Tyler Durden
via Zero Hedge

Either in anticipation of QE2 which will cut the value of the dollar by another 50% once another $2 trillion in toxic crap becomes the “assets” backing the viability of the dollar, or just because they are sick of Fed policies, mid-Michigan has taken monetary matters into their own hands, and in one simple act, completely bypassed the destabilizing influence of the domestic currency printers.

As ConnectMidMichigan reports, “New types of money are popping up across Mid-Michigan and supporters say, it’s not counterfeit, but rather a competing currency.  Right now, you can buy a meal or visit a chiropractor without using actual U.S. legal tender.” The plan is so simple, it just may work – after all if one can’t get away from the Fed’s probing and pickpocketing long fingers, all one has to do is learn to live without its parasitic pieces of paper. And not just paper: “I sell three or four every single day and then I get one or two back a week,” said Dave Gillie, owner of Gillies Coney Island Restaurant in Genesee Township. Gillie also accepts silver, gold, copper and other precious metals to pay for food.” So yes, you can eat gold…. and load up your gas tank with it.

“Do people have to accept dollars or money? No, they don’t,” Gillie said. “They can accept anything they want or they can refuse to accept anything.”

He’s absolutely right.

The U.S. Treasury Department says the Coinage Act of 1965 says “private businesses are free to develop their own policies on whether or not to accept cash, unless there is a state law which says otherwise.

That allows gas stations to say they don’t accept 50- or $100 bills after a certain time of day in hopes of not getting robbed.

A chiropractic office in Lapeer County’s Deerfield Township allows creativity when it comes to payment.

“This establishment accepts any form of silver, gold, chicken, apple pie, if someone works it out with me,” said Jeff Kotchounian of Deerfield Chiropractic. “I’ve taken many things.”

Jeff Kotchounian says he’s used this Ron Paul half troy ounce of silver to get $25 worth of gas from a local station.

While the government and banks don’t accept them, many others do.

So why is there interest in these competing currencies?

Is it just novelty or is there something deeper?

If the ruling kleptocrats, demand on being such an intimate part of everyday life, and procuring all of the population’s real wealth and cash producing assets in the process, said population has a choice of either going with this sheepish approach, and meekly allowing the loaded gun to be parked at its temple, or do what Michigan, with its 99.9% real unemployment, has decided to do.

You can reduce your outstanding debt with just one easy rule. The “Plus 1 Percent Rule” accounts for the monthly interest charged in each payment you make.

Trying to figure out how many payments you have left in your head can be tricky because you debt is still acquiring interest. Also when you just go along paying whatever you feel like is okay, you don’t pay much attention to fee’s and interest being accumulated and it’s very easy to fall into a trap where you pay much more that the amount you planned on.

For a long time my rule was to take the minimum payment then just pay a little extra, basically whatever I felt like I could afford at the time.

I found that my outstanding debts was not going away as fast as I felt like they should be.

Every time I made a payment to reduce my debts I would try and choose a nice rounded number, I would later come back to see that the interest charges would bump the debts back up to a higher level.

So I found a way to get ahead of the interest charges by factoring them into the payment ahead of the charges.

An easy rule of thumb to use is the “+1% Rule“. Take your initial payment and add 1% of the principal.

For this example we’ll assume 12 pct APR

If I owed $7,500 and I wanted next month to show that I only owed $7,000.

Before I was just paying off $500 and feeling pretty good about that payment.

At that rate it would be paid off in 15 months according to the in my head calculations.

However the next month I came back to see it was something more like $7075.

It was kind of discouraging to think I had felt like I just paid off a big chunk, considering the monthly minimum payment is something closer to $300, but I still didn’t hit my goal.

As a matter of fact by only paying the min. $75 goes to the interest and only $225 goes to pay down the principal. That’s 25% of the payment sucked off by interest.

I sat down and looked hard at all the money I was wasting on interest alone and decided to start knocking it out before I even considered how much to pay each month.

So now to keep on the schedule I’ve set, I pay the original $500 + 1% of the total (assuming that nice even 12% APR).

But adding 1% of the total amount you owe to each payment is a good rule of thumb to get ahead on your loans. If you’re paying a higher rate like 30% APR for example then 2.5%. Which is a little harder to do in your head, so just add 1% twice then round up.

