HYPERINFLATION AND THE STIMULUS PACKAGE

The massive stimulus packages put forward by governments around the world requires the printing of trillions of dollars. If and when the governments are successful in getting a fraction of this money into the hands of the working masses of the world it will surely cause a round if inflation like we have never seen before. With so much money being pumped into the economy, and human nature what it is, there will be billions of dollars siphoned off by companies and individuals in positions of power. When what’s left finally trickles down to those to whom it was originally intended, the cost of the end projects will be horrendous. 

The trillions of dollars now being printed and pumped into the economy will surely devalue the greenback as there is nothing to base the paper money on. The devaluing of the dollar will cause prices of all consumer goods to increase. As prices go up more money will have to be printed and the value of the dollar will decrease accordingly. As the value of the dollar decreases the price of materials quoted in U.S. dollars will spike up again. Inflation will no longer be controllable and hyperinflation will surely occur. A vision of needing a wheelbarrow full of money to buy a loaf of bread is not at all comforting. 

China, one of the main purchasers of American debt has already shown a reluctance to keep buying more of it, having domestic problems to deal with as it is. World economies are not in a position to buy American debt in the proportion required to finance the stimulus. Those with some extra money are opting to purchase gold as a hedge against impending financial disaster.

With little demand for their debt American Leaders will have no other option but to increase interest rates to try and attract buyers. As inflation rises from moderate inflation to hyperinflation and the cost of money rises right along with it, we will all end up in a whole world of hurt.

President Obama is engaging in very dangerous economic policy and if his timing is off just a little bit it will be disastrous. If he manages to pull it off he will be a hero but he has to know it’s a huge gamble. The way I see it, even if he manages to engineer a soft landing, the American taxpaying public will be generations trying to pay off the accumulated debt brought on by this massive stimulus package.

Trivia - California law prohibits a woman from driving a car while dressed in a housecoat.

SCENES WE'VE SEEN

I'll share  some of our Switzerlsnd pictures today. It is such a beautiful country we Enjoy revisiting through the pictures we've taken. We were there in springtime.

GOLD - INVESTMENT OR INSURANCE?

Gold has been bought as an inflation hedge for years. As such it hasn’t worked well because of the U.S. Government’s ability to manipulate the price and make billions of dollars in the process.

 Until 1933 U.S. citizens were required to sell their gold to the gov’t at $20.00 per ounce, at which time, since the government now owned all the gold, President F. D. Roosevelt raised the price to $35.00 per ounce thereby allowing the gov’t to print more money since it was at that time a gold backed currency and they had just ripped the gold owning citizens off by 65%.

In 1971 President Nixon abandoned the Gold standard and allowed the price of gold to float with the world demand and opened it up to Americans to own gold again. Thereby allowing the government to print any amount of paper dollars they wanted because there was nothing needed to back the currency. Opening it up for U.S. citizens to again own gold, which the government sold back to them at free market price, was one of the factors that drove the price up. By 1980 it reached a price of $850.00 which in todays dollars would be over $2100.00

Since then the world governments have been effective at manipulating and controlling the price of Gold by buying and selling as they chose. Even though inflation rose by double digits in the 80’s the price dropped to $350.00. It did not work out well as a hedge against inflation.

Fast forward to today and you have the U.S. Government printing paper money as fast as the printing presses can print with nothing to back it up. With other world economies in trouble as well, it is keeping the greenback strong for the time being.

The price of Gold is now starting to creep up due to world demand. China has started to be a purchaser of gold, no longer confident in owning U.S. Dollars, it has allowed it’s citizens to now own gold, and has started a Gold ETF, thereby affording it’s citizens the ability to own small amounts of the metal.

With governments around the world In a financial bind the American dollar is remaining the strongest currency in the world and the go to safety currency. The question now is can it retain it’s strength in the face of the massive stimulus spending they are now proposing. If it does it will keep a ceiling on the price of gold.

