The death song of capitalism?

[A Nonny Moose 8,261]

Ever wonder who really runs the show?

 

What rate are you getting on your pension savings?  I am getting 1% which is below the inflation rate.

[Duke87 1,070]

Inducing inflation is more politically palatable than raising taxes. Unfortunately, the induced inflation acts as a tax in its own way: it is a tax on the cash you have saved up, and is in turn a tax on your salary as well if you are not lucky enough to get an annual raise to compensate for it.

 

The way to combat this problem is to store your assets in some form other than cash - invest in something rather than putting money in the bank. Smart people know this - this is why commodity speculation has become much more of a thing in the past five years and is, by the way, a significant part of why gas prices are as high as they are (speculation on oil).

[ROFLyoshi 1,760]

Ever wonder who really runs the show?

What rate are you getting on your pension savings?  I am getting 1% which is below the inflation rate.

We will need to wait over 45 years for that answer for me...

I know my nana only gets several hundered dollars (actually less than I earn working ~30 hours/week in a part time job). I know she gets a German pension also, but the amount is negligible as she only worked there for a few years before emigrating. 

[LexusInfernus 908]

Inducing inflation is more politically palatable than raising taxes. Unfortunately, the induced inflation acts as a tax in its own way: it is a tax on the cash you have saved up, and is in turn a tax on your salary as well if you are not lucky enough to get an annual raise to compensate for it.

 

The way to combat this problem is to store your assets in some form other than cash - invest in something rather than putting money in the bank. Smart people know this - this is why commodity speculation has become much more of a thing in the past five years and is, by the way, a significant part of why gas prices are as high as they are (speculation on oil).

Its also pretty risky. You can invest in something, but with speculation there is no guarantee that whatever you invest in retains its worth. 

 

Besides, its pretty bad for the economy if everyone starts investing because they don't want to store money on the banks. If no one saves, the banks have no money to lend. Also, if my memory serves me right, wasn't that a problem during the 1930's as well? To many people messing around with stocks rather than putting their money on the bank? 

[A Nonny Moose 8,261]

If you look at what these people are up to, you will see shades of the 1920s.  When this bubble pops, there will be some interesting ashes among the bodies on Wall Street.

 

Next instalment.

 

There is no real growth which is a requirement for capitalism.  The 2008 melt-down was caused by speculation by the very people who should have known better with all those swaps and derivatives.  (Seemed like a good idea at the time ... ).

 

Wealth is only created by production, and production in the western economies is a joke.  Everything is virtually static.  Everyone should switch to assets that have permanent value: land or specie.  I am completely clear of the market now, and don't plan to invest in the current circus.

[mrbisonm 1,620]

I never really trusted any investor's group, bank or any other financial institution to handle my pension. So, I have created my own pension plan, didn't have much of a choice neither, since I always was selfemployed. Since the beginning of the seventies I invested my surplus profits into farmland (real estate) and today my farm has a couple of thousand acres of land surrounding it, having started all with 24 acres in 1970. 

The interest rates ( I call them the profit rates, are way more than any bank could deliver. Last fall I sold almost 200 acres down in the valley near the river, that I bought for 12,000$ in 1974, no buildings. I haven't used that land for the last 6 years because it is mostly wild grown land and nothing much worth for agriculture, and I though it was time to sell it and invest the money in another piece of land that I could use more for agriculture. Almost 40 years after, the offer I received was 480,000$, I would have been stupid not to accept it.

For Quebec/Canada this is enormous as a profit, surely more than 1%. With it, I bought 50 acres just in the back of one of my barns, leaving me only 9,000$ as pocket money. But in 30 years (I will surely be dead), this small piece of land will probably be worth a million or two, giving pleasure to my 3 sons.

 

So, I was lucky to have invested my money into lands (real estate), and I am also glad that I did so, but I didn't know at the time.  So, Bankers.......just go play in your own sandbox, there's no money to make with me. All the interests they make go into my own pocket.

 

For the younger generations, I recommend to invest your money into land, simple land that seems more or less worthless at this time and is not very expensive to buy. If you have some money to invest, go buy yourself some acres, pay the taxes regularily and when you're in need or simply at an age where you want to have a surplus of revenue, sell it. You will realize that you did well.

 

mrb

[A Nonny Moose 8,261]

Amen.  Land tends to always have some value, often more than you paid.  Specie (gold, jewels, other metals) also retains some value even if only as industrial items.

 

Urban land with its "cheap" mortgages is a trap.  If you can't pay for it outright, don't contract your life away.

[Duke87 1,070]

The problem with purchasing land is that it requires a huge upfront investment - a lot more than your average person has in the bank. Which means getting a mortgage, which means dealing with having debt and paying interest on the loan. No thanks to that, I say.

