How The US Government Will Seize Your Retirement Account

May 15, 2011

by Simon Black in Santiago, Chile

SovereignMan.com

(Editor’s Note: Of course, if you were in a state that seceded from the Union, and you moved your retirement account to a financial institution in that new nation, your retirement account would be safe. I’m just sayin…)

Following in the footsteps of a rather ignominious list of nations like Argentina and Hungary, the government of lreland is set to take its ‘fair share’ of private retirement funds.

Drowning in debt and faced with unpopular, unrealistic, ridiculously unpopular austerity measures, the government has announced that it will now tax private pension savings in order to raise 470 million euros (roughly $675 million) per year… a lot of money in a country of only 4.4 million people.

Somehow, the government expects to be able to create 100,000 jobs to bring down an unemployment rate at 14.7%. Perhaps they plan on hiring 100,000 new workers to go around the country and collect the tax.

It reminds me of what I saw in Bolivia a couple of weeks ago– there’s a tax or toll or fee for nearly everything you do. Driving on the highway (if you can call it that) outside of Santa Cruz, you pay a toll… obviously not for the maintenance of the road, but to pay the salary of the toll collector.

At the airport, you have to pay an airport tax before departure… obviously not for the upkeep and efficiency of the airport (it took 2-hours to make it to my gate), but to pay the salaries of the guys who collect the airport tax.

This is what politicians consider ‘job creation,’ yet these positions only serve to destroy value. That they would stick up the retirement funds of hard working people is even more immoral.

Here’s the best part, though. If you are a government worker in Ireland, your pension is exempt. They’re only going after people in the private work force. It’s truly disgusting logic to force private workers to pay for years of political incompetence while absolving government employees.

Coincidentally, there are a few other loopholes as well, particularly for non-residents and non-resident funds. Apparently those Irish who saw the writing on the wall and got busy moving themselves and their assets offshore will get to keep all of their savings.

Ireland is not the first country to call this play, nor will it be the last. Pension funds are attractive targets for politicians who have wide eyes and the most carnal thoughts at the site of any large pool of cash.

Think it can’t happen where you live? Think again. Late last year, the French government went through an elaborate process to change its pension laws, ‘legally’ allowing politicians to steal retirement funds from the public in order to pay off other debts.

In the US, public pensions have been raided for years, Congress routinely ‘borrows’ from Social Security to make up budget shortfalls. This is what talking heads mean when they play down concerns of a $14 trillion debt “because we owe it to ourselves–” $4.6 trillion of the debt is owed to intragovernmental agencies like Social Security.

Chances of this money being repaid to Social Security in full? Slim. The trend is more debt, not paying off existing debt. In fact, I’m convinced that politicians have their eyes firmly fixed on the trillions of dollars in private, individual retirement accounts (IRAs) in the United States to fund new spending.

Here’s how it will go down:

First, there will be some event… some sort of financial cataclysm, similar to the market meltdown we saw in 2008 after Lehman.

Bear in mind that most IRAs are managed by boneheads at big financial institutions; they get compensated not based on the performance of their portfolio, but on the total amount of assets under management. Your interests and their interests do not align.

As such, most IRAs are callously tossed into S&P index funds or some such generic vehicle, citing the safety of broader market diversification, as if that nonsense they teach in MBA finance classes is how the real world actually works.

When a big crash occurs, these unhedged broad market positions get hammered the most. Don’t worry though, your fund manager will still get a big fat bonus check, because his performance is irrelevant.

This is when Congress will step in. Citing its desire to ‘protect’ the American people from future market shocks, the politicians will mandate that a portion of all managed retirement funds be invested in the ‘safety and security’ of US Treasury bonds. And, just to be on the safe side, let’s park them in 30-year bonds that yield 4.35%.

Sound fair? Well who asked you anyways… just be a good citizen and turn over your money already. The important part is that the big financial institutions still get their big fat fees, and the government gets its hands on the mother lode.

This is how US taxpayers will end up being forced to loan their hard earned retirement savings to the government at rates far below any expected inflation.

Right now, there is a window of opportunity to take action; US taxpayers with retirement accounts can set up a special kind of IRA structure that allows you to take control of your retirement savings, and even ship it offshore if you want to, completely legitimately.

After taking control of your IRA, you can do any number of things– buy and store gold and silver coins overseas; hold foreign currencies in an offshore bank account; buy securities on international stock exchanges; purchase agricultural property overseas, or even a beautiful apartment on the beach in some sunny country.

The possibilities are incredible… but the most important thing is that you get this retirement money off the radar of the politicians before they pull an Ireland and announce some new measure, virtually overnight. These things can happen very, very quickly.

I’ve talked about this before a number of times, and every time I read the news of yet another country taking this approach, it serves as a reminder to take action.

If what I’m saying makes sense to you, my recommendation is to check out Terry Coxon’s book on this subject, Unleash your IRA. As one of the world’s foremost experts on this strategy, Terry walks you through the process of protecting your retirement savings quickly and legitimately. You can read more about it here.

Copyright 2011 International Man


Fractional Reserve Banking: The Biggest Bubble Of All Time

April 24, 2011

When this bubble pops, all economies will end

by Russell D.Longcore

Every day we hear talking heads talk about, or we read about, the various “bubbles” occurring in the world.

