Thursday, November 25, 2004

Somethin' Happenin' Here

Captain's Quarters has caught wind of mysterious, and apparently very important, developments in North Korea:

Two wire service reports indicate that North Korea has made major changes in its normally fanatical approach to its sovereignty and security. Reuters informs its readers that the hermit nation has suddenly developed a sense of urgency about restarting the six-nation talks that Kim Jong-Il previously joined with great reluctance:

North Korea wants urgently to restart six-party talks on its nuclear programs but is still demanding of its certain conditions be met, a top U.N. official told South Korea's Yonhap news agency on Thursday. North Korea still agreed with the format of the talks, it quoted Jean Ping, president of the U.N. General Assembly, as saying. Officials told him during a visit that Pyongyang was committed to denuclearizing the Korean peninsula, it said.

"North Korea not only agreed to the format of the talks but also believes that the talks should restart urgently," Ping was quoted as saying.

North Korea has hardly been a fan of the multilateral negotiations in the past. Their haste to return to the table sounds like someone else may be making the decisions now, an impression that only gains currency with this report from the French news agency AFP. Not only have Kim's pictures been removed from public places in Pyongyang, they've also been pulled from the lapels of traveling Northerners:

South Korea's Unification Ministry confirmed that lapel badges of Kim are no longer being worn by North Koreans travelling from the Stalinist state to China on official business. In the past, they wore either a badge portraying Kim or a similar badge portraying his father, the Stalinist state's founder Kim Il-Sung who died in 1994.

"North Koreans travelling to and from China who formerly wore the badge of either Kim Il-Sung or Kim Jong-Il on their chests, have stopped wearing the Kim Jong-Il badge," Unification Ministry spokeswoman Yang Jong-Hwa told AFP, citing an internal report from the ministry's information analysis bureau.

The official party line has Kim issuing orders to put an end to the personality cult he transferred from his father to himself after assuming power. Up to now, the only indication of regime change has been the removal of Kim's pictures, and the official explanation at least sounded plausible. Now that their foreign policy has apparently evolved, the rumors of Kim's demise start taking on a bit more credibility. The Reuters article discusses the latest of them:

Rumors circulated in currency and stock markets in Seoul and Tokyo early on Thursday that Kim had been shot dead. "There have been various rumors about North Korea and some do have an impact on the market, but this time there's no reaction," said a foreign exchange dealer at a bank in Seoul.

Something has changed up there. Maybe Kim just decided to get humble after Bush's re-election, but with the nation starving to death and their neighbors aligning themselves with the US on their nuclear ambitions, one or more of the palace guard may have decided that their Nero needed to go.


The U.S. Dollar vs. Gold

Recently, brother Dick asked if I would write an article on what is, and has been, happening with the performance of the dollar vs. gold. I thought, gee, I have a degree in psychology and I've been a software engineer for the last fifteen years how can I comment with any degree of authority on said topic? Well, as it turns out, this subject is kind of a hobby of mine and I've been following it for some time. Actually, off and on since the late '70s.

Back in the '70s I had a garage business where I worked on cars for a living. One of my customers was an older guy who would buy used cars, bring them to me for repairs so they would meet state inspection, and then sell them on his used car lot.

He was a gold bug. A gold bug (I prefer the term: gold advocate) is a person who believes that gold is and always will be the only real money, that gold has been wrongfully displaced by the paper dollars that the Federal Reserve creates with a key press on a computer, and that some day gold will again be recognized and restored as the only real currency.

This guy had an impact on me. Through discussions with him, I came to understand the significance of gold. It's actually very simple. Gold is a true store of wealth. In the 1920s, a $20 gold coin (one ounce of gold) would purchase a fine men's suite which retailed for...$20. Today, that same $20 gold coin will still purchase a fine men's suite which retails for $450 because that is what an ounce of gold is worth at the time of this writing. The take home message is that over the long term, gold maintains its value against the ravages of government sanctioned debauchery of its currency. In earlier articles I spoke of many of the issues surrounding gold.

