The Most Important Indicator for International Investing and National Economic Success
Stock-Markets / Financial Markets 2012 Nov 09, 2012 - 05:18 AM GMTBy: DeepCaster_LLC
“…We think that our responsibility is to clearly explain how the economic machine works by describing the cause/effect relationships that make it up…
“What are the Keys to Success? It seems intuitively obvious, and is in keeping with our experiences as a practitioners operating in many countries over several decades, that four factors drive relative growth: …competitiveness, indebtedness, culture and luck. In a study that we did … we show how we measured each of these and how they predicted subsequent growth, … focus on one of the components of our ‘Formula for Economic Success; –self-sufficiency–…
“It is both logical and consistent with the evidence to believe that self-sufficiency is an important ingredient for individuals and societies to be successful. Self-sufficiency encourages productivity by tying the ability to spend to the need to produce, it allows people to be free rather than dependent on others, and it gives people self-respect. It is not controversial to say that people spend the money that they earn differently than the money that others give them…. If people have to earn money to spend it, they have to be more productive. Over the long run increases in living standards rise as a function of increases in productivity. So, it is not a big leap to presume that countries with greater amounts of self-sufficiency do better than those with less. Since self-sufficiency creates capability and independence it produces self-esteem…
“…these factors are more highly correlated with happiness level than the amount of money one has. For these reasons, it is logical to conclude that self-reliance is both productive and satisfying….
“To be clear, by self-sufficiency, we do not necessarily mean leaving people on their own. Cases in which people are helped to stand on their own and the help prove to be cost-effective in encouraging growth….”
“Formula for Economic Success: Self-Sufficiency”
Ray Dalio, Bridgewater Associates, via zerohedge.com, 11/03/2012
There are many commonly accepted Indicators essential to successful Investing in countries other than one’s own. They include political stability, Reasonable and Enforceable Rules of Law, Reasonable Transparency and a positive Pro-Business Climate.
But perhaps the Most Important Indicator – the degree of Self-Reliance of those nations and individuals in those Nations is not well recognized.
Bridgewater Associates’ Ray Dalio has done Investors and Citizens of all Nations a Great Service by identifying Self-Sufficiency as the Key Trait of Economically Successful Nations and Individuals in those Nations.
(Dalio uses the term “Self-Sufficiency” interchangeably with “Self-Reliance”, but Deepcaster prefers “Self-Reliance” because it indicates an appreciation of the value of interchanges – as, e.g., trade – among people and Nations, provided it does not reflect an excessive dependency.)
Yet another benefit of Bridgewater’s study is the development of Criteria and a Reasonable Procedure for quantifying the Degree of Self-Reliance of Nations based on actual correlations with economic success or lack thereof.
Investors are quite familiar with two of the four factors Bridgewater identifies which determine relative growth and economic health – competitiveness and indebtedness, but two others – culture and luck – are equally important. These four factors collectively provide excellent indicators of economic success.
Nonetheless, there are Critical Implications, and one Crucial Omission, of considerable importance to Investors, which the study does not address. For example, the Omission of a “Resource Availability and Sustainable Use” “Indicator” is significant. Clearly, a country’s Natural Resources base and whether it is used sustainably, if that is possible, are critically important.
Nonetheless, the Bridgewater structure as applied is very useful and, when applied to specific countries, as in Bridgewater’s ranking appears quite accurate.
For example, it is no surprise that Indonesia, Singapore and Thailand are the top three performers according to the Bridgewater criteria and that Greece, Spain, France, Italy and Ireland are among those at the very bottom. These bottom-dwellers’ excessive Indebtedness and Dependency on a Supranational Structure – The Malignant Eurozone Bureaucracy – are impediments to their Economic and Political Success, and indeed their Liberty.
Thus there is an important logical and Necessary Inference from their data which Bridgewater does not explicitly make. Any Regional or Supra-National Structure which Impairs National or Individual Self-Reliance (such as the ECB and Eurozone bureaucracy or the North American Union) should be avoided at all costs.
