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Posts Tagged ‘interest rates’

Jeff RenseOn March 23, 2012, I noticed that Jeff Rense’s site had linked to the mass media article by Reuters, Bernanke says gold standard won’t solve problems, with the editorial title, Bernanke’s Idiotic Lies About A Gold Standard. It is still there as of April 1.

Here’s all the article says about Bernanke referencing the gold standard:

Since the gold standard determines the money supply, there is not much scope for the central bank to use monetary policy to stabilize the economy,” Bernanke said. “Under a gold standard, typically the money supply goes up and interest rates go down in a period of strong economic activity – so that’s the reverse of what a central bank would normally do today.

First of all, a government-guaranteed gold standard — which is what Bernanke is referring to — DOES determine the money supply, since a certain percentage of the money supply is backed by gold, by law, under such a standard. Bernanke is also right that under such a standard, “the money supply goes up and interest rates go down in a period of strong economic activity.”

The money supply goes up because it’s usually only partially backed by gold — up to 40% prior to the last gold exchange standard in the U.S. that ended in 1933. The Roaring Twenties followed by the Great Depression is the best example of this. It was the low interest rates that contributed to the easy-money situation that extended banks far beyond their ability to meet eventual customer demand for their money in cash or gold.

The implication of Rense’s link is that a government-guaranteed gold standard is somehow good, which is ironic, given that he considers the Protocols to be an authentic document, and in that document, it mentions using gold to control economies! (Note: I don’t regard the Protocols as authentic, despite its accurate statements about a gold standard —  but he does):

“22. YOU ARE AWARE THAT THE GOLD STANDARD HAS BEEN THE RUIN OF THE STATES WHICH ADOPTED IT, FOR IT HAS NOT BEEN ABLE TO SATISFY THE DEMANDS FOR MONEY, THE MORE SO THAT WE HAVE REMOVED GOLD FROM CIRCULATION AS FAR AS POSSIBLE.”

Was this simply a case of editorial license for the sake of getting thousands of cheap clicks, or does he really support a government-guaranteed gold standard?

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Combination of four currency symbols

Warren Buffett correctly points out that he pays less tax as a percentage of his income than his secretary does, as a result of her receiving nearly all of her income as personal income, while Buffett receives most of his as capital gains and dividends.

Thanks to the Bush tax cuts that were extended by President Obama, the man who promised change, long-term capital gains and dividends are taxed at only 15%, compared to a top rate of 35% for personal income over $200,000.

This is portrayed by the business community as a good thing, and even by some people making far less than $200k a year, with the justification that it’s important to promote investment.

I used to have the view that the government providing a preferential incentive for investing was a good thing, until I gained a better understanding of the proper role of government, and how preferential government incentives can lead to artificial boom-and-bust cycles.

You have three options with your money: You can either spend it, save it, or invest it.

Is spending a lot of your new money ever a good thing compared to investing it? Yes, for example, in the case of high inflation and low interest rates — as is increasingly becoming the case in 2011.

But why bother spending your money now when you can get a big tax advantage on dividends and capital gains, and can even claim any interest paid on borrowed money for such investments as a tax deduction?

Instead of spending your money and possibly putting more people back to work, more money is given to companies so that the executives at the top can award themselves more in stock options and bonuses, and hedge fund managers can make a killing off of manipulating the market, as Jim Cramer candidly admits.

If the market feels that more spending or saving is the order of the day, what business is it of government to create an artificial demand for more investment?

The problem of over-investment is acutely seen with so many would-be retirees who are dependent on their investments for retirement, and got a rude awakening in late 2008 when they depended on a government bailout in order to prop up the market back to its pre-2008 crash levels. Had they not been given an artificial incentive to invest, many would’ve made savings more of a priority, and put their money into less risky places than in a housing market propped up by junk mortgages sold as triple-A securities, and a stock market propped up by the financial services sector with its fraudulent financial vehicles.

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The Financial Consumer Agency of Canada (FCAC) has quarterly-updated comparison tables for all credit cards in Canada. The tables compare interest rates, service fees, grace periods and other related information.

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http://news.bbc.co.uk/2/hi/business/7921580.stm

The article reports that “Canada has cut interest rates by four percentage points since the cost of borrowing peaked in December 2007.”

Despite still having a slightly higher central bank rate than the U.S., the Canadian dollar is currently trading at 78 cents USD, down 20% since December 2007. (see xe.com for historical tables)

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