The fact of the matter is that the United States has become bankrupt. This is clearly apparent to even the casual observer who considers the twin deficits this once great country has acquired. These are the trade deficit which results from the U.S. importing more than 1/2 a trillion dollars more than it exports and the budget deficit which has resulted from the U.S. spending (borrowing) 1/2 a trillion dollars more than it generates in revenues. The situation is analogous to an individual who has massively over-extending their credit card. The U.S. must borrow $2 billion dollars from the rest of the word each and every day to finance its debt.

In addition to this is the fact that there exists a $50 trillion dollars in un-funded liabilities (that means there's no money to pay for the socialist style of government programs promised to Americans like Social Security, Medicare, etc.) which is due to become payable as the baby boomer generation begins to retire. See the abyss

This is a classic example of government gone wrong. It initiates socialist policies intended to "take care" of its citizens and ends up hurting them more than helping them. And so it ever is. I've said it before and I'll say it again, government has no business trying to "take care" of its citizens. That's the responsibility and mandate of the Church. If one could have every dollar they've paid to the government's accounts established for their "welfare", they'd be able to provide for their own retirement and wouldn't be in a position where they are depending on the government for their very existence only to be devastated by some bureaucrat's decision to break a promise.

If anyone reading this thinks their investments in the stock market are going to insulate them from this mess, ask yourself what the entire baby-boomer generation is going to do when as they begin to retire. They're going to start liquidating their investments in the stock market into cash because they're going to need it. This will cause the stock market to drop significantly and I doubt I'm the only one that suspects such an eventuality. Many investors, with more understanding than myself are aware of this issue also. I doubt they will stand by idly and watch their investments decline.

And speaking of retirement, I can't see how the majority of Americans will ever actually be able to retire. It's obvious that the government is going to renege on Social Security and Medical benefits. They won't say "you can't have what you have paid into for all of your working life." It will be more like "you can't have what you've paid for until your seventy years old...or seventy-five...or eighty... Consider just the financial burden of insurance. There's health insurance including medical, dental, and vision. People in their latter years will need this more than ever and they're in for a shock when the see what it will cost when it's no longer subsidized by they're employer. Add to this the cost of home-owner's insurance, life insurance, and car insurance. To be sure, the combined costs will be prohibitively expensive for people who are on fixed income or worse, without income. We've already reached a point today where these costs are prohibitively expensive for people who haven't even retired yet!

The new paradigm for many will be to work until they drop or live out their latter years in destitute poverty living a quality of life that is diminished because of poor health. I think it was the pirate, Black Beard who said: "them's that dies is the lucky ones." It could reasonably be interpreted that the government's withholding of benefits to people who have contributed to them throughout their entire working lives would be anything less than the killing off of those who can't meet these expenses.

The American citizen has a choice to make. They can continue to go bankrupt along with the U.S. by holding onto the paper dollars and dollar related investments like the stock market (just as the Germans did with the paper Mark in the '20s) See this link from an earlier post or they can trade that paper for real Forget about investing in the's just another paper charade just like the dollar. After all, it's not redeemable in anything of value. As Murray Rothbard said, "Fiat currency, by any other name smells just as sour."

It's interesting to consider that, since 2001, the U.S. dollar has been devalued by almost 30% against the basket of foreign currencies in the U.S. dollar index yet there has been little or no economic recovery. Historically, this would result in eventual economic recovery for any country in a similar situation as the cost of their exports would drop relative to foreign currencies and their manufacturing sector would surge, create new jobs, and pull them out of the dilemma. Obviously this has not been the case. Why?

There are two reasons that I can think of for why things are different this time. First, the U.S. has, for the most part, exported its manufacturing base overseas so there is no manufacturing sector left to do the heavy lifting and, secondly, some of the countries with which the U.S. maintains a trade deficit (in their wisdom) have pegged their currency to the U.S. dollar. This means that as the dollar drops, their currencies drop so no matter how low the U.S. dollar falls, our exports will not be attractively priced to these countries.

In either case, this is extremely significant as it implies that (A.) the laws of global economics are no longer relevant or (B.) they have apparently been suspended in lieu of a "new world order" or (C.) the party will eventually come to an end and life as we know it will be considerably different.

At this point I suspect I may have digressed from the topic I was asked to address so to gain a better understanding of the current state of the U.S. dollar see this article.

