My High Dividend Stocks Blog http://myhighdividendstocks.posterous.com Most recent posts at My High Dividend Stocks Blog posterous.com Mon, 17 Sep 2012 15:57:35 -0700 Marc Faber: Fed's QE Forever is Ludicrous; No Country Has Become Rich From Consumption http://myhighdividendstocks.posterous.com/marc-faber-feds-qe-forever-is-ludicrous-no-co http://myhighdividendstocks.posterous.com/marc-faber-feds-qe-forever-is-ludicrous-no-co

Marc Faber is dead on in this short article.  He points out that if money printing solved problems, then Zimbabwe would be an economic powerhouse.  If running huge deficits worked, then Greece would be the most successful European economy.

The Keynesian in charge of the central banks around the world are madmen.

Her is the short article from Marc Faber:

http://www.bi-me.com/main.php?id=59324&t=1&cg=4

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http://files.posterous.com/user_profile_pics/697493/v_for_vendetta_guy_fawkes_mask11.jpg http://posterous.com/users/4wuf4tt8LZzb Jason Brizic myhighdividendstocks Jason Brizic
Tue, 11 Sep 2012 17:33:31 -0700 Your First Step into the World of Bitcoins; An Excellent Primer. http://myhighdividendstocks.posterous.com/your-first-step-into-the-world-of-bitcoins-an http://myhighdividendstocks.posterous.com/your-first-step-into-the-world-of-bitcoins-an

The Wall Street investing game is rigged against you.  The theft of customer funds after the MF Global bankruptcy should have you worried about the safety of your brokerage account assets.

http://tinyurl.com/MFGlobalTheft

There is a new currency that you can buy to thwart the efforts of the Federal Reserve and the Wall Street banksters.  Do you have some of your investments in bitcoins?  Do you even know what a bitcoin is?  If you answered no to these two questions, then you had better read this concise, non-technical explanation of the bitcoin ecosystem:

http://blog.bitinstant.com/blog/2012/7/5/a-business-primer-on-the-bitcoin-ecosystem-erik-voorhees.html

You can listen to the article while driving in your car here:

        <!—Start of SpokenText player à

        <script type=”text/javascript” language=”javascript”>

               var recordingUrl = “http://www.spokentext.net/members/Gorbash91/A_Business_Primer_on_the_Bitcoin_...”;

               var width = “100”;

               var height = “20” ;   

        </script>

              

        <script type=”text/javascript” language=”javascript” src=”http://www.spokentext.net/display_player.php”></script>

        <!—End of SpokenText player à

I will be writing more about bitcoins in the future.  I’ll discuss how many of them that there will ever be, how they can be secured, and how much it costs to convert your national currency into bitcoins.

Be seeing you!

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http://files.posterous.com/user_profile_pics/697493/v_for_vendetta_guy_fawkes_mask11.jpg http://posterous.com/users/4wuf4tt8LZzb Jason Brizic myhighdividendstocks Jason Brizic
Mon, 10 Sep 2012 15:27:57 -0700 Keynesians make no sense. See why with some humor. http://myhighdividendstocks.posterous.com/keynesians-make-no-sense-see-why-with-some-hu http://myhighdividendstocks.posterous.com/keynesians-make-no-sense-see-why-with-some-hu

This guy does a humorous job of explaining the stupidity of Keynesian economics in a few minutes.

Be seeing you!

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http://files.posterous.com/user_profile_pics/697493/v_for_vendetta_guy_fawkes_mask11.jpg http://posterous.com/users/4wuf4tt8LZzb Jason Brizic myhighdividendstocks Jason Brizic
Thu, 23 Aug 2012 11:57:26 -0700 Why California and Other State Pensions are Just Like Social Security. http://myhighdividendstocks.posterous.com/why-california-and-other-state-pensions-are-j http://myhighdividendstocks.posterous.com/why-california-and-other-state-pensions-are-j

The California government employees pension fund (CalPERS) is caught in a war between the current government workers and the retired government workers.  It is the biggest pension fund in the USA and its problems are typical of all government pensions.  It has overpromised and it is underfunded.  This is not going to end well for California state retirees, current government employees, or California taxvictims.

CalPERS Defends Pension Benefits While Risking Losses

By James Nash - Aug 19, 2012 10:01 PM MT

The California Public Employees’ Retirement System, the largest U.S. pension, is defending government workers against criticism of their benefits even while it risks losses as municipalities, faced with rising retirement costs, file for bankruptcy.

Pension funds like to buy bonds because fund managers believe that bonds carry less risk than stocks.  Therefore, CalPERS is a large buyer of municipal bonds.  It bought Stockton and San Bernardino municipal bonds.  It probably bought Greek bonds also.  Why not?  The knuckleheads running this fund lost almost a billion dollars on Enron and WorldCom bankruptcies (http://www.treasurer.ca.gov/publications/actions.pdf).  The $290.8 million at stake amount to one-tenth of one percent of the funds assets.

The $239.1 billion fund is the largest creditor in bankruptcy cases filed by two California cities, Stockton and San Bernardino, since the end of June, with a total of $290.8 million at stake.

Current government workers in Stockton and San Bernardio account for 0.7% of CalPERS total contributions.

Increasing retiree obligations are straining budgets of cities across the Golden State, still grappling with income- and sales-tax revenue reduced by the longest recession since the Great Depression. The two bankrupt cities represent 0.7 percent of employer contributions to CalPERS, according to actuarial statements. Still, others may follow if judges relieve them of pension commitments, said Karol Denniston, a bankruptcy lawyer at Schiff Hardin LLP based in San Francisco.

“The briefs that have been filed by the insurers are interesting in that they’re arguing that CalPERS should be treated like any other creditor,” she said by telephone. “CalPERS is going to argue that they’re a different kind of creditor, in that they hold the money in trust for the retirees.”

Stockton, a city of about 292,000, about 80 miles (130 kilometers) east of San Francisco, and San Bernardino, with 209,000 residents, about 60 miles east of Los Angeles, both cited rising employee retirement costs as factors that drove them to seek court protection. A third community in bankruptcy, Mammoth Lakes, hobbled by a legal judgment, owes CalPERS $4.2 million, according to its filing.

Stockton Precedent

“Where this is so important is that we know Stockton is going to be precedential,” Denniston said.

