Are Chinese Laborers Cheaper to Employ than a Slave in America? Or, Why We Need an International Minimum Wage of at least $3 an Hour.
Intrusive Authorial Note:
Of course, slavery was abolished long ago in the United States and I totally abhor slavery. I use it as an extreme example here to point out the fact that wages are so low in China that they have a destructive effect on our economy similar to the slavery which helped destroy the middle class of Rome. Instead of outsourcing, wealthy Romans took middle class jobs away by having slaves that did the same work, and thus undermined Rome's economy by throwing the middle class out of work. I am using slavery only as a tongue in cheek example of how we will never be able to compete with Chinese labor, (read India, Taiwan, etc. labor and all loosely referred to herein simply as China).
For years, manufacturing jobs have been leaking away to China. There is no economic incentive for any single US consumer or any single US manufacturer to buy American or keep jobs in our country. The people who shop at Wal Mart do so because they offer the best price. The people moving jobs to China do so because they can’t make things cheaply enough in America to sell at the low price Wal Mart shoppers demand. While this makes perfect, rational economic sense on a micro level, it makes no sense at all when it comes to the survival of America on a macro level.
Prior to the Presidential election there was a lot of debate about bringing jobs back to America. Everyone agrees the middle class is slipping away and we are becoming a nation of rich and poor. Now President elect Obama has to come up with a way to do this. Can he do it? How will he do it? Is there some way that the driving force of Capitalism, essentially, self-interest on a micro level, which so far has worked on a macro level to take jobs away from Americans, be harnessed to achieve this goal? Yes, there is, using a pro-trade tariff system, combined with a mandatory international manufacturing minimum wage. Why and how does this work? Read on.
A simple way to get jobs back to America would be to lower American wages until they are competitive with Chinese wages. Then jobs would come flooding back into our country and we could all say, “Booyah! Mission accomplished!”
This is a simple and appealing argument, (especially when we hear about those guys in Detroit who are getting $70 plus an hour). Surely, if US workers would agree to work at a more reasonable wage, we could get manufacturing jobs back into this country.
Is it possible? Let’s start at the lowest pay scale possible and see if American labor can compete with Chinese labor. I can’t think of a pay scale cheaper than nothing, i.e., slavery, so let’s look at the cost of making something in America with slave labor and see if that could be competitive with Chinese workers. If not even slaves in America could compete with Chinese workers, then obviously, something else will have to be done to bring jobs back to America.
So, how much do those industrious Chinese workers get paid?
According to payscale.com, the average factory worker in China makes 15 Chinese Yuan an hour. And the Yuan is worth 15 cents. So the hourly wage of the average manufacturing worker in China is $2.25 an hour. That’s $390 a month.
(With an eight hour, five day, work week and 4.33 weeks a month on average, a Chinese factory worker is paid at least: $2.25 X 8 X 5 X 4.33 = $390 per month. Maybe more if he works six or seven days, but we’ll assume the same as an American work week. )
Even $390 a month might be too high, there are many reports that workers living in dorms and eating free company food work for $100 a month in China. But let’s assume that payscale.com has it right and that there’s also no added perks to this wage like health insurance or accident insurance.
$390 a month is very competitive with a US minimum wage worker. Current Federal minimum wage is $6.55 an hour, soon to go to $7.25 an hour in July, 2009. Even at $6.55, that’s a horrific $1135 a month in the US, almost three times the cost of a worker in China! No wonder so much stuff is made in China. But since we’re trying to compete, let’s see how slave labor compares to Chinese labor and once we find out if that is competitive, we can ratchet up those wages until American factories are humming once again!
A slave has two cost components, initial cost and maintenance. To analyze the monthly cost of purchasing a slave, you have to compare what is called the opportunity cost of your money of buying a slave to the return you’d get from a safer investment, like putting that money into a CD in a bank at 3%. That tells you what that slave is really costing you to buy on a month to month basis over the long haul.
What would a slave cost today in America? Well, we can use the price of a slave in 1800 in America and adjust for inflation. According to the website below, in 1800, the average adult male slave cost $381.
http://eh.net/Clio/Conferences/ASSA/Jan_00/rosenbloom.shtml
(It’s interesting to look at inflation as a side note, because it turns out there really wasn’t any inflation between 1800 and 1971. But in 1971 we went off the gold standard and now prices are at least 10 times what they were in 1971, according to:
http://mwhodges.home.att.net/inflation.htm#1800)
So the inflation adjusted cost of a slave in 2008 would be $3,810. At a 3% opportunity cost, that’s roughly $120 a year or $10 a month. We are certainly off to a good start here! That’s way under those pesky industrious Chinese. We’ll have jobs back in the good ol USA before we know it!
Ahh, but don’t forget slave maintenance. Things that pop to mind are food, shelter, water, utilities and some sort of shabby but adequate medical care. Speaking of medical care, there’s nothing like the wonderful free emergency room system we now provide our minimum wage workers! No sir, America is top notch medically speaking. If you have a cold in Sweden, that’s a free doctors visit. By golly in America, if you have a cold, that’s an emergency and you just have to wait in line behind the other emergencies like heart attacks or crash victims. But you wait those long hours with a certain sense of respect for your malady. It’s an emergency!
We’ll look at the medical costs later, first the slaves need to eat.
Food: I don’t think a person can live on less than 2,000 calories a day, and even if that were rice and beans, I can’t imagine food costing less than 50 cents a meal because food is not cheap in America. So, 500 calories a meal, 4 meals a day, $2 a day for food, $60 a month. Wow, food must be more expensive in America than China!
Shelter: Despite the recession, housing is still expensive in America. You can’t get much cheaper than a tent from Wal Mart, that runs about $200. But it wouldn’t last more than a year with a family of four running in and out, so figure $25 a year per worker, $2 a month for a tent.
And you’d have to allocate some land for this purpose. In America about the cheapest land you can find is still $3,000 an acre, so figure adding in a septic field for waste and a well, you’re going to have to put each slave tent on at least a twentieth of an acre of land., so about $150 for the land, but that septic and well gets expensive fast, probably a good $20,000 total for 20 families, so $1,150 for land and utility system per slave, and since this is a capital expense, it represents an annual opportunity cost of $35, a cost per month of $3.
So far so good, we’re only at $75 a month and headed down the home stretch!
Utilities: We won’t need heat or cooling, because tents are not useful in cold climates, we’ll have to have all our jobs somewhere warm, but not too warm because tents get hot at night. Somewhere south of Ohio but north of Louisiana can become the new slave belt, a perfect replacement for the rust belt!
But don’t forget garbage hauling. Now that’s expensive. All municipalities have contracts with garbage haulers and our intention here is to bring more jobs to America, not take them away, so I’m afraid that if my garbage costs me $80 a month for a family of 4, we’re going to have to allocate about $20 a month per worker for garbage hauling alone.
So far we’re at a cost of $95 a month.
Now, medical care. Obviously we again are not going to be able to use a slave doctor, because that would cut into doctor jobs. Same problem as slave garbagemen, no way. My extremely healthy daughter who is 20 and fit as an antelope pays $300 a month, and that’s cheaper than what I pay. Oh oh, I’m getting a bad feeling about this whole slave idea and cost cutting, but I want to be realistic. With medical care we’ve jumped to $395 a month.
Oh, and her plan doesn’t include pharmacy coverage. Again, we can’t cheat the pharmaceutical companies out of their due, after all, only with profits in the billions can you invent new drugs. What’s reasonable here? Well Viagra costs about $100 a month, or so I’ve been told. Figure that half the men would have no interest in sex after a hard day of 8 hours slaving away at their jobs, (literally), and you need them to be interested in sex to keep the slave supply up, so $50 a month for medicine, minimum, per worker.
Grand total, $445 a month. That’s discouraging, but wait, maybe shipping costs need to be added in here and having slaves in America would still be profitable!
Oops, I forgot payroll taxes. Payroll taxes? Why? They’re not getting paid! But according to IRS worksheet 437-A, subparagraph 3, “Compensation includes lodging and travel costs when you’re not on the road.” Frankly, I can’t imagine someone less on the road than a slave, after all, that’s the whole point of slavery, it’s the most awful be loyal to your employer program ever invented by humans! So, taxes will at least run 15% for Social Security and Medicare on the $445 a month, so about $70 a month and we’re up to, let’s round it to $515 a month.
But the whole idea of slavery is that it’s not voluntary, so you need to book some cost for keeping the slaves from rebelling.