And this caution extends to certain Multinational Agreements. For example, the proponents of “Free Trade” Agreements claim, with some justification, that such Agreements would benefit consumers via lower cost goods imported from abroad.
But what these proponents neglect to point out is that these agreements inevitably result in shipping jobs overseas as well.
For example, Americans are discovering that their 25 million unemployed, many of whom are unemployed because their jobs have been shipped overseas, cannot buy foreign-made goods whatever the costs.
In such cases, a healthy tariff system (i.e. “Fair Trade”) would preserve American jobs (or jobs of other Nations whose Nations are similarly encumbered by such Agreements), and thus preserve Americans’ Self-Reliance.
Another example is that of the pitiful Eurozone Nations which capitulated several years ago to the demands that they adopt the common currency – the Euro – and thus took a massive step away from self-reliance.
Now they cannot even print their way out of their own difficulties, but must rely on the not-so-tender mercies of the international Banking Cartel.
But perhaps, even worse than the economic penalties people pay for relinquishing their self-reliance, is the consequent inevitable loss of political and personal freedom when they have ceded those freedoms to a Globalist (as opposed to an internationalist) Elite.
Consider how shocking but not surprising, the attitude of Italy’s unelected Prime Minister Mario Monti is that “Governments” should not be bound by the decisions of their democratically elected parliaments and should be free to act without regard to the decisions of their citizens.
No surprise either that Monti’s goal is the “Deeper Integration” of Europe in light of his membership in the Trilateral Commission and Bilderberg Group, his affiliation with Goldman Sachs, and his being a founding member of the Spinelli Group, devoted to deeper integration of the EU. No surprise either that another member of the Spinelli Group Steering Committee is Daniel Cohn-Bendit (yes, the so-called “Danny the Red” a leading leftist Radical Activist in the Paris Uprisings of 1968).
The Implication for Investor-Citizens, as well as Citizens, should be clear: the typical member of the Regionalist (i.e. Globalist) Elite acts in their own interest (which is to say the interest of the Mega-Bank Cartel (see Note 1)).
Not only are the typical Globalist Cartel leaders anti-democratic Globalists, they also prefer to conduct their Affairs in secret. Chris Powell’s observations at the height of the Financial Crisis are still most relevant today.
“Refusing to disclose to Bloomberg News the identities of (the recipients of - Ed.) $2 trillion in government loans… the Federal Reserve Board is making the same argument it made this year in denying GATA access to the Fed’s records involving the U.S. gold reserve - - that “trade secrets” are exempt from disclosure. …any government that can disburse $2 trillion secretly, without any accountability, is not a democratic government. It is government, of, by, and, for the bankers. And maybe now GATA isn’t the only one to think so.” (emphasis added)
“Fed refuses to disclose recipients of $2 trillion”
Chris Powell, Secretary/Treasurer, Gold Anti-Trust Action Committee, 12/12/2008
The refusal (in the midst of the 2008-2009 Financial Crisis) of the private-for-profit U.S. Federal Reserve to identify the recipients of over $2 trillion in loans funded and/or authorized by the U.S. Congress, “courtesy” of U.S. Taxpayers, serves to re-emphasize the Grave Threat which The Fed-led Cartel poses to democracy.
The Modus Operandi continues to this day – the U.S. Taxpayer continues to borrow money (and pay interest on it) from The Fed which prints it for free out of thin air.
Congress simply rolled over and gave The Fed trillions in Bailout Monies, Authorizations and Guarantees, without any significant requirements of oversight or accountability, or disclosure, mandated. And, as our discussion of The Cartel’s End Game demonstrates, the threat goes beyond the policy of using U.S. Taxpayer-provided funds without disclosure or accountability. That threat is systemic and ongoing and increasing.
“Most Americans have a sense TARP was a badly managed program that bailed out "fat cat" bankers at the expense of U.S. taxpayers. Well, it's even worse than you think, according to Neil Barofsky, former Special Inspector General for TARP (SIGTARP).
