To Do Nothing, Is To Do Something :

I have always regarded individual investors as relatively undisciplined and great procrastinators. They only make adjustments or investments when “they get it”. The great market technician, Joe Granville always said, “When it’s obvious, it’s over.” My Grandfather’s friend, Jesse Livermore once said,”The public’s profits are recorded on paper…Where they shall remain.” He made this statement in the middle of a mania, just like the one we left behind, back in late 1928. The point I am making, is that it is a rare instance when an individual makes an investment with his/her hard earned cash based on sound, time-tested strategies. Most of the time, funds find there way into dusty ideas that have already run their course or based on mere suggestions that resemble the herd-mentality. i have always been able to guage the potential success of a strategy based on the public’s williingness to embrace it now…When the time is right.

Last night, my VIX Indicator reversed the first “reliable buy signal” I had received in months to “a sell“. First, I warned everybody I knew, in previous blogs, that any rally since Early December should be used to liquidate long-term stock holdings. This warning was issued on Dec. 1, 8, and 17.  To date, of the many investors who try and phone here, I am not aware of one person who followed that advice, vindicating the recommendation’s probability of success. Second, I suspect that various “shocks”, like the BAC & MER merger-mess forced this current sell signal, therefore, I am suspect that yet another bullish reversal is imminent. The problem with all of this is that it is occuring in a secular bear market where the upside potential for stock gains is extremely limited and the potential for bad news is enormous.

Simultaneously, I have been advocating the systematic purchasing of gold bullion. Since my more forceful recommendations to get busy buying, no one I’m aware of, has followed this advice. As of this morning , it is $50 higher than where I have been less than polite and advocated immediate action.

The point I am making is that timely investment strategies rarely make sense to the average guy out there who is distratced making a living at something else and far removed from capital markets. Markets are not designed to be made simple and require expertise that takes years and years to craft. CNBC should change its acronym to CROWD, as it advocates the herd mentality and invites guest who spew their garbage that keeps you tuned in, that you are predisposed to want to hear, and in return boosts ratings. 

As long as I remain a lone wolf, along with a few other advisors (and stay away from kooks like Jim Rogers and other gold-bugs), and advocate the swtich from traditional assets to store of value, the outlier, that odd individual prone to being proactive, is almost assured of success. The minute I see folks applying this advice, en masse, then I begin to worry that I have to reexamine my strategy.

John P. Crowley, January 23, 2009

Is now a good time to buy, buy, buy?

FACT…Global Capital Markets have collapsed and the days of winning a big prize for knowing very little about a security are over. Up until now, “deleveraging” has benefited the U.S. Dollar and Japanese Yen. The massive borrowing binge unleashed by The Bush Administration with the help of a Fed Chairman who carpet bombed a stumbling securitized debt market with waves and waves of cheap cash created the death knell for The Bretton Woods Agreement and the U.S.’s ability to export its inflation.

As bank assets imploded, globally, the dollar’s relative strength can be credited to its status as “the currency of settlement”, and nothing more. Two distinct events signaled that the end of the “Global Credit Club” was near: 1) The 2002 to 2005 spike in commodity prices, in general, broke through the secular downtrend line and signaled that credit and currency was losing their grip as accepted ‘store of value’. “Hot Money” found its way into any gizmo or investment concept that revisited the psychology of the 1970s. 2) In November of 2005, for the first time ever, Gold as expressed  in Euros, Yen, and Swiss Franc, broke out simultaneously. This signaled that gold was reemerging as a de facto currency and is now beginning to behave as such in spite of a cyclical correction in commodities.

Currently,  precious metal refiners are frustrated by their inability to meet current demand for the physical metal. Each day I hear personal accounts of bullion dealers and coin dealers running out of inventory. My friend and colleague, Ian McAvity of Deliberations (imcavity@yahoo.com) notes that daily price volatility is more a result of deleveraging by fund managers and hedgers as it barely effects the business of those buying gold to warehouse or refine into jewelry and industrial products. The above ground supply is finite (161,000 tons according to the World Gold Council) and getting harder and costlier to find and extract from underground. Ian further points out that “no bear market ever existed where after a 20% decline, there was a shortage of the asset that dropped 20% !” We both refer to gold. 

