Monday, May 31, 2010

First Argentina and Now the EU - Who Will Be Next?

To be realistic, we have to recognize that the federal government's growth rate has been accelerating, and continues to accelerate, under the present administration, while at the same time, the private sector continues to shrink. So, the real question is "How will the government sustain itself?"

The logical solution would be for the government to do what we all should do, and that is to learn to live within our means. Realistically, the government (i.e. most politicians) never will support that approach for multiple reasons, including procuring enough votes to ensure re-election. Also thwarting this approach is the fact that US debt is becoming less attractive to foreign buyers (Source: Washington Post, April 7, 2010). Therefore, the only alternatives seem to be:

1. Print more money,
2. Generate more revenue through increased taxes, or
3. Figure out new ways to access OUR assets.

Just to set the background based on facts, let us review what happened in Argentina. In 1902, Argentina was one of the richest countries in the world. At that time, the US was the only country close to Argentina in terms of being the second most powerful economy in the world. Both countries were running behind Great Britain.

In 1916, a new president was elected. The campaign appealed to the middle class and was predicated upon "fundamental change." The changes that were implemented included: "mandatory pensions, mandatory health care and support for low income housing.... to stimulate the economy." These programs resulted in two major changes: (1) the government assumed more control over the economy and (2) new taxes were assessed to fund the government's efforts. Not surprisingly, after some time the government's payouts exceeded the taxpayers contributions.

Do you think this is starting to sound a lot like the US entitlement programs -- specifically Social Security and Medicare? If you are not getting concerned yet, then read on!

The situation in Argentina only got worse under the Peron administration when the target of all the rhetoric first focused on the "rich" and then broadened to include the "middle class." Under Juan Peron's administration, government went through a rapid expansion, labor unions grew and social spending accelerated geometrically. Long after Peron was gone, the government continued spending way beyond its means resulting in "hyperinflation" in 1989.

By 1994, the net result of all of the new income taxes, taxes on the wealthy, value added taxes, etc. totally crushed the private sector. In 2002, Argentina was experiencing an economic collapse very much like the Great Depression in the US.

In summary, in a period of 100 years Argentina declined from the number two position in the world to a state of abject poverty whereby they were unable to meet their debt obligations.

Just think what would happen if America follows the same path as Argentina. As reported by the Heritage Foundation on October 31, 2008, Argentina's president "announced she would move forward with her plan to seize the nation's private pension funds.... seizure of the funds is necessary to protect Argentinian's from the global market crisis. But most observers believe the real motive is to use the $30 billion in seized assets to ease massive debt obligations her... government has run up."

If our government adopted the same approach, perhaps on a more subtle basis, IRA accounts alone would provide access to about 4 trillion dollars. Just think about how many new government spending programs, new Czars and new agencies that amount of money could support!

I would have to say that seizure of assets is most likely is beyond the scope of probability in the US. Seizure of retirement assets probably will not happen, but eating away at OUR freedom of choice regarding retirement savings could happen one bite at a time.

Consider the following:

1. The New York Times recently recognized that Social Security already has begun to "pay out more in benefits than it receives in payroll taxes, an important threshold it was not expected to cross until 2016, according to the Congressional Budget Office."
2. The US Treasury has begun introducing proposals to provide various incentives to divert money toward "government approved investments."
3. Based on a study conclusion that most Americans have saved very little for retirement to supplement their Social Security benefits, there are advocates in the present administration who are proposing to force workers to save five per cent of their income. Maybe that is not such a bad idea except that it is further proposed that these savings go directly into a "Guaranteed Retirement Account" run by the government. The net result of this proposal would be to leave less for you to control through an IRA. Moreover, you have to ask yourself, What would protect this account from ending up in exactly the same condition as Social Security?

I do not know about you, but it seems to me that there is an ill wind blowing us all down the same path as Argentina. Keep your eyes open! Watch for the first step which likely will be naming the US Government Czar of Retirement!

As an added thought, if you cannot relate to Argentina's history, take a close look at the growth of social programs in the European Union during the past 60 years, and look at where they are today!

