It's time for a revolt.
For longer than anyone can remember, the US govt has been doing a brilliant job of making the rich, richer.
One of the primary mechanisms for doing this is by privatizing benefits and socializing risks! Take a minute to read the article below. It's not as if this outcome wasn't predictable, it's just shocking, and awe-inspiring how FAST it's coming.
For too long, I thought that the wildly rich were somehow more intelligent, lucky, or gifted. The sad fact is, they are more gifted at THEFT! Another govt bailout. More outright tax money wasted. More money and credit created, further debasing your savings, all in the interests of bailing out STUPID overstretched borrowers, and greedy lenders who accepted ridiculous risk profiles on borrowers without doing any homework?
I will stop typing now before I print something that can be used against me in a kangeroo court after my (first) failed coup attempt. Ah, what the Hell....I already spent 2 1/2 years in Guantanamo Bay....The weather is actually pretty agreeable!
The snippet that has me so riled up:
Dodd Working on Foreclosure Bill
Senate Banking Committee Chairman Christopher J. Dodd, D-Conn., says he is working on legislation to prevent an “unprecedented” wave of subprime foreclosures and to give homeowners a grace period so they can get back on their feet.
“This is a homeownership crisis of unprecedented proportions,” Sen. Dodd told a group of mayors.
He is planning to hold hearings soon, possibly in two weeks. The committee chairman indicated that the legislation might include a rescue fund. “That is a possibility, but it would have to be paid back,” he told reporters.
Sen. Dodd also told reporters that he wants to move quickly on GSE legislation to strengthen regulation of Fannie Mae and Freddie Mac and pass a bill in the next two months. He said the Senate government-sponsored enterprise bill will be a “little different” from the House bill. And he declined to take a position on raising the GSE loan limits.
“I have to be careful about jumping into that,” Sen. Dodd said after speaking to the mayors. “I want to talk with my colleagues first.”
ciao for now,
fuBarrio
Tuesday, January 30, 2007
Monday, January 29, 2007
Fiat Empire
Today I'm going to let someone else do the talking for me again.
This is a pretty good hour long video. The last 25 minutes or so are just the unedited interviews in case you want to watch them.
Enjoy.
http://video.google.com/videoplay?docid=5232639329002339531
ciao,
fuBarrio
This is a pretty good hour long video. The last 25 minutes or so are just the unedited interviews in case you want to watch them.
Enjoy.
http://video.google.com/videoplay?docid=5232639329002339531
ciao,
fuBarrio
Thursday, January 25, 2007
Doug Casey Interview Part I
I held off printing any portion of Doug Casey's year-end interview since it was meant for subscribers only at the time it was forwarded to me.
I've since received it in a couple of emails meant for a more general audience as a way to advertise his service so I feel ok reprinting it here for your perusal.
enjoy. Part II is in the next blog post down (posted in reverse chron order so you can read one after the other)
fuBarrio
Make War Your Friend, Part I
With the advent of yet another year, we take a close look at the most powerful and least welcome driver of geo-politics—war. As in the misnamed yet overarching War on Terror and in the more specific War in Iraq and, maybe, coming to a theater near you, the expanding New Crusade for the Middle East.
The topic of war—with all its sorry implications—is, of course, emotionally and politically charged. Some believe to the depths of their soul that we need to “stay the course” in Iraq and Afghanistan, “fighting them over there, so we don’t have to fight them over here.” Others judge, correctly in our view, that any military effort in the Middle East is akin to entering a knife fight without a knife. You might survive, but not without losing a lot of blood. Individuals in the latter camp are accused of wanting to “cut and run,” as the talk show morons like to say. But few seem to remember the origins of that phrase. When weather demands it, sailors would cut the anchor line and run before the wind to avoid an approaching catastrophe. It was a sign of intelligence in the face of danger.
Missing from the debate is a candid discussion of the true implications of our current war, not just for the U.S. soldiers killed or wounded, and not just for the local citizens wounded or killed by soldiers sent to deliver “democracy” to people who don’t know what the word means. To an Iraqi caught in the crossfire between an occupying army and its tormentors, the word “democracy” now translates as “duck!”
Into this morass, we push forward Doug Casey, Chairman of Casey Research and the editor of the International Speculator, a monthly newsletter focusing on investments with the potential for a 100% or better profit over the next 12 months. Never one for moral equivocation or political correctness, Doug, who wrote the best-selling Crisis Investing (Harper Collins 1980), is an avid student of crisis in its many varieties. He foresaw the coming of what many are now calling a world war in his July, 2001, International Speculator article, “Waiting for World War III”.
A pertinent excerpt…
Waiting for WWIII
What are the greatest problems facing us today? Domestically, I’d say the continual and accelerating loss of freedom, compounded by the prospect of what I suspect could be the biggest financial/economic crisis of modern times. What might that crisis be like? That’s unpredictable, although the odds are it will be unlike any others that are still fresh in people’s memories, simply because people tend to be most prepared for the things that have most recently scared them. The big problems usually come from an unexpected quarter, and/or at an unexpected time. Like the monetary crisis of 1998 that materialized in Thailand.
That said, the question remains of where to look. My guess (although it sounds so unprofessional to use a word like “guess”; a government briefing would substitute a phrase like “our research shows” or “expert opinion indicates”) is that it will come from outside American borders, in the form of war. War is perhaps the worst thing that can happen, not only for the destruction it will cause in itself, but because it will immensely exacerbate America’s domestic problems. As Stirner famously said, “War is the health of the State.”
But neither a declared war, nor a war in the conventional sense, is likely in the cards. U.S. troops have been in combat in a dozen countries since our last “official” war ended in 1945; the U.S. troops stationed in over 100 countries are an accident waiting to happen. Besides the Balkans and Iraq, Colombia is probably highest on the dance card, but almost any place could erupt unpredictably. Who, after all, could have predicted that the U.S. would invade Somalia in 1991, a country few people other than stamp collectors even knew existed. No place is safe from being attacked in The National Interest of the world’s self-appointed policeman.
Anything is possible within this context, but I discount the possibility of another Vietnam, again because of the “recent collective memory” phenomenon. Vietnam is possibly the major reason why the Iraq attack ended so quickly; quick withdrawal obviated any danger that ground troops might get stuck in a major tar baby. But when you’re sticking your nose absolutely everywhere it doesn’t belong, there are lots of ways to get it bloodied. My guess is that something resembling a Crusade is developing against those who live in the Koran Belt. It won’t be overtly religious like the Crusades of the Middle Ages, but it will have major cultural undertones. And there’s every prospect it will be highly unconventional in nature.