“Officials in both the Bush and Obama administrations took the attitude ‘bankers know best,’ Barofsky recalls. ‘It was somewhat shocking how much control big banks had over their own bailout [and] the overwhelming deference shown by Treasury officials to the banks.’
“(In an accompanying video, [this writer]) focused more on TARP's failings to live up to its promise to help individual Americans, not just the big banks.
“Congress never would've passed TARP if not for programs included in the program to help homeowners facing foreclosure and generally spur bank lending. ‘TARP was an abysmal failure on those very important goals which was the reason why they got that money to give to the banks in the first place,’ Barofsky says.
“TARP ‘did help prevent financial Armageddon,’ he concedes. ‘But there's a reason why Congress required and Treasury promised TARP would do a lot more. It's not complicated to take hundreds of billions [of dollars] and pour them into institutions ... and they don't fail. You really can't evaluate TARP’ exclusively on how it impacted the banks.
“Similarly, Barofsky takes offense to Treasury's repeated proclamations that TARP has been profitable.
“While the big banks have paid back their loans, the overall program is now projected to lose somewhere between $32 billion to $70 billion, with $109.1 billion owed as of June 30, according to SIGTARP. Most of those losses are tied to AIG -- Treasury still own 61% of the company -- but more than half of the 325 banks that received TARP aid have missed dividend or interest payments.
“‘The bottom line is [the government] still expects tens of millions of losses on TARP,’ Barofsky says. ‘The losses are a lot less than originally anticipated but this resorting to trickery really shows you they're trying to cover up how badly TARP has failed in its other goals of helping homeowners and increasing lending to the economy.’”
“TARP Was Even Worse Than You Think: “An Abysmal Failure,” Barofsky Says”
Aaron Task, The Daily Ticker, 7/27/2012
Clearly, Investor-Citizens suffer when they cede their self-sufficiency to supra-Nation Institutions. TARP provides just one example, but there are others including, importantly allowing, degradations of the Purchasing Power of Fiat Currencies, via Monetary Inflation, e.g. the QE of The Fed and ECB.
Concerning the threat to Investors Profits, this Massive Monetary Inflation via Q.E. 1, 2, and 3 (and similar ECB actions) entails a continuing and Massive Decrease in Purchasing Power for both U.S. Taxpayers and Investors around the world. Notably, this QE unleashed this Force which does provide considerable Opportunity for Profit and Protection (see Notes 3 and 4 below).
As well, the massive Monetary Inflation continues to result in a massive Stealth Wealth Transfer to the owners of the private-for-profit Federal Reserve (and ECB’s Client Banks) and their Favored Financial Institutions.
This loss in Purchasing Power may be appropriately called The Fed’s ongoing (since the Fed’s Founding in 1913) “Inflation Tax.”
The “Inflation Tax” works like this: every dollar the Fed prints in excess of GDP growth makes every dollar each of us holds worth less than before in Purchasing Power terms. Indeed, over 95% less since The Fed’s founding. But, today, there is no real U.S. GDP growth (see Note 2 below) and there has not been for many months.
Consider the following in order to better understand the negative effects of the destruction of the Purchasing Power of the U.S. Dollar and certain other Fiat Currencies, as well as the attempted ongoing implementation of the quite anti-democratic Cartel “End Game.”
“…in every major US financial panic since at least the Panic of 1835, the titans of Wall Street – most especially until 1929, the House of JP Morgan – have deliberately triggered bank panics behind the scenes in order to consolidate their grip on US banking. The private banks used the panics to control Washington policy including the exact definition of the private ownership of the new Federal Reserve in 1913, and to consolidate their control over industry such as US Steel, Caterpillar, Westinghouse and the like. They are, in short, old hands at such financial warfare to increase their power.
Now they must do something similar on a global scale to be able to continue to dominate global finance, the heart of the power of the American Century.