Who is willing to do this awful work? Well, with Iraq winding down I’m sure such people are a bargain from Blackwater, but how long will that last? They make $100,000 a year because being mean is not a low cost job skill, so $12,000 a month. Probably take four of them to handle 100 slaves, boy this is getting expensive, that’s $48,000 a month or a whopping $480 a month per worker! Sheesh, that number alone is higher than the Chinese worker! Boy, it doesn’t look like we can compete with China, even with slave labor!
Maybe we can sharpen our pencil. What if the Blackwater guys agree that they’re not getting shot at like Iraq. Maybe they’ll work for half pay, something like $240 a month a slave? I know this seems like a lot. Maybe there’s some kind of pharmaceutical invention, that would make it easier to keep a slave. They could call it HappYSlave, kind of a cocktail of Zoloft for happiness, Prilosec for that excess stomach acid caused by stress in the workplace, Viagra, the whole need more slaves thing, and THC to make a worker tranquil. (I’m going to trademark that tomorrow, that’s the capitalist way isn’t it?)
Wait, this isn’t going to work, the drug companies would make this so expensive, it’s a new drug on patent after all, it would probably be cheaper to hire those Blackwater guys at half price.
OK, assuming cut rate slave guarding, we’re up to $755 a month, and now that’s almost double the $391 a month worker in China. How the heck are we going to bring jobs back into America by paying wages to American workers that compete with those paid the Chinese?
And I haven’t even begun to add in costs like:
Polluting in America: There are heavy fines for polluting in America. In China there are no pollution laws. If you want to turn a river into a toxic waste pit that glows in the dark in China, they tell you to pick a color and then say, go right ahead! No one seems to care except the peasants who can’t figure out why their crops are dying, but what the heck, they have no power and other peasants in other places can grow the food.
Slave Owner Therapy: Personally, I’d feel guilty as a slave owner even if I was saving America’s economy and the American worker Booyah! I’d probably spend thousands of dollars at the therapist. Almost impossible to quantify along with pollution but it’s just another ill wind blowing over this program which I have realized can be called:
JOBS AMERICAN WORKERS SLAVERY!!
Or JAWS for short!
Miscellaneous: There’s always a miscellaneous in any budget, clothing, gas to and from the doctors, eyeglasses, Christmas Hams, Easter Hams, Birthday Hams, (consistent gift giving is the corporate ideal).
So, a slave in America would run about $755 a month, and a Chinese worker is happy as a clam at $391 a month. (We assume that clams are happy, I personally don’t know.)
The sad fact is, it just costs too much to do business in America. There’s no way around it, the cheapest labor we’re ever going to have under the JAWS program, which is FREE SLAVES! would still cost an astounding double the Chinese worker.
Well, if we can’t compete with the Chinese labor, how are we going to bring jobs back and rebuild the middle class! Is Obama sure he wants this job? It sounds impossible.
Actually, there is a simple way, and it would get the Chinese worker on the side of the American worker, and it would improve life in China and America and create a new era of prosperity.
We need to enact trade laws that level the playing field. It’s ok to have free trade, however we need a law that says:
ANY COUNTRY SELLING A PRODUCT TO THE UNITED STATES HAS TO HONOR A NEW INTERNATIONAL MINIMUM WAGE LAW FOR MANUFACTURING WORKERS, A WAGE OF $3 AN HOUR, AN 8 HOUR WORK DAY, A 40 HOUR WORK WEEK, A 50 WEEK YEAR.
If a country doesn’t pay its workers at least that much, then we simply add a tax, it’s called a tariff and the Federal Government collects it. It is a charge added to the product price so that the product being sold into America would have a price equivalent to the price it would have if factory workers were paid $3 an hour. And we can spend the entire tariff on feeding, housing and medically taking care of our own laid off workers.
Why not? If the Chinese are going to take away our jobs, we should at least benefit from their being willing to work for us. Right now that cost difference goes into the pockets of the wealthy slave owners, err.. I mean business owners who have outsourced jobs to China.
Wait, does that mean that outsourcing is the same as having slaves? Yes, almost, except it’s even better, because you couldn’t pollute in America if you had slaves, and you don’t need to feel guilty about outsourcing like you would with slaves because the Chinese workers are free. So really, outsourcing is better for business owners than slavery! It’s cheaper and you can sleep at night while breathing clean air and drinking clean water. It’s just catastrophic for the average middle class factory worker and as a result, the entire US and then World economy.
Some free trade people will say that tariffs are anti-trade, and all that happens with tariffs is that the other country retaliates and doesn’t buy the stuff you make. For one thing, most other countries do that to us now anyway so it’s a specious argument. We don’t sell many cars in Japan because they won’t certify them. We don’t sell beef in Korea even though it’s cheaper because the people there want to protect the farmers.
Besides, this tariff is different. It’s not just a stick. It has a carrot for the average Chinese worker—higher wages for the same work!
Instead of retaliating and not buying stuff from us, the Chinese worker will get paid more for his labor, have more to spend, and possibly will end up buying more from America, not less, so that this tariff is a pro-trade tariff.
And don’t forget, now that an American worker will have his job back, he’ll be able to buy more goods from the Chinese. Everyone benefits! Even the slave owners… business owners.
What will happen if these laws are enacted? Very quickly, the Chinese workers will demand that they get paid their $3 an hour. They’ll say it makes no sense to have a tariff going to idle Americans when they could be making more money.
Their leaders will have to agree, and so will big business since they can’t just stop making things in their shiny new factories in China. Nope, profits will simply drop, and Chinese workers will make more money. But how does that help the American worker?
At some minimum wage in China, (and I don’t know what it will have to be, maybe more than $3 but that’s a good start), there will be no advantage to make some products in China any longer. New factories and jobs will come back to this country because shipping will be cheaper or quality will be better or they find that advertising made in America sells more goods.
With this basic underlying structure of a foreign minimum wage for manufacturing, and then tinkering with the number, we’ll bring jobs back to America until we’re at full employment, which should be the purpose behind this entire exercise. America’s economy drives the world’s economy. Only when America is at full employment does the rest of the world benefit to the maximum.
Now, if we get to the point that we have full employment, and find we’re getting cost inflation because we can’t keep up with demand, we can always reduce the Chinese minimum wage level we enforce. That way, American jobs and full employment in the US comes first, not the bottom line of businesses, but the bottom line of America, which has to be full employment. It’s fine that we’re the superpower policeman of the world and our markets drive the world economy, but the one thing we have a right to insist on is full employment in America for carrying those dual burdens.
Capitalism is a way of people behaving in their own self interest. But sometimes countries need to do things on behalf of their citizens so that the good of all, in this case full employment in America, comes about.
Will this be bad for China? I don’t think so. Employed Americans will buy more stuff, both made in America and China. In the end, businessmen will find they are making larger profits, because in the end, everyone will have a relatively good paying job. You can imagine how higher wages would help the Chinese economy.
And what about the future when robots become prevalent? If we don’t enact full employment laws now, someday the wealthy will own robots that don’t need medical care or food. On that day even the Chinese, if we don’t pass laws that prevent it, will find themselves out of work.
Who will business then sell products to when the whole world is unemployed? To the robots that don’t buy anything? This is the future, and beyond that future, we will some day have the Matter Replicator from Star Trek. You just stand by it and press some buttons and voila, new shoes are made from carbon and hydrogen and oxygen.
Who will own the Matter Replicator? It better be everyone, or someday, we’ll all be slaves.
Saturday, December 6, 2008
Tuesday, November 11, 2008
US Gov't Needs to Borrow $2.7 Trillion and why a Can of Coke is headed for $2
Martin Weiss, a noted economic adviser, is now predicting that the US Gov't will need to borrow a minimum of $2.7 Trillion during the next year to fund its bailout plans, and even that may not be enough. He then predicts that interest rates will rise and bond values will fall because of this "oversupply" of bonds and borrowing.
I believe he is right, that the Gov't needs this money, but I think he has the endgame wrong. Neither the US Economy nor the Gov't itself can afford to pay 10, 15 or even 20%, the rates that would be required to lure that money out of the hands of the rest of the world. Instead, I believe the Federal Reserve will simply purchase the debt directly, meaning that this is the equivalent of the Treasury just printing $2.7 trillion and spending it, rather than borrowing it from the rest of the world and retaining some sense of keeping the supply of dollars in line with the economic production of this country.
I just don't believe there are enough dollar holders in the world who want to buy all this planned debt. The Chinese are using their reserves to stimulate their economy, the ruble is cratering, the Arabs have to be wondering what happened to the price of oil and their own cash reserves and not feeling excited about lending the US even more money. Where will the US get all this money then?
I believe that the Fed will have to buy this debt and thus create this money out of thin air. When it does, the resulting inflationary cycle is going to be at first stimulating to the economy, but in the end result in a round of stagflation, a stagnant economy with inflation.
