In his State of the Union address last night President Obama promised to double exports in 5 years. Is that possible?

Normally this would not worry me too much but I recently watched a series of 8 YouTube video of Dr Albert A. Bartlett Professor Emeritus at the University of Colorado lecturing on the exponential function.

His opening statement is,

“The Greatest Shortcoming of the Human Race is our Inability to Understand the Exponential Function”.

To those that may be mathematically challenged it is all about things that increase at a constant rate and what happens over the long term.

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It’s congratulations to pickup truck owner and new senator Scott Brown for winning Ted Kennedy’s old seat. It was truly amazing to see him come from 30 points behind to take the seat from apparent “shoe-in” Martha Coakley.

But what is far more important is what it means for the future of the socialisation of America. I’m sure it won’t stop it as it has been going on for years, but it has received a serious set-back.

More importantly the Health Care bill is all but dead which means the US economy will not have to find $1 Trillion dollar to provide health care for about 30 million people.

This is not only good for the US, it is good for the world. The world needs the US to create wealth through business and entrepreneurship, not spend 20% or more of its budget on a national health care system. Why follow the rest of the developed world into the health care black hole?

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Sometimes when researching to find information that helps me understand why the world is in this economic mess and what I can do to protect myself and my nest egg, I come across some “real gold”.

That just happened today and I have spent considerable time reading and absorbing much of the information I have found.

It started off quite normally with me wanting to catch up on some stuff from Ron Paul. I started at the Mises site where there are many FREE ebooks by current and long forgotten economists and economic writers (philosophy too. I know,  why don’t I get a life, but I like reading this stuff )

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After I found this video of a guy asking people to sign a petition to “increase inflation to 100% to purposely cause hyperinflation“, it became obvious most people don’t understand the harm it can do.

Whether it is laziness, indifference or stupidity, failure to understand the danger of inflation could result in inflation seriously destroy your nest egg.

Government’s around the world use inflation to pay down debt with devaluing currency and in effect defraud the creditors of the full amount they are entitled to.

Governments have done it for years and not one is called to account for this fraud.

The real problem  for you is that inflation destroys the value of your nest egg over time too.

For years now most world governments have had a policy of keeping inflation around 3% and manipulated the amount if money in the economy to achieve that. They fear deflation and seem to believe an inflation rate of 3% is a safe margin.

I understand this was set  because they wanted to stimulate the economy enough to ward off deflation and encourage growth.

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I’m talking here to Baby Boomers and older who are relying on their retirement nest egg to live off along with any other income sources not from  a full-time job for the next 20-30 years maybe. In other words people on fixed incomes who need to be very risk-averse unless they have “surplus” money over and above that which they will need to live out their retirement.

It is now apparent to me that the people who have been asked to save for their own retirement since the 80’s have been the subject of a major Ponzi scheme legislated for by our governments and carried out by the financial industry for their own financial benefit and at the expense of the investors. These are your enemies NOT your friends.

During the last fifteen years there have been 5 major financial crises which have directly affected your nest egg if it was in a fully diversified p[portfolio. Using such a portfolio you can’t help have it affected by all five of the crises.

That effect was always to reduce your nest egg through accumulated losses. Then you had to sit there waiting for your nest egg to recover the losses before your nest egg grew again.

I now accept that the world banking system is based on the flawed fractional banking system which allows banks to keep lending a fraction of the same money to more and more borrowers. This causes a credit expansion and eventually ends up in a boom economy. This is the primary cause of your nest egg destruction and it will never be fixed. Read the rest of this entry »

In my quest to find the root cause of the retirement nest egg destruction I have entered the realm of economics. It was a journey that introduced me to the two prevailing schools of economic thought.

They are the Keynesian Economics and the Austrian Economics models. Keynesian economics is named after Keynes himself who had a great influence on Roosevelt and the British Government in the 30’s.

Austrian Economics was the prevailing economic system until around the 1920’s when  Keynes started to convince governments they need to control the money supply and that it was okay to run up deficits and spend themselves out or recessions, depression and the like.

The reason we are in this economic mess right now is due to the return of Keynesian economics with a vengeance. Bernanke and Greenspan (originally an Ayn Rand Objectivist) both are Keynesian Economists.

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In my quest to find the source of our continuing investment roller-coaster I have already mentioned my concerns about the three wealth destroyers which are in place even before you begin investing,

• The FED and how it controls to cost of money and the amount of money in the economy. I have always found it strange that the whole world basically puts it’s financial fate in the hands of a Greenspan or a Bernanke. This is just plain stupid to me. No one has any way of “really” knowing how a highly complex economy is going to perform or behave in the long term - remember its the long term that gets you.
• The Fractional Reserve Banking System which allows Banks to leverage themselves up aided and abetted by the FED to the point where they create a credit boom with the inevitable financial crash. These cycles seem to be getting faster and more volatile.
• Keynesian Economics which died after Reagan/Thatcher destroyed it. But it was quietly being taught in all the universities by true believers and now almost all economists lead by Paul Krugman believe the only way is the Keynesian way.

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If the government inflates the money supply then this will inflate prices once that money has filtered down from  the banks to the borrowers and finally to the wage earners. It is the last ones in the chain that will feel the effect of inflation first as prices adjust to put the new money back into equilibrium with the products and services available for sale.

You would do well to read a review of a book by Robert J. Samuelson entitled, “The Great Inflation and its Aftermath.”

“Inflation is always caused by government. Only government can expand the money supply sufficiently to generate chronic price inflation. The Great Inflation was caused by the greatest domestic policy blunders since WW-II, and the federal government is now at risk of repeating them.”

So why don’t we have rampant inflation after the FED, courtesy of Helicopter Ben has doubled the money supply?

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