Photo

Categories

Bookmark

Add to Technorati Favorites

« 2009-02 | HomePage | 2009-03 »

2009.03.31

How will we know its over?

How will we know that the worst is over?  Are we nearer the end of the bubble bursting or nearer the beginning?  In my mind we are nearer the beginning.  Why?  Because our fiat currencies are completely dependent on confidence.  Not only consumer confidence but the confidence of all aspects of the economy.  Confidence that you will have a job next year, confidence in the management of the companies you are investing in, confidence in your elected representatives, confidence in your bank and your pension plan, confidence in the justice system.  Unfortunately confidence is in short supply right now and it is getting worse not better.  And unlike what the cheerleaders in the press would have you believe, we do not simply have to think positive thoughts in order to make things better.  The only thing that will restore confidence is when people think that they are being treated fairly again.  They have to believe that the perpetrators of this economic disaster will be indicted for fraud.  People need to go to jail for their fraudulent acts.  Not just one or two scapegoats but everyone who lied or allowed those fraudsters to commit their crimes.  I am talking about more than just Bernie Madoff or Robert Stanford.  Sure these guys need to go to jail but what about the thousands of other accomplices that are required in order to pull off such enormous frauds?  One person simply cannot embezzle $50 billion on his own.  This goes beyond his accountants and top level employees.  I am referring to the regulators who looked the other way.  Politicians who received massive "political" donations from these people and others like them.  What about the CEO's of major banks and other major corporations who lied to the media about the health of their firms just days before going bankrupt or being bailed out?
 
I believe that this thing is far from over.  Until investors, consumers, citizens believe in the word of their politicians, securities regulators and bank regulators this crisis has a lot of legs left.

20:49 Permalink | Comments (2) | Email this

The Perfect Bubble: Iceland

How do bubbles get started and why do people who would otherwise know better go along with them?  How big can a bubble get?  What happens when they pop?  Sometimes the best answer is an anecdotal one.  This Vanity Fair article is about Iceland's banking bubble.  It is an eye opener ... and the Vanity Fair photos of Gisele are easy on the eyes too.
 

19:53 Permalink | Comments (0) | Email this

2009.03.30

A (partial) return to the gold standard?

What is the gold standard and why is a return to a gold standard needed?  To put a brake on government spending.  Please read http://www.telegraph.co.uk/finance/financetopics/g20-summ...
 
Gerry

20:45 Permalink | Comments (0) | Email this

Inflation? Deflation? ... Indeflation!!!

About a year ago I had a series of email discussions with a well known silver bullion expert and financial blogger regarding inflation.  At that time the prevailing wisdom was that we would experience ongoing inflation.  I wasn't so sure.  I predicted that the financial gurus would soon be arguing whether we were in a period of inflation or whether it was in fact the beginning of a deflationary period.  The second part of my prediction was that we would experience inflation in essential goods such as food, energy and health care but that we would have deflation in almost all other goods and services.  Well the first part of my prediction came true but the second part has not ... at least not yet.
 
I call this uncertainty about inflation versus deflation "indeflation".  It is a combination of the two words but it is also a play on the word indecision.  The fact is that most people (many economists included) do not understand what inflation really is.  I define inflation as the increase of money and credit in excess of the growth in productivity.  Deflation is the opposite ... a decrease of money and credit.  Inflation is not a general increase in the level of prices ... which is merely a symptom of true (monetary) inflation ... as most financial "experts" would have you believe.  The fact is that the world's fiat currencies have been centrally managed by the various world central banks since the early 1970's and one could argue that this process has occurred since 1944, 1933 or even 1913.  The most influential currency manipulator during this period was the US Federal Reserve (Fed).  In the past 40 years the Fed has increased money and credit greatly in excess of any increase in productivity in the US economy.  Since the US dollar is the world's reserve (fiat) currency this led to inflationary pressures in the US but even more so in the rest of the world.  This increase in money resulted in increasing prices of all goods and services but especially so for commodities which saw a top in prices in early to mid 2008.  Since that time we have been seeing falling commodity prices.  How can that be since the Fed has continued to increase its monetary base since then ... even more than doubling this monetary base over that period?  Many financial gurus were calling for prices and wages to explode upward in an inflationary spiral reminiscent of the 1970's.
 
The reason for this discrepancy is that the fall of Lehman Brothers and the bailout of AIG in the fall of 2008 resulted in a massive de-leveraging of the world banks and shadow-banks which is ongoing today.  Remember that I said above that inflation is the increase of money "and credit".  It is the function of our banking system to take the monetary base created by the world central banks and lever (or "gear") this money many times over through bank credit.  Since the 1990's this process went completely out of control and the banks geared to unimaginable levels using both legal and illegal methods.  This has now reached a point where the banks have created so much credit that the world is awash in debt.  In fact there is now so much debt in the world that the world income base cannot support the interest payments required to service the debt ... let alone try to pay off the principal.  This has resulted in a period of destruction of credit which by my definition above is deflation.  However, this deflation has not yet resulted in a general decrease in the level of prices and wages.  Why not?
 