CalPERS is a Stockton bondholder (they are playing the role of the northern European bankers) and Stockton is in serious financial turmoil (they are playing the role of Greece).

Stockton is trying to become the first American city since the 1930s to use bankruptcy to force bondholders to take less than the principal they’re owed. The city will need approval from a federal judge in Sacramento to impose any cuts on creditors.

In an Aug. 2 statement responding to insurer Assured Guaranty’s objections to Stockton’s bankruptcy filing, CalPERS general counsel Peter Mixon argued that the interests of pensioners should trump those of other creditors.

Mr. Mixon’s comments are designed to elicit emotional support to CalPERS predicament by claiming that the public employees are not in a position to evaluate credit risk.  CalPERS fund managers are responsible for evaluating municipal government credit risk.  CalPERS fund managers had proven themselves to be as stupid as the northern European bankers that lent money to Greece.

“The obligations owed to the public workers of the city have priority over those of general unsecured creditors including bondholders,” Mixon wrote. “Unlike insurance companies, policemen, firefighters, and other public employees are not in a position to evaluate credit risk of their employers.”

Even as it defends its standing in the Stockton case, CalPERS is working to counter the notion that pension costs are a significant factor in current and potential municipal bankruptcies.

‘Not Fair’

“It’s not fair to scapegoat public employees and pensions for the financial woes of our cities,” Rob Feckner, the chairman of the CalPERS board, wrote in an Aug. 8 op-ed in the Sacramento Bee. Feckner is an executive vice president of the California Labor Federation, which represents 2.1 million unionized workers, about half of them in government.

So, what then are the real causes of current and potential municipal bankruptcies?  Not unsustainable pensions with rising costs.  Oh, no.  I couldn’t be that.

“The real culprit is the economy and housing market, along with financial decisions made by city officials,” he said. “Pension costs are a small piece of the budget.”

CalPERS’ position contradicts the realities facing many municipalities, said Chris McKenzie, executive director of the League of California Cities. Reducing pension costs is the top priority this year for the Sacramento-based organization, McKenzie said by e-mail.

Rising Costs

“Cities statewide have seen pension costs rise to the point that they are no longer viewed as sustainable,” McKenzie said. “Soaring pension costs are a serious concern.”

While pension costs are roughly 10 percent of most city budgets, municipalities need flexibility to deal with them when revenues slump, said Dan Pellissier, president of California Pension Reform.

CalPERS is a ponzi scheme just like Social Security.  It is obligated to pay the pension to the retirees, but they also know that city/county/state budgets will be destroyed by rising pension costs.  Current workers in the ponzi scheme must be courted and reassured that the ponzi scheme really isn’t a ponzi scheme.  The current workers are needed to pay for the retirees.  That’s why CalPERS representatives are talking out of both sides of their mouths.

“It’s ironic that CalPERS is defending a system that is placing an unsustainable burden on employers’ budgets,” Pellissier said in an interview in Anaheim, California, where he spoke at a CalPERS forum on pension legislation. “CalPERS has to find out a way to work with government agencies that have overpromised benefits based on contribution rates that have been artificially low.”

So we learn that the municipalities are the source of 14 percent of CalPERS income annually.  As CalPERS investment returns fall short of their assumptions of 7.5% rate of return they will demand higher contributions from current workers to “save the system”.  Eventually, the retirees will get screwed when the younger California voters outnumber them.  This will take a while, but it will happen.

More than 1,500 cities, counties and other units of government pay into the fund, according to a CalPERS fact sheet. Such employer contributions accounted for $7.5 billion, or less than 14 percent of CalPERS’ total income in 2010-11; most of the income came from investment earnings.

Investments Return

CalPERS, which posted a 1 percent return on investments for the year ended June 30, has about 72 percent of the assets needed to pay long-term obligations to retirees, spokesman Brad Pacheco said.

CalPERS claims to have 72 percent of the assets it needs to keep the ponzi scheme going (based on false assumptions to begin with).  But let’s assume Mr. Pacheco is correct.  Where is CalPERS going to get the other 28 percent of assets that it needs to keep things going?  Its going to get it from the current workers in the form of higher contributions.  The more municipalities that go bankrupt; the more CalPERS doesn’t have enough assets to cover the current pension obligations to retirees.  This is exactly the same problem as Social Security and Medicare, but on a state level.

Even if the three bankrupt cities withheld their entire payments due to CalPERS, it would not “move the needle” on the pension’s funded status, Pacheco said in an e-mail message.

Robert Udall Glazier, a CalPERS deputy director, said leaders of the fund view cities’ financial distress “with great concern.”

“These cities,” he said, “are our partners in providing services and a better quality of life for Californians.”

Let me translate: We need the money from the current city employees to make up for our poor investment performance and growing pension payouts.  If the stock market doesn’t do what it did from 1982-2000, then we’re screwed.  If the Federal Reserve prints trillions of dollars and the banks lend it out, then there will be massive inflation which will destroy the asset value of all these bonds we’ve bought from the Greeks – Ahem! I mean cities.

The Stockton bankruptcy case is In re Stockton, 12-32118, U.S. Bankruptcy Court, Eastern District of California (Sacramento).

To contact the reporter on this story: James Nash in Los Angeles at jnash24@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net

The good news is that the State of California, the counties, and the cities will not be able to afford all the stupid government spending and regulations that they have put into place.  There will be more freedom once they go bankrupt through visible default on their welfare obligations.  That is good for individual liberty.

Subscribe today for free at www.myhighdividendstocks.com/feed to discover high dividend stocks with earning power and strong balance sheets.

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http://files.posterous.com/user_profile_pics/697493/v_for_vendetta_guy_fawkes_mask11.jpg http://posterous.com/users/4wuf4tt8LZzb Jason Brizic myhighdividendstocks Jason Brizic
Wed, 15 Aug 2012 11:04:50 -0700 Stay away from European Equities and Why. http://myhighdividendstocks.posterous.com/stay-away-from-european-equities-and-why http://myhighdividendstocks.posterous.com/stay-away-from-european-equities-and-why

MarketWatch commentator Charles Sizemore wrote an article that says that the German government’s actions are key to the future of the Euro and the Eurozone.  He’s right about that because Germany is the most solvent of the EU nations, but he has way too much faith that the German government will come to the rescue of the PIIGS (Portugal, Italy, Ireland, Greece, and Spain) governments.  My comments are in red.

http://www.marketwatch.com/story/heres-what-keeps-me-awake-at-night-2012-08-14?dist=countdown

Aug. 14, 2012, 12:01 a.m. EDT

Here's what keeps me awake at night

By Charles Sizemore

September 12, 2012. This is the date that may ultimately decide the fate of the euro zone.