What to do?

Gold is down $30 from Friday’s closing price. That’s a 3.5% drop. Given the $1 Trillion Budget Deficit we are headed for, which shall soon exceed 7% of our GDP, Given that our national debt is now getting up into Spanish-Italian levels of our total national income, Given that we have a $10 Trillion Entitlements Deficit, off-balance sheet, that will soon bankrupt our economy as 70 million new “boomers” come into retirement, it is inconsequential as to whether or not gold drops another $100, $200, or even $300. In lieu of massive fiat-money creation, gold has to go to new, exorbitant levels as the value of traditional financial assets implode. Harvard Grads, listen up … Inflation destroys Working Capital and Productivity. Think about that for a while !

Buy Gold now, and buy 1% of your net worth every month on a fixed date, regardless of price and look at it as insurance, praying it never goes up in price. Do not deposit it in a bank ! If it does what I think it will do, you’re covered.  

John P. Crowley, Jan. 12, 2009

How To Avoid Being Scammed By A “Market Maven”:

I have performed “due diligence” for a variety of investors in the past to vet a potential money manager as a candidate to “run” money on behalf of these investors. Performing such a service is laden with risk, therefore one who examines a fund manager, better do so with “eyes wide open”. Usually, I find that my assignment is to clear out all of the smoke in the room to determine how accurate the manager’s claims really are about his track record. To date, the most egregious act by a manager that I have encountered has been the gross overstatement of the manager’s performance which is a much more common event than you would think. In fact, SEC Rules have loopholes that encourage many managers to exaggerate their performance and one can conduct such fabrications well within the confines of securities laws.

I always approached examining the performance of a manager with a high level of professional skepticism, even more so for the ones with better-know reputations. For good reason, as in the case of Bernie Madoff, those who vetted Mr. Madoff for a fee, will most likely be sued for exercising negligence let alone gross negligence. It appears that many of these so-called professionals who held themselves out as “experts” in this process skimmed over or omitted some of the key procedures to determine suitability. In defense of those who did their due diligence properly and documented concerns, the more common instance I ran into was the investor’s unwillingness to continue the investigation beyond the initial fees agreed upon. Most of the time, the investor treated the examiner as a contractor in search of racking up more fees for the sake of fees. In other words, the average multi-millionaire was too cheap to buy the extra insurance of greater knowledge and proceeded to hand money over to a guy that was primarily based on reputation. This was usually the case in my travels. Most of my former partners did just that. I actually knew two lifelong friends who each gave Bernie Madoff over half of their net worth and were quite arrogant in the way they boasted about it.

Here are some tips on how to conduct an initial smell-test, before getting into examining the numbers, and we will use Mr. Madoff as a specific example:

Before you do anything else, examine by eye-balling the Manager’s Office Employee Functions. Is there a clear separation of responsibilities particularly where conflicts could lead to high-level fraud? Ask about employee vacation schedules to insure that key employees handling securities and funds spend time away from the office and others assume those responsibilities. Make sure every observation is in writing.

Commit yourself to focusing on performance during rough market periods, as scams and fraud have a tendency to surface during these periods.

Are there clear, delineated controls set in place?  Test such controls by setting up a responsibility flow chart and introduce typical and stressful events to see how controls actually perform.

Given the alleged size of these transactions, never was there any footprint of these trades in the market place. Traders taking the other side of these transactions had to lay their risk somewhere. Never, at the time of execution, was there any evidence of counter-party activity reflecting the size of such transactions.

The strategies themselves didn’t offer the so-called returns alleged by Madoff.