Although the Fed has more than doubled its monetary base since the start of 2008, this new money has largely been quarantined or sterilized on the Fed's balance sheet.  In addition it is highly likely that the amount of new money created by the Fed during the past year (although massive) has not kept pace with the destruction of credit that we have seen during that same period.  As a result, prices of most assets (housing, stocks, commodities and consumer discretionary goods) have either fallen (sometimes drastically) or remained flat.
 
So what is it ... inflation or deflation ... that we are experiencing?  I maintain that it is both simultaneously.  In the short to intermediate term we are experiencing deflation as the amount of credit destruction overwhelms the money creation by the Fed.  In the longer term expect inflation ... massive inflation ... even hyper-inflation to rear its ugly head.  Which is worse?  That's like asking someone to pick their poison.  Both are bad.  We will either experience a deflationary depression or an inflationary depression or cycle between the two.  In any event it will be bad.
 
How do you deal with this?  First of all cut back on your spending and either pay off your debts or increase your savings.  You will absolutely need this cushion to weather the storm.  Secondly if you have any money invested inside or outside of a tax deferral investment plan (RSP, 401k, IRA) make sure that a significant portion (10 to 40%) is invested in gold or silver bullion and/or stocks of silver and gold producing companies.  Most importantly do not assume that the "powers that be" will be able to fix this mess.  If either by luck or by skill these wizards behind the curtain are able to slow or stall the credit destruction this situation would not last.  The excessive amount of debt in the world must be destroyed.  This can only occur through inflation or deflation.  Expect that we will be cycling between the two for some time ... therefore expect INDEFLATION.
 
Gerry

14:37 Permalink | Comments (0) | Email this

2009.03.26

Montana HB639 - Montana Sound Money Bill

Are you confused about why the world is sinking further and further into an economic black hole which cannot seemingly be  reversed or controlled by even the most powerful world central banks and governments?  The root of the problem is our world fiat currencies.  There is not a single currency in use in the world today that is backed by anything other than the "good faith and credit" of a sponsoring government.  What exactly does this mean?  This is best explained by Lawrence (Larry) Parks (www.FAME.org).  (FAME is a 501(c)(3) not-for-profit educational organization whose sole mission is to educate people about the benefits of honest monetary weights and measures and the harm caused by our current fraudulent fiat money monetary system).  Larry recently made a presentation to the Montana state legislature in support of a plan to institute a program of sound money for the benefit of the citizens of Montana.  His presentation was given over the phone and was videotaped.  Although this is anything but a glitzy professional presentation it is accurate and very well presented.  If you want to educate yourself in the area of money and banking this presentation is a must see.

Videos of HB639 hearing:

http://www.youtube.com/watch?v=7s1bGv6CIJM  -----part one
http://www.youtube.com/watch?v=wLjJLw5_GB4  -----part two
http://www.youtube.com/watch?v=b7DFYpxKMCE  -----part three
http://www.youtube.com/watch?v=7gKwvEVK99g  -----part four
http://www.youtube.com/watch?v=4L171xn9suo  -------part five
http://www.youtube.com/watch?v=pqHKGBA2hhU  ----part six
http://www.youtube.com/watch?v=6_V6s1i179o  --------part seven
http://www.youtube.com/watch?v=BlGrds2LQkQ  ------part eight
http://www.youtube.com/watch?v=zaBEIjEYlN0  --------part nine
http://www.youtube.com/watch?v=ZbWbfTyt5rE  -------part ten

Also, I highly recommend the Crash Course developed by Chris Martenson available here: http://www.chrismartenson.com/crashcourse

If you watch these easy to understand presentations you will be better prepared to protect yourself and your loved ones from the full effects of the current monetary crisis.

Gerry

19:46 Permalink | Comments (1) | Email this

2009.03.24

The Big Takeover - Rolling Stone article

Dawn and I are back home and I am in the process of seeing my doctors to see if we can get to the bottom of my health issues.  Now that I am home I am back into studying money and banking and macroeconomics in general.  I have decided to post articles and other items which I find interesting dealing with the current financial crisis.  My son Toby found this article in Rolling Stone magazine that gives a good summary of exactly how we got into this mess.  It is a very accurate account of the history of the crisis to date.  The only weakness that I can spot is that it leaves out the role of the government agencies in this mess (Fannie Mae and Freddie Mac).  The article is written in the typical irreverent language of Rolling Stone and contains profanities so if this offends you do not read it.  It is written to non-financial types and is easily understood by anyone.  I urge you all to educate yourselves in this most serious matter which may turn out to be the most significant historical event of our lifetime.  If you object to this new type of post and would rather that I keep this blog purely devoted to sailing please let me know by leaving a comment.
 