It has nothing to do with Greece, Spain, Italy or any of the other problem children of Europe. No, it is Europe's stern school mistress Germany that holds the fate of the currency zone in the balance.

On Sept. 12, the eight justices of Germany's constitutional court will meet to decide the legality of the euro zone's rescue fund or, more accurately, the legality of Germany's participation in the bailout fund under the German constitution. Should Germany back out due a court veto, it's difficult to see the euro surviving the crisis of confidence that would follow.

The German government can’t afford to bail the PIIGS out forever.  The PIIGS have social welfare programs that are still growing.  There is no “real” austerity going on.  The PIIGS simply cut back on the rate of growth and call that “austerity”.  They will be back for more handouts.  The German Constitutional Court knows this.

Source: http://marginalrevolution.com/marginalrevolution/2012/05/how-savage-has-european-austerity-been.html

Americans are no strangers to debates over constitutionality. The 5-4 decision to uphold the Obama administration’s health care overhaul was one of the biggest headlines of 2012. But the German debates are a very different animal.

There are two competing clauses in the German constitution. One declares Germany to be "a democratic and federal state" with power determined "through elections and other votes."

This would seem to preclude Germany from granting control of its budget to an EU watchdog or obligating the German state to bail out euro zone neighbors; the judges have already questioned whether such transfers of sovereignty are permissible.

But then, the German constitution also calls for Germany to strive for a "united Europe," which would be presumed to include some degree of fiscal union. In effect, the fate of Europe depends on which clause of the German constitution the justices decide take precedence.

When clients ask me "what keeps you up at night," this is it. I fear that lack of German commitment could cause the entire European project to unravel.

This obviously doesn’t keep him up at night because he says later in this article that he is long European equities.  He’s so worried at night that he has an overweight allocation to European equities.

If the German court finds the bailouts unconstitutional, then Germany would have to amend or even rewrite its constitution in order to participate — which would require a referendum. And how likely does that sound?

The German voters will not support an amendment to their constitution that signs them up for a permanent bailout of the PIIGS.  Only the German politicians are eager to tax the German people for the money.

Even if a charismatic leader were to convince German voters that constitutional change is the right thing to do, these things take time, and time is a luxury that Europe doesn't have at the moment.

Now that I have sufficiently scared you, I should point out that I do not see the German constitutional court torpedoing the bailouts. They know what is at stake, and they don't want to be responsible for the death of the European project.

The German Constitutional Court knows what is at stake.  They know that the PIIGS will be back for more, and more, and more.  They know the Euro is in serious danger and  will likely die anyways, so why drag Germany down with it.  The court members have not staked their careers and legacy on the idea of the United States of Europe.

I am comfortable being invested in European equities, and Sizemore Capital has an overweight allocation to European equities in its Tactical ETF and Sizemore Investment Letter portfolios.

Charles Sizemore is a Keynesian investor and is going to lose a lot of money for himself and his clients if he believes that the Euro can be saved by Germany and the ECB printing press.  The Euro would have been saved already after 23 summit meetings if it could be.  There is no way to stop the PIIGS from defaulting if they don’t implement drastic government spending cuts.  Look at the voter backlash in Greece.  The voting population doesn’t want austerity.  The Greece voters want the free handouts from the northern European countries like Germany and Finland.  It can’t go on forever.

Still, investors have to consider the "what ifs" when they put capital at risk, and it makes sense to keep a little cash on the sidelines — just in case. It wouldn't be the first time that ideology trumped pragmatism in a high-profile court case.

A growing number of Greek citizens are putting their money in German banks so that it is out of the country if Greece exits the Euro.  Some are converting it to Bitcoins to escape a possible devaluation in the event that Greece leaves the Eurozone before Germany or Finland.

If we get a selloff in the days leading up to the court's decision, I would view it as a buying opportunity. But if the German court strikes down the bailout facility or attaches so many conditions as to make it unworkable, I recommend that investors consider selling all European equities and all but your highest-conviction core American positions as well. Because at that point, the probability of a full-blown meltdown on par with that of 2008 becomes uncomfortably high.

Let’s assume that the German court approves of the bailout facility and attached so few conditions to make it completely workable.  This will only slightly delay the day of reckoning for the Euro.  Again, the PIIGS have not changed any social welfare policies that go them into the unsustainable mess.  There is no real austerity (drastic government spending cuts).  So, they will be back for more bailouts, but the next time it will be time for the Germans and other northern Europeans turn to pay up.  What happens to the European stocks at that point in time?  They go down.  Why do they go down?  Because saved capital will be diverted from equities to taxation or the buying of PIIGS and European government bonds.

Stay away from European equities and Mr. Sizemore’s investments.

Disclosure: I own no equities at this time.

This commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities.

Disclosure: Mr. Sizemore is long European equities.

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Wed, 08 Aug 2012 14:03:40 -0700 Watch Milton Friedman Put a Young Marxist Michael Moore in his place http://myhighdividendstocks.posterous.com/watch-milton-friedman-put-a-young-marxist-mic http://myhighdividendstocks.posterous.com/watch-milton-friedman-put-a-young-marxist-mic

Milton Friedman was not a libertarian, but he believed in the free market a hell a lot more than today’s so-called conservatives.  Friedman advocated income tax withholding.  Government spending grows out of control when taxes are withheld from individual’s paychecks.

Watch Friedman totally destroy a young Michael Moore’s illogic in this short video.

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Tue, 07 Aug 2012 08:01:53 -0700 Dilbert Visits His Chase Branch Office http://myhighdividendstocks.posterous.com/dilbert-visits-his-chase-branch-office http://myhighdividendstocks.posterous.com/dilbert-visits-his-chase-branch-office

Dilbert deposits some money at a JP Morgan Chase branch office.