This is an important turning point in our country, investments and economy. Is Weiss right and a person should short bonds because rates are headed higher due to borrowing demand? Or am I right in predicting the Fed will buy the debt, initially keeping rates down but eventually leading to inflation and eventually higher rates?
A third viewpoint can be found in advisors from Deutschebank who advise buying long term treasury debt because rates will be falling! I was astounded when I saw this prediction on the news a few days ago. They say because we have a recession, the US dollar is going to strengthen and go up in value as the prices of all commodities continue to drop.
This is what makes horse races and why you can find someone to bet against.
Who is right?
Well, I think I am, the only way out of this recession/depression is for the Fed to create more and more money, and I firmly believe they are going to end up buying US Gov't debt directly as a buyer of last resort when rates start to climb because the gov't needs to borrow so much during the next year. I'm betting on higher gold and silver prices and a destructive tsunami of inflation as jobs are created in this country and our economy recovers. Eventually the gov't is going to have to deal with people trying to get their money out of this country as people have done in the past in Argentina etc., where inflation raged out of control when the gov't found itself in the same position and created too much money.
But, that's a different set of problems and much more politically acceptable, because at least people have jobs and have money, the problem is, the money is getting worth less each day! But who can argue against deferring pain for a few years? Hardly anyone.
I don't think you can go wrong in betting that this country's currency will continue its long downward spiral in value. My nickle coke in 1950 is now a dollar, a 20 to one increase in price, and headed for $2 a can.
Oh, and by the way, the CFTC has publicly admitted that several banks massively shorted silver earlier this year, to the tune of nearly 25% of annual world production, and that is what made the price drop to close to $10 an oz. Nothing will be done about it in all likelihood, but I have to believe the price of silver isn't going to be at this level much longer.
I believe he is right, that the Gov't needs this money, but I think he has the endgame wrong. Neither the US Economy nor the Gov't itself can afford to pay 10, 15 or even 20%, the rates that would be required to lure that money out of the hands of the rest of the world. Instead, I believe the Federal Reserve will simply purchase the debt directly, meaning that this is the equivalent of the Treasury just printing $2.7 trillion and spending it, rather than borrowing it from the rest of the world and retaining some sense of keeping the supply of dollars in line with the economic production of this country.
I just don't believe there are enough dollar holders in the world who want to buy all this planned debt. The Chinese are using their reserves to stimulate their economy, the ruble is cratering, the Arabs have to be wondering what happened to the price of oil and their own cash reserves and not feeling excited about lending the US even more money. Where will the US get all this money then?
I believe that the Fed will have to buy this debt and thus create this money out of thin air. When it does, the resulting inflationary cycle is going to be at first stimulating to the economy, but in the end result in a round of stagflation, a stagnant economy with inflation.
This is an important turning point in our country, investments and economy. Is Weiss right and a person should short bonds because rates are headed higher due to borrowing demand? Or am I right in predicting the Fed will buy the debt, initially keeping rates down but eventually leading to inflation and eventually higher rates?
A third viewpoint can be found in advisors from Deutschebank who advise buying long term treasury debt because rates will be falling! I was astounded when I saw this prediction on the news a few days ago. They say because we have a recession, the US dollar is going to strengthen and go up in value as the prices of all commodities continue to drop.
This is what makes horse races and why you can find someone to bet against.
Who is right?
Well, I think I am, the only way out of this recession/depression is for the Fed to create more and more money, and I firmly believe they are going to end up buying US Gov't debt directly as a buyer of last resort when rates start to climb because the gov't needs to borrow so much during the next year. I'm betting on higher gold and silver prices and a destructive tsunami of inflation as jobs are created in this country and our economy recovers. Eventually the gov't is going to have to deal with people trying to get their money out of this country as people have done in the past in Argentina etc., where inflation raged out of control when the gov't found itself in the same position and created too much money.
But, that's a different set of problems and much more politically acceptable, because at least people have jobs and have money, the problem is, the money is getting worth less each day! But who can argue against deferring pain for a few years? Hardly anyone.
I don't think you can go wrong in betting that this country's currency will continue its long downward spiral in value. My nickle coke in 1950 is now a dollar, a 20 to one increase in price, and headed for $2 a can.
Oh, and by the way, the CFTC has publicly admitted that several banks massively shorted silver earlier this year, to the tune of nearly 25% of annual world production, and that is what made the price drop to close to $10 an oz. Nothing will be done about it in all likelihood, but I have to believe the price of silver isn't going to be at this level much longer.
Sunday, November 9, 2008
New Companies Offer Hope for the Future
With all the current doom and gloom, I thought it might be useful to offer more of what is just over the horizon with new technology that is going to revolutionize our country by bringing jobs to America that solve many of our current problems such as the fact that we are shipping so much of our money to Arab countries in exchange for their oil.
While there are many approaches to alternative fuels, I believe that a start up called LS9 offers the clearest and simplest path to replacing foreign oil. You can see this at LS9.com, and here's a quote about their technology:
"Pushing the frontiers of synthetic biology and industrial biotechnology, LS9 has created industrial microbes that efficiently convert renewable feedstocks to a portfolio of "drop in compatible" hydrocarbon-based fuels and chemicals. LS9's unique technology provides a means to genetically control the structure and function of its fuels, enabling a product portfolio that meets the diverse demands of the petroleum economy.
LS9 has developed a new means of efficiently converting fatty acid intermediates into petroleum replacement products via fermentation of renewable sugars. LS9 has also discovered and engineered a new class of enzymes and their associated genes to efficiently convert fatty acids into hydrocarbons. LS9 believes this pathway is the most cost, resource, and energy-efficient way to produce hydrocarbon biofuels and petroleum-replacement products. This translates into efficient land and feedstock use and directly addresses tensions between food versus fuel production."
LS9 is using that old enemy e coli as their bacteria for converting starches like cardboard and paper into biodiesel! Waster, water and e coli combine to make diesel. What a miracle.
While energy systems in the past have been centralized and monopolized as in large scale electric utilities and huge oil companies who dominate the world, I wonder if our future isn't going to be a more diverse and spread out form of energy industry.
For example, what if farmers can get a culture of the LS9 ecoli and simply place it in a big vat with waste corn stalks and water? The LS9 information states that the end result of such a mixture is biodiesel that floats to the top of a tank and when skimmed off, can be burned in a diesel motor. Talk about cutting out the middleman! A process this simple could make farmers extremely efficient. I'm reminded of Jurassic Park and the statement that "Life finds a way". It strikes me that once an ecoli bacteria has been created like this it will be spirited out of some lab or factory and become like a yeast for making bread that no one owns and everyone can use. Life will find a way and no small handful of large companies will control all the energy.
In the same manner, another company, nanosolar inc. at nanosolar.com describes itself as the third wave of solar. They have developed a technology for printing photovoltaic material on thin film aluminum rolls, and promise solar power at one sixth the cost of current silica based technology. Again this is a few years out, but this seems to offer the possibility of running the average household with an investment of less than ten thousand dollars.
I like GM's Volt concept, a battery electric motor car with a small electric generator that is fueled by gasoline, but in the future could be a small biodiesel powered generator. What a wonderful future this is going to be! Plug your car in at night and fill up the battery with electricity from the grid that you have been sending electricity to all day, or storing perhaps in your home zpower battery system, (see previous blog). Top off your biodiesel tank with the daily skimming of biodiesel from your small garage garbage processor, "Mr. E Coli?", which converts your newspaper and cardboard into liquid biodiesel fuel?
And more than likely, a low cost subsidized government loan courtesy of our wonderful new President Obama will help us pay for the new aluminum solar roof, the Mr E Coli unit and the Volt!
I for one will enjoy the sight of the Arab nations returning to their days as wandering nomads of the desert, their palatial cities abandoned for tents and camels as they wander from oasis to oasis feeding their goats and camels and wondering how all that money slipped through their fingers leaving them nothing to show for it as I drive my Volt around on yesterday's newspapers and sunshine.
While there are many approaches to alternative fuels, I believe that a start up called LS9 offers the clearest and simplest path to replacing foreign oil. You can see this at LS9.com, and here's a quote about their technology:
"Pushing the frontiers of synthetic biology and industrial biotechnology, LS9 has created industrial microbes that efficiently convert renewable feedstocks to a portfolio of "drop in compatible" hydrocarbon-based fuels and chemicals. LS9's unique technology provides a means to genetically control the structure and function of its fuels, enabling a product portfolio that meets the diverse demands of the petroleum economy.