Here in America, we’ve had the Savings and Loan bubble of the 80s, the Internet “Dot-Com” bubble of the 90s, the real estate/mortgage bubble of the last decade, and now the credit/debt bubble. But there is a worldwide Super Monster Bubble that is the cause of all of the rest of the bubbles that have occurred for the last 100 years.

That bubble is the fiat “money” that is created by Fractional Reserve Banking.

Fractional Reserve Banking (FRB) is the legal system of counterfeiting that all banks worldwide utilize. In a world where 100% reserve banking was practiced, there would be no credit/debt bubble. There would also be no inflation. Here is the definition of FRB from Wikipedia:

Fractional-reserve banking is the banking practice in which only a fraction of a bank’s deposits are kept as reserves (cash and other highly liquid assets) available for withdrawal. The bank lends out some or most of the deposited funds, while still allowing all deposits to be withdrawn upon demand. Fractional reserve banking is practiced by all modern commercial banks.

When cash is deposited with a bank, only a fraction is retained as reserves and the remainder can be loaned out (or spent by the bank to buy securities). The money lent or spent in this way is subsequently deposited with another bank, creating new deposits and enabling new lending. The lending, re-depositing and re-lending of funds expands the money supply (cash and demand deposits) of a country. Due to the prevalence of fractional reserve banking, the broad money supply of most countries is a multiple larger than the amount of base money created by the country’s central bank. This multiple (called the money multiplier) is limited by the reserve requirement or other financial ratio requirements imposed by financial regulators.

Central banks usually require commercial banks to keep a minimum fraction of their customers on demand deposits as reserves. These reserve requirements help limit the amount of money creation that occurs in the commercial banking system, and help to ensure that banks are able to provide enough ready cash to meet normal demand for withdrawals. Problems can arise, however, when depositors seek withdrawal of a large proportion of deposits at the same time; this can cause a bank run or, when problems are extreme and widespread, a systemic crisis. To mitigate these problems, central banks (or other government institutions) generally regulate and oversee commercial banks, act as lender of last resort to commercial banks, and also insure the deposits of the commercial banks’ customers.

Do you see the con job? The central bank, in conjunction with the private banks, conspires to create giant amounts of “fiat money”…currency with no assets that back them. They keep depositing currency in each other’s banks over and over, and each time it creates new money from thin air.

Fiat money completely distorts the economic system, no matter what economic system is in place. Instead of the money supply having a concrete value, its value floats from day to day. That is another way to describe inflation. The value of the money becomes whatever any two entities agree on at any given moment in time.

Inflation is the method that governments and their central banks use to steal property from the populace. And I don’t mean they steal land or assets. They steal the value of our money, which is a component of our property rights as free men.

Here is the way an honest bank is formed, and how an honest bank does business when the money is either precious metals coins, or is an electronic currency backed by coins or another hard asset:

The investors/owners form a legal entity called a bank. The investors/owners put their own money into the new bank as their investment in the enterprise. That provides the new bank with capital. The capital allows the bank to fund operations, and a portion of the capital can be loaned to credit-worthy customers. When the bank loans its own capital to customers, it earns interest, and hopefully makes a profit. Those profits can be accumulated, invested in other non-loan assets (securities, land, etc.) or can be loaned out again.

But the bank can also act as a depository. Customers may place their money on deposit in savings or checking. The bank may charge a fee for this service, which would be customary.

The bank would be required to maintain 100% reserves, meaning that any money under management by the bank (checking or non-interest savings) would have to be kept at the bank and always 100% available for withdrawal. Money borrowed from depositors (interest-bearing savings, Certificates of Deposit, etc.) would not be subject to the reserves requirement, since the bank and depositor have a side contract. Money in safe deposit is not considered under management, since the bank is basically renting storage space in a secure vault for a fee.

A savings account passbook is equal to a receipt for money stored at the bank. Money simply stored would not earn interest, but would be much like money stored in a safe deposit box. But the depositor could enter into contract with the bank to make the deposits into an interest-earning account. In this account, the depositor in essence loans the bank his money for a period of time and earns interest. During that period of time, the bank may use that money to loan to others at a higher interest rate, thereby earning income for the bank. The bank could only loan out the depositor’s money for an amount of time less than the period of deposit. For example, if the depositor made a deposit for 90 days, the bank could only loan out the money for a period of time less than that length of deposit. If the term of the loan went beyond 90 days, the bank would have committed fraud, since they have a legal bailee duty to return the deposit to the depositor at the end of the 90 days.

A checking account allows a depositor to write paper IOUs…checks… against his account for any amount up to and including the account balance. The bearer of the the check may present the check at the bank and receive the amount of the check in hard money or electronic money. Banks customarily charge a fee to the depositor to manage a checking account, which is in essence a bookkeeping fee. If the depositor writes checks in excess of his account balance, he has committed fraud against the bearer.

A bank could issue paper currency of its own, kind of like a checking account IOU note, and based upon the bank’s assets. These are called “bank notes.” But at a 100% reserve requirement, it could only issue bank notes equal to the amount of its own hard assets, not including the deposits of its customers. Issuing bank notes in excess of its assets would constitute fraud and debasement of money.

If you look at the top of a piece of Federal Reserve currency, it will say “Federal Reserve Note.” The earliest Federal Reserve notes, like the Silver Certificate, actually could be redeemed for the underlying silver coins. But a Federal Reserve note is no longer a promissory note, since the only thing you would receive if you presented the note at a Federal Reserve bank would be more Federal Reserve notes. Just because today’s currency is called a note doesn’t make it so.