Image001

He should be pulling out $300 cash per week out of ATMs or the banks vault.

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Tue, 07 Aug 2012 07:29:40 -0700 Why the US Government Is Going Bankrupt http://myhighdividendstocks.posterous.com/why-the-us-government-is-going-bankrupt http://myhighdividendstocks.posterous.com/why-the-us-government-is-going-bankrupt

http://www.youtube.com/embed/mSYy3ZYOfgQ

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Mon, 30 Jul 2012 11:26:09 -0700 Austerity is not Discretionary http://myhighdividendstocks.posterous.com/austerity-is-not-discretionary http://myhighdividendstocks.posterous.com/austerity-is-not-discretionary

This is the most important article from a high level Washington insider in years.  David Stockman is the former Reagan Budget Director and Congressman.  He resigned because the congress refused to cut spending and Reagan went along with them.  Here is the wikipedia entry on him http://en.wikipedia.org/wiki/David_Stockman.  He discusses the future of the US economy in terms of the coming US sovereign debt crisis.  The Keynesians have created the mess and they will not get us out of it using the same failed methods.  Ignore the implications of this interview at your own peril.

http://www.caseyresearch.com/cdd/david-stockman-austerity-not-discretionary

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http://files.posterous.com/user_profile_pics/697493/v_for_vendetta_guy_fawkes_mask11.jpg http://posterous.com/users/4wuf4tt8LZzb Jason Brizic myhighdividendstocks Jason Brizic
Fri, 27 Jul 2012 12:24:19 -0700 TIP OF THE WEEK: An Open Letter to Warren Buffett http://myhighdividendstocks.posterous.com/tip-of-the-week-an-open-letter-to-warren-buff http://myhighdividendstocks.posterous.com/tip-of-the-week-an-open-letter-to-warren-buff

Warren Buffett is a genius investor but an economic ignoramus.  He has been paraded around by statists in government for his willingness to be taxed more.

This is a excellent article on why Warren Buffett should stop acting like a guilt ridden billionaire who wants the government to raise taxes on everyone.  It explains in very clear terms why Marx’s exploitation theory is complete wrong and why capitalism has improved all individuals standards of living.

http://mises.org/daily/6134/An-Open-Letter-to-Warren-Buffett

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http://files.posterous.com/user_profile_pics/697493/v_for_vendetta_guy_fawkes_mask11.jpg http://posterous.com/users/4wuf4tt8LZzb Jason Brizic myhighdividendstocks Jason Brizic
Wed, 18 Jul 2012 21:38:07 -0700 Do you want to know what is going on in Europe? http://myhighdividendstocks.posterous.com/do-you-want-to-know-what-is-going-on-in-europ http://myhighdividendstocks.posterous.com/do-you-want-to-know-what-is-going-on-in-europ

Nigel Farage explains the insanity going on in Europe in two minutes.

http://www.youtube.com/embed/TN_1mF-3JTI

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Thu, 05 Jul 2012 15:18:03 -0700 TIP OF THE WEEK: Read Mises on Money for free. http://myhighdividendstocks.posterous.com/tip-of-the-week-read-mises-on-money-for-free http://myhighdividendstocks.posterous.com/tip-of-the-week-read-mises-on-money-for-free

Avoid bad investments based on Keynesian economics.  Gary North explains Mises valuable contribution to Austrian economics.

Gary North's Tip of the Week - June 23, 2012 Money Book
                        =========================
                        My new book on money in now online. I am offering it to you for the price of toner
and paper.

                        The book presents what is known as the Austrian theory of the business cycle:
booms and busts. This theory was first presented a century ago by Ludwig von
Mises.

                        If you have never read what Mises wrote on money, but you really do want to know
what is going on today with the banking system, this book presents it in five
short chapters.

                        I am easier to read than Mises was. This will get you started.

                        http://www.garynorth.com/public/9689.cfm

                        Gary "Sound Money" North

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Wed, 04 Apr 2012 21:03:59 -0700 Quantitative Easing explained in less than two minutes http://myhighdividendstocks.posterous.com/quantitative-easing-explained-in-less-than-tw http://myhighdividendstocks.posterous.com/quantitative-easing-explained-in-less-than-tw This short two minute video explains quantitative easing better than
anything else I've seen.

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http://files.posterous.com/user_profile_pics/697493/v_for_vendetta_guy_fawkes_mask11.jpg http://posterous.com/users/4wuf4tt8LZzb Jason Brizic myhighdividendstocks Jason Brizic
Fri, 02 Mar 2012 22:03:31 -0800 Your Rotten Monetary Policy Is Destroying This Country by Ron Paul. http://myhighdividendstocks.posterous.com/your-rotten-monetary-policy-is-destroying-thi http://myhighdividendstocks.posterous.com/your-rotten-monetary-policy-is-destroying-thi Your Rotten Monetary Policy Is Destroying This Country

by Ron Paul

Before the United States House of Representatives Committee on
Financial Services, Hearing on 'Monetary Policy and the State of the
Economy,' 2/29/2012

Mr. Chairman, thank you for holding this hearing on monetary policy
and the state of the economy. I believe that now, more than ever, the
American people want to hold the Federal Reserve accountable for its
loose monetary policy and want full transparency of the Fed's actions.

While the Fed has certainly released an unprecedented amount of
information on its activities, there is still much that remains
unknown. And every move towards transparency has been fought against
tooth and nail by the Fed. It took disclosure requirements enacted
within the Dodd-Frank Act to get the Fed to provide data on the its
emergency lending facilities. It took lawsuits filed by Bloomberg and
Fox News to provide data on discount window lending during the worst
parts of the financial crisis. And it will take further concerted
action on the part of Congress, the media, and the public to keep up
pressure on the Fed to remain transparent.


Transparency is not a panacea, however, as a fully transparent
organization is still capable of engaging in all sorts of mischief, as
the Federal Reserve does on a regular basis. Ironically, one of the
Fed's more egregious recent actions, adopting an explicit inflation
target, was hailed by many as another wonderful example of
transparency. Yet if you think about what this supposed 2% inflation
target actually is, you realize that it is an explicit policy to
devalue the dollar and reduce its purchasing power. Two percent annual
price inflation means that prices rise 22% within a decade, and nearly
50% within two decades.