LS9 has developed a new means of efficiently converting fatty acid intermediates into petroleum replacement products via fermentation of renewable sugars. LS9 has also discovered and engineered a new class of enzymes and their associated genes to efficiently convert fatty acids into hydrocarbons. LS9 believes this pathway is the most cost, resource, and energy-efficient way to produce hydrocarbon biofuels and petroleum-replacement products. This translates into efficient land and feedstock use and directly addresses tensions between food versus fuel production."
LS9 is using that old enemy e coli as their bacteria for converting starches like cardboard and paper into biodiesel! Waster, water and e coli combine to make diesel. What a miracle.
While energy systems in the past have been centralized and monopolized as in large scale electric utilities and huge oil companies who dominate the world, I wonder if our future isn't going to be a more diverse and spread out form of energy industry.
For example, what if farmers can get a culture of the LS9 ecoli and simply place it in a big vat with waste corn stalks and water? The LS9 information states that the end result of such a mixture is biodiesel that floats to the top of a tank and when skimmed off, can be burned in a diesel motor. Talk about cutting out the middleman! A process this simple could make farmers extremely efficient. I'm reminded of Jurassic Park and the statement that "Life finds a way". It strikes me that once an ecoli bacteria has been created like this it will be spirited out of some lab or factory and become like a yeast for making bread that no one owns and everyone can use. Life will find a way and no small handful of large companies will control all the energy.
In the same manner, another company, nanosolar inc. at nanosolar.com describes itself as the third wave of solar. They have developed a technology for printing photovoltaic material on thin film aluminum rolls, and promise solar power at one sixth the cost of current silica based technology. Again this is a few years out, but this seems to offer the possibility of running the average household with an investment of less than ten thousand dollars.
I like GM's Volt concept, a battery electric motor car with a small electric generator that is fueled by gasoline, but in the future could be a small biodiesel powered generator. What a wonderful future this is going to be! Plug your car in at night and fill up the battery with electricity from the grid that you have been sending electricity to all day, or storing perhaps in your home zpower battery system, (see previous blog). Top off your biodiesel tank with the daily skimming of biodiesel from your small garage garbage processor, "Mr. E Coli?", which converts your newspaper and cardboard into liquid biodiesel fuel?
And more than likely, a low cost subsidized government loan courtesy of our wonderful new President Obama will help us pay for the new aluminum solar roof, the Mr E Coli unit and the Volt!
I for one will enjoy the sight of the Arab nations returning to their days as wandering nomads of the desert, their palatial cities abandoned for tents and camels as they wander from oasis to oasis feeding their goats and camels and wondering how all that money slipped through their fingers leaving them nothing to show for it as I drive my Volt around on yesterday's newspapers and sunshine.
Monday, October 20, 2008
Silver/Zinc Batteries the TSA and the GM Volt
Two blogs ago I extolled the virtues of owning physical silver and promised I would amplify on my reason for believing silver has an incredible upside due to its potential in silver/zinc batteries. To follow along, remember that one ounce has 28.35 grams in it. This will be important later on during the pop quiz.
A privately owned US startup company called ZPower, at zpowerbattery.com, says that they have developed a new, patented way of making silver/zinc batteries that will revolutionize the power available for our laptops, ipods, mobile phones and other portable devices.
Their main claim to fame is 40% more runtime at the same power and voltage for the same weight as a lithium-ion, rechargable battery. In addition, the ZPower battery materials can all be recycled easily and safely, while lithium can not, and the battery is not explosive. That is why TSA is in the title of this piece, they have become concerned about the potential threat of a lithium bomb on a plane, and are now limiting batteries at 8 grams of lithium and only one battery allowed in carry on, and only then if it is installed in a laptop. Evidently lithium can explode in the right conditions when mixed with water, I think because the hydrogen given off can explode, but not being a chemist, it's just important to know that the TSA thinks it's dangerous enough that a bomb could be made out of small amounts of it, so, when it comes to exploding, it can and it's dangerous.
Which brings up the GM Volt. GM and others are going to need batteries for electric cars, and hybrid cars, the lighter the better. And, who wants a battery that will blow up in an accident? Or cause a fire at the very least? And if it's to be made safe probably needs even heavier dense plastic or metal shielding around it? Now you're getting the picture, weight in a car, dead weight, reduces mileage and performance, so a lighter silver zinc battery could be a very good thing.
Let's look at how this new battery could impact the price of silver. If the average laptop has 5 grams of lithium in its battery, (http://www.batteryuniversity.com/partone-5.htm), then the equivalent silver/zinc battery would have about 2 grams of silver in it. And lithium ion cell phone batteries have approximately 1 gram of lithium, so a silver zinc battery would have about half a gram of silver.
Annual sales of laptops: roughly 130 million, (you can go to http://www.worldometers.info/computers/ and see a rolling number of computers being sold globally it's about 3 a second or so, it's going up like the national debtometer, really fast!)
Annual sales of cell phone: roughly 1.15 billion.
Potential silver usage in these two products:
Laptops: 130 million times 2 grams is 260 million grams of silver divided by 28.35, (you forgot already didn't you?) is 9.17 million oz. of silver a year.
Cell phones 1.15 billion times 1/2 gm silver is 575 million grams of silver, which is about 20 million more oz of silver each year.
So the new silver zinc battery could potentially increase the demand for silver by 29 million ounces a year. And that's not even starting to figure in the demand for camera batteries, hearing aid batteries, ipod batteries, and what about batteries for the Volt and other cars that need long lasting powerful light weight batteries? If you really want to start getting crazy, about 50 million cars are made a year. If they all end up being hybrids in 10 years, we're talking millions of pounds more of silver demand.
Currently total world silver production is about 600 million ounces a year, (Wikipedia claims 670 million oz. mined a year so I'll use that to be on the safe side) and existing industrial and jewelry demand is roughly 850 million ounces a year, the slack is coming from scrap and old silverware being turned in and melted down, (http://www.gold-eagle.com/editorials_04/scd032304.html)
So now, with the silver/zinc battery, we're going to increase the demand for silver by another 4%. Doesn't sound like a lot, but I predict it is going to gradually drive up the price of silver, because of the utility of the new, longer lasting battery in computers and cell phones, and especially if the price of silver is eventually driven by an exploding, (not literally) demand for silver/zinc batteries in hybrid/electric cars.
How high could silver go in price? Let's work backwards from how much a person would be willing to pay "extra" to have a battery that lasts twice as long. A battery that actually lets you use your computer for an entire five hour flight would have to be worth at least twice current prices, especially when you remember TSA won't let you bring a spare on board. But what would that do to the price of silver? Quite a bit actually.
A lithium ion battery for a laptop costs about $50 now, and a silver/zinc battery would be worth twice as much since it would last twice as long, so it would probably retail for $100. If the new laptop silver zinc battery sells at retail for $50 more than the lithium ion, what kind of cost increase just from the silver would that justify? You can work backwards typically, $50 retail is $25 wholesale which is $12.50 manufacturing cost - a very rough markup measurement used in industry, meaning a $12.50 cost increase due to silver content of 2 grams, or $6.25 a gram, times good old 28.35 grams in an ounce, meaning the demand for these excellent batteries could easily drive silver to a new price of $180 an ounce. This is 18 times higher than current prices. Keep in mind, that's the paper comex price, actual real silver is selling at about $14 an oz. $4 an oz more than spot comex. A coin show in Portland last weekend with over one hundred dealers offered for sale only one, one hundred ounce bar of silver. And that's without the utility of having a battery that is the same weight and twice as powerful. Meaning, if you inherit silverware from grandma, don't sell it! Because...
If these batteries are as great as ZPower says they are, the demand is going to be incredible. You can't buy ZPower stock yet, but when it goes public, snap it up, they have the patent lock on the process that will revolutionize batteries. And maybe make $250 an ounce, maybe $500 an ounce silver, a possibility in the next ten years. Of course there will be a lot of new silver mines going into production, which is great for mining stocks. Did I mention that some silver mining stocks went up 16500 percent during the last silver bull market? (Yes, penny stocks went to $50 and more a share before everything fell apart thanks to the Hunt brothers, but this time I think the demand is going to be real, not someone cornering the market).
But, that's another blog.
A privately owned US startup company called ZPower, at zpowerbattery.com, says that they have developed a new, patented way of making silver/zinc batteries that will revolutionize the power available for our laptops, ipods, mobile phones and other portable devices.
Their main claim to fame is 40% more runtime at the same power and voltage for the same weight as a lithium-ion, rechargable battery. In addition, the ZPower battery materials can all be recycled easily and safely, while lithium can not, and the battery is not explosive. That is why TSA is in the title of this piece, they have become concerned about the potential threat of a lithium bomb on a plane, and are now limiting batteries at 8 grams of lithium and only one battery allowed in carry on, and only then if it is installed in a laptop. Evidently lithium can explode in the right conditions when mixed with water, I think because the hydrogen given off can explode, but not being a chemist, it's just important to know that the TSA thinks it's dangerous enough that a bomb could be made out of small amounts of it, so, when it comes to exploding, it can and it's dangerous.