Banks may perform other services for customers for a fee, or a bank could decide to perform certain services for free. That pretty much sums up what a bank may do without committing fraud.

After reading this article sofar, you may have surmised that if the banking systems of the world operated in a legal manner, worldwide levels of credit would be only a very tiny percentage of how much credit and debt exists in today’s world. And you would be correct. The world banks have been throwing gasoline on the world’s economic fire for a century by creating fiat money. The economic activity worldwide has been wildly distorted by easy credit and massive debt. But easy credit and massive debt is what happens when money created from thin air is infused into the world economic system.

So, the governments of the entire world have conspired to defraud the entire population of the planet, and steal the value of their money by issuing fiat currencies. A state of bankruptcy exists when one’s liabilities exceed one’s assets, and one has no way to pay off the liabilities. The governments and banking systems of the entire planet are fundamentally bankrupt, sustained only by the power to create money out of thin air.

The thin air of worldwide monetary policy, its fractional reserve banking and fiat currencies, is what has inflated the Super Monster Bubble to its bursting point. Soon the bubble will burst, and all of the world’s economic systems will melt down simultaneously.

Around the globe, two groups will emerge. The first group contains the worldwide governments and their central banks who will simply invent another fiat system and fractional banking system, and try to convince the world that this new system will work.

The second group will be those that insist on hard money and honest banking. These people will be found in isolated geographic areas, like small nations…perhaps nations fresh from secession from the United States of America. They will have learned their lessons when the economic meltdown occurs and will return to those thrilling days of yesteryear when hard money meant true prosperity and inflation was what you did to a balloon.

DumpDC. Six Letters That Can Change History.

© Copyright 2011, Russell D. Longcore. Permission to reprint in whole or in part is gladly granted, provided full credit is given.


The Truth About Silver And Inflation

April 19, 2011

Courtesy National Inflation Association

Silver futures surged today to a new 31-year high of $42.80 per ounce. Silver is up 146% since NIA declared silver the best investment for the next decade on December 11th, 2009, at $17.40 per ounce. All we need is for silver to rise by another 15.5% and silver will reach its all time high set in 1980 of $49.45 per ounce.

Keep in mind, silver’s high of $49.45 per ounce in 1980 would equal about $140 per ounce in today’s dollars adjusted to the consumer price index and about $400 per ounce in today’s dollars adjusted to the real rate of price inflation. Despite silver’s huge gains in recent months, we have yet to see silver rise by $2 or more in a single day. When we start to see a true “silver mania” with investors around the world rushing out of their U.S. dollars and panic buying silver, we expect to see silver gain by $5 to $10 in a single day on more than one occasion.

Back in February of last year when silver dipped to below $15 per ounce, we sent out an alert saying, “NIA believes this is a once in a lifetime entry point for those wishing to go long silver at a bargain basement price”. NIA suggested silver call options in February of last year that ended up gaining over 1,000%. NIA’s latest silver stock suggestion is currently up 175% from our profile price.

In NIA’s top 10 predictions for 2010, we predicted a major decline in the gold/silver ratio, which was 64 at the time. The gold/silver ratio declined in 2010 down to 46, and in our top 10 predictions for 2011, we predicted another major decline in the gold/silver ratio and projected for it to decline this year to 38. NIA has been the most bullish organization in the world on silver, yet recent gains in the price of silver have surpassed even our short-term expectations. The gold/silver ratio is now down to 35 and we believe it will decline to at least 16 this decade, and possibly as low as 10.

The artificially high gold/silver ratio of the past century will be looked back at as an anomaly caused by the silver price suppression scheme of the Federal Reserve, which was in cahoots with Bear Stearns and now JP Morgan. NIA’s President Gerard Adams exposed this scheme in NIA’s critically acclaimed documentary ‘Meltup’, which has now been viewed by over 1 million people with an overwhelming 96% of its viewers giving it a thumbs up, a world record for an economic documentary. According to Mr. Adams, the Federal Reserve chose to bail out Bear Stearns and not Lehman Brothers, because Bear Stearns was the holder of a massive naked short position in silver that they were on the verge of being forced to cover.

It is not a coincidence that Bear Stearns failed on the very day silver reached its then multi-decade high of $21 per ounce. Bear Stearns was on the verge of being forced to cover their naked short position, which could have sent silver from $21 per ounce to $50 per ounce overnight. By bailing out Bear Stearns and allowing JP Morgan to acquire Bear Stearns’ assets with the promise to cover any losses derived from them, JP Morgan was able to continue managing the silver short position and orchestrate a manipulative take down in 2008 from $21 per ounce down to $8 per ounce.

Only ten times more silver has been produced in world history than gold and from the years 1000 to 1873, a period of 873 years, the gold/silver ratio remained between 10 and 16. In fact, the Coinage Act of 1834 defined a gold/silver ratio of 16. The gold/silver ratio started to rise after silver was demonetized in 1873. Despite silver being demonetized, we saw the gold/silver ratio return to 16 on three occasions during the past century: in 1919, 1968, and 1980.