How To Add 1 Percent In Your Head:

Adding 1% in your head is easy, just use the 10% rule and knock off an extra 0, and if you can’t figure out 10% of a number in your head then you should turn in all your credit cards, and let your parents, wife, husband, or random middle school student handle your finances from now on.

Instead of $500 now I pay $575.

That way the outstanding total is reduced by the amount I had intended it to.

The good news about this method of payment is that by accounting for the interest in the payment, the amount I pay each month actually gets smalller as I pay it down.

Next time I’ll only owe $7,000 like I intended so I will only have to pay $570 this month. In 5 months I’ll only be paying $550. If you could knock off $25 off your cell phone bill you would consider this a big savings!

This method is helpful if you can afford to pay extra on your debts in the short term and it helps you set a standard for your monthly payment instead of casually paying whatever feels right. It’s also rewarding to see your principal amount go down incrementally in while your monthly payments actually get smaller.

Even if you’ve been stuck paying minimum payments then you should still consider this method, monthly minimum payment + 1% of the total (or your APR / 12 months for higher interest rates ) or else you will never be able to pay it off.

The goal is to pay more today so that down the road your payments will be smaller. If left unchecked you could be paying the same or even more later on due to interest charges.

Not to long ago I clicked on an ad for a free investor’s kit from Goldline International. I was skeptical at first entering my phone number and address to a web form for a company I knew very little about. I was afraid of being spammed not only with unwanted emails, but advertisements in real life or even worse phone calls from telemarketers.

Despite these risks I took a chance and filled out the forms. The current climate here in the US has given me some serious concerns about the safety of the U.S. Dollar and my investments in the stock market. I felt like I needed to protect my savings with something I could physically put my hands on like gold or silver.

Within 2 weeks I received my Investors Kit along with only one or two emails, one confirming my sign-up and another monthly newsletter.

I was blown away by the quality of the Free Investor’s Kit. It came in a large envelope packed full of papers and information. Inside was a folder with several high quality full color pages printed on High Gloss paper and several brochures and documents with all the information that YOU NEED TO KNOW.

What Comes In The Goldline Free Investors Pack?

1. Precious Metals and Rare Coins Investors Guide

Tables of Contents:
I: Introduction to Precious Metals
II: Advantages of Owning Gold & Silver
III: Most Popular Coins & Products
IV: Why Investors & Collectors Choose Goldline
V: How To Acquire Precious Metals & Rare Coins

2. Coin Facts For Investors and Collectors to Consider

Facts, risks, and policies collectors should know:
Diversification, Holding Period, IRA Accounts, Buy Back Policy, Delivery, Storage, Risks In Precious Metal Investing, Pricing, Bullion Purchases, Exchange Transactions, Refund Policy

3. Account and Storage Agreement Information

Any and everything you need to know about Goldline International’s Terms and Conditions.

4. One-Time Special Offer Coupon for Free Shipping on my order.

5. Complimentary Issue of The American Advisor Newsletter
Goldline’s newsletter, American Advisor, provides timely news and information about our economy, precious metals and rare coins. The Investor’s Kit also included an offer for 1 Year Free subscription to the American Advisor.

Listen to the American Advisor Radio Podcast Here.

6. Pre-Paid FedEX Air Mail Envelope

7. Vintage Copy of 1933 Executive Order Gold Confiscation Act.

Under Executive Order Of The President issued April 5, 1933 all persons are required to deliver on or before May 1, 1933 all GOLD COINS, GOLD BULLION, AND GOLD CERTIFICATES now owned by them to a Federal Reserve Bank, brand or agency, or to any member bank of the Federal Reserve System.

8. Personalized Letter written to me from my Goldline Account Executive.

How was the customer service at Goldline?

About a week after receiving my Goldline Investors Kit I got the first phone call. Normally I don’t pick-up unknown phone numbers so I let it go to voicemail. It was from the same acount executive that left his business card in my free investors kit.

He was polite and basically said:

Hi John, we’ve got your phone number here because you requested some information online. I’d love to get a chance to talk with you about how we can help you with your investments at Goldline. Give me call back at this number…

It was a short message and not too pushy. I actually did not call them back right away, but my account executive called me two more times in the span of about 2 weeks and left a message each time. After that I did not hear back from him again.

Overall I would say that they were very professional and courteous. I was afraid to give out my ‘real’ phone number, but you can trust not to have problems with Goldline.