If there was a buzz regarding his returns, which he personally leaked, how come none of his traders were poached by other firms or how come they didn’t set off to duplicate these strategies on their own?

Madoff was always asking his investors not to disclose they had money with him. How come there was always such a buzz about his performance in his social circles ?

I suspect he used phony electronic trades to match other phony trades to give the impression of huge volume. He was actually soliciting firms to do trades through him and he would pay them for volume, which became customary amongst electronic traders.

No one, regardless of strategy, consistently makes huge returns 72 months in a row.

Unbeknownst to many, SEC records about who they discipline and who they investigate tend to be very murky unless their examination yields a conviction of some sort. I always advise investors to check with the State Attorney General’s Office in the state(s) the manager operates, as complaints are usually filed and on record.

I hope Santa brings you much better fortune for 2009. Merry Christmas and Peace and Good Will…

John P. Crowley, Dec. 23, 2008

70’s Redux: Bad Haircuts and Money Velocity…

Today’s Frat-Brats in Saville Row Suits and Hermes Ties assume a “bad haircut” is an accountant’s reduction in the value “Assets For Short Term Investments” on the balance sheet. Most Harvard Business School Grads don’t appreciate the battle that went on in the late 1970s between the “Keynesians” and “The Monetarist”, where the Monetarists eventually prevailed with the appointment of Paul Volcker to the Fed Chairmanship by Jimmy Carter. Volcker threw a monkey-wrench to halt the warp-speed velocity of money, which as Henry Kissinger once said, “Threatened all of  Western Capitalism.” Too bad the advocates of “Deficits don’t matter” didn’t consult either Dr. Kissinger or Dr. Volcker.

Yesterday’s FOMC Announcement not only put us on poor footing with our global trading partners, it sent a more draconian signal to global credit markets as the emphisis is now on tinkering with balance sheets, instead of applying credit to the right sectors of the shorter-term money markets…”From now on, The U.S. Central Bank will focus on fixing perception as opposed to the problem.” Many of today’s Trading-Desk Jockeys don’t recall the environment when the Velocity of Money was out of control as The Ford Administration countered with “WIN” Buttons. Back then, Fed Funds might open the morning trading at 5%, rally to 13% and close at 2% by day’s end. Such were the normal knee-jerk reactions of the “money markets” during a period of runaway inflation. What many are just coming to grips with, is that inflation not only destroys savings and productivity, it wreaks havoc with Working Capital by destroying it, the mother’s milk of corporate credit.

At the end of the day, The Fed’s move sends a signal of panic to other Central Banks which will ultimately change the significance of legal tender in every major economy. Are any of you aware that the laws regarding the acceptance of legal tender are different in every State in our Union ? Are you aware that no bank, no individual is obligated to accept any Federal Reserve Note if they desire not to? Woe to those who have cash stuffed away that their banks and local proprietors are not obligated under law to accept.

The argument for owing gold and moving one’s liquid assets to another, safer domain suddenly rises to a whole new level. You can thank anyone who ever engaged in the business of Securitized Finance and Dr. Bernancke for such a development.

John P. Crowley, Dec. 17, 2008

Gas at the pump is down, and the market price of my heating energy is way down…

You should be curious as to the real reasons “gas at the pump” and the cost of heating oil and propane have dropped over 55% since Labor Day. AAA’s latest survey concludes that the National Average Price for Gas at the Pump is $1.66. It was well over $4.00 back on Labor Day Weekend. Do we blame our Saudi allies for gouging us? Or…Is it possible that something more sinister was afoot, right here on our own shores? 

What The News Media has purposely shied away from 

Back in 2003, Goldman Sachs, Morgan Stanley and Merrill Lynch Capital were a few of the major Investment Banks (remember them?) who boasted in a Wall Street Journal Article putting “several $ billions” of their own capital in what they referred to as “the refining process”. No new refineries have been planned or built since then, so what could this mean? This could mean several things. However, one thing is abundantly clear, it paves the way to manipulate an already fragile, thinly traded “cash” or “spot” market in crude oil and its byproducts.