The time line for failure seems to be shrinking -- it took Argentina 100 years; it only took the EU 60 years. How quickly will the next country fail financially, and more importantly, might it be us?

Mr. Newman has roughly 40 years of industry experience - 28 years as part of the Ford Motor Company management team, and more recently, as President and COO of the Strategic Alliances Consulting Group, Inc. His business background encompasses a broad spectrum of experience in various disciplines including purchasing, finance, product planning, export planning, business planning and international business development.

On behalf of Ford Motor Company and his other clients, Mr. Newman successfully negotiated a variety of joint ventures, licensing agreements, acquisitions and divestitures around the world. As President and COO of Strategic Alliances, he developed a strategic and business planning process that was implemented successfully at many automotive supplier operations in North America and in Europe, at a charitable organization and in several entrepreneurial business enterprises.

To read more about Mr. Newman's business insights on business alliances, negotiation and other must have business tips, read his Book, Beyond the Chicken Dance ( )

Saturday, May 29, 2010

Global Economies, Equities, Currencies and Gold Markets on Edge!

Global Economies Are On Edge

I know for many of seems to be nothing more than presentation of a gathering of all the negative information available to fill twenty minutes of a thirty minute time slot. Stories of intense individual crisis from around the world in addition to global economic and environmental crisis is more than we were meant to handle in my opinion. It is like the media's goal it to help us pretend to be all knowing - Omniscient. God did not intend for His people to be constantly bombarded with one negative fact after another covering all corners of the world. Remember what the Apostle Paul wrote in Philippians 4:8, "Finally brothers, whatever is true, whatever is noble, whatever is right, whatever is pure, whatever is lovely, whatever is admirable - if anything is excellent or praiseworthy-think on such things." This should be our guide; but in today's world - is that even possible?

Not if you are focused on the current economies of the world... especially western economies. About the only good news is that the near crisis we are watching every day is affecting change - the great de-leveraging of overleveraged economies around the world. It was inevitable. Aside from this, there was/is little 'truth' in today's economies. They have been built on overextended promises by people who never intended to be held accountable.

Global Equities on Edge

The DOW Jones Industrial Average and other markets have seen sudden and dramatic decline over the last few weeks. I wrote about this in earlier articles many months ago. It is like everyone is sitting nervously at their computers with their finger right above the send button on nothing but "sell' orders. For over four months, the markets have been trying to go higher...but they want to go lower. Can you feel it? A sense of something bad is going to happen and it could be quick and severe. We have seen it before. We are treading on thin ice.

With the near record stock market recovery of the last year, you would think everyone would be happy. What is happening is that even those who understand little know that most every economic indicator available points to broad based problems. I could list them for you if I wanted to add to the laundry list of pain...stock valuations, unemployment, residential real estate, commercial real estate, bank failures, government bailouts of companies and recently other countries....but the biggest, most worrisome of them all - global government deficit spending. And the point I need you to understand? Your intuition is correct if you are feeling uncomfortable. Is there any other proof? Yes there is. The price of Gold and other precious metals.

Gold Markets on Edge?

Stock market recoveries are not paralleled by increases in the price of Gold. They almost always move in opposites. If there ever was a reason to worry about the state of global economics in my opinion, it can be summarized by the continued rise in the price of gold even as equities markets went up. Why?

There are more gold buyers than there are sellers. I am not just referring to individuals either, although this is true. I recently read an account where the travelers were in retail shops in China and there are floors where retail gold of all types are sold to the bars and gold coins specifically, and it was wall to wall, elbow to elbow people, and they were not just looking - they were buying.

China on Edge?

The new found wealth in China is scared. They are one of the few economies that seem to have everything going for it, yet these folks are trusting little of it...they want hard assets...real estate and gold. And since real estate has doubled in one year, they want gold. If you are a would-be gold buyer, you are competing with these folks.