 

There's also a question of access. You both live in rural areas of Canada where cheap land can be found nearby. But I live in New York City. There is no such thing as cheap land anywhere around here. Now, I suppose I could find a way to go purchase land in Wyoming or something, but that'd be silly - how would I keep an eye on the property?

[MandelSoft 2,769]

Buying land is not really an option for me here in the Netherlands; we just have not enough of it and I think all land here is already owned by someone or it's really expensive (thousands of euros for just a few square meters).

 

I can't really think of what to do with my pension, because I don't even have one. Heck, I'm still working on my graduation before I even get a job!

 

EDIT: Duke, that's also my point. We have the exact same problem here

[LexusInfernus 908]

The problem with purchasing land is that it requires a huge upfront investment - a lot more than your average person has in the bank. Which means getting a mortgage, which means dealing with having debt and paying interest on the loan. No thanks to that, I say.

 

There's also a question of access. You both live in rural areas of Canada where cheap land can be found nearby. But I live in New York City. There is no such thing as cheap land anywhere around here. Now, I suppose I could find a way to go purchase land in Wyoming or something, but that'd be silly - how would I keep an eye on the property?

If you just buy land without really intending to do anything with it, why would you need to keep an eye on your property? All you need to do afterwards is sell it to some investor or real estate development group that wants your land so they can develop it themselves.

 

 

And yes, good luck getting actual land in the Netherlands. Unless you are a big company or a very rich person, land of sufficient size is impossibly expensive. But as a Dutch person, you could always buy land somewhere where it is cheaper. France is not to expensive, and I think its also pretty easy to buy some land in Spain. 

[flatron 83]

But owning land without actually using it is socially and morally awkward. Imho, non-used land should belong to the state...

[LexusInfernus 908]

But owning land without actually using it is socially and morally awkward. Imho, non-used land should belong to the state...

How is it morally awkward? Owning land and not using it doesn't hurt anyone now does it?

 

Also, why should the state own it and how is it different if the state owns land and does nothing with it to a person owning land and not doing anything with it? 

[flatron 83]

because the state wont walk around with a gun and shoot everybody who steps on his belongings... And forests, lakes, mountains etc. should be publicly owned.

Auntie Edith want's me to announce that the state represents all people which makes him different to a single person.

[NCGAIO 562]

The problem is that central banks now have to choose between the frying pan and the fire after the deluge monetary which has protagonized since 2008 to save the world from crisis.

 

   Source:: http://www.cbc.ca/news/world/story/2013/04/26/f-rfa-macdonald-power-shift-savers.html

 

Who survives only financial income certainly will have much to worry about when the bubble burst!

 

 

What of those who caused the collapse? ... well these prowling out there because they are too big to be held criminally liable.

 

Ie committed the "perfect crime" so much that became a movie

 

 -  http://pt.wikipedia.org/wiki/Too_Big_to_Fail

[A Nonny Moose 8,261]

On the land question, Duke, holding a bit of range in Wyoming might look very good if you suddenly needed a place to lay your head down.  Meanwhile, if it is kept in a natural state, you could have an agent rent it as camp grounds thereby making enough(?) income to pay the taxes on it.

 

Never, never, never borrow to purchase land.  Save up, not in a bank.  Purchase specie in small amounts until you have enough to pay for the land.  You might do a little planning, and put aside, say, 10% of your after tax income this way.  A nice heavy safe in your basement is probably the best place for your gold and diamonds.  Maybe you could use a compartment in your gun safe.

[FreewayofFlight 41]

I watched that 'Monarchs of Money' special last night, it got me real concerned that we are already in the midst of the next bubble. All the Central Bankers are trying to get us to spend when spending caused the financial crisis we are still limping out of now. Maybe we should be looking at Greece and Cyprus as an omen of things to come?

[LexusInfernus 908]

because the state wont walk around with a gun and shoot everybody who steps on his belongings... And forests, lakes, mountains etc. should be publicly owned.

Auntie Edith want's me to announce that the state represents all people which makes him different to a single person.

Well I don't disagree with this, following this logic, shouldn't the state then own all the land of a country and all its natural resources? Forests, lakes and mountains are public good, but then shouldn't that count for metal, oil, coal, and whatever else you may find in the ground? 

 

Also, depending on what bit of state owned ground you step on, you might very well get shot. The state has guns too. 

[Duke87 1,070]

If you just buy land without really intending to do anything with it, why would you need to keep an eye on your property? All you need to do afterwards is sell it to some investor or real estate development group that wants your land so they can develop it themselves.