How Can I Get A Free Goldline Investors Pack?

1. Call Goldline at 1-800-827-4653 to speak with a Account Exec.

2. Sign up on the web here

3. Follow the links in the side bar.

Faced with a shortage of small banknotes, people in Myanmar are resorting to bartering cigarettes, shampoo and other items.

The bartering illustrates the effects of surging inflation and the curious decision to stop printing small notes.

How shall I give it to you? You want coffee-mix, cigarettes, tissues, sweets or what?

That question is heard often in shops and restaurants in the former Burma, where coins and small notes disappeared years ago and other notes have now started to follow suit.

State banks were main source of small notes for shop-owners, but they stopped issuing new currency several years ago. Today, beggars who collect money on the street now provide shops with the bulk of their small notes, often in return for food.

Rampant inflation also plays a role. Consumer prices rose by an average 24 percent a year between 2005 and 2008, according to the Asian Development Bank. That has taken a toll on Myanmar’s currency, the kyat.

Officially, the kyat is pegged at 5.5 per dollar. But it fetches nowhere near that, trading instead at about 1,000 per dollar. The cost of printing small notes is now far more expensive than the face value of the notes themselves.

A Yangon government high school teacher said most of her pupils had never even seen coins or small notes.

SWEETS AS CURRENCY

In the commercial capital, Yangon, 100 kyat (around 10 U.S. cents) is worth a sachet of coffee-mix or a small container of shampoo. Tissue packets or a cigarette or sweets are the equivalent of 50 kyat.

“The shopkeeper gave me three sweets for change of 150 kyat when I bought a bottle of cough mixture last week,” said Ba Aye, a Yangon taxi driver.

“When I told her that sweets would make my cough worse, she offered me a Thai-made gas lighter. When I said ‘I don’t smoke’, she then asked me to accept three packets of tissues that would be useful for my runny nose.”

General-store owner Daw Khin Aye said most of her customers preferred small items like sweets to notes.

“The small notes that are in circulation are in very bad shape — worn out, torn, stained, dirty and in most cases stuck with tape,” she said.

In Sittwe, the capital of western Rakhine State, teashop owners manufacture their own coupons to use as currency.

“It’s far more convenient to use these self-circulated notes instead of small items,” teashop owner Ko Aung Khine said.

“But you need to make sure coupons can’t be forged. Mostly we use a computer to print it with the name of the shop, face value and signature of the shop owner,” he added.

Officially there are 13 denominations of notes in circulation — starting from 50 pya (one cent) up to 5,000 kyat. But only the three big notes (200, 500 and 1,000 kyat) are common. The rest are growing scarcer by the month.

“So far as I know, they print only 1,000 kyat notes now,” said a retired economist from Yangon University. “The cost of printing is far higher than the face value of most small notes… so they now print just the biggest ones.”

How much money is in circulation is anyone’s guess. Myanmar has not publicly released money supply data since 1996-97, when it put the value at 179.82 billion kyat.

When asked for the latest figure, a senior government official replied: “We cannot tell you. It’s a state secret.”

What is the Credit Crisis?

It is a worldwide financial fiasco involving terms you’ve probably never even heard.

• Sub-Prime Mortages
• Collateralized Debt Obligations
• Frozen Credit Markets
• Credit Default Swaps

Who is Affected By The Credit Crisis?

Everyone

How Did It Happen?

The credit crisis brings two groups of people together. Homeowners and investors. Homeownwers represent their mortgages and investors represent their money.

The mortgages represent houses, and the money represents large institutions like pension funds, sovereign funds, insurance companies, and mutual funds.

These groups are brought together through the financial system normally known as WALL ST.

How is Wall St. connected to Main St?

Years ago investors were sitting on piles of money looking for a good investment, to turn into MORE MONEY. Traditionally they would go to the Federal Reserve, where they would buy treasury bills. However, in the wake of the dot com bust and the attacks on 9/11 . Federal reserve chairman Alan Greenspan lowered the borrowing rate to only 1% to keep the economy strong.

1% is a very small return on investment so investors said “No thanks.” On the flip side this means banks can borrow from the bank for only 1%. Now add to that a large surplus of money from China, Japan, and Europe, and you have an overwhelming abundance of cheap CREDIT.

This makes borrowing money easy and causes them to go crazy with LEVERAGE.