Indeed, if you look at the performance of the consumer price index
(CPI) under Chairman Bernanke's tenure, prices have risen at a rate of
2.25% per year. Many, perhaps even most, economists would consider
this a modest rise, an example of sober, cautious monetary policy.
Some economists of Paul Krugman's persuasion might even argue that
this is too tight a monetary policy. However, 2.25% is not too far off
from the Fed's new 2% target.


Now look at the performance of the US economy since February 1, 2006,
the date Chairman Bernanke took the mantle from Alan Greenspan.
Trillions of dollars have been wasted on bailouts, stimulus packages,
and other feckless spending. Millions of Americans have lost their
jobs and have lost hope of ever regaining employment. The national
debt has risen to more than 100% of GDP, as the federal government
continues to rack up trillion-dollar deficits, aided and abetted by
the Fed's policies of quantitative easing and zero percent interest
rates. And we are supposed to believe that a 2% inflation rate,
similar to what has prevailed during the worst economic crisis since
the Great Depression, is the cure for what ails this economy.

This explicit 2% target also fails to take into account that whatever
measure is used to determine price inflation, be it CPI, core CPI,
PCE, etc., will always be chosen with an eye towards underreporting
the true rate of inflation and price rises. Pressure will be exerted
on those calculating the price indices, so as not to alarm the public
when prices begin to accelerate. One need only look at what is taking
place in Argentina today, where the government publishes an official
CPI figure that is often less than half that reported by private
sources.

A similar situation exists in this country, where economists
calculating CPI according to the original basket of goods have
determined that price inflation has increased 9.5% per year since
2006, rather than the 2.25% reported by the government. Even the
government's own data reports price rises of nearly 7% per year since
2006 on such consumer goods as gasoline and eggs. Bread, rice, and
ground beef have increased by nearly 6% per year, while bacon and
potatoes have increased nearly 5% per year. This means that in a
little over half a decade, prices on staple consumer goods have
increased 30-50%, all while wages have stagnated and millions of
Americans find themselves out of work and without a paycheck. Of
course, government officials claim that price increases do not affect
the average American because they can always buy hamburger instead of
steak, or have cereal instead of bacon. But the American people can
see how they are suffering because of the Federal Reserve. The
government’s claims that the official statistics show no reason to be
concerned about inflation is Marxist – as in Groucho, who famously
said: "Who are you going to believe, me or your own eyes?"

The Federal Reserve continues to keep interest rates low in the hopes
of boosting lending and consumption. But keeping interest rates at
zero discourages saving, particularly as the rate of price inflation
continues to rise. Why stick money in a savings account earning 0.05%
if it is guaranteed to lose at least 2% of its value every year? And
this is a guarantee, as the Fed has promised a 2% rate of increase in
price inflation, while also guaranteeing a zero percent federal funds
rate through 2014. Retirees living on fixed incomes, dependent on
savings, or on interest income from investments will see their savings
drawn down as they are forced to consume principal. Young people, hard
hit by the recession and struggling to find jobs, will fail to see the
virtue of thrift. Saving or investing is an exercise in futility, as
parking money in the bank or in CDs will guarantee a loss, while
investing in stocks, bonds, or mutual funds will net at best paltry
gains, and at worst massive losses in this continuing weak economy.

The longer the Federal Reserve keeps interest rates low and
discourages savings and investment, the more societal attitudes will
change from being future oriented to present oriented. The Federal
Reserve and its policies already served to stimulate and prioritize
consumption over saving, creating the largest debt bubble the world
has ever known. The extended zero interest rate policy only serves to
promote more consumption and debt now, eviscerating thrift and savings
– the true building blocks of prosperity. This present-oriented
mindset has become pervasive especially among politicians, putting the
government in dismal financial shape as Congressmen and Presidents
over the years have taken to heart Louis XV's famous saying: "Après
moi, le déluge." If the American people follow the same path in their
own lives, this country will be ruined. Capital will be depleted,
infrastructure will fall into disrepair, and the United States will be
a mere shadow of its former self. It is well past time to end the
failed monetary policy that encourages this mistaken preference for
cheap money now.

March 1, 2012

Dr. Ron Paul is a Republican member of Congress from Texas.

Original link at LewRockwell.com: http://lewrockwell.com/paul/paul794.html

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Mon, 27 Feb 2012 14:13:55 -0800 Phony gold standard proponents in Utah and Colorado. Beware of wolves in sheep's clothing. http://myhighdividendstocks.posterous.com/phony-gold-standard-proponents-in-utah-and-co http://myhighdividendstocks.posterous.com/phony-gold-standard-proponents-in-utah-and-co

Some Colorado lawmakers are considering making gold and silver money again, but there is more than meets the eye going on here in SmartMoney’s article.

http://tinyurl.com/8xcgujd

You will get screwed if lawmakers have their way.  I guarantee that these politicians are not for a private gold coin standard.

If some lawmakers have their way, the future of money might not be a digital wallet, but a clinking gold coin.

How many Colorado state senators are sponsors of this bill?  I’m guessing hardly any.  Utah legalized the payment of taxes in gold coins at face-value.  For example, if Utah claims you owe $500 in Utah state taxes, then you could pay with 10 one ounce gold coins with a $50 face-value each (market value $17,750).  Thanks, but no thanks.

Colorado state senators are considering a bill that would legalize gold and silver as currency, a practice President Franklin Roosevelt banned to prevent hoarding. Currently, the metals are considered property, with capital gains taxes levied on the profits from their sale. Utah passed a similar measure legalizing gold and silver use last year, and a dozen other states are considering it.

There are two gold standards: a government gold standard and a private gold coin standard.  The first barely offers any more freedom than the current system.  The later offers privacy and freedom.

“It’s a message from the grassroots level that there needs to be a change in monetary policy,” says Rich Danker, economics director for American Principles Project, a conservative think tank. Investors often turn to gold as a way to preserve wealth in tough economic times, and supporters of such state laws have cited concerns about the strength of the U.S. dollar and the country’s growing deficit. A return to the gold standard, they say, would result in a stronger dollar.

Mr. Danker is not calling for a private gold coin standard in which prices are expressed in gold and/or silver weights.  He wants the government to control the price of gold like after WWI and before the government confiscation of 1933.  It is a fake gold standard if you can’t redeem dollars for gold at a bank.