And in August of 2002, he (correctly, it turns out) extrapolated where the attack on Iraq would lead, even before the bombs started to fall. (For the full article, see August 2002 “The Forever War, Chapter Next” in the Archives.)
At risk of being unpopular (admittedly a risk I’ve run my whole life), let me state my brief: the impending war is not only unnecessary, it’s unethical, will turn out to be totally counterproductive, will serve to further erode Americans’ freedoms, and move them further towards national bankruptcy, to boot. Are there any positives to it? I’m not sure there are any at all.
Quite frankly, the current drive toward war with a small (13 million people), backward country pretty much on the other side of the globe puzzles me. I have no question that its leader is a sociopath. But that’s true of many, if not most of the world’s leaders, and we aren’t about to start wars with them for that reason; many have been, or are, “allies.”
And here we are, four years later—with Doug’s dire predictions borne out. Where does Doug see things going over the next four years, and what are the Forever War’s more immediate implications for the global economy? We caught up with him in Buenos Aires, Argentina.
Q.: It’s sort of hard to know where to start. One day, the country was ticking along, the next, September 12, 2001, we were up to our neck in a global war. In the beginning, there was an international outpouring of support for the U.S. Now we are increasingly isolated. What was the name of the truck that hit us? Or, put another way, what do you think were the controlling
mindset and principles of the Bush administration that led us to this point?
A.: First let’s look at who’s been pulling the strings in Washington. The Bush Administration is overwhelmingly composed of Neocons.
They’re highly ideological academics and intellectuals who started off as hard-line socialists but converted to “conservatism” because they were bright enough to see socialism is a one-way street to universal poverty. But they don’t believe in free markets for any reason other than they generate more wealth for the people in charge to allocate—pretty much the same pragmatic approach taken by the Chinese Communist Party. And they never believed in personal freedom. Political hacks are pretty similar, no matter where you find them.
The Republicans in the U.S. have always pretended to believe in free markets while they nurtured the warfare state, but they were quite sincere in their disavowal of social freedoms. The Democrats, on the other hand, have always pretended to believe in social freedoms, and sometimes mounted weak rhetorical attacks on the warfare state, but they were quite sincere in their dislike of free markets. It was logical that, as Wolfowitz, Feith, Perle, and the rest of them saw the writing on the economic wall, they’d become Republicans. The Neocons, in other words, take most of the worst in both theory and practice from both parties. They’re fans of both the Welfare State and the Warfare State. They’re dangerous people.
In addition, almost all high-level Bush types are either Zionist Jews or Fundamentalist Christians, in either case reflexive and zealous supporters of the state of Israel. For myself, I have no problem with Israel going about its business; but I think the U.S. should treat it like any other of the world’s 200-odd countries.
Of course the U.S., as evidenced by the approximately $4 billion of aid it gives Israel every year, plus another $1.3 billion to bribe Egypt to be cordial toward Israel, has long treated the country as something approaching the 51st state. Bush has taken this to a new level.
Q.: How do Osama bin Laden and al-Qaeda fit into this?
A.: It’s funny, people talk about Osama bin Laden all the time. But nobody ever listens to him. This is very unwise, in that the single most important thing in a conflict is to understand your opponent’s mindset. Osama has said several times that he’s conducting his jihad for three rather simple and clear reasons. First, he wants foreign troops out of Islamic countries. Second, he wants foreign powers to stop propping up dictators in Islamic countries. Third, he wants foreign powers to cease their support of Israel, which he views as the usurper of Palestinian lands. These impress me as reasonable goals. He’s never said he’s fighting the U.S. because, as Bush seems to think, he “hates our freedom.”
Of course he loathes the U.S. and what it stands for, but that’s really got nothing to do with the actual reasons for his attacks.
The attacks were vastly more successful than Osama could have imagined—but only because of the Administration’s idiotic response. Bush immediately puts the world on notice they’re either “for us or against us,” then invades two small, primitive countries, neither of which had anything to do with the attack. This is followed up with all kinds of draconian measures at home and abroad—Abu Ghraib, Gitmo, snatching people on suspicion, the PATRIOT act, disregard for habeas corpus. Then, at least initially, the American people jumped on the jingoist bandwagon with their self-proclaimed war president and make a big deal of things like Freedom Fries. A hundred heavy-handed and pointless measures added up to convince people around the world that the U.S. had whooped itself into an out-of-control bully, undeserving of sympathy.
The U.S. likes to blame all terrorism on Osama and al-Qaeda. That’s because it makes the problem seem containable; it makes it seem as though there’s just one little group of bad guys the U.S. can track down and eliminate. That was once close to the truth. But now it’s just posturing. Today there are scores of Islamic groups all over the world, with similar worldviews and agendas. Of course they are all mutually sympathetic and try to support one another, but they’re completely independent. The way the U.S. has handled the problem is directly responsible for the metastasis.
Q.: You seem to think that Afghanistan wasn’t complicit in the 9/11 attacks. But there is a strong connection between Osama bin Laden and the Taliban, and even bin Laden himself said he was behind 9/11. So wasn’t some sort of punitive action called for?
A.: The first thing is to decide whether the events of 9/11 were an act of war by another state, or simply an act of criminality by independent actors. Clearly it was the latter. There’s no evidence whatsoever that the government of Afghanistan, run at the time by the Taliban, had anything at all to do with it. Is there a connection between the Taliban and Osama? Yes, of course. Osama was something of a national icon for helping to drive out the Soviet invaders in the ‘80s, which is why he was living there. But people forget that none of the 20 conspirators was an Afghan, and 15 of them, not to mention Osama himself, were Saudis. There was as much reason to attack Saudi Arabia as Afghanistan.
So we have an independent act of criminality with only an incidental tie to Afghans. And these are, incidentally, the same Afghans we armed and supported in their fight to evict the Soviets in 1980. At least the Soviets were invited in by the ruling government, as we were in Vietnam. Somehow we seem to think Afghans like our soldiers running around killing people and destroying property more than they liked the Russians doing the same thing. They don’t. The difference in political goals and the ideological distinctions between the U.S. and Russia are completely lost on these backward, religious, tribal people. So you can plan on the Afghan War growing ever larger and nastier.
