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2009.11.28
Leaving today.
We are ready to start our 7th season sailing aboard
Chinook Arch. We leave late this evening for the red-eye flight from
Calgary to Toronto. We have a 4 hour lay-over in Toronto and then leave
for Antigua. We should arrive there late tomorrow afternoon.
Chinook Arch is still on the hard and is waiting
for me to paint the hull with antifouling and make a few other repairs before we
splash. As it is rather difficult to live aboard on the hard while making
repairs to the boat we will be staying in a condo that we rented for 4
days. These condos have boat slips attached so we will be able to tie up
Chinook Arch just outside the condo for a day or two before heading out to the
anchorage.
We are looking forward to a new season of sailing
the leeward islands using Antigua as our base. We will be thinking of all
our family, friends and relatives that we are leaving behind to face another
cold northern winter. Good luck to all and we will see you again in the
spring.
Gerry
09:57 Permalink | Comments (0) | Email this
2009.11.16
Indeflation Revisited
Some month previous I posted my thoughts relating to the possibility of inflation and deflation occurring at the same time. I termed this state of economy as "indeflation". I have been puzzling over this for several years as I believe that this is exactly the situation that we find ourselves in today. How can this be so? How can you possibly have both inflation and deflation occurring at the same time? Is this not an oxymoron?
I have since come to the realization that we are experiencing inflation in real capital while experiencing deflation in financial capital. What exactly does this mean? First let us define these terms. I have previously defined inflation as an increase in money and credit relative to the available goods and services in the economy and deflation as the decrease in money and credit relative to available goods and services (see my previous post on "indeflation"). So what exactly do I mean by "capital"? Capital is the entirety of inputs required to manufacture goods or provide services demanded by consumers. These inputs can be subdivided into: 1. "real capital" - the physical inputs required to manufacture goods or provide services (such as tools, machinery and buildings); and 2. "financial capital" - commonly referred to as money but would include any commodity used to purchase the "real capital" required to produce demanded goods and services (note that this would include what we commonly think of as "credit").
My belief is that we are currently experiencing deflation in financial capital while at the same time experiencing inflation in real capital. The deflation in financial capital can be readily seen in the declining total system "money and credit" (consumer, corporate and government). The reason that the Federal Reserve has more than doubled its monetary base in the past year or so was a futile attempt to counteract the fall (reduction) in total system credit. The Fed has not yet succeeded to do this nor do I believe it will in the future. (At least not until the total amount of debt in the economy is reduced to the point where debt can be reasonably expected to be repaid with available income over a reasonable period of time relative to the life of the assets being financed.) On the other hand we have seen (and I believe we will continue to see) most essential (and scarce) commodities increase in price ... which I define as "real capital inflation".
Why then are we seeing "financial capital" deflation at the same time as "real capital" inflation? I believe that it is due to the devaluation of what we have been conditioned to regard as "money". Our society does not distinguish between money, credit and currency. These terms are generally used interchangeably but in fact have very different meanings. We commonly refer to all of these terms as "money". In fact, fiat money only holds value as long as the majority of people have faith in its value. "Money" is nothing more than any commodity that has increasing marginal utility. I believe that society is losing its faith in all fiat currencies as money. As a result, we are turning to "real capital" as an alternative to fiat money. Therefore "real capital" such as: precious metals (primarily gold and silver); oil; other forms of energy such as natural gas and renewable energy; and even other essential commodities such as grain, poultry and cattle, are increasingly serving a monetary role. Fiat currencies may continue to serve the monetary function of a means of exchange (at least for a while) but these other essential "real capital" forms will serve the monetary function of a store of wealth.
So bottom line is get used to a paradigm shift in your concept of "money". Money has two distinct functions: 1. a means of exchange; and 2. a store of wealth. It is entirely possible to see deflation in the former while at the same time seeing inflation of the latter (or vice versa).
Gerry
21:57 Posted in Finance | Permalink | Comments (1) | Email this | Tags: indeflation, inflation, deflation, gold, silver, oil, real capital, financial capital, money, credit, commodities, economics, capital
2009.11.13
Changing focus
I know ... I haven't posted in some time now. Not since August 9. I haven't changed my mind about the global economic situation. I still believe that we are in the middle of a severe bear market but we have been in a bear market rally (a temporary reprieve) since the beginning of March 2009. In short, I believe that the world's major stock markets will see new lows before seeing new highs. (For example the US S&P 500 index will fall below 670 before it breaks its all-time high of 1550). The reason that I am so confident of this prediction is that none of the world governments or central banks have done anything to lead us out of this mess. If anything their actions have only served to make things worse. The market can be counter-intuitive for very long periods but eventually fundamentals will prevail. Simply put, we need to de-lever and eliminate a substantial amount of world debt (through debt pay downs or through outright defaults) before our fiat monetary systems can become healthy and functional again. The only thing that we can do to prepare ourselves for this is to get our own individual finances in order ... pay down debt and reduce discretionary expenses ... in other words increase savings.
On that note, I want to say that Dawn and I will be returning to Antigua at the end of November. We will spend a few weeks making repairs to our 36 foot sailing sloop Chinook Arch before sailing to nearby islands over the winter months. As a result the focus of this blog will shift from commenting on global economic issues to providing a journal of our days in the Caribbean aboard Chinook Arch.
Gerry
22:36 Posted in Finance | Permalink | Comments (0) | Email this | Tags: caribbean, antigua, chinook arch, economics, deflation, bear markets, bear market rally, central banks, s&p500
2009.08.09
Is the BIS predicting the Great Depression II?
Is the Bank for International Settlements predicting another, even deeper, Great Depression? Please read the following well researched article.
Gerry
14:14 Posted in Finance | Permalink | Comments (0) | Email this | Tags: bank for international settlements, great depression, great depression ii, bis
2009.07.20
Is the recession finally over?
I think not. Many statistics published by the US government have had their methodologies changed over the years and therefore produce unreliable comparisons over the long term. However, payroll withholding receipts are difficult if not impossible to fudge or spin. Take a look at this graph!
Note that the 3rd quarter of 2009 is based on the first 17 days of July and will change as the quarter progresses (the chart is updated daily). The previous data points however are historical and will not be subject to adjustment.
Gerry
18:16 Posted in Finance | Permalink | Comments (1) | Email this | Tags: payroll withholding, recession, us government statistics