Going with gold has its hurdles. “Gold and silver prices fluctuate dramatically throughout the day,” says Jack Plunkett, chief executive of Plunkett Research. “It would be difficult to figure out what your coin was worth at the moment you paid your bill with it.” Finding merchants willing to accept gold as payment isn’t likely to be easy, either. (Utah’s law, for example, doesn’t require merchants accept gold or silver as payment.) Those buyers would need to determine the precious metal content of items such as coins and root out counterfeits, which could cost them money on the transaction, he says.

The same could be said about the dollar.  The dollar’s price fluctuates dramatically throughout the day.  It would be difficult to figure out what your dollars are worth at the moment you paid you bill with it.  The Federal Reserve could by inflating on the day you spend your dollars.  Violently enforced legal tender laws make finding merchants that accept dollars easy, but that isn’t a detractor to gold and silver as money.  Enterprising banks could issue gold/silver debit cards that guarantee the fineness and weights.  Trust would become commonplace if gold was redeemable at any time.  Dollars are counterfeits to gold and silver.  Inflation destroys the purchasing power of dollars.  This dwarfs transaction cost during a transition to a private gold / silver coin standard.

But supporters say those concerns are overblown. For one, they say the new state measures would allow consumers who have invested in gold or silver to spend it directly, rather than selling the metal first and incurring capital gains taxes, says Danker. That’s especially useful for older U.S. coins, which may have a higher value in metal content than their marked face value. It also may not mean walking around with a bag of precious coins, either — Utah Gold & Silver Depository is working on a debit card system that draws against the value of a customer’s deposited gold.

A repeal of legal tender laws would doom the dollar.  People would be free of the politicians and the Federal Reserve.  That isn’t what Colorado state senators want.  They are wolves in sheep’s clothing.

(Thanks to Jim for the link)

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Mon, 27 Feb 2012 11:08:52 -0800 I tried to open a lemonade stand by John Stossel http://myhighdividendstocks.posterous.com/i-tried-to-open-a-lemonade-stand-by-john-stos http://myhighdividendstocks.posterous.com/i-tried-to-open-a-lemonade-stand-by-john-stos

http://www.creators.com/opinion/john-stossel/i-tried-to-open-a-lemonade-stand.html

Politicians add 79,000 – 80,000 three column fine print regulations to the Federal Register every year.  You think you are free – whoever told you that is a liar or clueless or both.

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http://files.posterous.com/user_profile_pics/697493/v_for_vendetta_guy_fawkes_mask11.jpg http://posterous.com/users/4wuf4tt8LZzb Jason Brizic myhighdividendstocks Jason Brizic
Sun, 29 Jan 2012 10:56:41 -0800 Doug Casey on the Collapse of the Euro and the EU http://myhighdividendstocks.posterous.com/doug-casey-on-the-collapse-of-the-euro-and-th http://myhighdividendstocks.posterous.com/doug-casey-on-the-collapse-of-the-euro-and-th Here are some of my recommended action steps to help you with
implementing Doug Casey's recommendations in his recent article for
LewRockwell.com (http://lewrockwell.com/casey/casey105.html)

1) Buy $10,000 worth of precious metals if you have none. Put 80%
into gold coins from your home country. I recommend tenth ounce gold
coins because they are more tradeable, but they have a higher premium
over the spot price of gold. Go to www.kitco.com or www.apmex.com to
learn the spot price of gold and silver and the associated premiums
for various coins.

http://www.apmex.com/Category/504/American_Gold_Eagles_2012__Prior.aspx

Put the remaining 20% into one ounce silver coins or junk silver
coins. Junk silver is not "junk". That is the name of US dimes and
quarters from before 1965. Their composition is 90% silver.

http://www.apmex.com/Product/27/90_Silver_Coins___100_Face_Value_Bag_.aspx

2) Have printed cash on hand to buy valuable tools of production for
your side business from desperate sellers locally (e.g. Craigslist) or

3) I disagree with Doug Casey that the gold mining stocks are cheap
right now. Visit some of the gold mining stock articles on my blog to
see why I don't think they are so cheap. Here is one to start wiith:
http://www.myhighdividendstocks.com/category/stocks-that-pay-small-dividends/...

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discover high dividend stocks with earning power and strong balance
sheets.

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Wed, 18 Jan 2012 15:19:51 -0800 An excellent video on SOPA and PIPA legislation http://myhighdividendstocks.posterous.com/an-excellent-video-on-sopa-and-pipa-legislati http://myhighdividendstocks.posterous.com/an-excellent-video-on-sopa-and-pipa-legislati

There are a lot of blackouts on major websites like Wikipedia.org against PIPA and SOPA.

This is the best video I’ve found on the issue:

http://video.ted.com/talk/podcast/2012S/None/ClayShirky_2012S.mp4

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Fri, 16 Dec 2011 11:00:59 -0800 TIP OF THE WEEK - Why MF Global went down and how you can protect your life's savings http://myhighdividendstocks.posterous.com/tip-of-the-week-why-mf-global-went-down-and-h http://myhighdividendstocks.posterous.com/tip-of-the-week-why-mf-global-went-down-and-h

December 16th, 2011

Jason Brizic

Investment institutions (like MF Global) can legally steal your assets and use your property for their own purposes.  They can do this because you have agreed to let them do this by consenting to their customer agreements.  Read the article below by Austrian economist, Doug French, for a devastatingly clear explanation of what killed MF Global and it customer’s [victims] savings.

Your savings and investments may not be safe in your brokerage accounts depending on the fine print in the agreements you consented to.  Some financial corporations have agreements that allows them to use your assets as their collateral in their bets in the derivatives markets.  Other financial corporation’s only claim to do this with your margin accounts; therefore, standard brokerage accounts and retirement accounts would remain untouched in that situation.

This means that an investor who had $100,000 in a money market account with MF Global could still be wiped out by the MF Global bankruptcy.  Most people think that their brokerage money is safe in money markets, but that is not necessarily the case depending on the customer agreements you entered into.

