Reality Check Q&A #8
Oct. 6, 2009
CURRENCIES
What do you think China and India will do to try to prevent the total collapse of the debt-laden US and European economies?
They will move out of dollar-denominated debt. They will not do this unilaterally. They will gain cooperation from other central banks.
I think this is years away. The rulers of both nations are still mercantilists. They believe in government directing of their domestic economies. They both rely on exports. This is especially true of China.
The Chinese government is moving from mercantilism to Keynesianism. It is trying to substitute domestic demand for exports by creating government-funded boondoggles paid for by fiat money. The increase of M2 in China over the last year has been in the range of 28%. The central bank a years ago was talking about 16% as too high. Those days are gone.
Neither country is serious about stable money. Both are interventionist. Both are bureaucratic. India is a nightmare of bureaucracy. So, the United States still provides buyers of their exports. It will take years for the central planners in both nations to stop subsidizing exports by buying U.S. debt.
GEOGRAPHY
Age: 63
Location: Central Texas
Occupation: retired
#1 goal: heaven, enjoyable retirement
Deadline date: ASAP
Can't stand the excessive heat. Have opportunity to buy a small business in small-town ETEX or a job in New Mexico. $ would be the same. Which is better?
It's a good thing you want to go to heaven. You don't like excessive heat.
I lived in East Texas for 18 years. I liked it. But I rarely went outside. It is humid.
The dry heat in New Mexico is higher in temperature. I like things to be green. The price of green is humidity.
Go to Texas. Lower taxes. Better lifestyle. More opportunity.
FORECLOSURES
Who made money from the S&L crisis?How can an individual profit from this foreclosure disaster?
Those people who had cash did well in the S&L crisis. The best way to profit from foreclosures is to follow John Schaub's advice in his recent book on foreclosures. www.JohnSchaub.com
RETIREMENT
My question is: Do you think that public sector retirement systems (Cal-PERS specifically, if you care to comment) will renege on their promises to pay benefits and, if so, to what extent?
Yes. They have no choice. They have made more promises than they can possibly deliver.
They will rely on the Federal Reserve to bail them out through inflation. The FED will cooperate. Year by year, real income will fall. The retirees will be squeezed by price inflation.
This way, the states will be able to blame evil speculators for the destruction of retirees' dreams. "We held up our end of the bargain. But you cannot blame us for the rise in prices."
This will sell in Peoria. It always has. The public has no understanding of economic cause and effect.
HEALTH CARE
Can health care be 'reformed' ? without getting rid of insurers, the army of paper shufflers doctors must employ, the lawyers and enacting tort reform and get the doctors out of commercial real estate and back in home offices. The gadget and trinket medical businesses have not made much progress since aspirin and antibiotics. People pay for services they need and allow the market to price them for real without interference from government and insurers who need people to be dependent on them.
Of course it can be reformed.
Step one: Default immediately on Medicare. No more payments. Medical costs will fall like a stone.
Step two: Allow anyone to buy any medicine from outside the United States. Let the Internet cut prices.
Step three: End licensure of physicians. No more cartel.
Step four: Let anyone buy health insurance from any company on the Internet. Do not allow state Attorneys General to interfere with these transactions.
401(K)
Age: 55
Location: OklahomaI have a 401K from a previous employer that is just sitting. It is in a self investment account. I want to put it into either gold, silver or perhaps crude oil. That seems to be where everyone is headed. Your recommendations there would be very much appreciated. The account has approximately $40,000.00 in it.
Buy shares in the Central Fund of Canada (CEF). It holds mostly gold but some silver. It is listed on the AMEX. It takes delivery of the metals.
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