Q.: Getting back to what should have been done…
A.: What should have been done if 20 IRA soldiers, or 20 Quebecois separatists, or 20 Colombian Mafiosi had done the same thing? It’s a crime, albeit a very large, spectacular and
unusual one, but you treat it like a crime. The U.S. military is not suited for police work.
Few Americans realize that the Constitution provides for the issuance of “letters of marque,” that authorize private bounty hunters to bring pirates to justice. Outfits modeled on Pinkerton’s of the 19th century or Executive Outcomes of the 20th would be far more effective in dealing with al-Qaeda and vastly cheaper than a regular army. That, and less likely to invite retaliation against the U.S. itself. But who reads the Constitution anymore?
One interesting thing about al-Qaeda and its clones is that I think they’re indicative of the way the world is going to evolve. The nation-state, which is only an historical aberration in the big scheme of things, and a terrible idea, is on its way out. It’s going to be replaced by transnational groups of people who coalesce based on what’s important to them—religion, race, hobbies, philosophy, any of a million things that draw people together. Loyalties won’t be to a bunch of people who happen to share some government ID document, but to self-selected, and much stronger, groups. There’s a lot more I could say about this.
Q.: I think I know your answer this to one already, but why do you think the U.S. invaded Iraq? You’ve said that attacking Iraq for 9/11 would have been like bombing China for Pearl Harbor. So, why did we do it?
A.: Einstein said that, after hydrogen, stupidity was the most common thing in the universe. And I think that really is the best explanation. But Bush gave two reasons for the invasion. One, that Iraq was “linked” to al-Qaeda. Two, that Saddam was developing so-called Weapons of Mass Destruction. At the time I said that both excuses were pitifully transparent, even ridiculous, lies.
As to the first point, Saddam’s Baath regime was highly secular; the Baathists and the Islamic fundamentalists viewed each other as mortal enemies. True, they both had reason to distrust and dislike America in general, and the Bush regime in particular. But Saddam was precisely the type of Arab leader Osama wants to get rid off. The assertion they were “linked” is laughable.
The Weapons of Mass Destruction issue is more interesting. Anybody at all with some money, technical skill and motivation can develop biological and chemical weapons. Atomic weapons are more complex and expensive, but hardly rocket science in today’s world; the methods for making them are well known. My God, even North Korea, one of the most backward countries in the world, has done it. These things used to be lumped together as ABC (atomic, biological, chemical) weapons because they were unconventional. But only atomic weapons are actually capable of mass destruction. The WMD moniker was coined recently by the U.S. as a propaganda gimmick, to create an atmosphere of hysteria conducive to the war. It’s a stupid designation, but the press seems to like it. A classical artillery barrage, or a B-52 strike, is really much more of a WMD than chemical or biological weapons.
By the way, last November, there was a video released showing Saddam and his generals before the Iraq war, discussing the possible use of slingshots, Molotov cocktails and crossbows to fight back against the U.S. In the video, Saddam got quite excited about the idea of providing every Iraqi with a slingshot. So much for the scary WMDs.
In any event, was the fear of Saddam getting ABC weapons a reason to invade Iraq? Well, it wasn’t enough of a reason to invade Israel, India or Pakistan when they got them. The fact is that there are a couple dozen countries that could have a nuclear arsenal within a year if they wanted it. The nuclear weapons genie has long been out of the bottle.
And you don’t have to build them to own them. I’ll be quite surprised if some Russian general doesn’t sell some to a party with the right amount of cash. Or maybe some Russian sergeants, since they’re the ones who actually handle them. But the big danger here is Pakistan. The Islamic world views Musharraf as a stooge of the Americans. After he’s assassinated, the odds of which are very high, there’s no telling what will happen to Pakistan’s nuclear arsenal.
Bush’s rationale for invading Iraq has morphed from the Osama links and WMD’s to an altruistic desire to bring “democracy” to the Middle East. Like almost everything else the man says, it makes no sense. In the first place, democracy is just a means of installing rulers; it doesn’t in any way guarantee protection for free minds or free markets. In fact, in today’s idiom, it’s nothing but mob rule dressed up in a coat and tie. What I personally want is individual liberty, which is possible only with an extremely limited government, whose sole purpose is to protect one’s life and property from aggression. I recognize I’m in a small minority, even among Americans, who today view government as a cornucopia of all they desire and see democracy and majority rule as their opportunity to scoop out as much as they want.
But Americans, even though they’re pretty far from being libertarians, come a lot closer than the average devout Muslim, for whom the Koran is the direct and incontrovertible word of Allah.
It’s not just the prohibition on drinking, gambling and earning interest and the other puritanical features that make the faith unacceptable to me. Not just the obligatory zakat, which, feeling as I do about charity (see IS 6/2006), doesn’t fit. Not just the ritualistic prayer five times a day or the pilgrimage to Mecca. It’s that Islam is more than a religion; it’s a way of life that submerges politics, philosophy, economics, everything. It’s not a religion that allows for much individual liberty; the word itself means “submission.”
Q.: So here we are, three years later, and the situation is a real mess, as you and others accurately warned would happen even before the first shots were fired. Humor us by describing how you think the current mess in the Iraq and then in the Middle East will unfold from here.
A.: One thing is now clear to all but the dimmest observers: the U.S. has lost this war, and the longer it goes on, the worse it will get. The outcome was obvious from the start, because it’s not possible for an army from the other side of the planet to win a guerrilla war. At least not in a politically correct way. You could engage in wholesale ethnic cleansing, the way the Romans, Genghis Khan and Tamerlane did, but, at least in today’s world, that would be counterproductive in any number of ways, entirely apart from moral considerations. Simply killing guerrillas serves no purpose; to the contrary, the more you kill, the more you get. And, as the statistics show, for every fighter you kill, you kill several non-combatants. And there you’re really sowing dragon’s teeth, especially in a society that has high chronic unemployment among young, unmarried males—which are extraordinarily dangerous and volatile creatures.
My guess is that the next U.S. president will try to get out of Iraq and Afghanistan. But it’s going to be harder then, because the U.S. will be in full retreat, taking many more casualties than today. The Brits and other members of the phony “coalition of the willing” have already bailed.
From a strictly tactical point of view, it’s going to be much tougher than leaving Vietnam. The only portion of the Iraqi army that won’t have stripped off their uniforms and turned into the biggest jogging team in Asia will be the ones who are working with the insurgents. But, unfortunately, that’s the best-case scenario.