 

Perhaps. But I'm cynical and if I'm going to own land I want it made sure no one is squatting on it, vandalizing it, etc. Probably not much of a concern in Wyoming but my New York mindset refuses to let me be okay with just letting a possession of mine sit there unwatched and unguarded.

 

 

But owning land without actually using it is socially and morally awkward. Imho, non-used land should belong to the state...

How is it morally awkward? Owning land and not using it doesn't hurt anyone now does it?

 

Also, why should the state own it and how is it different if the state owns land and does nothing with it to a person owning land and not doing anything with it? 

 

 

If it's in the middle of nowhere it isn't hurting anyone and if you don't put up a fence or no trespassing signs it might as well be public.

 

The time when owning land without using it can hurt someone is if that land is in an urban area. Vacant lots are a blight on communities - better than abandoned buildings, but still a blight.

 

As for why the state should own it, I think the argument there is that it prevents people from doing exactly what we're talking about: buying land purely to speculate on it. There is a school of thought that speculation of any sort is immoral because it is a way of making money without actually doing anything productive to earn it - and this argument is particularly fueled by the fact that you need to have capital in order to partake in speculation, i.e. "it's just a way for the rich to get richer".

I don't quite subscribe to this way of thinking but there you go.

 

On the land question, Duke, holding a bit of range in Wyoming might look very good if you suddenly needed a place to lay your head down.  Meanwhile, if it is kept in a natural state, you could have an agent rent it as camp grounds thereby making enough(?) income to pay the taxes on it.

 

Never, never, never borrow to purchase land.  Save up, not in a bank.  Purchase specie in small amounts until you have enough to pay for the land.  You might do a little planning, and put aside, say, 10% of your after tax income this way.  A nice heavy safe in your basement is probably the best place for your gold and diamonds.  Maybe you could use a compartment in your gun safe.

 

If you have the money to buy up property with the intention of renting it, you might as well buy yourself a small apartment house instead. More rent that way. Of course, either way, we're talking six figures at least to buy in - not exactly chump change. Great if you've got the money, but out of the reach of most people.

 

As for buying precious stones and metals, it's risky because it pays no dividends, so in order to make money you have to sell higher than you buy. And, while precious metals are near 52-week lows right now, over the longer term they are still in a very high spot. The time to buy gold was ten years ago.

[A Nonny Moose 8,261]

Pessimism is what is keeping things so static.  As for specie, it is never, ever a short-term investment for a quick profit.  It is an asset of value, whether the value goes up or down in price is immaterial.  You always have the asset.  Money, on the other hand, is fiction.  It is a matter of faith, and currently the world is getting more and more agnostic.

 

Installment three.

 

Let us not be so foolish as to think this involves printing presses.  To create money, all one has to do is debit a loan account and credit a deposit account.  This is the way loans are made in Canadian banks.  I've been there, and done that.  The money comes out of thin air. 

 

The central bankers do the same thing, and use the 'new' money to buy up sovereign debt such as government bonds and treasury bills, which are really only promissory notes.  A few keystrokes at a terminal can do this, and it is frighteningly simple if you have the authority to do it.  Every manager of every bank branch in Canada has this power, limited only the the authority given to him by his supervisors.

 

The problem is that outfits like Goldman-Sachs got the bit in their teeth and by creating derivatives and swaps, usurped this power.  They should have been allowed to fail because they broke the rules (unwritten, but rules nevertheless).  Other banking houses could have stepped in an picked up the pieces.  The panic in the U.S. Federal Government in 2008 is the reason many outfits and people are in the dill now.  (Isn't hind sight 20/20?).  Obama should have had the guts to put his foot down on the neck of this snake instead of feeding it.

 

Don't blame the central bankers.  They are trying with all their might to stop the inundation by putting their collective finger in the dyke.  I leave you with this thought from Lewis Carroll.

 

"The sun was shining on the sea

"Shining with all its might

"It did its very best

"To make the billows smooth and bright

"And this was odd because

"It was the middle of the night."

[mrbisonm 1,620]

True, that buying land to invest is not always everybody's option. For those who live in countries that have restricted lands for sale (Holland as one example) and usually is of skyhigh prices, it would be better to consider other options or investing elsewhere.

Yes, I was lucky that I live in a rural countryside, but you don't really have to, because land can be bought "away from home", and don't worry about taking care of it, it usually does it by itself. In an urgent case, you can always ask or pay someone from the area with a little token to keep an eye on it. Don't buy land with buildings, that means higher taxes and maintenance costs every year and of course, many worries.

 

All depending where you live or where you will buy that land, it could be a really good investment. You don't have to live where you buy it, it can be in another region, nation or even on another continent, and it does NOT take that much money to start off with.