Which brings up the GM Volt. GM and others are going to need batteries for electric cars, and hybrid cars, the lighter the better. And, who wants a battery that will blow up in an accident? Or cause a fire at the very least? And if it's to be made safe probably needs even heavier dense plastic or metal shielding around it? Now you're getting the picture, weight in a car, dead weight, reduces mileage and performance, so a lighter silver zinc battery could be a very good thing.
Let's look at how this new battery could impact the price of silver. If the average laptop has 5 grams of lithium in its battery, (http://www.batteryuniversity.com/partone-5.htm), then the equivalent silver/zinc battery would have about 2 grams of silver in it. And lithium ion cell phone batteries have approximately 1 gram of lithium, so a silver zinc battery would have about half a gram of silver.
Annual sales of laptops: roughly 130 million, (you can go to http://www.worldometers.info/computers/ and see a rolling number of computers being sold globally it's about 3 a second or so, it's going up like the national debtometer, really fast!)
Annual sales of cell phone: roughly 1.15 billion.
Potential silver usage in these two products:
Laptops: 130 million times 2 grams is 260 million grams of silver divided by 28.35, (you forgot already didn't you?) is 9.17 million oz. of silver a year.
Cell phones 1.15 billion times 1/2 gm silver is 575 million grams of silver, which is about 20 million more oz of silver each year.
So the new silver zinc battery could potentially increase the demand for silver by 29 million ounces a year. And that's not even starting to figure in the demand for camera batteries, hearing aid batteries, ipod batteries, and what about batteries for the Volt and other cars that need long lasting powerful light weight batteries? If you really want to start getting crazy, about 50 million cars are made a year. If they all end up being hybrids in 10 years, we're talking millions of pounds more of silver demand.
Currently total world silver production is about 600 million ounces a year, (Wikipedia claims 670 million oz. mined a year so I'll use that to be on the safe side) and existing industrial and jewelry demand is roughly 850 million ounces a year, the slack is coming from scrap and old silverware being turned in and melted down, (http://www.gold-eagle.com/editorials_04/scd032304.html)
So now, with the silver/zinc battery, we're going to increase the demand for silver by another 4%. Doesn't sound like a lot, but I predict it is going to gradually drive up the price of silver, because of the utility of the new, longer lasting battery in computers and cell phones, and especially if the price of silver is eventually driven by an exploding, (not literally) demand for silver/zinc batteries in hybrid/electric cars.
How high could silver go in price? Let's work backwards from how much a person would be willing to pay "extra" to have a battery that lasts twice as long. A battery that actually lets you use your computer for an entire five hour flight would have to be worth at least twice current prices, especially when you remember TSA won't let you bring a spare on board. But what would that do to the price of silver? Quite a bit actually.
A lithium ion battery for a laptop costs about $50 now, and a silver/zinc battery would be worth twice as much since it would last twice as long, so it would probably retail for $100. If the new laptop silver zinc battery sells at retail for $50 more than the lithium ion, what kind of cost increase just from the silver would that justify? You can work backwards typically, $50 retail is $25 wholesale which is $12.50 manufacturing cost - a very rough markup measurement used in industry, meaning a $12.50 cost increase due to silver content of 2 grams, or $6.25 a gram, times good old 28.35 grams in an ounce, meaning the demand for these excellent batteries could easily drive silver to a new price of $180 an ounce. This is 18 times higher than current prices. Keep in mind, that's the paper comex price, actual real silver is selling at about $14 an oz. $4 an oz more than spot comex. A coin show in Portland last weekend with over one hundred dealers offered for sale only one, one hundred ounce bar of silver. And that's without the utility of having a battery that is the same weight and twice as powerful. Meaning, if you inherit silverware from grandma, don't sell it! Because...
If these batteries are as great as ZPower says they are, the demand is going to be incredible. You can't buy ZPower stock yet, but when it goes public, snap it up, they have the patent lock on the process that will revolutionize batteries. And maybe make $250 an ounce, maybe $500 an ounce silver, a possibility in the next ten years. Of course there will be a lot of new silver mines going into production, which is great for mining stocks. Did I mention that some silver mining stocks went up 16500 percent during the last silver bull market? (Yes, penny stocks went to $50 and more a share before everything fell apart thanks to the Hunt brothers, but this time I think the demand is going to be real, not someone cornering the market).
But, that's another blog.
Saturday, October 18, 2008
Is Obama this Depression's Huey Long?
October 18th, 2008 Saturday morning
Is there a storm on the horizon, another election that some feel is rigged? We'll find out soon. I hope not, I hope Obama wins by a landslide. It's his election to lose.
The last debate is over. Obama the calm winner, McCain the frantic, desperate, rattled old man whose time has come and gone. When he blustered, "Joe, you're rich!" in an angry response to Obama's logical explanation of his health plan, I thought, that's it, McCain has lost the undecided, because I for one couldn't understand his comment and I was weary of trying. Every time McCain said we needed change, that the country was hurting, he offered nothing but more of Bush's tax cuts for the super wealthy and it seemed to emphasize the need to elect Obama.
The benefit of Bush's tax cuts has not helped the average American. Maybe if everyone in Ohio for example was engaged in luxury boat building for the super rich, or personal massage or owned a $15,000 a night hotel suite on the Riviera, then Bush's wealth dripping down from the top economics might actually employ some people in Ohio! But from what I can see, the super wealthy have made sure that the smallest amount of money possible leaks out of their wallets.
Who are these super wealthy who benefited so much from Bush's tenure? I recall a dinner where Bush looked out on his audience and said, "Gathered tonight are the haves... and the have mores!"
Well, he was right, sadly, this one room full of several hundred people probably owned more assets than the other several million of the people in the town combined!
Huey Long was elected Governor of Louisiana in 1928. He campaigned on a platform of share the wealth, and coined the phrase, "Every man a king, but no one wears a crown." In one of his most famous speeches, delivered in 1934, which was called Every Man a King, he observed,
"Now, my friends, if you were off on an island where there were 100 lunches, you could not let one man eat up the hundred lunches, or take the hundred lunches and not let anybody else eat any of them. If you did, there would not be anything else for the balance of the people to consume." (http://www.americanrhetoric.com/speeches/hueyplongking.htm and for more on Huey Long, http://www.hueylong.com/index.php).
His philosophy holds as true today as it did then, but our perspective has expanded, we don't need to imagine ourselves on an island, for we all know that we are on Spaceship Earth, an island of warmth and light in a vacuum of vast, endless space.
Our island is the whole planet, and those people on the island now represent the six plus billion people who live here. Yet the problem still remains, we are still letting a few people eat all the lunches, and even worse, pass those lunches on from generation to generation, so that we end up with the Paris Hilton's of the world who are "famous for being famous"!
The super wealthy, the "have mores" as Bush described them, have been able to do this because they are very clever at hiding among the masses, at putting their own political identities in with those of the aspiring small business person of America, so that when we discuss capitalism and free markets, we end up with inheritance taxes as an example, in which the average business owner or rancher is dead set against a high inheritance tax rate, and the same rate is then applied to the "have mores" as well.
Now I totally agree that a family farm worth even $50 million should be passed on with no inheritance tax at all. A $50 million estate is not that large any more. What we need to do though, is to separate the "have mores", the people with 100 lunches in Huey Long's terms, from the rest of us, and have a high inheritance tax that does not even get imposed until one reaches some level like $50 million, (adjusted for inflation each year).
While not taxing an estate until it is worth $50 million, remember that while a person with a net worth of $50 million is 1,000 times wealthier than a person has with an estate of $50,000, Bill Gates with a fortune of $50 billion is an astounding 1,000 times wealthier than the person with the $50 million fortune. And to his credit, Bill Gates feels that the inheritance tax he pays should be far higher than the one on the books now.
Estate taxes are only one area where the "have mores" are not sharing their lunches because they are hiding among the common man's laws. Take minimum wage for example. When I was 18, it was roughly $2 an hour. It cost $4 a day to ski at Mt. Bachelor. Now, the highest minimum wage in the country is in Oregon and it will be close to $8 an hour, yet Mt. Bachelor now charges almost $80 a day to ski! Minimum wages have gone up four fold since 1966, while prices have gone up 20 fold! The have mores definitely benefit when they can hire labor for less than $8 an hour. If minimum wage had gone up with inflation, it would now cost $40 an hour, a living wage, to hire a gardener.