It was only ten months ago in June of 2010 that the gold/silver ratio was 70. With the gold/silver ratio now at 35, it means that silver investors have seen their purchasing power double over the past ten months, while those with their savings in U.S. dollars have seen their purchasing power decline by 20%. That’s right, forget about NIA’s silver call option that gained over 1,000% and forget about NIA’s most recent silver stock suggestion that is currently up 175%; the simple act of following NIA’s most basic suggestion of getting rid of your U.S. dollars and buying physical silver means that over the past ten months, your purchasing power has doubled while non-NIA members with U.S. dollars lost 1/5 of their real wealth.

The Federal Reserve can claim all they want that there is no inflation, but as we write this article we are eating Ben & Jerry’s ice cream that we just bought at Quick Chek for $5 a pint. Three years ago, the same pint of Ben & Jerry’s ice cream at Quick Chek cost us $3. Three years ago, one ounce of gold would have bought 295 pints of Ben & Jerry’s ice cream and it still buys 295 pints of Ben & Jerry’s ice cream today. Three years ago, one ounce of silver would have bought 5.7 pints of Ben & Jerry’s ice cream and today it buys 8.5 pints of Ben & Jerry’s ice cream.

Americans with their savings in U.S. dollars can today only afford 3/5ths of the ice cream that they could have bought three years ago, but those with their savings in gold have maintained their purchasing power, and those with their savings in silver have greatly increased their purchasing power. NIA is 100% sure that the gold/silver ratio will decline to at least 16 within the next few years, and that will mean those with silver will once again more than double their purchasing power. Considering that the gold/silver ratio overshot to the upside and was as high as 100 in 1991, we fully expect it to overcorrect to the downside and possibly reach a low of 10 this decade. That would mean a more than tripling of ones purchasing power from the current ratio of 35.

When silver rose to $49.45 per ounce in 1980, the government said that the rise was due to the Hunt brothers “cornering” the silver market. The truth is, silver reached $49.45 in 1980 due to the massive inflation that was created by the U.S. government during the 1970s, and the Hunt brothers were used as a scapegoat. The Hunt brothers were accumulating silver in order to protect themselves from a collapsing U.S. dollar, just like NIA has been encouraging its members to do in a countless number of articles and videos over the past two years.

When the Hunt brothers were accused by the U.S. government of “cornering” the silver market and trying to manipulate silver prices higher, they only owned a concentrated long position of approximately 100 million ounces of silver. JP Morgan today has a concentrated naked short position in silver of approximately 122.5 million ounces, but the U.S. government doesn’t seem to have any problem with it.

The problem with the Hunt brothers’ strategy of accumulating such a large concentrated long position in silver is that after silver prices rose, their position was simply too large for them to ever sell without causing silver prices to crash. With silver reaching $49.45 per ounce in early 1980, the world was about to lose confidence in the U.S. dollar, which would have caused an outbreak of hyperinflation. In a desperate attempt to save the U.S. dollar and prevent hyperinflation, the CBOT raised margin requirements and limited traders’ positions to only 3 million ounces of silver futures. The COMEX also limited traders’ positions to 10 million ounces of silver futures. Not only that, but the COMEX and CBOT only had a total of 120 million ounces of silver in inventory, and the COMEX was likely going to default from futures contract holders requesting physical delivery. The COMEX was forced to go into “liquidation only” mode, ending all silver futures contract buying.

Combined with the Federal Reserve rapidly rising interest rates, silver prices began to plunge and the Hunt brothers were hit with massive margin calls. On one single day in March of 1980 when the Hunt brothers were forced to liquidate a large part of their position, silver lost 1/3 of its value, declining by over $5 to $10.80 per ounce. That represented a total decline of 78% from its high two months earlier.

NIA has been receiving a countless number of emails asking if now is the time to sell silver, and if silver could crash by 78% once again like it did in 1980. The fact is, while the Hunt brothers’ 100 million ounce concentrated silver position was on the long side, JP Morgan’s 122.5 million ounce concentrated silver position is on the short side.

While the Hunt brothers’ long position was impossible to sell without causing silver prices to crash, JP Morgan’s naked short position is impossible to cover without causing silver prices to explode to the upside. Being that the CFTC was so quick in 1980 to support the position limits that were then imposed by the CBOT and COMEX, NIA believes it would only be fair for the CFTC to mandate similar position limits today. This is unlikely to occur because the U.S. government believes JP Morgan’s silver manipulation to be a good thing, since it is giving the phony appearance that the U.S. dollar still has purchasing power. The free market will ultimately win in the end and silver prices will soar through the roof to where they belong based on supply and demand fundamentals.

It is important to spread the word about NIA to as many people as possible, as quickly as possible, if you want America to survive hyperinflation. Please tell everybody you know to become members of NIA for free immediately at: http://inflation.us


The Run On US Debt Has Begun

March 12, 2011

by Russell D. Longcore

(Editor’s Note: Yesterday an earthquake of 8.9 on the Richter scale rocked Japan, with a 6.5 aftershock and tsunami waves following that scoured the coastlines. Japan is the third largest economy in the world, and their public debt is three times the size of their annual economic output. Japan’s economy has been in a recession for 20 years! Japan’s government holds $877 billion in US Treasuries, second only to China. And consider what effect this catastrophe will have on worldwide insurance companies as earthquake claims are paid. Insurance companies hold US debt too. I guarantee that some insurance companies will go bankrupt because of this earthquake. And companies that default are forced to sell off their assets.