The good news is that the individual American citizen doesn't have to suffer the same economic fate as the U.S government. You are free to choose to salvage and ensure your wealth by breaking free of the paper mentality and acquiring gold which preserves wealth for ever. So while the prospect for increasing financial devastation occurs on a global level, the prudent individual has isolated themselves from the powers they have no control over by acquiring gold.

In 1980 gold reached a high of approximately $800 per ounce. When adjusted for inflation, today that would be equal to approximately $1900 per ounce. Given our current economic situation, one has to ask themselves why gold is at today's price of $450 and govern themselves accordingly.

At this link are two charts: one reflecting the price of gold and beneath it a chart reflecting the value of the U.S. dollar against currencies of other countries. They say more than I ever could about what is going on with the dollar vs. gold.

Keep in mind that gold is a long-term concept. For instance, in November of 2002 gold was at $320. Then it rose to $$380. Then it plummeted to $320 again. That's called volatility and you can't let it influence your thinking. Many who bought gold at $380 sold it at $320 thinking it was the worst investment they ever made. They were controlled by emotions rather than their reasoning and understanding. It's the trend that's important and it appears to me that the trend of gold is to increase in value over the long term. Today, gold is at $450 (I wonder what those folks who sold at $320 are thinking now.) and could very possibly drop to $420 again where it was in April of this year. That too shouldn't influence your thinking. Gold advocates acquire gold and hold on to it for the long term. Gold is the metal of kings, a true store of wealth, and protection from the ravages of governments.

Thanks for reading,


Thanksgiving Proclamation

Hugh Hewitt has posted an historical document which your child will not be allowed to read in school. Doubtless if any public school teacher was so insensitive as to post this on the classroom bulletin board he or she would be compelled to remove it. We offer it to you, in part, as a way of sticking our thumb in the eye of the censorious mullahs who run our educational bureaucracy and in part so that we may all have a deeper understanding of, and appreciation for, the context in which Thanksgiving originated:

General Thanksgiving

By the PRESIDENT of the United States Of America



WHEREAS it is the duty of all nations to acknowledge the providence of Almighty God, to obey His will, to be grateful for His benefits, and humbly to implore His protection and favour; and Whereas both Houses of Congress have, by their joint committee, requested me "to recommend to the people of the United States a DAY OF PUBLICK THANSGIVING and PRAYER, to be observed by acknowledging with grateful hearts the many and signal favors of Almighty God, especially by affording them an opportunity peaceably to establish a form of government for their safety and happiness:"

NOW THEREFORE, I do recommend and assign THURSDAY, the TWENTY-SIXTH DAY of NOVEMBER next, to be devoted by the people of these States to the service of that great and glorious Being who is the beneficent author of all the good that was, that is, or that will be; that we may then all unite in rendering unto Him our sincere and humble thanks for His kind care and protection of the people of this country previous to their becoming a nation; for the signal and manifold mercies and the favorable interpositions of His providence in the course and conclusion of the late war; for the great degree of tranquility, union, and plenty which we have since enjoyed;-- for the peaceable and rational manner in which we have been enable to establish Constitutions of government for our safety and happiness, and particularly the national one now lately instituted;-- for the civil and religious liberty with which we are blessed, and the means we have of acquiring and diffusing useful knowledge;-- and, in general, for all the great and various favours which He has been pleased to confer upon us.

And also, that we may then unite in most humbly offering our prayers and supplications to the great Lord and Ruler of Nations and beseech Him to pardon our national and other transgressions;-- to enable us all, whether in publick or private stations, to perform our several and relative duties properly and punctually; to render our National Government a blessing to all the people by constantly being a Government of wise, just, and constitutional laws, discreetly and faithfully executed and obeyed; to protect and guide all sovereigns and nations (especially such as have shewn kindness unto us); and to bless them with good governments, peace, and concord; to promote the knowledge and practice of true religion and virtue, and the increase of science among them and us; and, generally to grant unto all mankind such a degree of temporal prosperity as he alone knows to be best.

GIVEN under my hand, at the city of New-York, the third day of October, in the year of our Lord, one thousand seven hundred and eighty-nine.

(signed) G. Washington

Happy Thanksgiving,