 The Golden
Goose
Frank Lechner
whynotgold@msn.com
Jan 10. 2006
A certain man
had a goose
That never failed to produce,
For daily, lo and behold,
She laid him an egg - all gold!
But the man had a miserable itch
To become very rapidly rich.
So he killed the goose, like a dunce,
Since he thought that he all at once
Would get all the goose's gold treasure.
But dead the bird gave him no pleasure.
"There's no gold inside her," said he.
"Just a simple old goose - like me!"
I am amused. You want to know
why I say buy gold and silver? Read on... for one day the banksters
will finally kill the goose that lays the golden egg.
The stories that are coming
out of the banking industry are incredible to say the least.
From the credit card industry to the mortgage industry, credit
has exploded. Our government of course, has lead the charge with
its deficit spending that never ends. The banksters will
get what they deserve one day into the future, although I have
no idea how long it will take.
As the credit card industry
has grown, so has the addiction to return on cash for the banksters.
This has resulted in a continuously growing animal which now
resembles King Kong. From its smallish beginnings, where only
the most credit worthy could get cards, it has grown to include,
and I would argue embrace, those of low credit quality.
It has gotten so out of control,
that even the dead, the bankrupt, those of no physical means
of support, are getting cards. The 'risk quotient' is spread
over so many users, that it is considered acceptable risk to
continue to put the cards out there.
It has become so convenient,
that one who pays at the grocery store with cash or check is
considered a dinosaur. The preparations for the digitized economy
are in full stroke.
A person who charges, and then
pays his credit card bill on time monthly now is considered a
deadbeat. The prime customers are those who pay any interest
rate, and virtually minimum payments. With the recently passed
bankster protection laws, or the new restrictions on bankruptcy
proceedings, they have now been given carte' blanche to screw
the customers. This is as if they hadn't already been doing it.
Out the door have went the
maximum usury rates of 18% +- in some states, and in come even
more excessive rates. For instance, you may be a great credit
risk, but you have paid a credit card bill a few days late a
few times in the past year. You have never been 30 days late,
but your interest has climbed to a previously criminal 30+ %.
So you have never been a credit risk, as you don't pay past the
30 day period, and your credit score remains the same. You look
good on their customer lists for regulators and investors, but
yet they are creaming you with criminal rates.
This will all end badly some
day, when the customers actually revolt and say to heck with
it. I don't care about bankruptcy laws, you ain't gettin' nothin'
from me. The legal claim will be to garnish his wages, so he'll
quit his job. Hmmm, lost his job, or quit, so now that mortgage
can't be paid either. Or that car payment can't be made. Hmmmm.
The car manufacturers have
jumped into this swimming pool, claiming to be one of them. They
have created full divisions, where they act as the bankster for
their customers. It is widely known that much of the car manufacturer
profits are derived in the financing division, and their operations
divisions run at unending losses.
Of course, a full industry
has been created for credit towards vehicles. They too have gone
down scale. Offering loans to even the most severely credit deprived.
The creative financing available due to the very high prices
for vehicles has become a hide and seek game. You rarely see
a vehicle advertised at X price. It is always described at some
low monthly payment amount. Sure, people haggle over price at
the dealership, but in reality, it always comes down to monthly
payment and affordability. Don't forget that part of that equation
is also the bankster credit rating association. If you are a
'supposed' good risk, you get the best rate, and the rate of
course declines as the customer quality does. Customer quality
is not to be confused with honesty, integrity, and so on, it
is strictly based on a computer generated 'score'.
The big prize in all of this
is mortgage banking. Americans love home ownership, and the politicians
and banksters love to give it to them... literally. With the
tax structure set up to encourage home ownership, and the funds
made available through government organizations such as Fannie
and Freddie, the government is full steam ahead behind this increase
in home ownership. Read further tax capacity because of this.
Now the funding industry comes
along, having an outlet to dump generated mortgages onto, Fannie
and Freddie, and have taken the financing of homes to a new level.
Interest only mortgages, longer terms, lower credit quality,
no money down, 100% + mortgages, and the full basket of other
offerings have all filled the banker toolbox. You have to be
almost dead to not get a home loan of some type, (that is reserved
for the credit card industry :0)
The industry has again morphed
into the 'monthly payment' syndrome. The value of the house,
perceived or real, doesn't matter anymore. The real questions
are appraisal value, monthly payment, and credit score. The appraisal
must support the documents, and many are false appraisals for
exactly this reason. The monthly payment is the customer affordability.