Could this earthquake…the worst to hit Japan in 140 years, collapse the Japanese economy? And, if Japan’s economy falters, will Japan sell off portions or all of its US debt? It certainly could happen. Stay tuned.)

Anybody out there remember reading any of my articles in which I predicted that the worldwide rejection of US Treasury securities could trigger the collapse of the dollar?

Well, this news story from Thursday is a MAJOR step toward seeing that prediction come true. PIMCO is the world’s largest bond fund. They have just divested themselves of ALL United States Treasury debt instruments. Bill Gross, who runs the fund, urged investors to get out of US debt and get into the debt securities of emerging nations.

Pimco Eliminates Government Debt From Total Return Fund

Friends…How are you doing on your survival supplies and your efforts to change US dollars into gold and silver coins? You may need them sooner than you think.

Secession is the Hope For Mankind. Who will be first?

DumpDC. Six Letters That Can Change History.

© Copyright 2011, Russell D. Longcore. Permission to reprint in whole or in part is gladly granted, provided full credit is given.


The Perfect Business

February 14, 2011

by Richard Russell
Dow Theory Letters

(Editor’s Note: Mr. Russell doesn’t think that a perfect business exists. I, however, own just such a perfect business. And I am on a national talent search for entrepreneurial associates. You may be looking for a business. Or, you may already own a business, and want to add another profitable stream of income to your existing business. To learn more about it, and determine if you could benefit from owning a business like mine, click on the ”Residual Income” tab above.)

AH PERFECTION: Strange, but the most popular, the most widely-requested, and the most widely quoted piece I’ve ever written was not about the stock market – it was about business, and specifically about what I call the theoretical “ideal business.” I first published this piece in the early-1970s. I repeated it in Letter 881 and then again in Letter 982. I’ve added a few thoughts in each successive edition. But seldom does a month go by when I don’t get requests from subscribers or from some publication or corporation to republish “the ideal business.” So here it is again – with a few added comments.

I once asked a friend, a prominent New York corporate lawyer, “Dave, in all your years of experience, what was the single best business you’ve ever come across?” Without hesitation, Dave answered, “I have a client whose sole business is manufacturing a chemical that is critical in making synthetic rubber. This chemical is used in very small quantities in rubber manufacturing, but it is absolutely essential and can be used in only super-refined form.

“My client is the only one who manufactures this chemical. He therefore owns a virtual monopoly since this chemical is extremely difficult to manufacture and not enough of it is used to warrant another company competing with him. Furthermore, since the rubber companies need only small quantities of this chemical, they don’t particularly care what they pay for it – as long as it meets their very demanding specifications. My client is a millionaire many times over, and his business is the best I’ve ever come across.” I was fascinated by the lawyer’s story, and I never forgot it.

When I was a young man and just out of college my father gave me a few words of advice. Dad had loads of experience; he had been in the paper manufacturing business; he had been assistant to Mr. Sam Bloomingdale (of Bloomingdale’s Department store); he had been in construction (he was a civil engineer); and he was also an expert in real estate management.

Here’s what my dad told me: “Richard, stay out of the retail business. The hours are too long, and you’re dealing with every darn variable under the sun. Stay out of real estate; when hard times arrive, real estate comes to a dead stop and then it collapses. Furthermore, real estate is illiquid. When the collapse comes, you can’t unload. Get into manufacturing; make something people can use. And make something that you can sell to the world. But Richard, my boy, if you’re really serious about making money, get into the money business. It’s clean, you can use your brains, you can get rid of your inventory and your mistakes in 30 seconds, and your product, money, never goes out of fashion.”

So much for my father’s wisdom (which was obviously tainted by the Great Depression). But Dad was a very wise man. For my own part, I’ve been in a number of businesses – from textile designing to advertising to book publishing to owning a night club to the investment advisory business.

It’s said that every business needs (1) a dreamer, (2) a businessman, and (3) a S.O.B. Well, I don’t know about number 3, but most successful businesses do have a number 3 or all too often they seem to have a combined number 2 and number 3.

Bill Gates is known as “America’s richest man.” Bully for Billy. But do you know what Gates’ biggest coup was? When Gates was dealing with IBM, Big Blue needed an operating system for their computer. Gates didn’t have one, but he knew where to find one. A little outfit in Seattle had one. Gates bought the system for a mere $50,000 and presented it to IBM. That was the beginning of Microsoft’s rise to power. Lesson: It’s not enough to have the product, you have to know and understand your market. Gates didn’t have the product, but he knew the market – and he knew where to acquire the product.

Apple had by far the best product in the Mac. But Apple made a monumental mistake. They refused to license ALL PC manufacturers to use the Mac operating system. If they had, Apple today could be Microsoft, and Gates would still be trying to come out with something useful (the fact is Microsoft has been a follower and a great marketer, not an innovator). “Find a need and fill it,” runs the old adage. Maybe today they should change that to, “Dream up a need and fill it.” That’s what has happened in the world of computers. And it will happen again and again.

All right, let’s return to that wonderful world of perfection. I spent a lot of time and thought in working up the criteria for what I’ve termed the IDEAL BUSINESS. Now obviously, the ideal business doesn’t exist and probably never will. But if you’re about to start a business or join someone else’s business or if you want to buy a business, the following list may help you. The more of these criteria that you can apply to your new business or new job, the better off you’ll be.

