The U.S. dollar continues to slide in value as out of control spending continues. China, the largest holder of U.S. debt, is considering dumping two-thirds the dollar reserves that it holds, to the tune of about $3.04 trillion.
According to a report from China’s Xinhua news agency, a member of the Chinese central bank’s monetary policy committee is recommending that Beijing reinvest its foreign exchange reserves. Other Chinese financial authorities confided at a forum in Beijing that China’s current U.S. holdings are too high. The governor of China’s central bank has said that China’s foreign exchange reserves are excessive and that Beijing should begin to diversity its vast pool of dollars.
While American corporations have led the world in economic growth for more than a century, China’s government has had enough business sense to become the world’s second largest economic power. China is on target to overtake the U.S. economy.
Central bankers and many investors want to unplug the dollar as the international mainstay of finance. China wants its currency to play a more dominant role in the global economy, dumping the dollar (treasuries) as a viable investment, since the Federal Reserve is addicted to printing money, which further devalues the dollar to keep the current global money scene afloat.
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What are some of the similarities and differences between ponzi and pyramid schemes?
Pyramid schemes and ponzi schemes are closely related. They both involve paying longer-standing members with money from new participants, instead of actual profits from investing or selling products to the public. Here are some common differences:
||Earn high profits by making one payment and finding a set number of others to become distributors of a product. The scheme typically does not involve a genuine product. The purported product may not exist or it may only be “sold” within the pyramid scheme.
||Earn high investment returns with little or no risk by simply handing over your money; the investment typically does not exist.
||Must recruit new distributors to receive payments.
||No recruiting necessary to receive payments.
|Interaction with original promoter
||Sometimes none. New participants may enter scheme at a different level.
||Promoter generally acts directly with all participants.
|Source of payments
||From new participants – always disclosed.
||From new participants – never disclosed.
||Fast. An exponential increase in the number of participants is required at each level.
||May be relatively slow if existing participants reinvest money.
What steps can you take to avoid schemes and other investment frauds?
When you consider your next investment opportunity, start with these questions:
- Is the seller licensed?
- Is the investment registered?
- How do the risks compare with the potential rewards?
- Do I understand the investment?
Many ponzi schemes share common characteristics. Look for these warning signs:
- High investment returns with little or no risk. Every investment carries some degree of risk. Investments yielding higher returns typically involve more risk. Be highly suspicious of any “guaranteed” investment opportunity.
- Overly consistent returns. Investments tend to go up and down over time, especially those seeking high returns. Be suspect of an investment that continues to generate regular, positive returns regardless of overall market conditions.
- Unregistered investments. Ponzi schemes typically involve investments that have not been registered with the SEC or with state regulators. Registration is important because it provides investors with access to key information about the company’s management, products, services, and finances.
- Unlicensed sellers. Federal and state securities laws require investment professionals and their firms to be licensed or registered. Most ponzi schemes involve unlicensed individuals or unregistered firms.
- Secretive and/or complex strategies. Avoiding investments you don’t understand or for which you can’t get complete information is a good rule of thumb.
- Issues with paperwork. Ignore excuses regarding why you can’t review information about an investment in writing, and always read an investment’s prospectus or disclosure statement carefully before you invest. Also, account statement errors may be a sign that funds are not being invested as promised.
- Difficulty receiving payments. Be suspicious if you don’t receive a payment or have difficulty cashing out your investment. Keep in mind that ponzi scheme promoters sometimes encourage participants to “roll over” promised payments by offering even higher investment returns.
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Global industrial production now shows clear signs of recovering at least when comparing the current ‘recession’ with the Great Depression. During that time, a decline in industrial production continued for a full three years. The question remains regarding final demand for this increased production. Will renewed demand actually materialize or did the U.S. government create a small bubble with $2 billion “Cash for Clunkers” program? Will consumer spending, especially in the US, remain weak, causing the increase in production to go into inventories? If production simply falls into inventories, this will result in sharp cut backs and result in a return to recession. The labor market combined with ailing business credit and finance in the U.S. does not hold out much promise for an end to the recession. Will the Obama administration jigger with credit markets to somehow expand credit markets?
Global stock markets and investment banking and profiteering have mounted a sharp recovery since the beginning of the year. Still, the decline in stock market wealth remains even greater than at a comparable stage of the Great Depression. The downward spiral in global trade volumes has abated. This may be due to the return of the old ways of doing business that President Obama has decried publicly in the last few days. Data exists for June that shows a modest uptick in trade, but the collapse of global trade remains dramatic by the standards of the Great Depression.
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What has been described as a contrite Bernie Madoff appeared in court with an apology to his victims. Madoff expressed that he believed that he would be able to work his way of his financial scheme, but was never able. Madoff was sentenced to 150 years in prison, according to the judge, symbolic for a crime of “extraordinary evil.” Madoff was perceived as a powerful financial advisor because he was able to create double digit returns for his clients in all financial weather. For more than a decade, even the SEC overlooked the fact that he was running a ponzi scheme, using new investors to pay off old ones as he lived the high life.
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All interest rates are not equal when it comes to any given investment product. The rates on bonds of different maturities behave independently of each other. Short-term rates vs. long-term rates can move in opposite directions simultaneously. The gods of finance say that what is important is the overall pattern of interest-rate movement: a direct reflection of the future of the economy and Wall Street confidence.
The Fed is not certain what is driving the sharp rise in long-dated bond yields and has noticed a widening gap between short and long term yields. What does it all mean? Is someone like the Chinese manipulating the market?
