< HOME  Monday, December 26, 2005

taking OPM to new heights

Money markets give new meaning to the phrase 'making money off other people's money.'
The dollar gained on speculation an economic report tomorrow will show the confidence of U.S. consumers rose for a second month, giving the Federal Reserve greater cause to keep lifting interest rates next year.
Forgive me that I can't understand why consumer "confidence" should be followed by rising interest rates.

Is it to tame the shrew; or exploit the masses?
The U.S. currency has gained about 14 percent versus the euro and yen in 2005 as the Fed raised its key borrowing cost eight times, widening the rate gap with Japan and Europe. The dollar on Dec. 23 completed its biggest weekly rally in seven against the euro after a report showed housing starts surged.
This aggregate gain in the dollar against the yen and euro is notwithstanding the nose dive the dollar took the week before Christmas.

But, let me get this straight, "housing starts surged?" Last I heard, new home sales were down 11%. But assuming they did surge, why does the dollar rally?

Let's examine the facts.

When housing starts surge, it usually indicates an increase in prices and people borrow more to pay for those new houses. When people borrow more, if interest rates are higher, mortgage bankers make more, and so on and so forth.

So, what's wrong with that, you ask? It's a win-win situation.

Trouble is, not only are increases in real estate prices illusions, but when interest rates increase, the debt-saddled homeowner is stuck with much higher expenses in an economy whose money supply is contracting.

That is NOT win-win. Not only is the borrower destroyed, while the lender is enriched, but there is a direct causal relationship between the lender's enrichment and the borrower's destruction.

Parasitoids differ from parasites in their relationship with the host. In a truly parasitic relationship, the parasite and host live side by side with little or no damage to the host organism while the parasite takes enough nutrients to live on and reproduce without draining the host's reserves.

In a parasitoid relationship, the host is usually killed after the full development of the other organism. This type of relationship seems to occur only in organisms that have fast reproduction rates.

The borrower is the host, and pseudo-money at INTEREST is the parasitoid.

(Pseudo-money is credit based on fractional reserves. In practice, pseudo-money performs just like bills, only it costs those who issue it virtually nothing to create--or destroy, and they do so at whim.)

So, how fast does pseudo-money at interest multiply?

Based on interest and compound interest, our money doubles at regular intervals, [and] follows an exponential growth pattern: at 3% compound interest it takes 24 years; at 6% it takes 12 years; at 12% 6 years.

One penny invested at 5% interest in the year 0 [zero] would be worth 134 billion balls of gold of the weight of the earth in 1990, at the price of gold in [2005]- a practical impossibility.

A quote from a presentation (PDF) by Margrit Kennedy at the "Doors of Perception Conference" in New Dehli, India in March 2005. Essential reading for anyone who wants to understand how and why world economies are disintegrating before our eyes.

It's one thing to make use of other people's money by investing it creatively and productively.

It's another thing entirely to manufacture need for money and then proceed to exploit that need fully.

If we don't put an end to funny money at INTEREST, IT will put an end to us.

It is painfully obvious that we CANNOT co-exist indefinitely.


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