The worst case, and a not unlikely one, is there is another incident like 9/11, possibly much more serious, especially while Bush is in office. At that point, mass hysteria may take over, and the government will lock the country down like one of its many new federal prisons. If the Iranians are implicated, it may be the excuse Bush is looking for to launch an air strike against them. Now you’re looking at WW3.
A surprising number of Neocon types are saying that WW3 has already started. They’re not just saying that to make an astute observation; they’re saying that because they want the U.S. to actually broaden the war. The enemy is Islam.
To be continued…Doug Casey
.....see next post down for conclusion to this interview
ciao,
fuBarrio
I've since received it in a couple of emails meant for a more general audience as a way to advertise his service so I feel ok reprinting it here for your perusal.
enjoy. Part II is in the next blog post down (posted in reverse chron order so you can read one after the other)
fuBarrio
Make War Your Friend, Part I
With the advent of yet another year, we take a close look at the most powerful and least welcome driver of geo-politics—war. As in the misnamed yet overarching War on Terror and in the more specific War in Iraq and, maybe, coming to a theater near you, the expanding New Crusade for the Middle East.
The topic of war—with all its sorry implications—is, of course, emotionally and politically charged. Some believe to the depths of their soul that we need to “stay the course” in Iraq and Afghanistan, “fighting them over there, so we don’t have to fight them over here.” Others judge, correctly in our view, that any military effort in the Middle East is akin to entering a knife fight without a knife. You might survive, but not without losing a lot of blood. Individuals in the latter camp are accused of wanting to “cut and run,” as the talk show morons like to say. But few seem to remember the origins of that phrase. When weather demands it, sailors would cut the anchor line and run before the wind to avoid an approaching catastrophe. It was a sign of intelligence in the face of danger.
Missing from the debate is a candid discussion of the true implications of our current war, not just for the U.S. soldiers killed or wounded, and not just for the local citizens wounded or killed by soldiers sent to deliver “democracy” to people who don’t know what the word means. To an Iraqi caught in the crossfire between an occupying army and its tormentors, the word “democracy” now translates as “duck!”
Into this morass, we push forward Doug Casey, Chairman of Casey Research and the editor of the International Speculator, a monthly newsletter focusing on investments with the potential for a 100% or better profit over the next 12 months. Never one for moral equivocation or political correctness, Doug, who wrote the best-selling Crisis Investing (Harper Collins 1980), is an avid student of crisis in its many varieties. He foresaw the coming of what many are now calling a world war in his July, 2001, International Speculator article, “Waiting for World War III”.
A pertinent excerpt…
Waiting for WWIII
What are the greatest problems facing us today? Domestically, I’d say the continual and accelerating loss of freedom, compounded by the prospect of what I suspect could be the biggest financial/economic crisis of modern times. What might that crisis be like? That’s unpredictable, although the odds are it will be unlike any others that are still fresh in people’s memories, simply because people tend to be most prepared for the things that have most recently scared them. The big problems usually come from an unexpected quarter, and/or at an unexpected time. Like the monetary crisis of 1998 that materialized in Thailand.
That said, the question remains of where to look. My guess (although it sounds so unprofessional to use a word like “guess”; a government briefing would substitute a phrase like “our research shows” or “expert opinion indicates”) is that it will come from outside American borders, in the form of war. War is perhaps the worst thing that can happen, not only for the destruction it will cause in itself, but because it will immensely exacerbate America’s domestic problems. As Stirner famously said, “War is the health of the State.”
But neither a declared war, nor a war in the conventional sense, is likely in the cards. U.S. troops have been in combat in a dozen countries since our last “official” war ended in 1945; the U.S. troops stationed in over 100 countries are an accident waiting to happen. Besides the Balkans and Iraq, Colombia is probably highest on the dance card, but almost any place could erupt unpredictably. Who, after all, could have predicted that the U.S. would invade Somalia in 1991, a country few people other than stamp collectors even knew existed. No place is safe from being attacked in The National Interest of the world’s self-appointed policeman.
Anything is possible within this context, but I discount the possibility of another Vietnam, again because of the “recent collective memory” phenomenon. Vietnam is possibly the major reason why the Iraq attack ended so quickly; quick withdrawal obviated any danger that ground troops might get stuck in a major tar baby. But when you’re sticking your nose absolutely everywhere it doesn’t belong, there are lots of ways to get it bloodied. My guess is that something resembling a Crusade is developing against those who live in the Koran Belt. It won’t be overtly religious like the Crusades of the Middle Ages, but it will have major cultural undertones. And there’s every prospect it will be highly unconventional in nature.
And in August of 2002, he (correctly, it turns out) extrapolated where the attack on Iraq would lead, even before the bombs started to fall. (For the full article, see August 2002 “The Forever War, Chapter Next” in the Archives.)
At risk of being unpopular (admittedly a risk I’ve run my whole life), let me state my brief: the impending war is not only unnecessary, it’s unethical, will turn out to be totally counterproductive, will serve to further erode Americans’ freedoms, and move them further towards national bankruptcy, to boot. Are there any positives to it? I’m not sure there are any at all.
Quite frankly, the current drive toward war with a small (13 million people), backward country pretty much on the other side of the globe puzzles me. I have no question that its leader is a sociopath. But that’s true of many, if not most of the world’s leaders, and we aren’t about to start wars with them for that reason; many have been, or are, “allies.”
And here we are, four years later—with Doug’s dire predictions borne out. Where does Doug see things going over the next four years, and what are the Forever War’s more immediate implications for the global economy? We caught up with him in Buenos Aires, Argentina.
Q.: It’s sort of hard to know where to start. One day, the country was ticking along, the next, September 12, 2001, we were up to our neck in a global war. In the beginning, there was an international outpouring of support for the U.S. Now we are increasingly isolated. What was the name of the truck that hit us? Or, put another way, what do you think were the controlling
mindset and principles of the Bush administration that led us to this point?
A.: First let’s look at who’s been pulling the strings in Washington. The Bush Administration is overwhelmingly composed of Neocons.
They’re highly ideological academics and intellectuals who started off as hard-line socialists but converted to “conservatism” because they were bright enough to see socialism is a one-way street to universal poverty. But they don’t believe in free markets for any reason other than they generate more wealth for the people in charge to allocate—pretty much the same pragmatic approach taken by the Chinese Communist Party. And they never believed in personal freedom. Political hacks are pretty similar, no matter where you find them.