A steepening yield curve could mean that investors are worried about the deterioration in the U.S. economic outlook… or the possibility for a collapse in the U.S. dollar as the Federal Reserve continues to load the world with newly minted currency as part of its recent program.
Economists are involved in open combat over what is driving the signs and even worse, what the cause or the solution really is. Some Fed officials believe that a recent glimmer-of-hope in economic data is encouraging investors to believe there is less need for ‘safer government bonds’. Richard Fisher in the Dallas Fed contends that the steepening yield curve is generally a sign of a recovery, but huge debt may dampen that perception.
What is certain is that the U.S. Treasury is being forced to sell more bonds to cover the unprecented U.S. debt and falling tax revenues as a result of the recession. What does appear to be certain is that the relentless dumping of dollars on the market will ultimately result in inflation that could easily get out of hand. Is it recovery from investor confidence, investor manipulation, worried investors or defective monetary policy driven by central bankers? Not even the gods of finance know the answer. The gods of finance do not know right or wrong. They know theory and are now in uncharted territory.
We live in exciting times. The stock market is up 100 points… or who knows what goodness corporate investors are blessed with today. Wall Street mavens and financial wizards are feeling giddy with delight. They want good times so badly that they are already deluding themselves that the recession is over and that runaway prosperity is in the wings. It’s time to start making money all over again the way “we” used to. After all, nothing has changed beyond massive cast infusions to hold up the system. Multitudes of banks, corporate mongers, financial wizards and wishful investors are convinced that we are about to relive heady good times without an ounce of reform or correction in the system that jack built. They may be right.
The longer reform takes, the less likely reform is to happen, at least if financial and corporate simple simons have their way. It’s time to stop pretending that the Wall Street economy is the same as the real economy that everyone lives in. Wall Street hasn’t met with total and final meltdown because the Wall Street economy has been rescued. They have lived to see another day because of government bailout, presumably at taxpayer expense. Yep, Wall Street seems to be showing signs of life along with the giddiness that goes along with having a future without any reform or consequences. A real party is set to ensue at the expense of all. The real economy that the rest of America lives is another matter altogether.
What is truly important where the economy is concerned is whether real Americans can find work. If Americans can’t find work or create work that they use to survive, the country is in trouble, pure and simple. 539,000 Americans lost their jobs last month after many months of ongoing successive unemployment disaster. Since the recession officially began in December 2007, 5.7 million jobs have been given the write off by government employment statistics. The reality is actually even worse.
Still, there has been plenty of impressive talk about the new world of reform that America will enjoy, but little has been done beyond the talk. Regulatory reform is dying on the government vine of important projects.
Geithner has quipped, “We are being dramatically more aggressive than I believe any serious government has ever been, certainly in generations, in responding to financial crises. So if you look at the scale of action, look at the quality of initiative we’ve taken, I think it dramatically exceeds even the best-managed crises we’ve seen before.” Ple-e-ze. The system continues just as before, but without any reform or any real ideas for reform that hold any substance. The Masters of the Economy can’t seem to wrap their minds around the banking deluge that has brought us to our knees, much less figure out a way to reform it. They just don’t want to rock the boat of monetary largess. Geithner told Congress that fixing the system would be accomplished not by “modest repairs”, but by “new rules of the game.” I agree that what is playing out between government, corporate bankers and central bankers is a game. That much is obvious.
People are watching. Are you? ~ E. Manning
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Yeah. Yeah. You’ve heard it all and everybody is trying to sell you something. The snake oil salesmen are all around. Washington is no different. The lie continues to spread that investing your money in banks or the latest government bonds are safe and sound investing. Think again.
The problem is that we have a ‘dumbing down’ of the American economic system as foreign investors pile on to invest their otherwise worthless American greenbacks and you are the one that will suffer through devaluation and hyperinflation because you base your life on money and monetary acquisition that central bankers run. Your economic livelihood and future is at stake if you have piles of money or owe piles of money. That applies to most Americans. Your investment is an illusion, the same as the thin air that central bankers and banks have created.
The fact remains that there is little monetary defense or value in trying to tell the average American that they can somehow defend their monetary wealth when the central bankers continue to erode that wealth into nothing in a hopelessly compromised financial system. Central bankers are riding the dark horse as they plow the dollar into non-existence so that they can rebuild a new monetary system from the ashes they have created. Naturally, this is to their advantage. The sad thing is that Washington politicians are hopelessly compliant and cooperative in an effort to create a new system from the ashes of your financial lives and years of servitude to their system. We are the fools and most Americans will undoubtedly foolishly listen the advice of the financial sages. What is Washington D.C. up to? CONTROL. What are central bankers up to? CONTROL. Never forget that what you are being told by mainstream politicians and financial media is designed to secure the system over your life or means of livelihood at your expense.
Gold? Unless you hold the nuggets of goodness in your meaty little hand, don’t buy the snake oil. Gold investment certificates aren’t worth a thunder mug full of waste. Remember the old proverb that possession is nine-tenths of the law. In this case, physical possession is your safest bet, but far from perfect. Your stuff is only as secure as you are. The little guy can easily be pulled from his stuff during a crisis.
I am linking to this electroblurb because it is the right thing to do overall. I do not advocate the sales of the product or the conclusion reached. I ask you to read the facts and forget about buying anything that involves a significant portion of your money, devalued or otherwise, because the money you earn represents your life.
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