Seeing that the US is having serious financial problems, land there (in some locations) has dropped enormously, therefor a good occasion to invest some money in a long term. In fall 2010, I bought almost 150 acres of wooded land in the  Aspen/Colorado area for the small amount of 22,000 $ US. I could have sold it the next week for 35K $ Us. Great occasion, but I kept it.

Then, last fall I bought 40 acres in Arizona, believe it or not, there was even a house on it. I paid 9,000 $ Us. I didn't care about the house at all, it wasn't in good shape anyways. One year after, people have stolen most of it anyways, thinking that it was abandonned. Today only three walls and a part of the roof exist....lol. To me this is less yearly taxes to pay and besides, I paid the money for the land and not for the house.

 

This fall I am looking at some ground with a house in my favourite country, New Zealand, not to invest, but I go there so often, that I would like to have somewhat of a little home there, a place to stay and be at home, instead of hotels and motels all the time. There too, prices have gone down, and it is the time to invest.

 

But, yesss, there's a big "BUT" that comes with it. You need money. No money, no land, and sometimes a lot of money will do better than little. You can start small though, land will never loose it's value if you hang on to it until it is the right time to sell has come.

 

 

Good investment.

 

mrb

[A Nonny Moose 8,261]

Amen.  For those who don't believe that land is one of the ways to hedge against the current state of affairs I heartily recommend "The Good Earth" by Pearl S. Buck.  It was a must read when I was in high school, and the sequel, "Sons" is a fine example of how to squander your wealth in land.

 

As for specie, gold is the easiest to acquire.  Not gold certificates, but the actual metal.  If you prefer something smaller and more portable, diamonds are a guy's best friend as well.  They should be uncut diamonds of the highest quality.

[hym 358]

As for specie, gold is the easiest to acquire.  Not gold certificates, but the actual metal.  If you prefer something smaller and more portable, diamonds are a guy's best friend as well.  They should be uncut diamonds of the highest quality.

 

For what it's worth, the purchase of uncut diamonds by individual people is rare enough in the US that the mere attempt to purchase them can trigger the FBI into investigating you.

[blunder 1,079]

On the thought about government owning land to 'protect' the natural resources; that is a terrible, terrible eventuality.  Although it might sound good in theory the government (at least mine) completely fails at land and resource management.  Where i live the government controls and/or administers a huge amount of land: in washington state over 50% and in oregon i think it's 80%.  

 

Their idea of 'management' is to do absolutely nothing to it-even when action is needed to prevent greater harm.  For instance the government agencies refuse to remove windfall timber in many places, which has led to a massive increase in the timber beetle population which now threatens many forests.  There are also about 400 known mineable gold deposits in Washington state.  Many of them are suitable size that they could support mining operations at least the size of a small business (think craft brewery size) but the EPA has made darn sure that mining is completely unprofitable, and now there are 0 mining operations in washington.  And there are far too many examples of government inadequacy to list besides.

 

Other people/businesses/whatever should own more land than they do and the government should be relegated to enforcing regulations, not ownership (except for national parks / wilderness areas / hazards like volcanoes).  Granted the BLM and NFS would probably fail just as much at enforcement as they do at responsible management, but whatever.

[LexusInfernus 908]

On the thought about government owning land to 'protect' the natural resources; that is a terrible, terrible eventuality.  Although it might sound good in theory the government (at least mine) completely fails at land and resource management.  Where i live the government controls and/or administers a huge amount of land: in washington state over 50% and in oregon i think it's 80%.  

 

Their idea of 'management' is to do absolutely nothing to it-even when action is needed to prevent greater harm.  For instance the government agencies refuse to remove windfall timber in many places, which has led to a massive increase in the timber beetle population which now threatens many forests.  There are also about 400 known mineable gold deposits in Washington state.  Many of them are suitable size that they could support mining operations at least the size of a small business (think craft brewery size) but the EPA has made darn sure that mining is completely unprofitable, and now there are 0 mining operations in washington.  And there are far too many examples of government inadequacy to list besides.

 

Other people/businesses/whatever should own more land than they do and the government should be relegated to enforcing regulations, not ownership (except for national parks / wilderness areas / hazards like volcanoes).  Granted the BLM and NFS would probably fail just as much at enforcement as they do at responsible management, but whatever.

Well, enforcing rules or owning the land, there need to be people who want to own all that land, and at the same time exploit it as well. Because if you just want to have land without actually doing anything, you would have to take care of the land making such a thing prohibitively expensive. If no one wants to own the land because they can't exploit it, then what? You still end up with the government. 