The Republicans in the U.S. have always pretended to believe in free markets while they nurtured the warfare state, but they were quite sincere in their disavowal of social freedoms. The Democrats, on the other hand, have always pretended to believe in social freedoms, and sometimes mounted weak rhetorical attacks on the warfare state, but they were quite sincere in their dislike of free markets. It was logical that, as Wolfowitz, Feith, Perle, and the rest of them saw the writing on the economic wall, they’d become Republicans. The Neocons, in other words, take most of the worst in both theory and practice from both parties. They’re fans of both the Welfare State and the Warfare State. They’re dangerous people.
In addition, almost all high-level Bush types are either Zionist Jews or Fundamentalist Christians, in either case reflexive and zealous supporters of the state of Israel. For myself, I have no problem with Israel going about its business; but I think the U.S. should treat it like any other of the world’s 200-odd countries.
Of course the U.S., as evidenced by the approximately $4 billion of aid it gives Israel every year, plus another $1.3 billion to bribe Egypt to be cordial toward Israel, has long treated the country as something approaching the 51st state. Bush has taken this to a new level.
Q.: How do Osama bin Laden and al-Qaeda fit into this?
A.: It’s funny, people talk about Osama bin Laden all the time. But nobody ever listens to him. This is very unwise, in that the single most important thing in a conflict is to understand your opponent’s mindset. Osama has said several times that he’s conducting his jihad for three rather simple and clear reasons. First, he wants foreign troops out of Islamic countries. Second, he wants foreign powers to stop propping up dictators in Islamic countries. Third, he wants foreign powers to cease their support of Israel, which he views as the usurper of Palestinian lands. These impress me as reasonable goals. He’s never said he’s fighting the U.S. because, as Bush seems to think, he “hates our freedom.”
Of course he loathes the U.S. and what it stands for, but that’s really got nothing to do with the actual reasons for his attacks.
The attacks were vastly more successful than Osama could have imagined—but only because of the Administration’s idiotic response. Bush immediately puts the world on notice they’re either “for us or against us,” then invades two small, primitive countries, neither of which had anything to do with the attack. This is followed up with all kinds of draconian measures at home and abroad—Abu Ghraib, Gitmo, snatching people on suspicion, the PATRIOT act, disregard for habeas corpus. Then, at least initially, the American people jumped on the jingoist bandwagon with their self-proclaimed war president and make a big deal of things like Freedom Fries. A hundred heavy-handed and pointless measures added up to convince people around the world that the U.S. had whooped itself into an out-of-control bully, undeserving of sympathy.
The U.S. likes to blame all terrorism on Osama and al-Qaeda. That’s because it makes the problem seem containable; it makes it seem as though there’s just one little group of bad guys the U.S. can track down and eliminate. That was once close to the truth. But now it’s just posturing. Today there are scores of Islamic groups all over the world, with similar worldviews and agendas. Of course they are all mutually sympathetic and try to support one another, but they’re completely independent. The way the U.S. has handled the problem is directly responsible for the metastasis.
Q.: You seem to think that Afghanistan wasn’t complicit in the 9/11 attacks. But there is a strong connection between Osama bin Laden and the Taliban, and even bin Laden himself said he was behind 9/11. So wasn’t some sort of punitive action called for?
A.: The first thing is to decide whether the events of 9/11 were an act of war by another state, or simply an act of criminality by independent actors. Clearly it was the latter. There’s no evidence whatsoever that the government of Afghanistan, run at the time by the Taliban, had anything at all to do with it. Is there a connection between the Taliban and Osama? Yes, of course. Osama was something of a national icon for helping to drive out the Soviet invaders in the ‘80s, which is why he was living there. But people forget that none of the 20 conspirators was an Afghan, and 15 of them, not to mention Osama himself, were Saudis. There was as much reason to attack Saudi Arabia as Afghanistan.
So we have an independent act of criminality with only an incidental tie to Afghans. And these are, incidentally, the same Afghans we armed and supported in their fight to evict the Soviets in 1980. At least the Soviets were invited in by the ruling government, as we were in Vietnam. Somehow we seem to think Afghans like our soldiers running around killing people and destroying property more than they liked the Russians doing the same thing. They don’t. The difference in political goals and the ideological distinctions between the U.S. and Russia are completely lost on these backward, religious, tribal people. So you can plan on the Afghan War growing ever larger and nastier.
Q.: Getting back to what should have been done…
A.: What should have been done if 20 IRA soldiers, or 20 Quebecois separatists, or 20 Colombian Mafiosi had done the same thing? It’s a crime, albeit a very large, spectacular and
unusual one, but you treat it like a crime. The U.S. military is not suited for police work.
Few Americans realize that the Constitution provides for the issuance of “letters of marque,” that authorize private bounty hunters to bring pirates to justice. Outfits modeled on Pinkerton’s of the 19th century or Executive Outcomes of the 20th would be far more effective in dealing with al-Qaeda and vastly cheaper than a regular army. That, and less likely to invite retaliation against the U.S. itself. But who reads the Constitution anymore?
One interesting thing about al-Qaeda and its clones is that I think they’re indicative of the way the world is going to evolve. The nation-state, which is only an historical aberration in the big scheme of things, and a terrible idea, is on its way out. It’s going to be replaced by transnational groups of people who coalesce based on what’s important to them—religion, race, hobbies, philosophy, any of a million things that draw people together. Loyalties won’t be to a bunch of people who happen to share some government ID document, but to self-selected, and much stronger, groups. There’s a lot more I could say about this.
Q.: I think I know your answer this to one already, but why do you think the U.S. invaded Iraq? You’ve said that attacking Iraq for 9/11 would have been like bombing China for Pearl Harbor. So, why did we do it?
A.: Einstein said that, after hydrogen, stupidity was the most common thing in the universe. And I think that really is the best explanation. But Bush gave two reasons for the invasion. One, that Iraq was “linked” to al-Qaeda. Two, that Saddam was developing so-called Weapons of Mass Destruction. At the time I said that both excuses were pitifully transparent, even ridiculous, lies.
As to the first point, Saddam’s Baath regime was highly secular; the Baathists and the Islamic fundamentalists viewed each other as mortal enemies. True, they both had reason to distrust and dislike America in general, and the Bush regime in particular. But Saddam was precisely the type of Arab leader Osama wants to get rid off. The assertion they were “linked” is laughable.