(1) The ideal business sells the world, rather than a single neighborhood or even a single city or state. In other words, it has an unlimited global market (and today this is more important than ever, since world markets have now opened up to an extent unparalleled in my lifetime). By the way, how many times have you seen a retail store that has been doing well for years – then another bigger and better retail store moves nearby, and it’s kaput for the first store.

(2) The ideal business offers a product which enjoys an “inelastic” demand. Inelastic refers to a product that people need or desire – almost regardless of price.

(3) The ideal business sells a product which cannot be easily substituted or copied. This means that the product is an original or at least it’s something that can be copyrighted or patented.

(4) The ideal business has minimal labor requirements (the fewer personnel, the better). Today’s example of this is the much-talked about “virtual corporation.” The virtual corporation may consist of an office with three executives, where literally all manufacturing and services are farmed out to other companies.

(5) The ideal business enjoys low overhead. It does not need an expensive location; it does not need large amounts of electricity, advertising, legal advice, high-priced employees, large inventory, etc.

(6) The ideal business does not require big cash outlays or major investments in equipment. In other words, it does not tie up your capital (incidentally, one of the major reasons for new-business failure is under-capitalization).

(7) The ideal business enjoys cash billings. In other words, it does not tie up your capital with lengthy or complex credit terms.

(8) The ideal business is relatively free of all kinds of government and industry regulations and strictures (and if you’re now in your own business, you most definitely know what I mean with this one).

(9) The ideal business is portable or easily moveable. This means that you can take your business (and yourself) anywhere you want – Nevada, Florida, Texas, Washington, S. Dakota (none have state income taxes) or hey, maybe even Monte Carlo or Switzerland or the south of France.

(10) Here’s a crucial one that’s often overlooked; the ideal business satisfies your intellectual (and often emotional) needs. There’s nothing like being fascinated with what you’re doing. When that happens, you’re not working, you’re having fun.

(11) The ideal business leaves you with free time. In other words, it doesn’t require your labor and attention 12, 16 or 18 hours a day (my lawyer wife, who leaves the house at 6:30 AM and comes home at 6:30 PM and often later, has been well aware of this one).

(12) Super-important: the ideal business is one in which your income is not limited by your personal output (lawyers and doctors have this problem). No, in the ideal business you can sell 10,000 customers as easily as you sell one (publishing is an example).

That’s it. If you use this list it may help you cut through a lot of nonsense and hypocrisy and wishes and dreams regarding what you are looking for in life and in your work. None of us own or work at the ideal business. But it’s helpful knowing what we’re looking for and dealing with. As a buddy of mine once put it, “I can’t lay an egg and I can’t cook, but I know what a great omelet looks like and tastes like.”

Copyright © 2011 Dow Theory Letters


When Will The Renminbi Overtake The Dollar?

January 9, 2011

by Simon Black

(Editor’s Note: Simon Black has discovered one of the most frightening risks facing the world today. The dollar is going to meltdown, but no worldwide currency is ready to step forward to become the world reserve currency. This one unknown makes the world economy extremely dangerous and volatile. If the dollar collapsed today, it could be years before the Chinese renminbi could stand alone as the new world reserve currency. However, this danger would be a boon for a newly seceded American state, now a fledgling nation…but only if it has a precious metals money system not controlled by the new Nation. That new nation would be the only place on the planet with sound money. Almost overnight, the wealth of the world would flow to that new nation. I hope that new nation is Texas.)

Without a doubt, the existing global financial system depends on the widespread use of fiat currencies issued by insolvent governments. The wealth of the world’s large financial institutions requires that there be currencies with sufficient size and circulation to absorb massive capital flows.

The current system is based primarily on the dollar; with a $14 trillion economy, the United States was for years the only country in the world with a sufficient money supply and financial infrastructure to take in the preponderance of the world’s wealth.

It is for this reason commercial loans, commodities contracts, international reserves, and cross border settlements have traditionally been denominated in US dollars.

Competing reserve currencies arose with the advent of the euro and Japan’s post-war rise; while the dollar has continued to remain dominant, these three are the only currencies which have the necessary supply and credit rating.

With trillions of dollars floating around the global financial system, managers are constantly making capital allocation decisions, moving funds in and out of various instruments. The reserve currencies play a big role in this because unallocated capital is frequently parked in their bond markets.

For example, large corporations or banks that are sitting on billions of dollars in cash typically purchase short-term US or European government bonds because the low default risk.

The dollar, euro, and yen have bond markets of such size that getting liquid is never a problem, even for billions of dollars. There is always a market for treasury securities, hence they are considered ‘cash equivalents’.

You couldn’t do the same thing in the Kingdom of Bhutan with its tiny $3.5 billion economy. If you tried to move $100 million into Bhutan, its currency (the ngultrum) would spike. In the US, Europe, and Japan, $100 million barely registers a blip.

Over the last few years, though, the confidence has begun to fade quickly, and the reserve currency issuing governments are starting to be viewed with increasing skepticism.

The thing that’s missing right now is an acceptable alternative. There’s really nothing out there in large enough scale to withstand massive capital flows, and as I have written before, the game is now one of judging the ‘least worst’ of these three major currencies.

In what seems to be a 6-month cycle, the dollar and euro have been jockeying for the ‘worst of the worst’ title; markets focus on Greek woes for a few months, then turn their attention back to California and Obamanomics.