As the world economies start to recover and confidence comes back to lesser currencies, people will start dumping their U.S. dollars. As the dollar weakens, the theory goes, there will be upward pressure on the gold price.

If the U.S. led recovery program does not go exactly as planned, all bets are off, governments worldwide will no longer be able to manipulate the price of gold and it will have the potential to spike to prices not even dreamed of in past.

So as an investment gold has not worked out well in the past.

As a speculation, if your timing is spot on, there has been an opportunity to make some money.

As insurance against a pending financial disaster, in my opinion, it is a very wise choice.

Trivia - It’s against the law to pawn your dentures in Las Vegas

EXECUTIVE COMPENSATION AND PRESIDENT OBAMA

President Obama has just moved up a notch in my opinion. Reducing executive compensation on companies that have received taxpayer funded bailouts was the right thing to do. The gall of these executives to vote themselves huge compensation packages while the taxpayers, some of them in dire straights themselves, are paying the bills, is incomprehensible. That these executives would even consider taking such compensation packages shows how out of touch with reality they really are.

Rewarding incompetent management for running a company into the ground should not entitle them to any kind of a pay package, at least the way I see it.

A salary of $500,000.00 per year should be enough for these people to scrape by on during these tough times. They may of course have to give up one or two of their weekend jaunts to Paris or London but so be it.

Trivia - Tipping at a restaurant in Iceland is considered an insult!

B.C. BUDGET DEFICIT

B.C. will have a Budget Deficit  this year and next at least. How fast he can turn around and recall parliament and repeal the balanced budget law of 2002 that was passed with much fanfare. 

We are stuck with billions of dollars of expense to host the Olympics, we won’t even know how much until the Olympics are finished. I expect the government will never admit to most of it being other than a normal run of the mill infrastructure cost. I don’t yet know how they will disguise the cost of Games Security but I expect they will come up with some story. Being upfront with the public in the first place would have been more palatable, at least in my view.

The Liberal government doesn’t have to concern themselves with not getting re-elected, simply because there is no viable alternative to them. 

The embarrassment of breaking his own budget law doesn’t seem to faze Mr. Campbell in the least. I expect his biggest regret is there will be a $9,000.00 holdback on his salary, unless he repeals that part of the legislation as well.

Trivia - It is illegal to wear spurs while walking through a hotel lobby in Phoenix, Arizona.

BANKERS BONUSES

Kudos to the Canadian bank CEO’s who are giving back their multi-million dollar bonuses for 2008 leaving them with only their million dollar plus base salary. This lends a lot of credibility to Canadian Banking executives who also are not looking for taxpayer funded bailouts.

Unlike their American counterparts who have made sure they received more compensation than they can responsibly spend in any given year. Although even the American executives are facing a cut in compensation packages, it still gives them more than enough to live comfortably. The taxpayers who are paying their bills are suffering some considerable hardship and are rightfully angry when they read about the people who got them into this mess still living so high off the hog. The fact that they have received billions in taxpayer funded bailout money puts them in a very bad light. 

GRASSHOPPER AND THE ANT - THE REAL STORY

I Can't help but pass this along!  -It sounds real to me!

Thomson report

by John Thomson - Story: 44677
Jan 29, 2009 / 5:00 am

I was going through some papers looking at some stuff I had kept from last year and found this story. I'm not sure where I had received this from but got a laugh and thought you would too. The story about the ant and the grasshopper... 

CLASSIC VERSION 

The ant works hard in the withering heat all summer long, building his 
house and laying up supplies for the winter. The grasshopper thinks he's a 
fool, and laughs and dances and plays the summer away. Come winter, the 
ant is warm and well fed. The shivering grasshopper has no food or shelter, so he dies out in the cold. 

THE END 

THE CANADIAN VERSION 

The ant works hard in the withering heat all summer long, building his 
house and laying up supplies for the winter. The grasshopper thinks he's a 
fool, and laughs and dances and plays the summer away. Come winter, the 
ant is warm and well fed. So far, so good, eh? 