The above mentioned firms were in a position to buy oil in its physical form, right off the boat, at key terminals up and down the East Coast, and store it in their own non-regulated facilities. This kept the cash market (for immediate delivery) “tight” and created upward pressure on the price of oil. Actual end users were concerned over their ability to obtain normal supplies.

What makes this even more diabolical is the probability that investment banks were doing this in collusion with their “refining” clients, such as the major “Integrated firms” (Exxon-Mobil, Texaco-Chevron). Several contacts, who for sound reasons, will never go on record, admitted that such a scheme, as outlined above, was very much “in play”. I also know other “consultants” who worked with these traders that know that this spot-market manipulation has been going on for some time. One can obtain a list of all storage facilities up and down the Eastern Seaboard which identifies regular storage clients and these clients’ actual owners. The API compiles such lists, however, I can not vouch for its accuracy. I know refiners are more than happy to cooperate in such a manipulation scheme because it helps them maintain record profit margins on the production of byproducts such as unleaded gasoline, heating oil, and liquid propane.

Recent market events, such as the implosion of capital of these investment banks have forced investment banks to liquidate their warehoused positions, pushing prices sharply lower. Market events have compounded the problem for oil refiners, as profit margins are suddenly squeezed. Valid estimates calculated that during the summer months when oil prices spiked to record levels, Wall Street “paper refiners” were hoarding as much as 138 million physical barrels, the equivalent of one week’s total US Demand, off the market. My knowledge of SEC Law permits me to conclude that these firms violated numerous criminal statutes regarding market manipulation. However, due to the current Administration’s bias, and a toothless SEC, there has never been any will to reel these players in and regulate the trading of “spot” (cash delivery) energy products. It would also squash key tax benefits to any of the bigger players who take advantage of tax loopholes in our tax code that permit “hedgers” to “cherry-pick” their tax liabilities.

How do we prevent this from happening again?

There are simple solutions and they won’t cost the taxpayer one dime:

1) Do not raise exchange investment margins across the board, as certain members of congress advocate. Doing that would sharply reduce Exchange Volume helping the very players who wish to manipulate supply in the cash markets continue to make the market tight. 2) Do raise margins to 50% in the front 3 delivery months only. That would raise the cost of storing cash delivery product and reduce hoarding due to the prohibitive costs of funding such schemes. 3) Regulate the trading of all cash delivery crude oil, heating oil, natural gas, and liquid propane. 4) All “lock-in” price protection contracts offered to heating energy consumers would be supervised, based on strict standards, and set by the NY State Securities Commission. 5) All Heating Energy providers’ conduct with the public would become regulated by the NY State Public Service Commission. 6) Abolish the Current Federal & State Tax Loopholes regarding hedge accounting of unregulated energy balance sheet items that permit anyone who buys and sells energy products to “cherry pick” their tax liabilities for the year.

Here is some additional info that should make Heating Energy consumers irate and emphasize the need for regulation:

Oil-Supply Data Probed for Manipulation

By Ann Davis , Sept. 4, 2008

Commodity-market regulators are investigating whether energy-market players are injecting false data into the marketplace to influence perceptions about crude-oil supply and demand, people familiar with the probe say.

Among other things, regulators are concerned that companies may be reporting inventory levels that benefit their own trading positions but that may not be accurate, people familiar with the regulators’ thinking say.

Unexpected drops in oil inventories reported each Wednesday by the U.S. Energy Information Administration can spark price spikes on the main oil futures benchmark on the New York Mercantile Exchange. A company could theoretically underreport barrels in its tanks, for …

John P. Crowley, Dec. 11, 2008

Why all the talk about Volatility (as it realtes to markets)?

Professional money managers use VIX (S&P 500 Volatility) as a leading indicator of intermediate market direction. One of my recent blogs addressed this in some detail.