Gerry

13:56 Permalink | Comments (0) | Email this

2009.03.11

See what we missed?

When we left Antigua for Nevis on Feb 25 there were 3 other boats that left at the same time as us: Mike & Chris aboard s/y Reverie, Doug and Judy s/y Purpose and Leon and Barb s/y Lagniappe. Purpose and Lagniappe were intending to spend a few days in Nevis before moving on to St. Matin where Doug was to meet up with his brother and sister-in-law to join him and Judy on Purpose for a sailing holiday. Purpose and Lagniappe were trying to convince Dawn and I (mostly Dawn as I was already convinced) to sail with them to St. Martin and then on to the BVI. Well due to my health issues we never did decide to go with them as we had to return rather unexpectedly to Antigua as described by Dawn in an earlier posting. We just received an email from Leon on Lagniappe who describes their adventures so far. Leon is quite a funny guy. I thought I should share this with you as we don't have too many sailing stories of our own to share with you this year. Enjoy,
Gerry

We have been in St. Martin for about 8 days and will probably be here for at least another 5 to 7 due to the unbelievable strong front sitting over us. We have made the best of our time and were able to sail the boat around the island before getting caught in some pretty wild stuff that sent us to the protection of Simpson Lagoon (look it up on the internet for a spectacular birds eye view). The Lagoon is a very large body of water completely surrounded by land except through two channels one on the Dutch side and the other on the French side of the island. We sailed to Grand Case where we anchored and went ashore to an area of street vendors and rows of excellent French restaurants where it was almost impossible to decide which one we wanted so we chose the same one we ate at last year which was excellent. From there we sailed to a small island called Tintamar where we were greeted by a catamaran full of naked people and the boat captain who only wore a tux bowtie and nothing else. That day, we sailed on to Orient Beach where we anchored and went ashore by dingy. This multiple miles long beach is like something out of the movies with 1000's of people and rows of beach bars and restaurants peddling their umbrellas and beach chairs. The beaches are divided into two sections. The naked section and the not so naked section. Each group is suppose to keep to their area but somehow cross over into each other's turf. Anyway lots and lots of nakedness. We had hamburgers at this Jimmy Buffet type joint where the singer offered prizes for the best dancers but announced he would favor the naked ones. Actually, it was kind of disgusting when this lady who had no business not wearing anything to cover her behind decided to enter the contest. To shake all this nakedness from our minds we walked down a back road to a butterfly farm that was quite interesting. The beach had a very high surf making it difficult to get in the dingy and return to our boats. Doug and his brother helped Barbara and I push out into the surf and the four of them managed to get out in their dingy OK. This is the same beach where four years ago my sister in law, Linda, got her underwear knocked off when the high surf put a roller right smack in her lap as we pushed off the beach barely avoiding a capsizing. She could not find them when she got to Lagniappe but the next morning I found them on the floor of the dingy. Later in the afternoon we were able to do some nice snorkeling on some reefs off orient beach. At that point everything was going well and according to plan as we went to sleep that night. The next morning we woke up to tremendous offshore surf and wind. The dingy was still down and the waves were so high that it was almost impossible to jump from the boat into the dingy to attached the lifting points. I kept waiting for lulls in the wind and waves that never came. So I jumped in and was immediately drenched by waves breaking over the dingy. I hurriedly made my attachments and jumped back on the boat. Unfortunately, when Barbara and I began to lift the dingy on the davits we noticed that one of the lifting blocks was twisted. The meant I had to jump back in the dingy which took another 20 minutes for me to get the courage and pick out the right instant to make my leap into this very rolling, bouncing and thrashing around dingy. With the waves lifting it and slamming it into the transom of Lagniappe I once again jumped in and when I looked back at Barbara all I could see was terror. Anyway, we managed to re-attach it and safely lift and secure it but not without some hearth throbbing moments. Now Lagniappe and Purpose (with Brother Steve and Michelle) had to round the island to the other side in heavy seas and wind. With the wind blowing 30 knots we sailed under small staysail alone and as I rounded a section of the island I ran right smack into the Heineken regatta with lots and lots of boats coming right at us heeled over with their bows violently rising above and sinking through rolling waves(the regatta was cut short because of the extreme weather). Here we were dodging one after the other sometimes having to jibe just to avoid the oncoming mass of boats. The racing boats were heeled over with rows of crew sitting and hanging their legs over to counter balance the heel. I could not go out to get away from the race as the ocean was way too rough to venture out any further. So Lagniappe and Purpose continued to penetrate right through the center of the regatta zigzagging between some very fast approaching boats as they tried to overtake one another. One thing for sure, they were not going to give way to us. Finally as the last of the boats sped by coming close enough for us to read the expressions on their crews faces we finally reach what we thought was going to be a safe haven to wait for the bridge opening into the Lagoon. Well we arrived at the bridge around noon and the bridge did not open until 2:30 so we had no choice but to anchor in what I can only describe as ocean going white cap filled short steep waves. We managed to set the anchor but the boat felt like we were sailing as it lifted with each on coming wave as they broke into white foam under the boat. I did not leave the cockpit and stood at the ready at the wheel. Looking over at Purpose I could not believe my eyes as the boat plunged its bow through each oncoming wave looking as if it were in a regatta. Finally it was 2:30 and we lifted anchor along with about 15 other boats to wait in line for the bridge opening. Here we had all these boats circling each other and trying to maintain control within a shoal sided entrance with rolling waves that actually broke over our boat. How no one collided is a mystery. The wind was blowing so strong that it was almost impossible to hold the boats straight at such low speed. Every time you approached another boat circling and you slowed down, the wind would catch you and push you over all the while the waves were lifting and tossing you in different directions. I was never so relieved to see a bridge open (delayed by 15 minutes) in my whole life. The anxiety was not yet over as we entered the lagoon and tried to find a spot to anchor among half the boats in the Caribbean who were there seeking shelter. Barbara was on the edge as we made our way around jam packed boats and their anchor lines in a squall with teeming rain and 20 to 30 knot winds. After three attempts in anchoring with the wind pulling the anchor out of the grass bottom on each try we were finally able on our fourth try to get two anchors down in half sand and half grass. This was yesterday and the two anchors held all night through constant squalls and high winds and me sleeping next to the anchor alarm. Today we saw Steve and Michelle off and are settled in until the weather breaks for our next leg to the Virgin Islands.