The Weapons of Mass Destruction issue is more interesting. Anybody at all with some money, technical skill and motivation can develop biological and chemical weapons. Atomic weapons are more complex and expensive, but hardly rocket science in today’s world; the methods for making them are well known. My God, even North Korea, one of the most backward countries in the world, has done it. These things used to be lumped together as ABC (atomic, biological, chemical) weapons because they were unconventional. But only atomic weapons are actually capable of mass destruction. The WMD moniker was coined recently by the U.S. as a propaganda gimmick, to create an atmosphere of hysteria conducive to the war. It’s a stupid designation, but the press seems to like it. A classical artillery barrage, or a B-52 strike, is really much more of a WMD than chemical or biological weapons.
By the way, last November, there was a video released showing Saddam and his generals before the Iraq war, discussing the possible use of slingshots, Molotov cocktails and crossbows to fight back against the U.S. In the video, Saddam got quite excited about the idea of providing every Iraqi with a slingshot. So much for the scary WMDs.
In any event, was the fear of Saddam getting ABC weapons a reason to invade Iraq? Well, it wasn’t enough of a reason to invade Israel, India or Pakistan when they got them. The fact is that there are a couple dozen countries that could have a nuclear arsenal within a year if they wanted it. The nuclear weapons genie has long been out of the bottle.
And you don’t have to build them to own them. I’ll be quite surprised if some Russian general doesn’t sell some to a party with the right amount of cash. Or maybe some Russian sergeants, since they’re the ones who actually handle them. But the big danger here is Pakistan. The Islamic world views Musharraf as a stooge of the Americans. After he’s assassinated, the odds of which are very high, there’s no telling what will happen to Pakistan’s nuclear arsenal.
Bush’s rationale for invading Iraq has morphed from the Osama links and WMD’s to an altruistic desire to bring “democracy” to the Middle East. Like almost everything else the man says, it makes no sense. In the first place, democracy is just a means of installing rulers; it doesn’t in any way guarantee protection for free minds or free markets. In fact, in today’s idiom, it’s nothing but mob rule dressed up in a coat and tie. What I personally want is individual liberty, which is possible only with an extremely limited government, whose sole purpose is to protect one’s life and property from aggression. I recognize I’m in a small minority, even among Americans, who today view government as a cornucopia of all they desire and see democracy and majority rule as their opportunity to scoop out as much as they want.
But Americans, even though they’re pretty far from being libertarians, come a lot closer than the average devout Muslim, for whom the Koran is the direct and incontrovertible word of Allah.
It’s not just the prohibition on drinking, gambling and earning interest and the other puritanical features that make the faith unacceptable to me. Not just the obligatory zakat, which, feeling as I do about charity (see IS 6/2006), doesn’t fit. Not just the ritualistic prayer five times a day or the pilgrimage to Mecca. It’s that Islam is more than a religion; it’s a way of life that submerges politics, philosophy, economics, everything. It’s not a religion that allows for much individual liberty; the word itself means “submission.”
Q.: So here we are, three years later, and the situation is a real mess, as you and others accurately warned would happen even before the first shots were fired. Humor us by describing how you think the current mess in the Iraq and then in the Middle East will unfold from here.
A.: One thing is now clear to all but the dimmest observers: the U.S. has lost this war, and the longer it goes on, the worse it will get. The outcome was obvious from the start, because it’s not possible for an army from the other side of the planet to win a guerrilla war. At least not in a politically correct way. You could engage in wholesale ethnic cleansing, the way the Romans, Genghis Khan and Tamerlane did, but, at least in today’s world, that would be counterproductive in any number of ways, entirely apart from moral considerations. Simply killing guerrillas serves no purpose; to the contrary, the more you kill, the more you get. And, as the statistics show, for every fighter you kill, you kill several non-combatants. And there you’re really sowing dragon’s teeth, especially in a society that has high chronic unemployment among young, unmarried males—which are extraordinarily dangerous and volatile creatures.
My guess is that the next U.S. president will try to get out of Iraq and Afghanistan. But it’s going to be harder then, because the U.S. will be in full retreat, taking many more casualties than today. The Brits and other members of the phony “coalition of the willing” have already bailed.
From a strictly tactical point of view, it’s going to be much tougher than leaving Vietnam. The only portion of the Iraqi army that won’t have stripped off their uniforms and turned into the biggest jogging team in Asia will be the ones who are working with the insurgents. But, unfortunately, that’s the best-case scenario.
The worst case, and a not unlikely one, is there is another incident like 9/11, possibly much more serious, especially while Bush is in office. At that point, mass hysteria may take over, and the government will lock the country down like one of its many new federal prisons. If the Iranians are implicated, it may be the excuse Bush is looking for to launch an air strike against them. Now you’re looking at WW3.
A surprising number of Neocon types are saying that WW3 has already started. They’re not just saying that to make an astute observation; they’re saying that because they want the U.S. to actually broaden the war. The enemy is Islam.
To be continued…Doug Casey
.....see next post down for conclusion to this interview
ciao,
fuBarrio
Doug Casey Interview Part II
I held off printing any portion of Doug Casey's year-end interview since it was meant for subscribers only at the time it was forwarded to me.
I've since received it in a couple of emails meant for a more general audience as a way to advertise his service so I feel ok reprinting it here for your perusal.
enjoy.
Make War Your Friend, Part II
Q.: What about Iran?
A.: I’m desperately looking for the time to visit Iran while that’s still possible. But my take, from reading and talking to overseas Iranians, of whom there are more than a million in North America alone, is that attacking it would be insane. One reason is that there’s plenty of restiveness among young people; they’ll likely, sooner or later, kick the mullahs out. Unless the U.S. attacks, in which case they’ll unite the way Americans would and try to find a way to counterattack.
Another reason is that Iran is a very large, sophisticated and well-educated place, with plenty of cash—although it’s cash that’s being badly managed, as is always the case with socialist economies. Since WW2, we’ve only invaded really small, poor, primitive places. Iran is big game.
Israel has threatened to act on its own if the Iranians build a nuke. I think that’s most foolish; nobody can hold back technology. But I’d let it be the Israelis’ problem, not ours. They’ve simply got to learn to get along with their neighbors. It’s too bad they live in such a bad neighborhood, but the location was their choice.
Q.: But isn’t Israel fighting for its survival?
A.: As hard as this may be to imagine, Jews, Christians and Muslims got on quite well in the Palestine before the aliyahs, the waves of Jewish immigration, began in earnest early in the 20th century. Then trouble started, as it does whenever there’s massive immigration from a different culture—especially if the newcomers are much better educated, cohesive and motivated than the locals. Things got out of hand when the Jews decided to transform Palestine into Israel in 1949. Israel’s formation is understandable, I suppose, in light of what the Jews had just been through during WW2. And what they’ve done is certainly nothing new in history, which, in addition to being little more than a compilation of the crimes, follies, and misfortunes of mankind, as Gibbon observed, is basically just a register of involuntary real estate transactions. Actually, if the Bible is to be believed, it’s the second time the Jews have done the same thing to the same people in the same place. The Promised Land and all that.