Yesterday, Fed Chairman Bernancke discussed the widespread knowledge that the current recession began last December. His mere acknowledgment that we are facing severe challenges sent investors in every sector running for safety . VIX jumped 13 handles while the DJ Industrials plunged 700 points; performance only a few of us entertained a few years ago.

My friend Ian McAvity, in his Deliberations newsletter two issues ago (Oct.29, 2008) (imcavity@yahoo.com), presented a pictorial of why markets abhor volatility.

Here is his data on every 5%  Dow Jones 30 swing up or down since 1920:

In Ian’s sample of 23,781 days going back to Dec. 31, 1919, there have been 116 examples of the DJ Industrials going up or down 5%.

From Sep. of 1929 to June of 1932 there were 43 such days. Of those 5% swings,  23 of the 43 days were UP days. 14 of those 23 UP days saw lower prices 10 and/or 20 days later.

From June of 1932 to Sep. of 1933, there were 36 more 5% swings, with 21 UP and 15 DOWN. The DJ Industrials appreciated 164% during this period.

During 1937 to the March 1938 Depression Low, there were 8 swings of 5% or more ( 6 DOWN & 2 UP).  

From Sep. of 1948 till Sep. 30,  2008 there were a total of 15 such days (4 of them were in 1987, 2 UP and 2 DOWN)

From October 1, 2008 until October 29, 2008, there were 7 days where the DJ Industrials swung 5% or more.

Of all of the 116 days where swings of 5% or more occurred since 1920, 90 of those days occurred between 1928 and 1938.

Is it any mystery why investors are accepting 0.05% for 91 Day Treasury Bills while the Treasury floods the markets with $ Trillions more ?

Take this one step further, if the Treasury runs the printing presses until they melt, the Velocity of Money surges. What does that say about future value of pictures with dead presidents on them and their purchasing power ? Do you wish to own traditional, dollar-denominated financial assets in such an environment ?

John P. Crowley, Dec. 2, 2008

RE My VIX Indicator: Issued an ”unreliable buy signal” as of Tuesday’s close. In this environment, most investors should be looking to do one thing and one thing only…use rallies to dump long-term stock holdings and get totally into cash. Stock Indexes are still at historically high levels which should be retraced in the coming years.

You’re telling me that CNBC is the financial version of “The Soupy Sales Show” ?

Sure. Warren Buffett made a big to-do on CNBC weeks ago when he announced, on the air, that he was bailing out Goldman Sachs and “cut a check” (as well as pollute the air). Public Investors got a pie-in-the-face days later when “The Braggart of the Breadbasket” did an Op-Ed in the NY Times advocating that all Americans throw “Value Investing” to the wind and use that Heating Oil money to buy “stocks on steroids”. I suspect Mr. Buffett’s real M.O. was to bribe Secretary Paulson into bailing out the insurance industry when it’s their turn to march up to Capitol Hill “hat in hand”, with a cheap PR campaign. “The Squawk Box Gang” revel in all of this hijinx as the prop door reverberates an impromptu “knock-knock”…”Oh, it’s Mother-Ship ex-CEO Jack Welch, the squirt who had the wind at his back, dumped PCBs into the Hudson & Housatancic , and dumped his wife for his publicist. C’mon in !” “White Fang” has a question for all investors out there:  

You hesitate to dump your stocks in the face of the following issues ?

1) It will takes years, if ever, for banks to “deleverage” (the polite new-age term for dumping assets they never should have owned in the first place, which they borrowed money to buy). Last week, when the Government propped up Citischtup, they had on-and -off balance sheet leverage of 70 to 1 !  Deutsche Bank and J.P. Morgan remain hauntingly quiet. Did I mention the insane degrees of leverage assumed by Asian and European banks ?

2) America became a nation of dissavers in late 2006. Much of the current fiscal stimulus, all $200 Gazzillion of it, will prove ineffective for that very reason .