“Leverage is borrowing money to amplify the outcome of a deal.”

How Does Leveraged Investing Work?

In a normal deal someone with 10,000 dollars buys a box for 10,000 dollars. He then sells that box to someone else for 11,000 dollars, making a $1,000 profit. Using leverage someone who has $10,000 will go and BORROW $990,000 instead. Using the original $10,000 as collateral.

He now has $1,000,000, and he can buy 100 boxes. He sells them to someone else for $1,100,000. Now he has to pay back his 990,000 plus 10,000 in INTEREST. After you subtract the initial $10,000 he is left with a $90,000 PROFIT

Leverage turns good deals into GREAT DEALS.

“This is how banks make their money”

Wall Street takes out lots of loans, makes great deals and gets really rich and then pays it back. Investors see this an want a piece of the action. This give Wall street an idea. They can connect their investors to homeowners with MORTGAGES.

Here’s how it works?

• A family wants a house, so they save for a down payment.
• They then contact a mortgage broker. The mortgage broker connects the family to a lender who gives them a loan.
• The broker makes a nice commission, the family buys a house, the banker makes some interest, and everyone is happy.
• One day the lender gets a call from and investment banker who wants to buy the mortgage, the lender sells it to him for a nice fee
• The investment banker then borrows billions of dollars and buys thousands of mortgages. He puts them into a nice box. Every month the investment banker sits back and collects the monthly payments from thousands of mortgages.

But the process doesn’t stop here.

What is a Collateralize debt obligation?

Each box of mortgages is cut into 3 separate smaller boxes named: Safe (AAA), Okay (BBB), and Risky (Unrated). They once again package these up and call it a COLLATERALIZED DEBT OBLIGATION (CDO)

As money comes in the top rated, safest investments are paid off first, then the okay loans are paid off, and whatever is left over goes into the risky loans.

If some homeowners don’t pay on the mortgages and go into default then less money is coming in and the risky box will not be filled with as much money. To compensate for the higher risk, the bottom risky tray pays out a higher interest rate, while the top safer investment receives a much lower rate.

To make the top tray even safer banks will sell insurance on it, called a CREDIT DEFAULT SWAP.

Now the investment banker can sell each piece of the pie to different investors who have different levels of risk and everyone is happy and making money.

The investment banker calls up the mortgage broker for more home loans, but everyone who is loan worthy already has a home.

Taking on more risk.

When a homeowner defaults on a loan, the investment banker is left with the home. Since homes are always increasing in value then banker is covered from any losses. Because of this he can start adding risk to his investments.

No down payment, no proof of income, FREE MONEY.

So instead of loaning to responsible homeowners called PRIME MORTGAGES.

they started to get people who were less responsible, these were SUBPRIME MORTGAGES.

TURNING POINT

Like usual the mortgage broker connects the family with a lender who writes the mortgage and the family buys a BIG HOUSE.

The lender sells the mortgage to an investment banker.

The investment banker turns it into a CDO and sells it in slices to the others

This works nicely for everyone, and everyone gets very very rich.

Except this time the model could not go on forever. Like playing a game of hot potato with ticking time bombs, each person has to pass on the risk to the next person.

As predicted the home owners defaulted.

Then the home is now owned by the banker who forecloses and one of his monthly payments turns into a house.

As more and more of his monthly payments turn into houses, the housing market gets saturated with too many houses for sale and houses start to drop in value.

As house prices plummet in value more and more families start to walk away from their mortgages once their home value are turned UPSIDE DOWN.

Now the investment banker is stuck with boxes of worthless houses.

The banker can no longer sell the CDO’s because everyone knows there is no money coming in anymore.

The investment bank goes into a downward spiral because the bank itself has borrowed Billions of dollars and sometimes TRILLIONS of dollars and he cant pay it back

The investment bank is not the only one in trouble because the investors have bought thousands of these junk bonds and the lender tries to sell mortgages but the banker has no more money to lend, the whole financial system is frozen and things get dark.

Everybody starts going bankrupt.

Welcome to the CRISIS OF CREDIT.

Online currency exchange offers a massive money making opportunity to the savvy investor who is prepared to take a risk and speculate on the currency market.

Also known as the FOREX or foreign exchange market, this is a global trading arena that is open 24 hours a day from Monday through Friday. This is because no matter what time it may be where you live, there is always somewhere in the world that is open for business.