With Bernanke’s “100% certainty” and nonsensical economic numbers coming out of the America’s Ministry of Truth (Newspeak: USMiniTruth), we seem to be back in a period where the markets are more concerned with Europe. I think that Japan will be called to the carpet before too long as well.

As such, in an almost ritualistic cycle, financial markets are shifting funds around these currencies… the analogy I like to think of is like a series of buckets.

Imagine three buckets and an increasing volume of water. Capital allocators are essentially dumping the contents of one pail into another– from the dollar bucket into the euro and yen bucket, and from the euro bucket back into the dollar bucket.

Each time this happens, though, a little bit of water spills out into smaller buckets– gold, silver, Switzerland, Norway, Canada, Chile, Australia, etc.

All throughout, central bankers are standing there keeping the spigot at full blast, pumping more water into the system while bankers desperately try to find the least leaky balance.

What’s required is a new bucket that bankers view as strong, sturdy, and large enough to handle the volume. The most likely candidate is the Chinese renminbi… but not yet.

China’s economy is set to be the largest in the world in a matter of years, and it has the money supply to match. While its economic and monetary fundamentals are far, far from perfect, China is arguably in a much better financial position than the west.

It’s going to take several years for the renminbi to overtake the dollar, euro, and yen as a serious contender for the world’s main reserve currency… but it can happen. The major roadblock is that China’s renminbi is not free-floating– the government has imposed severe exchange controls.

I’ve written before that we are seeing the early signs of relaxing controls. China doesn’t do anything overnight, and I think there is a long-term plan in the works.

We have already seen China agree with other sovereign nations to introduce currency swap arrangements, so there are now several countries holding renminbi. Furthermore, the Hong Kong gold exchange recently announced its plans to launch a new gold contract denominated in renminbi.

To be clear, China already has its own gold exchange, but having one in Hong Kong opens up renminbi-denominated gold contracts to the entire world since Hong Kong has no exchange controls.

On that note, the mainland authorized Hong Kong’s banks to establish cross-border settlement accounts in renminbi last year, effectively providing a way for people to open a renminbi bank account. In fact, we have one.

Each of these measures to reduce exchange controls is one step closer to the renminbi being introduced as a global reserve currency.

Perhaps the most obvious step, though, came in just the last few days. Beijing has already allowed several multinational companies like McDonald’s and Caterpillar to issue renminbi denominated bonds. Now the World Bank, that unfortunate staple of the financial system, is issuing its own two-year renminbi bond.

This is a big deal… and I think that we’re going to continue to see bigger and bigger steps like this taken throughout 2011 and the coming years.

China’s government has been very clear that by 2020, it wants Shanghai to be a leading global financial center… and Chinese policymakers know that for Shanghai to be a financial center, the renminbi must be freely convertible.

Make no mistake, my friend, the deadline has been set… and if you haven’t started making decisions to preserve your capital, I strongly urge you to start now.

Simon Black is an international investor, entrepreneur, permanent traveler and free man. Visit his website at www.sovereignman.com

Copyright 2011 International Man. All Rights Reserved.


Thinking About Expatriation? Watch This Video

December 18, 2010

by Simon Black

(Editor’s Note: This is DEFINITELY worth four minutes of your time. Make sure you show this to your kids.)

Professor Hans Rosling has an uncanny ability to take enormous heaps of data, crunch the numbers, and present them in such a fluid way that it would make the most disinterested viewer sit up and take notice, and his focus on developing countries shatters a lot of misconceptions.

In the video below, Rosling charts a moving 200-year history of the wealth and life expectancy of 200 countries. In just 4 minutes, he shows that the gap between developing countries and developed countries is actually rather small, and that places like Shanghai, Taiwan, South Korea, and Singapore have already caught up with the West.

Two of the things that I thought of immediately when watching this video were:

1) The catastrophic long-term effects of government-organized folly (war, central planning, currency debasement, etc.) are very clear when watching the progression of his data set;

2) It’s incredible how fast developing nations can catch up with the West; technology, productivity, and a high savings rate are key drivers, and those are the critical ingredients to look for when assessing the long-term growth capacity of any economy.

I highly recommend the above video, it’s only 4 minutes. If you have time for a more in-depth presentation about the growth rates of developing nations (particularly India and China), check out Rosling’s lecture at a 2009 Ted conference, it’s about 15 minutes.

And finally, if you want to play with the data yourself, you can do so at Rosling’s website.

Anyone considering a move or exploratory trip overseas, might want to consider starting his or her research in some of the developing nations that rank highly in Rosling’s data set. Chile ranks the highest in Latin America, Malaysia in developing East Asia, and Sri Lanka in developing South Asia… 3 of my top picks.

Copyright © 2010 Sovereign Man


The Next World Reserve Currency: The Chinese Yuan?

October 24, 2010

The National Inflation Association has a new video posted below about what China is doing to protect THEIR economy from the destruction of the US Dollar.

Watch this short video. It is only a matter of time before the dollar collapses. Either (a) the nations of the world will cause the collapse, or (b) China will destroy Washington themselves with economic warfare, never having to fire one bullet in anger or place one Chinese army soldier on American soil. Remember…China holds almost $900 Billion in Treasury securities…more than any other entity on the planet. All China has to do is dump 5% of their Treasuries onto the bond market on any given trading day and it’s all over for America.

We hear over and over how our clueless American presidents bluff and bluster to China about revaluing the yuan to make it more “fair.” China takes care of China first. Wouldn’t it be nice if our national leaders did the same for America?