One thing seems baked in the cake: the Israelis aren’t going away voluntarily, and the Muslims, particularly the Arabs, particularly the Palestinians, are very unhappy about it. And the Muslims don’t need to fight to win; simple demographics would seem to guarantee their eventual victory at the ballot box. Democracy in action; that should make the U.S. Government happy. Meanwhile, as the recent Israeli/Hezbollah dust-up in Lebanon has demonstrated, even the military situation is turning against Israel. Their hi-tech, American-style weapons are great for fighting a conventional army. But they’re nearly worthless in asymmetrical, guerrilla-type warfare, where they’re not even fighting another state.
Q.: Isn’t that an overstatement?
A.: I think not. Another thing Osama has said is that he plans to beat the Americans by letting them bankrupt themselves—but Washington seems to have disregarded this statement as well. The math is quite simple. Their cost of fielding a fighter, typically a highly motivated teenager who feels he’s defending his family from alien invaders, is next to nothing. Our cost of fielding a U.S. soldier, typically a teenager looking for a college loan, or an adventure to help him grow up, is hundreds of thousands of dollars. Our cost for an M1 tank, or a Bradley fighting vehicle, is several million dollars. Their cost for an IED to blow up is next to nothing. Our cost for an F-16 to launch an air strike is maybe $40 million. Their cost for a SAM to bring it down is maybe $5,000.
Actually, it’s worse than that. The new Joint Strike Fighter will cost something like $300 million a copy. I can’t imagine who that’s supposed to be used against, besides the U.S. taxpayer. At best it’s an open provocation to the Russians and Chinese. And with the Persian Gulf, basically a shallow and narrow lake, full of U.S. warships at anywhere from $500 million to $5 billion per, it’s going to be a real shooting gallery for anyone who has a good supply of $1 million anti-ship missiles that can travel 2,000 mph. I’m sure the Iranians are planning on swarming the things. If the U.S. Navy isn’t careful, they’re going to wind up looking like the Japanese at Truk Lagoon.
It’s said that the generals always fight the last war. And that’s precisely what the U.S. military is prepared to do.
It’s perverse that the U.S. Government spends more than $400 billion per year on “defense,” almost as much as the rest of the world combined, and America basically has no defense at all. People are in a lather about North Korea launching missiles. This is a complete non-event. If the Koreans, or anyone else, want to attack a U.S. city, the last thing they’ll do is use a missile. Not only are they unreliable and inaccurate, but the victim can tell precisely where it came from, which is equivalent to the attacker signing its own death warrant. I have little doubt there will be one or more nuclear events in the U.S. over the next generation, but the delivery systems will be container ships or private yachts. Cargo plane or private jet. Or maybe FedEx. And nobody will know for sure who sent it. In today’s world, there is no military defense against attack.
Q.: So what should we do? Just roll over to the bad guys?
A.: Of course not. But it pays to think these things out beforehand, not jump around, hooting and panting like a chimpanzee the way Bush is doing. Start by noticing that the “bad guys” all sincerely see themselves as good guys. Even Hitler had the self-image of a man fighting for right against the forces of evil.
It’s insane to go out of your way to provoke people who can do you serious harm, especially if it serves absolutely no purpose. Remember “Bring it on!”? This is just one of several signs that Bush may be psychologically unstable, in addition to being demonstrably unintelligent, ignorant and thoughtless. The accelerating War on Islam has no upside. If it gets out of control, scores of millions of people could die. We’ll defeat them, of course, but it will be a totally Pyrrhic victory. The real winners will be the Chinese and the Indians.
So the wise course is to defuse the bomb before it goes off. Here’s what I suggest:
Withdraw all U.S. troops from foreign soil. As hard as it is for the average American to understand, foreigners like American soldiers running around in their country about as much as Americans would like an Islamic army here. Even if they were supposedly invited by Washington. Prognosis? This will eventually happen, but unfortunately, for pretty much the same reasons the Romans came home.
Cease meddling in other countries’ affairs. Despite our politicians’ certainty that they know what’s best for the natives, economic and military aid should stop. Not just because we have to borrow money from the Chinese to dispense it, but because it always makes steadfast enemies and gains only a fickle friend who has to stay bought. Prognosis? This will happen too, but only when the USG is forced to acknowledge bankruptcy.
Make a sincere and well-publicized apology to the Muslim world for having caused so much grief and promise it won’t happen again. Yes, I recognize the chances of this happening are about the same as those of Bush appointing me SecDef.
Return to the principles that made America unique and the world’s best-loved and most respected country. This is, of course, a complete pipedream.
In light of what needs to be done but won’t be done, I think it’s prudent to prepare for some really rough times ahead.
Q.: So you expect more terrorism?
A.: First, let’s discuss that word. Bush calls what he’s doing now a War on Terror. Which is completely idiotic. Terrorism isn’t an ideology, it’s a method, a tactic. Having a war on terror is as ridiculous as having a war on cavalry charges or frontal assaults or commando raids. Terrorism may be defined as an attack on a society’s non-combatants, with the intention of weakening their support for the status quo. It’s a tactic that melds the political with the military, much as guerrilla warfare does. But what’s new or strange about that? Clausewitz pointed out that war is nothing but the continuation of politics by other methods. Anybody can use terror, and most combatants do. We used terror extensively in WW2 with the fire bombings of places like Hamburg, Dresden and Tokyo, when there was no military reason for it. Terrorism was what the Phoenix Program in Vietnam was all about. Everybody accuses his enemy of terrorism. It only seems illegitimate when the terrorist isn’t a recognized state.
One advantage of terrorism is its low cost. You don’t have to invest billions for cruise missiles to blow something up if you can get a guy to drive a truck full of explosives to the same place. It’s strictly PR to style only the latter as terrorism. Remember the old line “I’m a freedom fighter, you’re a rebel, he’s a terrorist”? You don’t hear it much anymore, I suspect, because it strikes too close to home. It sounds somehow seditious now that the war is underway. But this is to be expected. Truth is always the first casualty in war.