The Forex Market is the largest financial market in the world. The current amount of daily trading done in the Forex market is around 3 Trillion dollars. By comparison, the New York Stock Exchange trades around 30 billion dollars a day.

The 24 hour market provides many opportunities for traders that do not exist on the normal stock market.

For example, you can still have a day job and trade currency from home in the evenings or early mornings. You are not limited to trading your own country’s currency either. This can be an advantage during times of economic crisis when price movements in one currency pair may be difficult to predict, but others are relatively stable.

Currently the U.S. Dollar is going through a time of great turmoil. With much inflation on the horizon due to stimulus and the printing of trillions of dollars, FOREX can be one way to invest your money outside the realm of the U.S. Dollar.

How To FOREX Trade

Currency is always traded in pairs because you have to give one currency in order to buy another. You will see the different pairs written with their three letter codes, such as EUR/USD for the euro and US dollar. Prices will depend on the economic situation of the relevant countries.

If you are used to dealing in stocks, this may be confusing at first, but you can think of it as if you were buying stock in a whole country.

If you live in Canada then you would need to find out the Canadian exchange rate against the US Dollar or if in Europe the best Euro exchange rate again against the US dollar as the green back is the principle currency of the foreign exchange market.

To get started you just need a computer with a good fast internet connection. You cannot trade forex
with a dialup connection, it would be too slow. Your computer will need to display prices that are changing very rapidly, and you will want to act while the price is in the right zone.

In previous times you needed thousands of dollars to open a FOREX trading account with a broker but that has all changed now. As well as the old style standard accounts, many brokers offer mini and micro accounts where you can trade position sizes that are just 10% or 1% of the standard lot size. This means you can start out with just a few hundred dollars.

How to Practice Currency Trading

Fortunately, you do not have to start right out risking real money. You can sign up for a dummy or demo FOREX account with most brokers. This allows you to try out their trading platform, opening and closing dummy trades according to the real time FOREX prices. You can also test out systems in demo mode and keep track of your gains and losses.

Online currency exchange is fast moving and high risk. You must expect some losses and if your risk management is not good, you may see your start up funds wiped out. Be careful not to risk too much on one trade, no matter how confident you are.

Also there is no substitution for traditonal learning. There are many online courses that promise you the ability to “GET RICH” over night, with no experience, and no need to do any learning on you own. The truth is you WILL be able to make lots of money on FOREX, but only if you take the time to learn what you are doing. Online courses may be good but nothing beats reading the book first. The same way every college course comes with a professor AND A BOOK. Get a good FOREX training course or book and follow it until you are confident enough to risk real money.

By Puru Saxena

Make no mistake the developed world is drowning in debt and there are only two viable options – a global economic depression or very high inflation. It is our contention that the policymakers have chosen the latter option and over the following years, we will experience the trauma of severe inflation.

The American government is staring at total obligations of US $115 trillion, America’s debt-to-GDP ratio is off the charts and the American public is also up to its eyeballs in debt. Under this scenario, you can bet your bottom dollar that the American establishment will try to reduce this debt overhang through a process known as monetary inflation. If you have any doubt whatsoever, take a look at the chart below, which captures the incredible expansion in America’s monetary base.

Expansion in the money supply

As you can see, over the past two years, the monetary base in America has expanded from US$827 billion to an astonishing US$1.93 trillion! Until now, this surge in the monetary base has not produced a highly visible inflationary impact…yet.

But it is notable that America is not alone in pursuing inflationary policies. All over the world, the developed nations are printing money and debasing their currencies. In this era of globalization, no country wants a strong currency and everyone is engaged in competitive currency devaluations. This massive money and debt creation will cause an inflationary boom over the coming years.

In fact, those who erroneously believe that deflation is unavoidable should review Figure 2, which highlights the mind-boggling expansion in the balance sheets of various central banks. As you can see, America is not the only nation guilty of printing money; the Europeans have also jumped on this train to Inflationville.

Inflation vs. Deflation

Now, we are aware that many prominent commentators are still calling for deflation. “After all,” they argue, “how can inflation be a problem when bond yields are so low?” Well, these deflationists seem to be missing the point because the US Treasury market is no longer an entirely free market. We would argue that the Federal Reserve’s intervention is largely responsible for keeping bond yields artificially low. Over the past several months, the Federal Reserve has purchased most of the net new issuance of Treasury securities. The American central bank is engaged in this desperate act in order to keep interest-rates low. However, it is buying these Treasuries by creating money out of thin air. This is inflationary.