18:12 Permalink | Comments (0) | Email this

2009.03.07

Returning to Canada Early

We finally broke away from Antigua February 25th and decided to go to Nevis (40 nm away) to renew our visa here.  Due to the unrest in the French islands south of us we decided that the option of going south wasn't a great one.  That was the good news, we hadn't forgotten how to sail and the trip was brisk and uneventful.  The bad news was Gerry had to hand steer the whole way which normally would not have bothered him but due to his health issues from last summer he found it wore him out.  He was very tired when we arrived to the point of exhaustion and then on the second night we were there he fainted on the toilet. (Funny now not then!)  Luckily for him as any of you boaters can attest to the head on a boat is very small so when he fainted the door kept him contained in the small space until I could get to him and help him up.  This is a  very scary and disconcerting thing to have happen when you are anchored off of an island that has virtually no up to date medical care that we could rely on and no easy way to get him to shore.  Luckily we were with our good friends Chris and Mike on s/v Reverie and I was able yell over to her that we needed their help and they got their dinghy down and came over.
 
We discussed what we were going to do and after a trip into town (just the 2 of them) late at night with their dinghy and them asking around at the nearest police station for facilities we decided that that wasn't the place we wanted to take Gerry. At this point he had regained the color in his face and although weak seemed to be okay for the moment.  There was a tall ship anchored a little further out than we were so Mike and Chris had the presence of mind to go over and ask if there was a medical person on board, there were - 3 of them.  A dermatologist, a psychologist and an anesthesiologist.  The anesthesiologist thought he would be the best person for the job and their co-captain brought him straight over. 
 
Meanwhile back on board I was in communication with our son Toby on Skype and Alana and Giselle by phone.  They were wonderful moral supports and were putting in phone calls to anyone they could get information from even people at the Four Seasons in Nevis (which is now shut down since Hurricane Omar last fall).  The night would have seemed even more frightening if it hadn't been for their help.  Once the Dr. arrived and examined and talked with Gerry he concluded that he was okay and that what had happened was not an uncommon occurrence and he didn't feel it was related to his heart problems and was not life threatening.  However, it is something that he felt he needs to follow up on with his own doctor.
 
The next day, aside from being tired, Gerry seemed to be himself again and we made arrangements with two other sailing friends, one of which is a retired ER doctor, here in Antigua to fly over and help us sail the boat back to Antigua.  The weather was good for a return trip home right away so we were back here by the 1st of March.
 
So where does that leave us for sailing?  At first there was much talk about simply putting the boat up for sale here but as time has gone on since our return we feel that for now we are going to use the boat as a floating condo during the coldest months of the year (back home) and just stay around Antigua.  There are beautiful spots to anchor in, some of which we haven't even been to and we are not quite ready to give up this life style.  For now we feel that the longer treks between islands are over for us if it is just the two of us, however,  if we had experienced sailing friends join us from time to time it would be something we would consider doing with them aboard.
 
So it's been a short sailing season this year but we were fortunate to be able to enjoy such a spectacular place albeit was for only a short time.  We are getting excited about returning and seeing our children and grandchildren once again.

13:16 Permalink | Comments (6) | Email this

All the posts