Action steps:

1)    Go to Google and perform a search using the name of your financial institution plus the word rehypothecation.  The results might scare you.

a.    For example Fidelity rehypothecation yields the following results: http://www.google.com/search?q=fidelity+rehypothecation&rls=com.microsoft:*&ie=UTF-8&oe=UTF-8&startIndex=&startPage=1

b.    Click through a couple of the results until you find someone who dug out the applicable fine print from the customer agreements

2)    If the fine print says anything like what MF Global’s fine print said, then you have a decision to make soon.  You can keep the account or close the account.

“7. Consent To Loan Or Pledge You hereby grant us the right, in accordance with Applicable Law, to borrow, pledge, repledge, transfer, hypothecate, rehypothecate, loan, or invest any of the Collateral, including, without limitation, utilizing the Collateral to purchase or sell securities pursuant to repurchase agreements [repos] or reverse repurchase agreements with any party, in each case without notice to you, and we shall have no obligation to retain a like amount of similar Collateral in our possession and control.”

It isn’t clear to me at this time how the MF Global bankruptcy will be handled by the FDIC and the SIPC (http://en.wikipedia.org/wiki/Sipc).  There are proposals in congress to change what is covered and by how much.  Regardless of the actions of congress, ultimately the FDIC and SIPC are empty promises because they don’t have enough money to insure the assets they claim to insure.  The Federal Reserve would have to hyper inflate the money supply to back their insurance claims.  Doug French addresses this at the end of his article below.

* * * * * * * * * *

MF Global's Fractional Reserves

by Doug French

Recently by Doug French: Who Serves During Disaster?

 

 

 

Jon Corzine told the House Agriculture Committee, "I simply do not know where the money is, or why the accounts have not been reconciled to date." The public is outraged that the former CEO of bankrupt global financial-derivatives broker and prime dealer in US Treasury securities MF Global doesn't know where the missing $1.2 billion in client funds went.

Corzine is the member a few exclusive clubs: he is a Goldman Sachs alum, former US senator, and former New Jersey governor. After the incumbent Corzine was beat by Chris Christie in the 2009 New Jersey gubernatorial race, the MF board probably rejoiced, believing the guy to fix their problems was suddenly available. Now he's in the club of taking a mere 20 months to create the eighth largest bankruptcy in history.

As a stand-alone entity, MF Global was born in 2007 when it was spun off from UK hedge-fund giant, Man Group. MF booked revenues of $4 billion that year from interest earned by using its customers' funds, an operation that sounds like fractionized banking: short-term embezzlement used to make profits.

For banks, the practice was sealed in English common law in 1811 in the court case of Carr vs. Carr, where Master of the Rolls Sir William Grant ruled that debts mentioned in a will included bank accounts since the money had been deposited into the bank and wasn't earmarked in a sealed bag. The deposit was thus a loan rather than a bailment.

The same Judge Grant ruled the same way five years later in Devaynes vs. Noble, despite an attorney's argument that "a banker is rather a bailee of his customer's funds than his debtor … because the money in … [his] hands is rather a deposit than a debt, and may therefore be instantly demanded and taken up."

In 1848, in Foley vs. Hill and Others, Lord Cottenham ruled,

"Money, when paid into a bank, ceases altogether to be the money of the principal; it is then the money of the banker, who is bound to an equivalent by paying a similar sum to that deposited with him when he is asked for it.… The money placed in the custody of a banker to do with it as he pleases."

It's been clear sailing for bankers ever since. No questions asked.

At the same time, people are surprised that a commodity brokerage firm would misplace client assets. As Christopher Elias explains for Thomson Reuters,

"MF Global's bankruptcy revelations concerning missing client money suggest that funds were not inadvertently misplaced or gobbled up in MF's dying hours, but were instead appropriated as part of a mass Wall St manipulation of brokerage rules that allowed for the wholesale acquisition and sale of client funds through re-hypothecation. A loophole appears to have allowed MF Global, and many others, to use its own clients' funds to finance an enormous $6.2 billion Eurozone repo bet."

Free bankers are always insisting that fractional-reserve banking is A-OK, as long as bankers inform depositors up front that the bank will be using their customers' money to make loans and investments.

That is exactly the case with MF Global. The company's customer agreements included the following clause:

7. Consent To Loan Or Pledge You hereby grant us the right, in accordance with Applicable Law, to borrow, pledge, repledge, transfer, hypothecate, rehypothecate, loan, or invest any of the Collateral, including, without limitation, utilizing the Collateral to purchase or sell securities pursuant to repurchase agreements [repos] or reverse repurchase agreements with any party, in each case without notice to you, and we shall have no obligation to retain a like amount of similar Collateral in our possession and control.

Back in 2007, customer funds held by MF as collateral against commodities trades could be invested in two-year Treasuries earning north of 4.5 percent. But in the wake of the '08 meltdown, the Bernanke Fed has flattened yields to be counted in basis points. With these low rates MF Global revenues fell to $517 million in 2010.

The old bond trader Corzine thought he could juice up MF's earnings with a little financial razzle-dazzle. Thinking outside the box (and off the balance sheet), Corzine moved $16.5 billion in assets into repos. A repo involves putting up assets as collateral, assets to be repurchased later, and borrowing money against those assets. MF used an off-balance-sheet repo called a "repo-to-maturity" where the loan and the collateral in the transaction have the same maturity. US accounting rules consider the transaction a sale and the assets can be moved off the balance sheet.

Most of these assets were bonds from Italy, Spain, Belgium, Portugal, and Ireland, all paying healthy coupon rates that would easily cover the repo interest rate and provide a nice profit. MF Global would have virtually no skin in the game (their customers provided it) and be earning a nice interest-rate spread.

Although things have been rocky in euroland, the collateral value of the short-term bonds appeared safe with the guarantee provided by the European Financial Stability Facility (EFSF).

With the $16.5 billion in assets moved off its balance sheet, MF Global then ramped up a net-long sovereign-debt position of $6.2 billion on its balance sheet – exposure that was five times the company's net worth.

While the EFSF guarantee would insure against the default of the sovereign debt if the bonds were held to maturity, MF was still at risk to make margin calls, if the bonds dropped in price day-to-day. Elias writes,

"Like Wall Street cocaine, leveraging amplifies the ups and downs of an investment; increasing the returns but also amplifying the costs. With MF Global's leverage reaching 40 to 1 by the time of its collapse, it didn't need a Eurozone default to trigger its downfall – all it needed was for these amplified costs to outstrip its asset base."