If our assessment is correct, somewhere down the road, the Federal Reserve will lose its battle and T-bond yields will soar. As more and more bond investors wake up to the looming inflationary menace, they will start demanding a higher rate of return on their capital. When that happens, the dyke will break and the Federal Reserve will become irrelevant.

America has run out of choices. If the Federal Reserve does not inflate away this mountain of debt, the biggest sovereign default in history is guaranteed. Now, given the ability of the Federal Reserve to create confetti money, we are convinced that it will opt for the inflationary solution. Inflation would certainly make America’s debt more manageable, but it would also dilute the purchasing power of the dollar. Of course, this inflationary agenda is not a secret and this is why many creditor nations with huge reserves are beginning to diversify away from the American currency.

Where should position yourself

In the past, when inflationary episodes spiraled out of control, hard assets were the prime beneficiaries and this trend is likely to remain intact in this inflationary episode. If our assessment is correct, over the coming years, stocks, precious metals, commodities and real estate will appreciate in value versus paper currencies. Furthermore, on a relative basis, we expect precious metals and commodities to outperform all other asset-classes. Conversely, we anticipate that cash and fixed-income instruments will probably turn out to be the worst assets to own over the next decade.

Bearing in mind the looming inflationary nightmare, we urge you to protect your purchasing power by allocating capital to precious metals and commodities-related businesses. Finally, we suggest that you consider allocating a portion of your capital to the fast-growing economies in Asia, like China, India and Vietnam. Such investments should prosper during the low-growth, high-inflation environment to come.

via: The Daily Reckoning

History of the United States National Debt

The United States has had public debt since its inception. Debts incurred during the American Revolutionary War and under the Articles of Confederation led to the first yearly reported value of $75,463,476.52 on January 1, 1791. Over the following 45 years, the debt grew, briefly contracted to zero on January 8, 1835 under President Andrew Jackson but then quickly grew into the millions.

The first dramatic growth spurt of the debt occurred because of the Civil War. The debt was just $65 million in 1860, but passed $1 billion in 1863 and had reached $2.7 billion following the war. The debt slowly fluctuated for the rest of the century, finally growing steadily in the 1910s and early 1920s to roughly $22 billion as the country paid for involvement in World War I.

The buildup and involvement in World War II plus other social programs during the F.D. Roosevelt and Truman presidencies in the 1930s and 40′s caused a sixteenfold increase in the debt from $16 billion in 1930 to $260 billion in 1950. After this period, the debt’s growth closely matched the rate of inflation where it tripled in size from $260 billion in 1950 to around $909 billion in 1980. Public debt in dollars quadrupled during the Reagan and Bush presidencies from 1980 to 1992, and remained at about the same level by the end of the Clinton presidency in 2000. During the administration of President George W. Bush, the total debt increased from $5.6 trillion in January 2001 to $10.7 trillion by December 2008, rising from 54% of GDP to 75% of GDP. During March 2009, the Congressional Budget Office estimated that public debt will rise from 40.8% of GDP in 2008 to 70.1% in 2012.[8] The total debt is projected to continue increasing significantly during President Obama’s administration to nearly 100% of GDP, its highest level since World War II.

What is the National Debt ceiling

The Second Liberty Bond Act of 1917 established a statutory limit on federal debt. Congress had previously approved each debt issuance separately. The debt limit provided the U.S. Treasury with more leeway in the administration of debt, allowing for modern management techniques in government finance.

The U.S. Treasury Department now conducts more than 200 sales of debt by auction every year. The Treasury has been granted authority by Congress to issue such debt as was needed to fund government operations as long as the total debt (excepting some small special classes) does not exceed a stated ceiling.

The United States Congress has raised the debt limit several times in recent years. The debt limit was most recently raised to $12.104 trillion by the American Recovery and Reinvestment Act of 2009 (H.R.1), which was signed into law on February 17, 2009

As recently as December 2009, there has been a push to raise the Debt Ceiling again, this time by as much as 2 Trillion dollars.

Did You Know?