And the credit score is used to set the term and interest rate.
With the now average family
consisting of two working parents, in lieu of the one of yesteryear,
the unions decimated (allowing a working wage with benefits and
retirement), and globalization (allowing our workers to compete
against an Asian worker making peanuts literally), the standard
of living is actually dropping. Wages are not keeping pace with
the monetary inflation. The expansion of the monetary base, that
has been so choreographed, that has gotten every fiat currency
in history in trouble, resembles the inverted pyramid. Less and
less backing more and more credit expansion.
One day the culmination of
this will be complete. The final fiat reckoning will be made
clear for all to see. The hole in the bottom of the funnel will
open, and the now ruined fiat will be pouring out. A deflationary
contraction is the anti fiat expansion. It becomes a boulder
rolling down a mountain, ending in a horrible thud. As loans
are called, discharged, wrote off, or otherwise removed from
a financing institutions books, what were assets, disappear.
With a leveraged fiat monetary regime, or fractional reserve
lending, this destruction works too in reverse. At a 10:1 fractional
ratio on the way up, a bank that receives $1000 cash or assets
gets a bank $10,000 lending capability. On the way down, a $200,000
mortgage default, with a corresponding fire or foreclosure sale
at $150,000, relieves the bank of $50,000 in assets. This is
excluding additional costs. This $50,000 is $500,000 in LOST
lending capacity for the bank.
This lost lending capacity,
results in tighter requirements to borrowers and so on. Effectively,
it becomes a self-perpetuating spiral downward, as more and more
loans are called, lower prices are received on the flop in foreclosure,
and costs rise dramatically. Jobs are lost because of this lost
capacity, and decreased 'velocity' of money in the system. This
decreased velocity will show up in credit lending of all types,
mortgages, business, credit cards, vehicles, furniture, and all
other manner of products. Less product is sold, and more jobs
are lost, more manufacturing disappears. This continues to happen
until the funnel empties the rubbish that is a 100% fiat currency.
This is why I have been pushing
the purchase of gold and silver. This is why I have been saying
for quite some time now that it is the 'inflate or die' syndrome.
This is the reason that I have been saying that this period will
resemble the 70's for product inflation, as this newly created
fiat continues to manifest itself in all things 'real'. This
is why Bernanke was recently elected the head printer at the
fed reserve. His comments argue that he wholeheartedly believes
that he can continue this shell game. The monetary expansion
and velocity must continue, or the death of a fiat currency will
be the end game.
Your only safety net in such
a scenario is gold, silver, and other things 'real'. At the very
least, you know something is amiss. You would have to be dead
(and getting a credit card offer), to not see it or feel it.
Worst case scenario regarding gold and silver, you purchase some
for insurance, and it decreases in price. So? It isn't going
to zero, and I would certainly argue that it is going much much
higher before this is all over.
When this does finally come
to an end, it will be nothing like what Volcker and Reagan dealt
with in the 80's. It will be much grander, and much more painful
than the depression of the 30's. The future is already known,
it is just the words to the final chapters that must be written
yet.
The gold and silver bull market
will be grand for sure, but there will be many who will sit it
out on the sidelines, having lost their stake as emotions drive
their actions.
Best of Luck To You,
Continue to accumulate physical
gold and silver on the breaks.
Get Physical and Stay Physical
!
Frank A. Lechner
email: whynotgold@msn.com
Frank A. Lechner
is a private investor, and makes no allowances for stupidity or
insanity as each chooses his own investment battles. "Past
performance is no indication of future direction, nor do I even
care about govt mandated disclosures. You make your choices and
you live with them." He does in fact believe "that
we are indeed in a time of turmoil, a time of increasing prices,
much as wrote about before, and that this period will resemble
the 70s. Those that fail to learn from history are destined to
repeat, or so I hear. Good investing to you."
Recent Gold/Silver/$$$ essays at 321gold:
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May 06 Gold Sector: The Early Stages of a Multi-Year Bull Run Bob Hoye 321gold
May 03 Gold Stocks: Bulls Have A Slight Edge Morris Hubbartt 321gold
May 03 Gold's Pullback and Miners Adam Hamilton 321gold
Apr 30 Gold Stocks: A Pause With Grace Stewart Thomson 321gold
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