If Obama is elected, his tax plan, increasing taxes on incomes over $250,000, while lowering on those below, will be a wonderful beginning at legally separating the economic fate of the have mores from the rest of us on the island that are frankly, in need of some lunches! He plans to increase minimum wage to $10 an hour, and I just hope that it indexes higher each year with inflation.
Is Obama another Huey Long? I think in his heart, he is, but his rhetoric is not that of Every Man a King. Instead it is more balanced and deals in concepts such as bringing jobs back to America, a medical plan for all. The have mores are going to have to give up a little by paying more taxes, but it is going to help all of us a lot. And in the end, that's a good thing for the have mores, I'm sure that Louis 14th would have gladly given up some of his fortune to avoid his fate.
I just hope that Obama takes a lesson from Huey Long's life and takes a slow and careful path in making his changes. Huey Long was one of the most popular men in America, and would have probably become President in 1936, yet he fell to an assasin's bullet. The have mores don't take kindly to the rest of us trying to improve our lot.
Is there a storm on the horizon, another election that some feel is rigged? We'll find out soon. I hope not, I hope Obama wins by a landslide. It's his election to lose.
The last debate is over. Obama the calm winner, McCain the frantic, desperate, rattled old man whose time has come and gone. When he blustered, "Joe, you're rich!" in an angry response to Obama's logical explanation of his health plan, I thought, that's it, McCain has lost the undecided, because I for one couldn't understand his comment and I was weary of trying. Every time McCain said we needed change, that the country was hurting, he offered nothing but more of Bush's tax cuts for the super wealthy and it seemed to emphasize the need to elect Obama.
The benefit of Bush's tax cuts has not helped the average American. Maybe if everyone in Ohio for example was engaged in luxury boat building for the super rich, or personal massage or owned a $15,000 a night hotel suite on the Riviera, then Bush's wealth dripping down from the top economics might actually employ some people in Ohio! But from what I can see, the super wealthy have made sure that the smallest amount of money possible leaks out of their wallets.
Who are these super wealthy who benefited so much from Bush's tenure? I recall a dinner where Bush looked out on his audience and said, "Gathered tonight are the haves... and the have mores!"
Well, he was right, sadly, this one room full of several hundred people probably owned more assets than the other several million of the people in the town combined!
Huey Long was elected Governor of Louisiana in 1928. He campaigned on a platform of share the wealth, and coined the phrase, "Every man a king, but no one wears a crown." In one of his most famous speeches, delivered in 1934, which was called Every Man a King, he observed,
"Now, my friends, if you were off on an island where there were 100 lunches, you could not let one man eat up the hundred lunches, or take the hundred lunches and not let anybody else eat any of them. If you did, there would not be anything else for the balance of the people to consume." (http://www.americanrhetoric.com/speeches/hueyplongking.htm and for more on Huey Long, http://www.hueylong.com/index.php).
His philosophy holds as true today as it did then, but our perspective has expanded, we don't need to imagine ourselves on an island, for we all know that we are on Spaceship Earth, an island of warmth and light in a vacuum of vast, endless space.
Our island is the whole planet, and those people on the island now represent the six plus billion people who live here. Yet the problem still remains, we are still letting a few people eat all the lunches, and even worse, pass those lunches on from generation to generation, so that we end up with the Paris Hilton's of the world who are "famous for being famous"!
The super wealthy, the "have mores" as Bush described them, have been able to do this because they are very clever at hiding among the masses, at putting their own political identities in with those of the aspiring small business person of America, so that when we discuss capitalism and free markets, we end up with inheritance taxes as an example, in which the average business owner or rancher is dead set against a high inheritance tax rate, and the same rate is then applied to the "have mores" as well.
Now I totally agree that a family farm worth even $50 million should be passed on with no inheritance tax at all. A $50 million estate is not that large any more. What we need to do though, is to separate the "have mores", the people with 100 lunches in Huey Long's terms, from the rest of us, and have a high inheritance tax that does not even get imposed until one reaches some level like $50 million, (adjusted for inflation each year).
While not taxing an estate until it is worth $50 million, remember that while a person with a net worth of $50 million is 1,000 times wealthier than a person has with an estate of $50,000, Bill Gates with a fortune of $50 billion is an astounding 1,000 times wealthier than the person with the $50 million fortune. And to his credit, Bill Gates feels that the inheritance tax he pays should be far higher than the one on the books now.
Estate taxes are only one area where the "have mores" are not sharing their lunches because they are hiding among the common man's laws. Take minimum wage for example. When I was 18, it was roughly $2 an hour. It cost $4 a day to ski at Mt. Bachelor. Now, the highest minimum wage in the country is in Oregon and it will be close to $8 an hour, yet Mt. Bachelor now charges almost $80 a day to ski! Minimum wages have gone up four fold since 1966, while prices have gone up 20 fold! The have mores definitely benefit when they can hire labor for less than $8 an hour. If minimum wage had gone up with inflation, it would now cost $40 an hour, a living wage, to hire a gardener.
If Obama is elected, his tax plan, increasing taxes on incomes over $250,000, while lowering on those below, will be a wonderful beginning at legally separating the economic fate of the have mores from the rest of us on the island that are frankly, in need of some lunches! He plans to increase minimum wage to $10 an hour, and I just hope that it indexes higher each year with inflation.
Is Obama another Huey Long? I think in his heart, he is, but his rhetoric is not that of Every Man a King. Instead it is more balanced and deals in concepts such as bringing jobs back to America, a medical plan for all. The have mores are going to have to give up a little by paying more taxes, but it is going to help all of us a lot. And in the end, that's a good thing for the have mores, I'm sure that Louis 14th would have gladly given up some of his fortune to avoid his fate.
I just hope that Obama takes a lesson from Huey Long's life and takes a slow and careful path in making his changes. Huey Long was one of the most popular men in America, and would have probably become President in 1936, yet he fell to an assasin's bullet. The have mores don't take kindly to the rest of us trying to improve our lot.
Friday, October 10, 2008
Market Meltdown Friday Oct. 10th.
It's 11:00 am in New York as I write and so far this morning the Dow has:
opened lower than last night's close, plunged 570 some points within in an hour to almost go into the 7,000's, 8059 to be precise, then rose within another hour to go up 600 to a little above the open price. Now it's back down 270.
Wow! If this was a roller coaster, everyone on board would be dead with broken necks from whiplash! That will teach the SEC not to not allow people to short stocks! (The big selling started yesterday afternoon when they lifted the short ban and the dammed up shorts flooded the market, kind of an odd visual picture of underwear racing down a mountain canyon made up of high rise New York buildings).
Meantime, the spot price of silver is $11.77 an oz., and spot is supposed to be the daily price of the physical commodity, but if you go to Kitco.com, one of the big market makers, they say they don't know when they can deliver to you if you want them to actually sell you some real physical silver, and if you're crazy enough to want to sell it to them today, they'll give you a $1.35 an oz. premium over "spot". Meaning the real spot price for one oz. of silver this morning is actually over $13!
What is going on? First, am I a silver "bug" whose opinion now should be totally dismissed for even mentioning the security of physically owning silver and gold in these crazy financial times? Well, for starters, I don't own 127 million oz. of silver physically stored in a vault in London, nope... that honor goes to Warren Buffet! If the much touted wizard of investing owns that much physical silver in a vault, he's the King Cockroach of silver! No one calls him a silver bug, nope he's a Wizard of Wall St. Maybe if you own over a billion dollars worth of silver and it's only 1/40th of your net worth, then you're elevated to guru from bug.
Anyway, why can you buy "spot" silver in the paper markets at less than the price of spot silver in the physical market? Paper, that's the key word. You can buy pieces of paper that say you own silver in an ETF, or on a commodities exchange, because they don't actually have enough physical silver stored to honor all their client's claims of ownership at once if all the clients demand physical delivery of their silver! (This is a very old type of swindling that goes back to the time when people invented silver certificates, pieces of paper saying that you could get an oz of silver for each denominated certificate, what we used to call US dollars when I was a little kid until 1964 when the US government gave up on the idea cause it was too hard to borrow money when it actually had to be real money. Since then a nickel Coke is now $1.00 or more.)
The ETF's contract with storage companies that promise to dutifully warehouse silver when a person sends money in to the ETF. Yet these storage companies aren't audited. They just say they have as much silver as they've issued certificates. Doesn't this sound like another perfect storm where we wake up one morning next week and listen to a reporter on CNN reporting from one of Bermuda's spa hotels?
"To the amazement of all, the most powerful and honored Wall St. company called ______________, (fill in the blank here, already you could put in Bear Stearns, Lehman etc.) has gone bankrupt and has announced they really don't have the silver in storage that they said they did. Their top executives could not be reached at the beach in Bermuda where they have all landed courtesy of their golden parachutes, as they are currently in a stress therapy seminar entitled, "How not to feel guilty about cheating other people out of money."