# U.S. official gold reserves, totaling 261.5 million troy ounces, have a book value as of 30 November 2009 of approximately $11 trillion, vs. a commodity value as of 17 December 2009 of approximately $288.5 billion

# Foreign exchange reserves $134 million as of October 2009

# The Strategic Petroleum Reserve had a value of approximately $69 billion as of December 2009, at a Market Price of $104/barrel with a $15/barrel discount for sour crude

# The national debt equates to $30,400 per person U.S. population, or $60,100 per head of the U.S. working population, as of February 2008

# In 2008, $242 billion was spent on interest payments servicing the debt, out of a total tax revenue of $2.5 trillion, or 9.6%. Including non-cash interest accrued primarily for Social Security, interest was $454 billion or 18% of tax revenue

# Total U.S. household debt, including mortgage loan and consumer debt, was $11.4 trillion in 2005. By comparison, total U.S. household assets, including real estate, equipment, and financial instruments such as mutual funds, was $62.5 trillion in 2005

# Total U.S Consumer Credit Card revolving credit debt was $931.0 billion in April 2009

# Total third world debt was estimated to be $1.3 trillion in 1990

What Are Risks to the U.S. Dollar

A variety of factors are placing increasing pressure on the value of the U.S. dollar, increasing the risk of devaluation or inflation and encouraging challenges to dollar’s role as the world’s reserve currency. If another currency or basket of currencies replaced the dollar as the reserve currency, the U.S. would face higher interest rates to attract capital, reducing economic growth for the long-term. The Economist wrote in May 2009: “Having spent a fortune bailing out their banks, Western governments will have to pay a price in terms of higher taxes to meet the interest on that debt. In the case of countries (like Britain and America) that have trade as well as budget deficits, those higher taxes will be needed to meet the claims of foreign creditors. Given the political implications of such austerity, the temptation will be to default by stealth, by letting their currencies depreciate. Investors are increasingly alive to this danger…”

On the cover of the October 19, 2009 issue of “Time” magazine ran this headline: “Why It’s Time to Retire the 401(k).” The cover picture was ominous, showing a 401(k) sinking like the Titanic.

I recommend reading this entire article, especially if you do have a 401(k). My concern is that the flaws of this retirement plan will grow into personal tragedies as the first of approximately 75 million baby boomers retire, leading to the biggest stock market crash in history.

But in spite of the apparent problems with the 401(k) plan, the darlings of financial media continue to tout its benefits. The same month “Time” ran its article, “More” magazine’s financial guru, Jean Chatzky, wrote an article about using low-interest savings to pay off high-interest credit cards. In the article she states, “There’s no better guaranteed return on your money (except, perhaps, a 401(k) match).”

Countering Jean’s wisdom of “no better guaranteed return,” the “Time” article stated, “At the end of 1998, the average 401(k) balance was $47,004. By the end of 2008, the average balance was down to $45,519.” If that is a great guaranteed return, I’m glad I don’t have a 401(k). The “Time” article pointed out that $100 in 1998, after inflation, was worth about $73 in 2008, a loss of $27 after ten years. So whom do you believe…”Time” or “More” magazine?

If you are unsure as to whom (and what) to believe, the “Time” article made two more statements worth considering. They are:

1. “The older you are the riskier a 401(k) gets.”

2. “Forty-four percent of all Americans are in danger of going broke in their post-work years.”

Now, I can hear some of you saying, “But the stock market is going back up. Green shoots are appearing. Everything is fine. The crash was just a correction.” For those optimists among you: I wish that all of your dreams come true and you live happily ever after.

I do not criticize the 401(k) plans just to criticize. I write because I am concerned. Let’s say “Time” magazine’s estimates are correct. Let’s say 44 percent of all Americans will go bankrupt after retirement. For approximately 75 million baby-boomers preparing to retire, that means 33.8 million of them will go bust once they stop working. To me, this is disturbing.

While many think the financial crisis is over, I believe the worst is yet to come. In spite of the green shoots in the stock market, the fundamentals of the U.S. government are worsening. I doubt Social Security can afford the avalanche of retiring baby boomers. The Social Security fund is empty, underfunded by approximately $10 trillion. For the first time in 35 years, Social Security will not pay a cost of living increase. And Medicare is projected to face a shortfall as well, of between $65 and $85 trillion.