But they are not alone. Central Banks and other countries have switched from long time net sellers of gold to buyers over the last two years. If I had to ask that you focus on just one thing, it would be this fact. These same institutions have been telling everyone for years that gold is not money, it is a relic left over from the old days when all currencies were tied to gold...the gold standard. Yet when the International Monetary Fund announced their plan to sell gold to generate some cash for struggling countries months ago, there was a line of would be buyers ready to take all they could sell. They eventually sold 200 tons to India - China wasn't happy. They did all they could to secure that gold. China is the largest producer of gold on Earth and yet they are looking to buy all they can find.

Fiat Currencies on Edge!

I answered this in other articles...why do all these governments and banks want gold? Back-up my friend. The same reason you should be taking the time right now to become proficient in these markets. There is still time - but not much.
You need to be careful. Trust me, I know; the precious metals markets can be very unforgiving. I am 100% convinced you need to be in them. You need to own gold. However, not just any gold, at any price...get educated by knowledgeable, un-biased, experienced people with only your interest at heart to be your guide. Find advocates.

For me, taking positive action in the middle of all the economic pain allows me some freedom to focus on the positive. As the Paul suggests...doing this is an active endeavor. It is work. It is not a passive act. Remembering that there is much that is more important than all of this also helps. During challenging times, it is a good idea to re-set your priorities on a macro level. For many, God, family, other people, much more rank above the problems of today. But God did give us all a mind and I believe He expects us to use it.

I want to close with a final request. Print out this article and stick it away for a year. In one year, take it out and read it. If you took my advice and became educated and finally bought precious metals for the right price for the right reasons...well, a thank you email or card will be sufficient.

Insanity = doing the same things over and over expecting different results!

Steve Peters brings over 24 years of business, financial markets and gold broker experience to help new or unsure gold buyers avoid the mistakes so many make. Go here to read more: Best Gold Guide Ever Written.

Saturday, May 22, 2010

What Would You Do Now?

I recently stumbled upon a television program I'd never seen before. It immediately captured me. Random people are put in contentious situations by staged actors and a hidden camera crew. The situations are emotionally driven and eagerly judged by societies.

From rulers to peasants, we all have our own throne to sit upon. It is built of our ideals, comprised of what we believe to be right, and that which we know to be wrong. So what do we do when we step outside and find ourselves faced with testing the sturdiness of that throne we sat so securely on just this morning?

The program shows outrageous incidents that demand an instant opinion, requiring you to choose which side of the fence you're on. Society, on a whole, immediately chooses the obviously correct side of that proverbial fence and for most of us, that choice is the building blocks of our individual ideals.

I was elated! Have we hit the upward curve of enlightenment? I am watching societies ideals in action and grateful to a television program for giving us a live seminar on how to grow new generations of sturdy, easily obtainable, throne building material. These random people are faced with defending an apparent victim and they overcome that forceful surge of emotion telling them to "stay out of it". We are all touched with the majority of people saying it wasn't heroism, but just the "right thing to do."

For the most part, we've agreed that we know what the right things are and applaud the 'heroes' out there for doing them. The program shows us it does happen; people are standing up for each other - stranger to stranger. We even see people doing the right thing on a humanity level; stopping situations that can possibly lead to the harm of unseen strangers. This proves to me that each one of us is capable of doing the right thing. Just think, if more and more people, every day, stood up and did the right thing, what our world would look like. This has to be the inertia that propels us toward becoming a truly peaceful, respectful society.

The program throws a twist in this two part seminar. They test not only our ideals, but also the materials we chose to build with. Maybe that's the key to building the strongest possible throne; if your materials are filled with holes, it is easily blown down. Intellectually we know this, yet every form of media shows daily examples of us not applying it. What if the victim sits upon a throne that is frowned upon by society? Are they still not a victim? And doesn't it portray the strongest of thrones in protecting the victim without judgment, but simply for being a fellow human being?

How many people will be motivated to always trust in their core and overcome the emotionally fearful drive to walk away? Will we act in faith of the "right thing to do", or will we shuffle home, climb upon our trembling thrones and convince ourselves it doesn't touch us? What would you do... now?

T Timlock

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