Ladies and Gentlemen, I keep telling you to buy silver. For Christ’s sake, don’t allow peasants in China to be smarter than you.

American hubris will soon be answered by Chinese nemesis.


12 Ominous Signs For World Financial Markets

October 13, 2010

from Economic Collapse Blog

Can anyone explain the very strange behavior that we are seeing in world financial markets right now? Corporate insiders are bailing out of the U.S. stock market at a very alarming rate. Investors are moving mountains of money into gold and other commodities. In fact, there is such a rush towards gold that shortages are starting to be reported in some areas. Meanwhile, some very, very unusual option activity has started to show up. In particular, someone is making some incredibly large bets that the S&P 500 is going to absolutely tank during the month of October. Central banks around the world have caught a case of “loose money fever” and are apparently hoping that a new flood of paper money will shock the global economy back to life. Meanwhile, the furor over the foreclosure procedure abuses of the major U.S mortgage companies threatens to bring even more turmoil to the U.S. housing industry.

There are some very ominous signs that something is just not right in world financial markets right now. Some of the signs listed below may be related. Others may not be. That is for you to decide.

Often, just before something really bad happens, you can actually see the rats leaving a sinking ship if you know where to look. The truth is that if things are going to go south it is the insiders who know before anyone else.

So are some of the signs below actually clues for what we should expect in the months ahead?

Maybe.

Maybe not.

You make your own call.

But it is becoming hard to deny that there are some serious danger signs out there at this point….

#1 Corporate insiders are getting out of the U.S. stock market at an absolutely blinding pace. It is being reported that the ratio of corporate insider selling to corporate insider buying last week was 1,411 to 1, and this week the ratio has soared even higher and is at 2,341 to 1.

#2 Many of the world’s wealthiest people are buying absolutely massive quantities of gold right now.

#3 It is being reported that J.P. Morgan is gobbling up the rights to as much physical gold as it possibly can.

#4 The United States Mint has announced that it has run out of 1-ounce, 24-karat American Buffalo gold bullion coins and that it will not be selling any more of them in 2010.

#5 It is becoming increasingly difficult to explain the unusually high option volume that we are witnessing right now.

#6 Some very large investors are making massive bets that the S&P 500 is going to take a serious tumble during the month of October.

#7 On Tuesday, the Bank of Japan shocked world financial markets by cutting interest rates even closer to zero and by setting up a 5 trillion yen quantitative easing fund.

#8 The president of the Federal Reserve Bank of New York and the president of the Federal Reserve Bank of Chicago are both publicly urging the Fed to do much more to stimulate the U.S. economy, including beginning a new round of quantitative easing, even if it means a significant rise in the U.S. inflation rate.

#9 Nobel Prize-winning economist Joseph Stiglitz told reporters on Tuesday that the loose monetary policies of the Federal Reserve and the European Central Bank are throwing the world into “chaos”.

#10 At the end of September, federal regulators announced a $30 billion bailout of the U.S. wholesale credit union system.

#11 Bank of America, JPMorgan Chase and GMAC Mortgage have all suspended foreclosures in many U.S. states due to serious concerns about foreclosure procedures. Now, Texas Attorney General Greg Abbott is actually demanding that all mortgage servicing companies in the state of Texas immediately suspend all foreclosures, the selling of foreclosed properties and the eviction of people living in foreclosed properties until they have completed a review of their foreclosure procedures.

#12 Not only that, but Nancy Pelosi and 30 other members of Congress are requesting a federal investigation of the foreclosure practices of U.S. mortgage lenders. Needless to say, this controversy has the potential to turn the entire U.S. mortgage industry into an absolute quagmire.

So are dark days ahead for world financial markets?

Well, yeah, but it is incredibly hard to predict exactly when things are going to fall apart.

The truth is that there are going to be a whole lot more “crashes” and “collapses” in the years ahead.

The important thing, as discussed yesterday, is to keep your eye on the long-term trends.

The U.S. economy is undeniably in decline. The only thing keeping the economy going at this point is a rapidly growing sea of red ink. Debt is literally everywhere. It is what our entire financial system is based on in 2010.

In the months and years to come, the major players are going to try very hard to keep all the balls in the air and to continue the massive shell game that is going on, but in the end the whole thing is going to collapse like a house of cards.

Unfortunately, we have been destroying the U.S. economy for decades and there is simply not going to be a happy ending to this story.

courtesy The Economic Collapse Blog


Gold and Silver Correction Happening NOW

October 12, 2010

It’s always a pleasure to feature the work of the National Inflation Association…I mean a pleasure to feature such high quality analysis. The message of their work is scary and dire. But they are spot on every time.

Ladies and Gentlemen, you should be converting every spare dollar you have into gold and silver right now. This is not in any way an investment recommendation. It is a recommendation to convert US Dollars into a “wealth preservation” or “store of value” modality. My recommendation is to build up your inventory of silver. Buy it any way you possibly can. Sell off stuff you don’t need. Have a yard sale. Convert all your “junk” to cash and buy silver. I also recommend that when you are making your purchases, you make cash purchases with no paper trail. For example, if you are buying silver online, there is a record with the merchant of your name, address and what you bought. Governments like this, and will use that info if there is ever a confiscation of gold and silver.

Here is the latest video presentation from NIA. Watch it more than once.