider the three American major credit report agencies: Equifax, Experian and Trans Union for consumers as reported by the Fed. Reserve and then let's have a look at the overall social debt load that amounts to a total of $40 trillion or $136,479 per man, woman and child. 66% ($27 trillion) of this debt was created since 1990 the expert Michael Hodges reveals...

How did we get there, how can the most respectable institutions run away from their responsibilities, fail their duty to protect the citizens from what appears to be "predatory lending"?

43% Of First-Time Home Buyers Put No Money Down a headline in the USAToday says... here is a relevant quote: "If we do get a spike in mortgage rates, and a modest decline (in the housing market) turns into a rout, there's almost no bottom to that," Baker says. "That's a crash scenario.

"Um-um, why the heck didn't the so-called agencies never warn the public, run huge TV commercials to prevent this awful outcome? Alas, there aren’t many ways to defeat this because the obvious seems to point to fraudulent policies, which are allowed to take place because of conventional wisdom: after all, we’re all taught that there is nothing really wrong with debts… As long as we can afford the (minimum) monthly payments.

Debtomenia is about to engulf America: economists argue that America's net liabilities, which totaled $2.48 trillion at the last official count, will soon cost more in interest payments than America earns in investment income...These potential consequences include rising U.S. interest rates, a sharp decline in consumer spending or a fall in the dollar. Or possibly all three... (Jan 30,2006 -Reuters)

Indoctrination often uses violence and therefore has never been sustainable, but when supported by conventional wisdom, its pernicious side effects are long and lasting. In this particular case, self-hypno$i$ will end with a trauma, resulting in the brutal collapse of many cherished delusions.

If you already went to war against conventional wisdom, you may have lost nearly all your friends because they saw your warnings as the result of reading too many senseless conspiracy theories. They will soon hate you because you incarnate the truth they refuse to see.

Willing to help stop the madness? Drop us an email!

previous article: A Short Story About Billions and Trillions

Fiscal aside: rotting prawns in the curtain rails By Agric

I'm going to explain this simply, apologies to those who are more aware.The USA needs approx $2 billion daily of foreign investment to stave off its bankrupcy. It gets this money largely by issuing treasury bonds, a bit like taking out fixed term interest only loans then repaying them when they become due.Typically it repays these loans by issuing further treasury bonds. Now, that is not a long term sustainable situation for you or me.

Fortunately for the US it's OK while foreigners, who have surplus US$ due to trade surpluses, continue to grant those loans.

OK, some day maybe they won't, what happens then? Hmmmm. I must digress. The US Treasury produces 'TICS reports' which say which overseas countries own what US debt. In 2005 there were surprising increases in certain countries' holdings, notably 'Caribbean' and UK, most markedly the former.

Odd, methinks, as did others even almost a year ago:http://www.safehaven.com/showarticle.cfm?id=2764 The US Treasury TIC page is here (but you would have to access the spreadsheet style data to see the foreign holdings info well):http://www.treas.gov/tic/ticsec.html

Back then, a whole 45 weeks ago, the truth was merely hinted. Now it is being spoken aloud: "If foreigners decide to stop buying our government’s new debt, the Federal Reserve will have the ability to create new “digital” money out of thin air to loan it to the government themselves. This process is called “monetizing” the debt and is considered highly inflationary. They will use U.S. banks with offshore offices in the financial centers such as London and the Caribbean Islands to make it appear that foreigners are buying the debt paper."

http://www.financialsense.com/Market/hartman/2006/0201.html Now, this is not quite cricket! If foreigners will not finance one's debt then one must make 'economic adjustments' or call in the IMF who will loan one the readies in exchange for economic reforms. One should not loan oneself money by sleight of hand, that is poor form indeed. Let me assure you, when you look at the detailed data it is pretty hard to conclude otherwise than this is what the US is doing: buying its own debt and pretending foreigners are doing it. The US govt can print as much money as they want (and believe me, they have been for a too long time) but excess money printing has inflation and currency implications.

Does it matter? Well, it kinda compromises credibility, both economic and truthfulness. The buyers of US debt will be aware, no doubt, and will be taking steady and measured steps to reduce their exposure in US debt. If the signs continue in this direction you can expect a significant devaluation in the US$ and / or an upturn in US interest rates - regardless of domestic US economic circumstances.That whiff of rotting prawns may soon become an intolerable stench.

http://theslide.blogspot.com/