3) Average Household Debt remains at historical levels ($20,000), while Median Home Prices continue to drop and certain regions remain in freefall.

4) Credit Card Defaults are on the rise long with a drop in Commercial Real Estate Prices. Today, major banks announced $2 Trillion in credit line cutbacks.

5) Here comes TWIT, now that TARP and TALF are ineffective.

6) Taxes a have to go up, at all levels, as States and municipalities fail to deal with budget shortfalls.

7) Many employment experts predict the full brunt of job-cuts hasn’t hit us yet as the economy appears far from bottom.

The US Credit system still has multiples of private and corporate debt outstanding in relation to its GDP as we try to support twin-deficits racked up in recent years.

9) Time prohibits me from listing all of the key issues that dictate that stocks are overpriced even at these levels, although I would be remiss had I not mentioned that suspension of FAS 157 and non-enforcement of FAS 133 & FAS 139 greatly limit ones ability to value any publicly traded company at the moment.

Get over it ! Dump your stocks now, get into cash, and go read a good book or see a provocative play ! 

“The days of winning a big prize for knowing very little are over.” … Warren Buffett, one year ago.

John P. Crowley, Dec. 1, 2008

“Where is the outrage, America?”.

Rick Santelli, CNBC’s only credible market commentator is beside himself, given his last commentary, over the stats being released regarding the entire Government sponsored bailout package, and rightly so. In previous blogs, I have outlined how our government has to reach out for your savings in order to show the rest of the world that they are minding the store.

According to Bloomberg News last night, our Treasury and our Fed have racked up $7.4 Trillion in guarantees and outright purchases homemade toxic financial products. That equates to half of our total Gross Domestic Output before expenditures. To add insult to injury, Goldman Sachs, Morgan Stanley, Citigroup, and all the other financial reprobates are lining up to issue $ billions of Government guaranteed debt without issuing a public statement or demonstrating any transparency whatsoever and the ratings agencies are jumping on board by rubber-stamping all of this tissue paper with their highest ratings before they have examined the terms of the offerings ! I am still miffed that the US Government warrants a Aaa or AAA rating at all !  Now that the printing presses are running at breakneck speed, no one at any of the major ratings agencies has expressed any concern over a rapidly deteriorating fiscal position at the Treasury, which would normally warrant a rush to review the US for a possible downgrade.

Ladies and Gentlemen, your savings and retirement funds are being marginalized without a peep coming out of Congress (Ron Paul being the lone exception) and no one in the media or any public forum is taking issue with this. In case you have forgotten your history, it was a string of events leading up to this that lead to the Boston Tea Party and The Boston Massacre ! Isn’t the outright devaluation of your savings, in effect a de facto tax ? Aren’t we suppose to have representation before being taxed ?

I warned you in previous blogs that this Congress and this Government have set out to pilfer your nest eggs to pay for their misdeeds. Consider the first shot fired and consider the war against those that wish to raid your nest egg underway ! Exchange Controls cannot be far away.

If you aren’t making preparations to move the bulk of your assets to a safer haven offshore, pity you !   

John P. Crowley, Nov. 25, 2008

The Bigger Picture for Gold

As the Federal Government appears ready to swoop down and take control of a fledging Citigroup, I recall  the comments made to me by a John Reed acquaintance who recalls CEO John Reed’s cynical congratulations offered to Sandy Weil. Gold Bullion, in its own cynical state, is up $46 /oz. today, having its own last laugh if you will. “The Too Biggest To Fail” is flapping in the water like an expiring canard at the mercy of a hunting party. The retrievers are moving in.

