Liquid Lies and the Purpose of Government
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- Published on Monday, 07 May 2012 08:00
- Written by Sara Nunnally, Editor, Inside Investing Daily
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As long as the government continues to lie, investors will lose faith in the greenback. But until something better comes along, the dollar is the best of the worst.
Now that I'm back on my farm in Wisconsin after our Natural Resource Investing Summit in Toronto, I have a chance to go through all my notes from the presentations.
On one notepad is a phrase I bolded and underlined:
"Liquid Lies."
During our panel discussion on the very last day, we were asked about where we thought the U.S. dollar was headed, and what, if anything, would replace it.
Now, we've created so many dollars out of thin air that no single thing will replace it.
Not gold or silver, nor any other single commodity, unless we hack up the value of the dollar.
I believe that we could see a return to more of a barter-type economy, at least on some levels. We've already seen this as an unintended consequence of the sanctions against Iran's oil exports. India has been trading rice and wheat for barrels of oil in order to keep much-needed fuel flowing.
There's even a bartering commission for companies here in the U.S., and alternative barter-able currencies are popping up around the country, offering certain things like eggs for handyman services, or knit scarves for a physical.
But I doubt the Big Banks will let you trade your hours of work in payment for your mortgage.
So, if gold, silver or eggs won't replace the King of Currencies, is there another actual currency that could replace the dollar?
Nobody on our panel believed there was another currency with the "strength" and liquidity of the dollar.
In other words, all the other major currencies are in a worse spot than our greenback.
Rick Rule calls all paper currencies liquid lies. Fiat currencies aren't backed by anything of real value. Rather, they're backed only by the full faith of the government that printed them. And that makes the U.S. dollar just the most liquid of lies.
That our government lies should come as no surprise to you... all governments do. In fact, the purpose of government is to swindle enough money from its people to stay in power.
Two quotes from John Steele Gordon's An Empire of Wealth illustrate this point:
Since the earliest days of civilization, politicians have faced tough choices between raising unpopular taxes and controlling popular spending. When they possessed the power to pay their bills with cheaper money, such as by debasing or short-weighting the coinage, all too often they did so.
And...
People in government will always try to help those who are powerful at the expense of those who might become so. What-is can always wield influence that what-might-be cannot match...
As a result, there is great resistance to changing this balance... Why would government want to upset this apple cart if perpetuating it keeps them in power?
One of the more overlooked lies comes from how the government reports on itself. Unemployment figures, CPI, GDP growth. The list goes on.
My biggest issue with these figures is how they are openly manipulated -- revised higher or lower to suit the political whims of the folks in power.
But these lies don't just serve to affect political gains on the campaign trail. They have a real effect on your portfolio and investment style.
Think about it. Friday's jobs report showed unemployment dropped to 8.1%. Good news, right? Things are finally starting to move in the right direction, and you can finally make some strides in your bullish portfolio.
But I wouldn't be so sure... Here's why.
About a year ago, Option Strategies Weekly editor Jared A. Levy pulled back the curtain on the unemployment figure.
The percentage number we are told is the official unemployment rate is called the "U3" measurement, which doesn't calculate the full unemployment picture. It actually measures the amount of unemployed workers divided by the people in the participating labor force.
The devil is in the details in how they define "unemployed workers" and the participating labor force itself....
The participation rate is the ratio between the amount of people who are currently employed or who are ACTIVELY looking for a job as a percentage of the total people who are able to work (labor force). Talk about a subjective definition!
How can you make an accurate assessment on the health of the economy with such loosey-goosey numbers?
You can't. The traditional economic indicators are dead.
That's why, on Friday, after the official ADP jobs report came out showing an improvement in the unemployment rate, the markets dropped more than 1%.
These kinds of false reports need to be thrown out, and we need to find real numbers and truthful correlations.
Otherwise, we're just participating in our own economic slavery to, as John Steele Gordon put it, "What-Is."
Editor's Note: I just got back from the biggest conference Insiders Strategy Group has ever hosted. Without a doubt, it was a runaway success. It was a winner because of the focus -- natural resources.
We pulled together some of the best and brightest of the industry and asked them to reveal their insight and their own tricks to success. There were gold mining insiders, oil drilling CEOs, geologists and even top resource-focused portfolio managers.
We understand that not everybody can hop on a flight to Toronto and spend three days at a conference – even one as big as important as this one. That is why we recorded everything.
It means you have access to the entire event... over 24 hours' worth of material. Here's how you can get your hands on it.
Chart of the Day: The Brutal Reality of Underemployed Undergraduates
By Adam English, Associate Editor, Inside Investing Daily
Student loans and the interest rates they come with are getting a lot of attention in Congress and from the mainstream news.
For many students it is a make-or-break issue.
Unfortunately for recent graduates, keeping rates low is just the start of the argument. The root of the problem is not being addressed. Underemployment is dooming many students to a lifetime of debt.
This chart comes with some serious caveats. It assumes that a student would have the average debt burden of an undergraduate from public or private universities. It then removes the average cost of living. The assumption is that every single spare penny the new worker makes will be dedicated to debt reduction.
The superhuman level of discipline required to put every penny into debt reduction virtually guarantees that no one could meet these ideal time frames. It is especially true if we consider the horrific job market for today's youngest members of the workforce.
In 2011, about 1.5 million, or 53.6%, of bachelor's degree holders under the age of 25 were jobless or underemployed.
This is the new norm for young, educated workers entering the American workforce. It'll have life-long implications for everything from homeownership and car sales to retirement funds.
A brutal reality awaits most undergraduates in America once they leave school. Interest rate reductions will help, but grads need something Congress cannot give them -- a job that matches their education.
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