The shivering grasshopper calls a press conference and demands to know why the ant should be allowed to be warm and well fed while others less 
fortunate, like him, are cold and starving. 

The CBC shows up to provide live coverage of the shivering grasshopper, 
with cuts to a video of the ant in his comfortable warm home with a table 
laden with food. 

Canadians are stunned that in a country of such wealth, this poor 
grasshopper is allowed to suffer while others have plenty. 

The NDP, the CAW and the Coalition Against Poverty demonstrate in front of the ant's house. The CBC, interrupting an Inuit cultural festival special 
from Nunavut with breaking news, broadcasts them singing 'We Shall 
Overcome'. 

Jack Layton rants in an interview with Mike Duffy that the ant has gotten 
rich off the backs of grasshoppers, and calls for an immediate tax hike on 
the ant to make him pay his 'fair share'. 

In response to polls, the Conservative Government drafts the Economic Equity and Grasshopper Anti-Discrimination Act, retroactive to the beginning of the summer. 

The ant's taxes are reassessed, and he is also fined for failing to hire 
grasshoppers as helpers. 

Without enough money to pay both the fine and his newly imposed 
retroactive taxes, his home is confiscated by the government. 

The ant moves to the US, and starts a successful agribiz company. 

The CBC later shows the now fat grasshopper finishing up the last of the 
ant's food, though spring is still months away, while the government house 
he is in, which just happens to be the ant's old house, crumbles around 
him because he hasn't bothered to maintain it. 

Inadequate government funding is blamed, Bob Rae is appointed to head a 
commission of enquiry that will cost $10,000,000. 

The grasshopper is soon dead of a drug overdose, the Toronto Star blames 
it on the obvious failure of government to address the root causes of despair arising from social inequity. 

The abandoned house is taken over by a gang of immigrant spiders, praised 
by the government for enriching Canada's multicultural diversity, who 
promptly set up a marijuana grow op and terrorize the community. 

THE END

EXECUTIVE COMPENSATION AND BAILOUTS

President Obama is apparently not happy about the fact that bailed out companies are still paying themselves billions of dollars in bonuses, nor should he be.

The audacity of company executives who feel that they are worthy of such bonuses for incompetent management is incomprehensible in my view. 

Top executives meeting in Davos, Switzerland, of all places, are admitting that compensation models of some firms will have to be completely overhauled. I believe that would be an understatement. 

It’s not as if these people are being compensated with the worthless stock of the companies they have run into the ground, no, they get paid in cash thanks to the taxpayer funded bailouts.

 

I would humbly suggest that if a bailout is provided it should be contingent on management getting no bonuses and a 50% cut in salary. That would give them some incentive to manage the company prudently and profitably, give the shareholders some incentive to hold on, save the taxpayer the cost of bailing them out and financing such insane compensation packages.

The taxpayers of the world, unable to pay their mortgage or rent, are rightfully feeling they are being crapped on and then having their noses rubbed in it by these holier than thou executives who are living high off the hog on taxpayer handouts.

OUR CRAZY WORLD

Japan - Fire crew left the stove on when they went on a fire call and burned the fire station down.

South Korea - A Bio company says you will soon be able to clone your dog for about $50,000. Down 50% from the current cost of $100,000.   I have no idea why anyone would do that in the first place.

Britain - After 34 years a British Doctor has admitted that a paper published in the British Medical Journal on Cello Scrotum, a painful ailment suffered by Cello players, was a Hoax. The Dr. and her husband have been dining out on the story ever since it was published. Thank you very much. The story was inspired by a report on another highly suspect condition called Guitar Nipple.  Go figure.

New Zealand - Two prisoners, handcuffed together, made a run for freedom outside a courthouse. Unfortunately for them they tried to run one on either side of a lamp standard and fell to the ground where the police apprehended them.