Money: Slip Sliding Away
by Bill Sardi: America
Paying the Price for Ignoring Ron Paul-Type Foreign Policy
Woe, is me.
Hold your hands to your head as you read below that the value of
your money is eroding rapidly. This is the worst Federal Reserve
Bank headache ever created. A
return to the gold standard may be the only pill that will make
it go away. Despite many current opinions that a return to a
gold standard is an archaic impossibility (some even say the very
is ludicrous), in 1995 Bettina
Bien Greaves said: "There is no reason, technically or
economically, why the world today, even with its countless wide-ranging
and complex commercial transactions, could not return to the gold
standard and operate with gold money." If a gold standard is
ludicrous, then what is current fiat money?
below the major places where Americans can invest their money and
the kind of yield (interest) they can typically anticipate in each
category. Obviously, individual rates of return will differ.
When it comes
to investing your money, don’t
forget to calculate for inflation (loss of purchasing power
of your money). The numerical figure in your accounts may be the
same or rise slightly but actually lose value due to inflation.
made in the way inflation is calculated in 1980 and 1990 so that
historical figures that compare yield to rate of inflation prior
to 1990 are misleading. Therefore, historical rates of return on
investment are off the table in such an environment. John Williams
of ShadowStats.com shows the real inflation rate is currently 9.3%,
not the oft-quoted 2.2%, which is the target rate of inflation established
by the nation’s central bank. Reference
From a net-income
standpoint, you will have to pay special attention this upcoming
year (2013) to rising income tax rates which increase the yield
your investments must achieve to report any growth in your individual
wealth (see chart at end of this report).
Make sure you
are reading up-to-date projections on rate of return. In the past
"cash typically had a return of 4 percent, putting bonds at
6 percent and stocks at 8 to 9 percent. With cash now yielding zero,
that has lowered bonds’ return to 2 to 2.5 percent and stocks to
5 percent. The problem is that too many people are stuck on the
old numbers," says Jean L. P. Brunel, chief investment officer
at GenSpring Family Offices. Reference
counselors may inquire what your financial goals are, such a question
is an oxymoron in today’s economic environment. Your investments
must achieve 9-10% return on your investment per year or else! In
order to just maintain the value of your money you must either ask
your employer for a 9-10% increase in pay or achieve the same via
pay raises and investment returns.
RATES OF RETURN
(Series I): 2.2% Reference
account: o.19% Reference
(not even 1%)
account ($25,000 minimum deposit): CIT Bank 1.05% Reference
savers are capitalizing banks for free while taking a loss on their
banked money, all the while bankers enrich their stockholders with
(held as cash): 0.05% yield. Reference
balance in 401k accounts with Fidelity declined from 2010-2011.
in 401k plans: "An ordinary median-income, two-earner household
will pay nearly $155,000 over the course of their lifetime in 401(k)
Average rate of return past 2 decades: 3.5%* (read why 401k plans
don’t work) Reference
(top-rated global fund): 5.7% Reference
"For the six months ended February 29, 2012, Vanguard Prime
Money Market Fund earned a negligible return, and the Federal and
Admiral Treasury Funds earned 0%." Reference
the advertised 7-8% annual return may not be the rate of return
on your specific investment.
CalPERS, the California State public employee retirement fund and
the world’s largest pension fund, with its cadre of professional
investment counselors, could only produce a 1%
return on its investments in the latest year, falling short
of its 7.5% target return. In the past two decades CalPERS
had achieved a 7.5% return on investment.
market has become a casino, artificially propped by free money
pumped into the economy (largely to banks and investment houses
that get to invest it first), distorted by fast electronic trades
and after-hours trades to elite clients, the quoted average rates
of return may not be what individual investors can achieve.
*Read a report
by Bill Gross why the stock market is a Ponzi scheme and how profits
have been skimmed by brokers. Reference
The stock market
currently benefits from a bubble created by the Federal Reserve.
the economy improves, the stock market could predictably crash
because investors will likely return to less risky investments.
Feldstein is concerned that the stock market might be in a bubble.
The extremely low interest rates on long-term investments, such
as treasuries, are forcing people to look to the stock market to
get some yield. But those interest rates are likely to rise, so
we’ve got a bubble in the long-term bond market," Feldstein
says. At some point, he says, we’ll return to normal rates, which
will make equities less attractive. An improving economy could actually
make the bubble worse because long-term interest rates on borrowed
money could go up. "I don’t think that an improving economy,
per se, is going to help the stock market," Feldstein said.
"It certainly won’t help the bond market."
Did you hear
that? An improving economy will crash the stock market! Maybe this
is why the Federal Reserve Bank is so friendly to Wall Street and
not to Main Street.
A huge inventory of empty homes and a shadow inventory of 4 million
non-performing home loans that lenders have been hiding, suggests
residential real estate is still over-valued. Read why home
prices are likely to decline by an additional 20%.
(coffee can, under mattress): losing value at 9.3% per year (real
rate of inflation). Reference
How much of
your income do you need to sock away in the bank to achieve a comfortable
retirement? Answer: at 2-3% rate of return, you would need to save
40% of your income. Reference
A GOLD STANDARD:
Paul says a majority of Americans favor a return to a gold standard.
says: "there is a whole tradition of excellent academic scholarship
virtues of the gold standard."
Rothbard wrote an excellent text on this subject. According
to Murray Rothbard’s theory
of banking, the gold standard means banks would hold 100% reserves
against demand deposits. "Under these conditions there is no
necessity or even any purpose to having a central bank," says
writing at lewrockwell.com.
A book has
even been written providing specifics on how to convert back from
a paper money system to a gold-backed currency system (The
True Gold Standard A Monetary Reform Plan without Official
Reserve Currencies by Lewis E. Lehrman).
With so many
predictions that the price of gold will rise from its current $1700/oz.
$5000, and the fact
that there may be no
telling how high gold can go (and thus, how far the value of
paper money will decline) with the Federal Reserve pumping money
into the system, this sends a signal to buy gold but also (sadly)
sends a signal that paper money is confetti. To escape this crash,
investors will have to be holding assets (fully-paid real estate,
preferably agriculture land, gold, silver, and other tangible items).
News report, quoting Dylan Grice, global strategist at the French
bank Societe Generale, says $10,000
is the "fair value" of an ounce of gold. The same
formula used during the Bretton Woods agreement in 1944, that established
the current international financial system (agreed to by 44 allied
pegged the dollar at $35 per ounce has been used to predict
A newly published
Golden Revolution by John Butler) says $10,000/oz.
gold is "inevitable."
At a price
of $2500-3000/oz., gold will begin to become the preferred form
of money and there will be a predictable gold rush around the world.
If the price
of gold rises to the heights some analysts predict, it will become
the de-facto currency in the world. It will become THE desired currency.
Recognize it is not just the U.S. Federal Reserve bank that is pumping
money into the economy. Central banks worldwide are in working in
a concerted effort to pump money into economies ahead of an impending
collapse (fiscal cliff in USA), which is historically unprecedented.
Cast a gander
at the upcoming tax increases and current rate of inflation in the
graphic below. If that isn’t impetus for the public to route out
the central bankers and install a gold standard, nothing will be.
Only misplaced trust in a bought-off government keeps central banking
him mail] is a frequent writer on health and political
topics. His health writings can be found at www.naturalhealthlibrarian.com.
latest book is Downsizing
© 2012 Bill Sardi Word of Knowledge Agency, San Dimas, California.
This article has been written exclusively for www.LewRockwell.com
and other parties who wish to refer to it should link rather than
post at other URLs.
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