That process of using panics to centralize their private power created an extremely powerful concentration of financial and economic power in a few private hands, the same hands which created the influential US foreign policy think-tank, the New York Council on Foreign Relations in 1919…”
“Behind the panic: financial warfare over future of global bank power”
F. William Engdahl, 10/10/2008
Consider the implications of the F. William Engdahl quote regarding “global bank power.” As Engdahl points out, the evidence is increasing that the 2007-2009 financial panic and economic distress is and has been planned as a part of Cartel Strategy to increase power and, in our view, to implement its “End Game.”
To understand the Cartel’s likely “End Game” we must understand the Root Cause.
The Root Cause of The Systemic Threat to Democracy and Investor Profits
The root cause of The Threat lies in the structure, functioning and policies of the private-for-profit “U.S.” Federal Reserve.
Various international private banks, several of which are headquartered in Europe, own the “United States” Federal Reserve Bank.
These International Mega-Bankers, acting through their “U.S.” Fed, make money by creating money out of “thin air” as eloquently described by the Dean of the Newsletter Writers, Richard Russell:
“I still can’t get over the whole Federal Reserve racket.”
Consider the following - - let’s take a situation where the U.S. government needs money. The U.S. doesn’t just issue United States Notes, which, of course it could. These notes would be dollars backed by the full faith and credit of the United States. No, the U.S. doesn’t issue dollars straight out of the U.S. Treasury.
This is what the U.S. does - - it issues Treasury Bonds. The U.S. then sells these bonds to the Fed. The Fed buys the bonds. Wait, how does the Fed pay for the bonds? The Fed simply creates money “out of thin air” (book-keeping entry) with which it buys the bonds. The money that the Fed creates from nowhere then goes to the U.S. The Fed holds the U.S. bonds, and the unbelievable irony is that the U.S. then pays interest on the very bonds that the U.S. itself issued. (With great profit to the private owners of The Fed - - Ed. Note) The mind boggles.
The damnable result is that the Fed effectively controls the U.S. money supply. The Fed is …not even a branch of the U.S. government. The Fed is not mentioned in the Constitution of the United States. No Constitutional amendment was ever created or voted on to accept the Fed. The Constitutionality of the Federal Reserve has never come before the Supreme Court. The Fed is a private bank that keeps the U.S. forever in debt - - or I should say in increasing debt along with ever rising interest payments.
How did the Fed get away with this outrage? A tiny secretive group of bankers sneaked through a bill in 1913 at a time when many in Congress were absent. Those who were there and voted for the bill didn’t realize (as so often happens) what they were voting for (shades of the shameful 2002 vote to hand over to President Bush the power to decide on war with Iraq).”
Richard Russell, “Richards Remarks,” dowtheoryletters.com, 3/27/2007
After President Wilson signed the Federal Reserve Act into law in 1913, he reportedly said, “I am a most unhappy man, I have unwittingly ruined my country…a great industrial nation is now controlled by its system of credit…the growth of the nation, therefore, and all of our activities are in the hands of a few men…” Certainly, an early statement about the threat to “democracy” occasioned by The Fed.
Insightful economic forecaster Ian Gordon notes several negative consequences of the nearly 100-year reign of The Fed, consequences with which we cope today.
“Since its inception in 1913, the Federal Reserve Board has been responsible for almost 95% devaluation of the U.S. Dollar. All this has been achieved through its ability to continually inflate the money supply.
And, between 1985 and 2005, the Federal Reserve Board has increased the money supply by five times. This extraordinary money creation is merely the catalyst for debt creation. In a fiat money system, money is debt…there is absolutely no way this money can ever be repaid except by continued inflation. But, now that the credit bubble is blown up, inflation is no longer an option; bankruptcy looms.”
“The Federal Reserve…What Has It Done For You Lately? ”
Ian Gordon, 12/29/2007 (www.axisoflogic.com)
To put it bluntly, the “devaluation” of which Gordon speaks is loss of Purchasing Power.
Bottom line: The USA’s and Eurozone Nations’ ceding of authority to print their own currencies has been a massive and very costly step away from self-reliance. Such abdications of self-reliance not only have Negative consequences for Investors and Economies, but Negative consequences as well for Political and Personal Freedom.
Best regards,
www.deepcaster.com
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