So while MF Global's eurozone bets had not defaulted, the company's liquidity was drained making margin calls and trying to meet short-term-debt obligations as the euro-crisis news flow out of Europe vacillated.

MF Global was able to leverage up its euroland bets by way of the rehypothecation of their clients' collateral. Hypothecation is pledging collateral for a loan. Like the mortgage on your house.

Customers of MF posted cash, gold, or securities as collateral to backstop their commodity futures and derivatives trading. MF would then take those customer assets to back its own trades and borrowing. Mr. Elias explains, "The practice of re-hypothecation runs into the trillions of dollars and is perfectly legal. It is justified by brokers on the basis that it is a capital efficient way of financing their operations much to the chagrin of hedge funds."

Under US rules, a prime broker is allowed to rehypothecate assets to the value of 140 percent of the client's liability to the broker. The rules are more liberal in the United Kingdom, where there is no limit and in many cases UK brokers rehypothecate 100 percent of collateral value placed in their custody.

Elias writes that by 2007, rehypothecation was half the shadow banking system.

"Prior to Lehman Brothers' collapse, the International Monetary Fund (IMF) calculated that U.S. banks were receiving $4 trillion worth of funding by re-hypothecation, much of which was sourced from the UK. With assets being re-hypothecated many times over (known as 'churn'), the original collateral being used may have been as little as $1 trillion – a quarter of the financial footprint created through re-hypothecation."

All of this churning has created rivers of liquidity, much of it with no asset backing. And what assets do provide backing aren't the quality they used to be. The repo rules were liberalized in the Clinton era. So instead of AAA government paper being required, AA sovereign debt works just fine; after all, as James B. Stewart writes for the New York Times:

"The law also allows commodities firms like MF Global to use segregated customer funds as a source of low-cost financing for their own operations, but they are required to replace any customer assets taken from segregated accounts with supposedly ultrasafe collateral of the same value, typically United States Treasuries, municipal obligations and obligations whose payments of principal and interest are guaranteed by the government." [emphasis added]

Of course all this rehypothecating creates mountains of counterparty risk, all dependent on dubious collateral that has been pledged multiple times. The equivalent of having four mortgages on a house, each having been sold to other parties who have been told their mortgage is in first position. When the property value starts dropping or the borrower doesn't pay, only one lender will get there first and legal fistfights ensue.

This rehypothecation activity may be the biggest credit bubble of all time, according to Elias. J.P. Morgan alone has rehypothecated over half a trillion dollars in 2011, Morgan Stanley $410 billion, Goldman Sachs $28 billion, and the list goes on.

Americans have been told US banks have little exposure to European sovereign debt, but according to the Bank for International Settlements (BIS), US banks hold $181 billion in the sovereign debt of Greece, Ireland, Italy, Portugal, and Spain. And while Germany is considered the belle of the Continental ball, Grant's Interest Rate Observer reports that Deutsche Bank is levered at 43:1 and the Bundesbank has doubled its leverage since 2007 when it was geared at 75:1 – these days the central bank is levered at 153:1.

Extreme leverage is a problem if the slightest thing goes wrong – anywhere. When the cost of swapping euros for dollars soared at the end of last month, a coordinated central-bank cavalry charged out of nowhere, cutting swap rates and establishing temporary bilateral-liquidity swap arrangements. Nobody but financial news junkies seemed to know or care.

The truth about the financial crash wasn't known until Bloomberg chased its request for information all the way to the Supreme Court to obtain documents that shed light on how much dough the Federal Reserve really provided the banks during the 2008 meltdown.

For instance, it turns out Wachovia shareholders got lucky as the bank was floated a secret loan from the Fed of $50 billion to keep the doors open while a sale could be arranged with Wells Fargo for $7 a share rather than shareholders having to take the buck-a-share offer from the wounded Citibank.

"This deal enables us to keep Wachovia intact and preserve the value of an integrated company, without government support," Wachovia's chief executive Robert Steel said at the time.

Right, no government support at all.

Instead of being among the bailed out, Corzine and MF Global are now joining Lehman, IndyMac, Colonial, and all the small-fry banks lacking the friends in high places needed to keep them afloat. In the fractional-reserve world, markets don't decide the winners and losers; government does.

Stewart writes for the NYT, "SIPC will replace up to $500,000 of securities and cash (but not futures contracts) missing from customer accounts at member firms," and the notion of even covering futures accounts has been floated on CNBC by Senator Debbie Stabenow, just as the FDIC replaces deposits up to $250,000. But covering the losses of clients and depositors is hardly the reflection of sound capitalism and the honoring of property rights.

Murray Rothbard wrote,

"If no business firm can be insured, then an industry consisting of hundreds of insolvent firms is surely the last institution about which anyone can mention 'insurance' with a straight face. 'Deposit insurance' is simply a fraudulent racket, and a cruel one at that, since it may plunder the life savings and the money stock of the entire public."

So it's unlikely Jon Corzine knows where the $1.2 billion in customer money went any more than the president of a failed bank would know exactly where the customer deposits went.

The bigger issue is that, day by day, Mr. Corzine looks to be merely a canary in the fractional-reserve coal mine.

Reprinted from Mises.org.

December 15, 2011

Doug French [send him mail] is president of the Ludwig von Mises Institute and the author of Early Speculative Bubbles & Increases in the Money Supply. He received the Murray N. Rothbard Award from the Center for Libertarian Studies. See his tribute to Murray Rothbard.

* * * * * * * * * *

Link to the article on LewRockwell.com: http://lewrockwell.com/french/french143.html

For more tips of the week click here: www.myhighdividendstocks.com/tip-of-the-week

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Mon, 12 Dec 2011 20:55:51 -0800 Legendary Investor, Jim Rogers, says times are going to get much worse http://myhighdividendstocks.posterous.com/legendary-investor-jim-rogers-says-times-are http://myhighdividendstocks.posterous.com/legendary-investor-jim-rogers-says-times-are
An excellent, straight shooting article on Jim Rogers thoughts.  Own real assets in times of high inflation.  Central bank money printing will lead to highly inflationary times.
 
 
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