Wednesday, December 25, 2019

The Coming New Year Boom Economy

Our economy is now taking off. Here is the logic. Remember back to WWII, the rest of the world was destroyed and the US supplied the product that everyone needed. Filling the orders from the rest of the world in 1946, created full employment for the U.S.

This time around, we have told the rest of the world to take a hike, we don’t need them to produce our products. We will produce it ourselves. This demand for product previously produced overseas is stimulating our economy while putting the skids on everyone else’s economy.

It was cheaper to produce products in the third world, but the middlemen costs were beginning to take too big of a slice of the pie. The evaded tax consequences of offshore production were a big loss for our government.

In the past, the American manufacturer went to China and made shirts for a dollar apiece. He then sold them to a wholesaler, who happened to be his wife. The wife sells them to an importer at $15 apiece and the shirts hit the shelves at $35. The only American making money is the “Manufacturer.” $14 a shirt tax free. It is still going to cost about $12 a shirt to make them in the US. Most of it going to labor and production costs. In this case the return for the manufacturer (one person) is a lot less, but the benefits of onshore production stimulate our economy and create jobs.

Notice that this production out of country was considered “Globalism.” It literally wiped out industry in the United States. We could not compete on a labor or regulation basis. Their quality was good as was the price. Right now, heavy industry is returning. We still have a long way to go, much of the consumer goods manufacturing is still offshore.

So, for the coming new year what do we have? Some things will do better, I see unemployment down for the year. Manufacturing should go up. I can’t do much for predicting the stock market, I was never any good at reading chicken entrails. At McDonalds, you may have to push the start button to get your Big Mac. (I wish they would go back to their old coffee instead of trying to copy Starbucks. And while we are at it, give us the old French fries with animal fat—they were so delicious).

I think there will be some blowback on environmentalists. The low flush toilet has to go, as well as the restricted flow shower head. The government needs to get out of our lives. If they want to tell someone what to do, let it be the homeless. Taxpayers have a right to expect better government services than the deadbeats who pay no taxes.

I can stop stockpiling the old incandescent light bulbs, Government regulations have been dropped, so companies can keep making them now. I used one of the new ones over the kitchen table and the food looked absolutely horrible. I think we can expect many more government regulations to fall by the wayside.

Here's hoping everyone had a Merry Christmas (ie the kids got what they wanted for Christmas). Here's hoping that everyone reading has a Happy New Year.

Saturday, December 21, 2019

Precious metal "The Buy of the Century"

If we go back in history, we see gold and silver as the universal medium of exchange. Usually it was in a ratio of 15 to 1: silver to gold. Put another way, a day’s wages were an ounce of silver, a week’s wage was an ounce of gold. Not sure it has kept up to its historic norm.

The big thing to remember is that the medium of exchange got spent. Gold or silver, it was gone by the end of the month; laborers were waiting for the new payday. Some savings was occurring. But it wasn’t something that would have made the precious metals more valuable, and make them worth more. The system had no inflation. A silver dollar was a dollar.

In today’s world, gold and silver float in a commodity’s market. The currency systems of the world are all about paper currency; no gold is necessary. Inflation is a function of printing more currency instead of taxing the people.

Is our currency as good as gold? The answer is no. Inflation (a disease of paper money) will eat the perceived value of the dollar alive. The price of gold and silver over time will reflect the inflationary effect of government spending and printing of currency.

The big thing about buying gold and silver now is that it costs very little to retain ownership over time. it used to be that you got 8% interest on your savings. Now you only get .05%. There isn’t much reason to put your money in the bank anymore. Buy gold, it doesn’t comprehend inflation.

Inflation is a tax on old people, not the young. Retirees have saved a lifetime and many can no longer work. They are stuck with what they have saved over the years. The extremely low interest rates on savings have literally ruined retirement plans for many of the elderly. An 18-year-old buying a pack of cigarettes for $8.00 today, has no idea that they costed 25 cents a pack 40 years ago. Mix the mindset of the young person with that of the retiree. It takes a lifetime to realize that you have been ripped off silently.

The real problem right now is not the scarcity of gold silver or platinum. The problem is the perceived value of the government currency. If too much currency is printed, the buying power of one million dollars may in the near future, only buy one hundred thousand dollars’ worth of goods.

What we are looking at here is an option that most have overlooked. There is no investment loss on buying precious metals. The banks cannot even match the yearly inflation rate loss of 7 percent; they’re paying .75 percent interest. So, I am suggesting that people 20 years away from retirement, put their savings in gold and silver. The Hell with an IRA. Congress created the IRA so they could borrow more money; not enough people were saving the dollars that Congress desperately needed to borrow, to fund government spending.

You are not buying gold as an investment; you are buying precious metals as a backup for a government induced inflation. It cost you nothing at the present bank interest rates. In fact, the whole retirement IRA scheme falls apart at these low bank interest rates. There is no incentive to save dollars today for consumption 20 years in the future.

Reflect back, with an interest rate of 7 percent, your nest egg will double in 10 years. With and interest rate of .75% your money will double in in 95 years.

Imagine if a politician told retirees that they are taxing everyone’s savings at 7% a year and keeping the interest rates extremely low, they would be voted out of office. The funny thing is that the retirees can’t do much about it. Inflation and interest rates are not parts of a party platform for reelection. Inflation is a little like sex, as you get older—you get too much of one and too little of the other.

The thing to realize here, is that all of your savings in a 401K or in the bank are an entry on a ledger. If through no fault of your own if the currency becomes worthless, precious metals in your possession have a basis of worth. You have to ask one question. Can this deficit spending go on forever? Or is there a limit? So far the answer is that it can go on forever. Common sense suggests that limits imply responsibility. There is no responsibility, so hold on to your hat.