This reporter asked if they might be available later on in the afternoon but the massage staff from the Hotel that just flew in by private jet after giving $23,000 worth of massages to those troubled AIG execs last week said, "Of course not, these are VIP's desperately in need of life saving massages! Are you crazy? Do you want to upset these geniuses of Wall Street upon whom their very existence our future depends?" (Masseuses speak in their own odd, grammatical way.)
This reporter observed that if they were such geniuses, then why did their companies go bankrupt? With a shake of their heads and toss of their towels, the totally white uniformed, buff and beautiful male and female massueses refused to answer any more questions and stomped off in a huff down the palm lined concrete sidewalk while cursing me in Swiss, (they all speak 11 languages).
I guess I rubbed them the wrong way."
The advice for today is to go out and find some physical silver if you can and hide it in your house, the middle class equivalent of yet again successfully emulating Warren Buffet. Oh, and don't rush out and sell your stocks now, you're too late and the party's over. The sky isn't falling. The Fed will eventually lower to below 1% and all will be set right in another rush of mortgage refinancing as mortgages for about a year go to the 4% range as inflation holds off and the world recovers.
But then hold on! If that flood of shorts was bad, wait until it takes a wheel barrel of hundreds to go grocery shopping! That's when you'll be glad you hid that pile of silver in your house.
Come back soon for more on the reason silver is going to be rising soon - the silver zinc battery for the electric car, twice the power for the same weight!
Oh, and my other advice for your future security is to learn massage and 10 more languages so you too can get a job in the future where the middle class has had all its money taken away and there are only two jobs left , VIP and masseuse, and you can only be a VIP if you already were as of the day you read this article. While this sounds like the decline of Rome with the rich and the slaves... it is!
opened lower than last night's close, plunged 570 some points within in an hour to almost go into the 7,000's, 8059 to be precise, then rose within another hour to go up 600 to a little above the open price. Now it's back down 270.
Wow! If this was a roller coaster, everyone on board would be dead with broken necks from whiplash! That will teach the SEC not to not allow people to short stocks! (The big selling started yesterday afternoon when they lifted the short ban and the dammed up shorts flooded the market, kind of an odd visual picture of underwear racing down a mountain canyon made up of high rise New York buildings).
Meantime, the spot price of silver is $11.77 an oz., and spot is supposed to be the daily price of the physical commodity, but if you go to Kitco.com, one of the big market makers, they say they don't know when they can deliver to you if you want them to actually sell you some real physical silver, and if you're crazy enough to want to sell it to them today, they'll give you a $1.35 an oz. premium over "spot". Meaning the real spot price for one oz. of silver this morning is actually over $13!
What is going on? First, am I a silver "bug" whose opinion now should be totally dismissed for even mentioning the security of physically owning silver and gold in these crazy financial times? Well, for starters, I don't own 127 million oz. of silver physically stored in a vault in London, nope... that honor goes to Warren Buffet! If the much touted wizard of investing owns that much physical silver in a vault, he's the King Cockroach of silver! No one calls him a silver bug, nope he's a Wizard of Wall St. Maybe if you own over a billion dollars worth of silver and it's only 1/40th of your net worth, then you're elevated to guru from bug.
Anyway, why can you buy "spot" silver in the paper markets at less than the price of spot silver in the physical market? Paper, that's the key word. You can buy pieces of paper that say you own silver in an ETF, or on a commodities exchange, because they don't actually have enough physical silver stored to honor all their client's claims of ownership at once if all the clients demand physical delivery of their silver! (This is a very old type of swindling that goes back to the time when people invented silver certificates, pieces of paper saying that you could get an oz of silver for each denominated certificate, what we used to call US dollars when I was a little kid until 1964 when the US government gave up on the idea cause it was too hard to borrow money when it actually had to be real money. Since then a nickel Coke is now $1.00 or more.)
The ETF's contract with storage companies that promise to dutifully warehouse silver when a person sends money in to the ETF. Yet these storage companies aren't audited. They just say they have as much silver as they've issued certificates. Doesn't this sound like another perfect storm where we wake up one morning next week and listen to a reporter on CNN reporting from one of Bermuda's spa hotels?
"To the amazement of all, the most powerful and honored Wall St. company called ______________, (fill in the blank here, already you could put in Bear Stearns, Lehman etc.) has gone bankrupt and has announced they really don't have the silver in storage that they said they did. Their top executives could not be reached at the beach in Bermuda where they have all landed courtesy of their golden parachutes, as they are currently in a stress therapy seminar entitled, "How not to feel guilty about cheating other people out of money."
This reporter asked if they might be available later on in the afternoon but the massage staff from the Hotel that just flew in by private jet after giving $23,000 worth of massages to those troubled AIG execs last week said, "Of course not, these are VIP's desperately in need of life saving massages! Are you crazy? Do you want to upset these geniuses of Wall Street upon whom their very existence our future depends?" (Masseuses speak in their own odd, grammatical way.)
This reporter observed that if they were such geniuses, then why did their companies go bankrupt? With a shake of their heads and toss of their towels, the totally white uniformed, buff and beautiful male and female massueses refused to answer any more questions and stomped off in a huff down the palm lined concrete sidewalk while cursing me in Swiss, (they all speak 11 languages).
I guess I rubbed them the wrong way."
The advice for today is to go out and find some physical silver if you can and hide it in your house, the middle class equivalent of yet again successfully emulating Warren Buffet. Oh, and don't rush out and sell your stocks now, you're too late and the party's over. The sky isn't falling. The Fed will eventually lower to below 1% and all will be set right in another rush of mortgage refinancing as mortgages for about a year go to the 4% range as inflation holds off and the world recovers.
But then hold on! If that flood of shorts was bad, wait until it takes a wheel barrel of hundreds to go grocery shopping! That's when you'll be glad you hid that pile of silver in your house.
Come back soon for more on the reason silver is going to be rising soon - the silver zinc battery for the electric car, twice the power for the same weight!
Oh, and my other advice for your future security is to learn massage and 10 more languages so you too can get a job in the future where the middle class has had all its money taken away and there are only two jobs left , VIP and masseuse, and you can only be a VIP if you already were as of the day you read this article. While this sounds like the decline of Rome with the rich and the slaves... it is!
Thursday, October 2, 2008
What is the Senate Thinking Passing the Bailout Bill?
This Bailout looks like it is going to happen with last night's approval by the Senate.
$700 Billion from American taxpayers to buy all the bad loans from banks all around the world. What? United Bank of Switzerland, Deutschebank, banks in Hong Kong, we're bailing out those banks too?
That's right, go to this wonderful video on TheYoungTurks.com for an excellent insight into the insanity of this bailout bill, called This is How the Bailout will Screw You
http://www.youtube.com/watch?v=1OTM8Y3a5zQ&feature=related
But other countries are helping us right? Doesn't sound like it. Just us!
Hey, we're going to spend $5,000 each to bail out all by ourselves all the bad loans that banks around the world now hold, not to help homeowners in America. If this is going to help Main St. it's going to be the crumbs and dust falling off the plates of the super rich of Wall St. and being scooped up for food by the starving on Main St.!
And watch this wonderful objection to the bailout bill by Rep. Mary Kaptur from Ohio's 9th District, suggested by Alan who read an earlier blog,
http://www.youtube.com/watch?v=S27yitK32ds
Honestly, we don't need to bail out all the bad loans of the global big banks to end this liquidity crisis on US Banks. Instead, we just need to change the mark to market regulations on banks, as proposed by DeFazio, and this "emergency" will be over. Their assets will be held at full value with the stroke of a pen and no money spent by us. Problem solved.
Then, if we want to turn our economy around, let's subsidize mortgages for those in foreclosure to the tune of $2 billion a year initially, and at the same time, spend the $700 Billion on infrastructure, solar, wind, more efficient car motors, gosh, that would be so many wonderful things for the good of our country! Why give it all to global banks who want to get rid of bad loans? Because the market dropped 778 three days ago? It went up 450 the next day. So where's the panic? Maybe if we spend $700 Billion on infrastructure it would go up by 4000! Hey, why not just split the bill, $350 Billion on bailout, $350 Billion on infrastructure, and see what happens? Why put all our money into one basket?
Why rush the decision? Is the sky really falling? It is for the bankers, but not for Main St. Not badly enough to bail out United Bank of Switzerland's bad loans!
Who came up with this? Oh, that's right, Treasury Secretary Paulson, formerly CEO of Goldman Sachs, who is personally worth $700 million. Well gosh, he's got a lot in common with those of us on Main St.