In 2009, interest payments on our national debt are about $380 billion, which is $1 billion a day in interest. At the same time, the national debt is projected to climb to $20 trillion by 2012, which means the U.S. will have to borrow money just to make the interest payments.

I know the Federal Reserve Bank can continue to print more and more money…but city and state governments cannot. This means your city and state taxes will have to go up. If you think your property taxes are high now, just wait five years. I predict that, even if your home’s value does not go up, property tax rates will, and higher taxes will do wonders for property values. This means people counting on their home as their biggest asset may be disappointed.

In 1913, when the Fed was created, and in 1971, when President Richard Nixon took the U.S. off the gold standard, the ultra rich were allowed to siphon off our wealth — via our own money, the very thing we work hard for and do our best to save. In other words, with every dollar the Fed prints, our wealth is being drained via increased taxes, debt, inflation, and savings.

A Cash Heist

There are four expenses that keep the poor and middle class struggling financially. They are:

1. Taxes — both apparent and hidden

2. Debt — mortgages, credit cards, and student loans.

3. Inflation — rising food and fuel costs

4. Retirement plans — 401(k) and savings

It is via these four expenses that the rich get richer. In other words, all four of these expenses are a cash heists, the ways the rich use the government to get into our pockets, draining us of our wealth.

The Silver Lining

The silver lining of all this: With a more sophisticated financial education, rather than have taxes, debt, inflation, and retirement accounts as drains on a person’s wealth, a person can convert those government-sponsored expenses into elements that work in one’s favor. By using the same rules of money the rich use, those four expenses will make you richer. In other words, taxes, debt, inflation, and not needing a retirement plan can make you richer if you use different rules of money. As stated earlier, in 1971 Nixon changed the rules — and so should you.

In closing, the 401(k) has a few good points…but not good enough, in my opinion, given the financial challenges that lie ahead.

Yahoo Finance

Reuters — Gold prices are currently high and markets should be careful of a potential asset bubble forming, a senior official at China’s central bank said on Wednesday, as prices for the precious metal hit a record high.

“We must keep in mind the long-term effects when considering what to use as our reserves,” Hu Xiaolian, a vice-governor at the People’s Bank of China, told reporters in Taipei, when asked if China had plans to increase its gold holding in its foreign exchange reserves.

“We must watch out for bubbles forming on certain assets, and be careful in those areas.”

Gold hit record highs at US$1,216.75 an ounce in Europe on Wednesday as investors bet on higher prices.

China’s more than US$2-trillion in foreign exchange reserves are mostly parked in U.S. treasuries, despite calls from some in China to invest the reserves in oil and other natural resources that the fast-growing Chinese economy will need in future.

Before gold prices hit record highs, however, China said last month that it is working to improve the allocation of assets in its foreign exchange reserves, when asked whether it would buy any of the gold that the International Monetary Fund is seeking to sell.

Children’s cartoons have a better understanding of monetary policy then the federal reserve and our Washington Bureaucrats. When the boys get a hold of a Multiphonic Duplicator they start duplicating money like crazy. In the end the bury the town in money, which leads to hyperinflation. I think we need to send Scrooge McDuck to D.C. to straighten them out.

Peter Schiff’s weekly video blog. Peter recaps the money bomb, which was sabotaged by hackers but still raised over $60,000. Peter talks about housing and how the government is ruining the college degree.

Peter Schiff’s weekly podcast. This week IMF sold 200 metric tons of gold to India’s central banks. The move resulted in a $25 jump in the price of gold setting a new all time high of $1080.

The fact that india is willing to step in and pay an all time high for a massive purchase of gold shows you that there is sign of the gold market weakening. If anything it proves that gold will continue to rise for some time. Gold $2000 here we come!

George from InflationUS sits down with Mike of Local Gold Buyer. Mike is expanding into a new office and has recently hired 6 new employees. Gold businesses is booming and the price is hitting all time highs every single day.

Anyone can become a gold trader its easy to learn, and once you build your network of people you’re guaranteed to make profit. Buy low, sell higher, and you earn the difference.

You can pick up the official scrap gold buying guide here

If you don’t have the money to afford the book or even to buy gold but you have a website or a large social network. You can become an affilliate of Local Gold Buyer and earn 50% of all sales off of the ebook by visiting this link.

On the Edge with Max Keiser interviews Catherine Austin Fitts on how to deal with the corrupt bankers in your life.