Gold remains the ultimate store of value and real money, especially in a global credit-meltdown. Gold’s meteoric run, which began in November of 2001 travelled the longest period ever without a correction of 30% or more. This “run up” is a tribute to all of the smarter money globally who recognized that the world credit system was in peril. Now that a substantial correction is underway, one has to view gold’s behavior, relative to the financial market debacle that is still in its early phase. Deflationary psychology has affected gold in the past, has done so recently. I recall back in 1975, in the mmiddle of a primary bull market in gold, gold reacted to global economic condtions as it corected 55% in just a few months. It later recovered and went to new all-time highs.

Gold’s recent low was within a few dollars of a perfect two-thirds retracement of the entire run up discussed previously. We also know that all of Gold’s market activity since its early 2008 $1,040 /oz. high has been corrective in nature. The question remains, “Has gold bottomed, or do we still have a rendezvous with major-support at the $625 /oz. level, which was the previous low of the previous cyclical correction back in the middle of 2006?”

Current U.S. Monetary Management behavoir tells us stop-gap measures are ineffective

The answer to my questioned posed above is, “It doesn’t matter.”   What gold does in the short-run is of little significance to how it will behave in an environment where global monetary authorities have few if any effective ideas to stop the implosion of bank assets. Everyone reading this should be buying a predtermined allocation each and every month at the sametime, regardless of price, to protect your other assets that may be in jeopardy due to the monetary-meltdown. You should own enough gold to protect you and your assets from catastrophic consequences and pray that it doesn’t appreciate in value which might imply that your other traditional assets are safe from the current calamities. If you follow this advice, you’ll be buying more ozs. when the price is cheaper and fewer ozs. when the price has appreciated, such as we witness today. It is a time tested discipline for a time tested strategy. And don’t forget to shut off CNBC and ignore their collective advice.

John P. Crowley, November 21, 2008

RE My VIX Indicator: It reversed it’s “unreliable buy” and issued a “reliable sell” as of the close of last night .

An Interesting Spin on restoring U.S. Reserves to bolster our credit system 

As the Treasury comes to Congress with its partisan hat-in-hand, asking for historic amounts of money to bailout frat-buddies who went on to become reckless lenders, incompetent risk managers, and now … Inebriated Corporate Directors that burn cash as if it were kindling, one has to concern oneself not just with the certainty that taxes have to jump to begin to pay for all of this, but what about the survival of the currency of the realm ? What about the integrity of our capital markets ? What about our individual freedoms if economic disorder turns in to political and social strife as Karl Marx warned it would ?

If it is still a secret, congressmen are woefully derelict in their duties to defend fiscal discipline at any cost. After all, once one begins to breathe the air inside the Beltway, no one has any difficulty accepting payola to promulgate the Welfare-State and all of the congressional committees and agencies necessary to nurture it.  Current rescue packages such as TARP, TURD, HELP to rescue the likes of Fannie Wipe, Sallie Might, CITISCHTUP, and Goldman Sucks are nothing less than handouts to “Friends of the Fraternity to Finagle the System” to support “Yachtaid”.

As our elected officials press all of the old buttons attached to burned out relay switches, one thing is painfully clear: all of the tools invented to avoid the current dilemma are rusted and fail to have the impact they were designed to discharge.

It has been suggested that trying to peg each of our reserves to a store of value in the face of economic peril could backfire and create a deflationary spiral that would be biblical. One idea however is gaining some degree of acceptance.

Given that economic stimulus has a global impact, weld the two biggest economies together at a fixed exchange rate. Peg the Dollar to the Euro at 1.30. Then combine the two Central Banks Gold Reserves, which totals approximately 12,000 tons. Immediately reestablish gold convertibility and raise that price to $6,000 / oz. The newly issued currency would encourage the dishoarding of gold as it becomes obvious that the amount of money in circulation would once again be guided by the amount of gold reserves held in stock at realilstic values. This would create a true free-market regulator of the growth of Monetary Base.

The sole impediment to this scheme? Monetary officials unwillingness to give up their authority and power…And self-Interests, as demonstrated by Alan Greenspan. This is certainly something to think about and develop further.    

John P. Crowley, Nov. 19, 2008