I have a very bad feeling about this bill. It's going to get passed, and we're still going to have a recession/depression. Get ready to spend $1 Trillion next year on infrastructure because we're not going to see the economy improve much at all with this baillout bill.
Sure, when it passes, the market is going to rally, for awhile, but I would strongly advise putting very tight stop limits under your rising stocks, because once it's apparent that this bailout bill is not going to stop our slide into a depression, stocks are going to drop even more. Maybe not financial stocks, but most of the rest.
I'm so disappointed in the Senate.
$700 Billion from American taxpayers to buy all the bad loans from banks all around the world. What? United Bank of Switzerland, Deutschebank, banks in Hong Kong, we're bailing out those banks too?
That's right, go to this wonderful video on TheYoungTurks.com for an excellent insight into the insanity of this bailout bill, called This is How the Bailout will Screw You
http://www.youtube.com/watch?v=1OTM8Y3a5zQ&feature=related
But other countries are helping us right? Doesn't sound like it. Just us!
Hey, we're going to spend $5,000 each to bail out all by ourselves all the bad loans that banks around the world now hold, not to help homeowners in America. If this is going to help Main St. it's going to be the crumbs and dust falling off the plates of the super rich of Wall St. and being scooped up for food by the starving on Main St.!
And watch this wonderful objection to the bailout bill by Rep. Mary Kaptur from Ohio's 9th District, suggested by Alan who read an earlier blog,
http://www.youtube.com/watch?v=S27yitK32ds
Honestly, we don't need to bail out all the bad loans of the global big banks to end this liquidity crisis on US Banks. Instead, we just need to change the mark to market regulations on banks, as proposed by DeFazio, and this "emergency" will be over. Their assets will be held at full value with the stroke of a pen and no money spent by us. Problem solved.
Then, if we want to turn our economy around, let's subsidize mortgages for those in foreclosure to the tune of $2 billion a year initially, and at the same time, spend the $700 Billion on infrastructure, solar, wind, more efficient car motors, gosh, that would be so many wonderful things for the good of our country! Why give it all to global banks who want to get rid of bad loans? Because the market dropped 778 three days ago? It went up 450 the next day. So where's the panic? Maybe if we spend $700 Billion on infrastructure it would go up by 4000! Hey, why not just split the bill, $350 Billion on bailout, $350 Billion on infrastructure, and see what happens? Why put all our money into one basket?
Why rush the decision? Is the sky really falling? It is for the bankers, but not for Main St. Not badly enough to bail out United Bank of Switzerland's bad loans!
Who came up with this? Oh, that's right, Treasury Secretary Paulson, formerly CEO of Goldman Sachs, who is personally worth $700 million. Well gosh, he's got a lot in common with those of us on Main St.
I have a very bad feeling about this bill. It's going to get passed, and we're still going to have a recession/depression. Get ready to spend $1 Trillion next year on infrastructure because we're not going to see the economy improve much at all with this baillout bill.
Sure, when it passes, the market is going to rally, for awhile, but I would strongly advise putting very tight stop limits under your rising stocks, because once it's apparent that this bailout bill is not going to stop our slide into a depression, stocks are going to drop even more. Maybe not financial stocks, but most of the rest.
I'm so disappointed in the Senate.
Tuesday, September 30, 2008
If there's no $700 Billion Bailout, What's Going to Happen?
Congress today demonstrated wisdom and courage, defending themselves against the panic attack of Paulson and not going along with his bill. But what happens next? Will the Senate approve the bill as is, or work up something they can offer the House that is more palatable?
In any event, I think the $700 Billion Bailout is DOA. So what's going to happen?
1. Congress will craft a bill they can live with that will rescue the banks from the little guy up, starting with a stay on all foreclosures until a new FHA mortgage plan can be created, some form of subsidized mortgage that can pull people out of foreclosure. I humbly suggest a new FHA mortgage plan I like to call the Salvage Mortgage. People in foreclosure can apply with FHA and get a new, covers all costs, mortgage that takes them out of foreclosure, and gives them a subsidized, fixed rate, 30 yr. mortgage at one half the prevailing 30 yr. T Bill rate. Estimates are that only $65 Billion in mortgages are in foreclosure. Rescuing all of them would only cost the annual subsidy amount of roughly 3 percent a year, or about $2 Billion a year, a far cry from $700 Billion. In exchange for this new subsidized mortgage, the homeowner would give up one half of their equity increase upon sale or refinancing, or the subsidized interest, whichever is higher, so in the end, the government will be repaid in full, or even make a profit while helping. Who would be eligible for this one time mortgage fix on primary residences? Hardship cases, including all those with adjustable rate mortgages that have become too much for them. But, at the same time, forbid clauses in adjustable rate mortgages that carry a large refinancing penalty, so that the lender doesn't get such a penalty and benefit from this mortgage program.
2 Also in this bill, Congress will include a clause that eliminates the current requirement to mark to market these toxic assets, which, though they are currently at only 85% default rate, are valued at zero because no one will buy them. Congressman DeFazio of Oregon has already suggested this, a brilliant suggestion that frees up huge amounts of capital, all for free.
Under such a plan, Main St. is out of foreclosure, no one is losing their home, banks are restored to full liquidity and all at a cost under $2 Billion a year.
Let's help Main St, and let Wall St. benefit, not bail out Wall St. and hope it benefits Main St.
I am fully confident that Congress will create a sensible plan like this, and if they do, the US economy should come roaring back.
However, if Paulson's panic attack succeeds, then all bets are off. We're headed for massive inflation and a near collapse of the US currency.
Which will happen? It's up to Congress. Hold physical gold and silver for now, consider getting a safe in your house, (Equipmentland.com sells fire resistant gun safes at nearly half of retail, delivered to your home). Store food, medicines, water, and if you are so inclined, you have the right to own weapons and defend your home, God Bless America and the 2nd Amendment.
Let's hope that Congress passes a sensible bill that bails out Main St. If they do, put your bets down on a bull market in the US for the next five years, minimum. If not, sell your gold and silver after they go up to $3,000 an oz. for gold, and at least $60 for silver.
Let's hope they don't!
In any event, I think the $700 Billion Bailout is DOA. So what's going to happen?
1. Congress will craft a bill they can live with that will rescue the banks from the little guy up, starting with a stay on all foreclosures until a new FHA mortgage plan can be created, some form of subsidized mortgage that can pull people out of foreclosure. I humbly suggest a new FHA mortgage plan I like to call the Salvage Mortgage. People in foreclosure can apply with FHA and get a new, covers all costs, mortgage that takes them out of foreclosure, and gives them a subsidized, fixed rate, 30 yr. mortgage at one half the prevailing 30 yr. T Bill rate. Estimates are that only $65 Billion in mortgages are in foreclosure. Rescuing all of them would only cost the annual subsidy amount of roughly 3 percent a year, or about $2 Billion a year, a far cry from $700 Billion. In exchange for this new subsidized mortgage, the homeowner would give up one half of their equity increase upon sale or refinancing, or the subsidized interest, whichever is higher, so in the end, the government will be repaid in full, or even make a profit while helping. Who would be eligible for this one time mortgage fix on primary residences? Hardship cases, including all those with adjustable rate mortgages that have become too much for them. But, at the same time, forbid clauses in adjustable rate mortgages that carry a large refinancing penalty, so that the lender doesn't get such a penalty and benefit from this mortgage program.
2 Also in this bill, Congress will include a clause that eliminates the current requirement to mark to market these toxic assets, which, though they are currently at only 85% default rate, are valued at zero because no one will buy them. Congressman DeFazio of Oregon has already suggested this, a brilliant suggestion that frees up huge amounts of capital, all for free.
Under such a plan, Main St. is out of foreclosure, no one is losing their home, banks are restored to full liquidity and all at a cost under $2 Billion a year.
Let's help Main St, and let Wall St. benefit, not bail out Wall St. and hope it benefits Main St.
I am fully confident that Congress will create a sensible plan like this, and if they do, the US economy should come roaring back.
However, if Paulson's panic attack succeeds, then all bets are off. We're headed for massive inflation and a near collapse of the US currency.
Which will happen? It's up to Congress. Hold physical gold and silver for now, consider getting a safe in your house, (Equipmentland.com sells fire resistant gun safes at nearly half of retail, delivered to your home). Store food, medicines, water, and if you are so inclined, you have the right to own weapons and defend your home, God Bless America and the 2nd Amendment.
Let's hope that Congress passes a sensible bill that bails out Main St. If they do, put your bets down on a bull market in the US for the next five years, minimum. If not, sell your gold and silver after they go up to $3,000 an oz. for gold, and at least $60 for silver.
Let's hope they don't!
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