[A Nonny Moose 8,261]

The FBI investigates sales of uncut diamonds to individual investors?  Big brother syndrome, perhaps?  Government should mind its business and not anyone else's without at least a cause.  A single innocent transaction shouldn't trigger any kind of investigation.  Land of the free?  Free to do  what?  Conform?  Be sheep?  Haven't they got anything better to do?  Sounds like make work for idle hands.  And yes, I know all about the blood diamond trade and how easy it is to take diamonds worth millions of dollars across a border.  Bits of crystallized carbon?  So what?

 

Land ownership has some responsibilities, the least of which is to pay the appropriate taxes.  You are not required to improve it in any way.  However, you may not leave it is such a state that it presents a hazard without posting it against trespassers and in some jurisdictions to abate the hazard.  When a piece of land is cheap, you might want to investigate whether it is contaminated before making any kind of deal.  Inspections like this are part of the cost of doing this kind of business.  Then there is the title search, which must be done usually to complete the transfer.

 

One of the neat games played around here is for a retired farmer to continue to live on the farm but to lease the fields to another farmer to grow crops on it.  At that point the type of business changes from being a farmer to being a landlord with all that that implies in the jurisdiction where the farm is domiciled.  If you should pick up some arable land, it might be worthwhile to consider such a scheme.  In this context, livestock could be considered a crop.

[MandelSoft 2,769]

The FBI investigates sales of uncut diamonds to individual investors?  Big brother syndrome, perhaps?

No, it's just a suspicious action. It might also mean that you could do that to laundry your criminal money. This is kind of an example where a small minority ruins it for the majority, so this is not really a good option to invest your money. At least, not without a hassle. You can prove that you have legally earned that money, but it still costs time and effort.

[hym 358]

The FBI investigates sales of uncut diamonds to individual investors?  Big brother syndrome, perhaps?  Government should mind its business and not anyone else's without at least a cause.  A single innocent transaction shouldn't trigger any kind of investigation.  Land of the free?  Free to do  what?  Conform?  Be sheep?  Haven't they got anything better to do?  Sounds like make work for idle hands.  And yes, I know all about the blood diamond trade and how easy it is to take diamonds worth millions of dollars across a border.  Bits of crystallized carbon?  So what?

 

First, uncut diamonds have a well known application as a form of currency on the black market, so there is always a certain level of scrutiny surrounding the industry.  Second, there is a relatively small pool of players in the industry, so unusual transactions can stick out like sore thumbs. Third, given that there is no really standardized model for assessing the value of diamonds, the technical knowledge to successfully invest in diamonds is probably beyond most casual investors.  As a result of these factors, if an individual put his name out as being interested in acquiring any sizeable investment in diamonds (especially uncut ones) and was not working for a recognized company in the diamond industry, it would be reasonable to suspect that he is working on behalf of someone else (and thus probably attempting to launder money).

 

Realistically, diamonds are not an investment vehicle that is practically available to the average individual.  It wasn't till last year that the US Patent Office approved a method for classifying diamonds for investment purposes, and the SEC is still in the process of approving the first diamond-backed ETF for public investment.

 

As for the issue of the FBI monitoring private transactions, there is an increased tendency in some sectors for cooperation between private players and law enforcement.  This is one of those areas.  As long as things appear to be normal, you won't be looked at too seriously, but when anomalies pop up, you will come under scrutiny.  American Express is one such example.  If you apply for an AMEX card and the company's investigation team can't figure out how you can afford to live the lifestyle that you do, they will hand over their documents to the FBI so that law enforcement can take a look.  Interestingly, quite a few drug and financial crime operations have been broken up because AMEX investigators realized that a client's finances looked funny.

[LexusInfernus 908]

Not to mention the fact that the diamonds might be blood diamonds. 

[A Nonny Moose 8,261]

Many diamonds are blood diamonds.  An investor has to be relatively careful as to his sources.  Interesting that all Canadian production is marked at a microscopic level with a tiny polar bear.  I haven't looked into it, but legitimate diamonds should be similarly marked.  I guess that is up to De Boers.

 

Meanwhile, let's look at what happened today.

 

The article states that the German manufacturing sector is shrinking.  This should tell the money czars, at last, that the strategy isn't working.  This kind of "stimulus" isn't getting through to the common consumer, good intentions aside,  The faith in the monetary system is on very shaky ground.

 

Europe is now picking up our top guy.  So far, his replacement hasn't been named.  I don't know whether becoming governor of the Bank of England will help the situation or is just a lateral arabesque for Mr. Carney.  Hopefully, both. 

 

The Bank of Canada has been a great cushion for Canadians, but I am not sure picking up the operator will do the ECB and its minions any good.