Q.: The current U.S. foreign policy would seem to be the containment of Iran and Syria. But containment turned out to be a failure in Vietnam. Why do you think we are trying it again in the Middle East?
A.: You know, you put people in a position of power, and they’ll predictably find some way to justify their existence by using that power as promiscuously, and therefore stupidly, as possible. It doesn’t matter if we’re talking about the lowliest bedbug working for TSA or the Secretary of State.
Containment was a moronic concept not only when it came to Vietnam, but the whole Soviet empire. These places couldn’t even feed themselves. Their factories were museums of industrial archaeology. Their citizens joked “They pretend to pay us; we pretend to work.” The USSR would have self-destructed decades before it did, were it not for the U.S. acting as a bogeyman, which united its numerous nationalities, all of whom hated one another, against a common enemy. Worse, the U.S. propped the place up with technology transfers and loans. The only thing the Soviets had going was a military, which bankrupted them. And even the military was a paper tiger, as the Afghans proved.
Vietnam had absolutely nothing, only what the Soviets gave them. Except for one thing: spirit, because they were fighting invaders from an alien culture. People will always fight for their homes against foreigners, even if the homes are hovels, and even if they have nothing but sticks and stones for weapons.
To me it just showed how little confidence the average American had, and has, in his civilization that he could actually feel threatened by a small, desperately poor bunch of peasants, who barely even knew that America existed. It’s proof of what Spengler said, that a civilization can’t be conquered from without until it’s already rotted from within.
We should let these people work things out for themselves. By sticking our nose in their business, we make fickle friends but really serious enemies. In fact, we should have let the Soviets and the Nazis sort things out after Hitler attacked in June of 1941. The chances are excellent both empires would have collapsed in exhaustion, and the Cold War, which barely escaped turning into a worldwide thermonuclear war, would have been avoided. No Korea. No Vietnam.
Q.: The ultimate price tag of the war in Iraq alone is estimated to top one trillion dollars. That’s real money. How does the country afford that, and what are the consequences to you and me as taxpayers?
A.: In pre-industrial times, wars could actually make economic sense, at least for the short run. You sent your army somewhere to steal valuable goods—gold, cattle, fabrics, artwork, women, slaves—and bring them back home. The folks back home liked the improvement in their standard of living. Better, after you killed the natives, you could distribute the land to your soldiers. And the natives who were left would be a source of continuing tax revenue. In those days, the most practical version of the Golden Rule was “Do unto others—and do it first.” There was a lot to be said for devastating your neighbors before they became large and powerful enough to devastate you. War, assuming it was successful, had some real advantages.
In today’s technological world, however, war is a totally different animal. Wealth is no longer something you can steal wholesale. This is why I never felt the Soviets would have invaded Western Europe—you can’t effectively steal businesses and technology, which are the main forms of wealth today. As economically illiterate as Marxists are, the Russians intuitively understood that.
The argument is made that we’re in Iraq to steal the oil, which is absolutely the only thing of value in the region. After all, Boobus americanus might self-righteously say to himself, “What’s our oil doing under their sand?” Of course it’s true that the Arabs wouldn’t even know what oil was, much less how to extract and use it, were it not for Western companies—which discovered and developed the deposits, only to have them stolen by the local governments. But in my view, that’s a problem for those companies’ managements and shareholders. It’s perverse to make it the problem of the U.S. taxpayer.
The direct cost of this war has been estimated at between one and two trillion. But who knows? The tab depends on how long the war lasts and how it mutates before the Americans have to abandon everything they’ve done in a panicked exit. Put it this way. Even if we were to ship out every drop of Iraqi oil, at zero production cost, that oil would still cost about $12 per barrel due to the war alone. It’s a ridiculous proposition from an economic point of view.
But the real costs are indirect. I’m not talking about the tens of thousands of permanently
maimed and disfigured U.S. soldiers who will have to be compensated. Or the hundreds of thousands of dead and disabled Iraqis who will never be compensated. Or the wholesale destruction of the country itself. After all, we did pretty much the same thing in Vietnam, and life went on. The problem here is that Bush may have started what amounts to WW3. Vietnam was a small, isolated, pitifully poor and backward place; so we could get away with destroying it… although we almost destroyed ourselves in the process.
The difficulty is that the Muslim world sees itself as a whole. The worldwide Muslim community, notwithstanding the Shia/Sunni conflict, very much sees itself as the ummah, which is somewhat
their equivalent of our term “Christendom,” a term that no longer has much meaning. Fortunately, for most Americans and Europeans, religion is largely a cultural artifact, a relatively insignificant accident of birth. I say fortunately because it liberates their minds to pursue things like science, technology and business; it allows them to think for themselves and not automatically see those who believe in other religions as infidels. Muslims, as a rule, take their religion much more seriously. It’s one reason the Muslim world is so backward.
We forget that the conflict between Islam and the West has been going on for over 1,300 years. Up to the Battle of Vienna in 1683 where the Turks were turned back, the Muslims actually had the upper hand, except for the interlude of the Crusades, when the Europeans invaded the Levant. But since the start of the Industrial Revolution, we’ve had the upper hand. And since the 19th century, most of the states of the Muslim world have been either European colonies or puppet governments. And we drew the boundaries.
It’s a history they resent. So would we.
Q.: Turning to other topics, do you think it is realistic that the U.S. dollar could lose its status as the world’s reserve currency anytime soon? What are the implications and how soon do you think it could happen?
A.: The U.S. dollar will eventually reach its intrinsic value; it’s simply a question of time. The Forever War is greatly accelerating the process. The whole idea of a reserve currency is meaningless if the currency is backed by nothing but the good will of the issuing government. That’s why gold has always been used as money; you don’t have to rely on anyone’s full faith and credit, good will, competence, trade surpluses, self-restraint or anything else. And it’s why gold will again be used, in everyday transactions, as money.
The dollar is a hot potato. there are trillions—nobody knows exactly how many—floating outside the U.S. But only Americans have to accept them, and only the U.S. Government can create them (although the North Koreans do their best). The Chinese have good reason to worry about all those dollars. When they tried to buy the Unocal oil company, they were turned away by the U.S. Government. So, obviously, their dollars weren’t good for that. When Dubai wanted to buy companies that manage six U.S. seaports, they found their dollars had no value.
At some point there’s going to be a panic out of the dollar. When it happens, it’s likely to be the biggest financial upset since the 1930s. Part of the question is what they’ll panic into. The euro? As I have said many times, if the dollar is an “I owe you nothing,” the euro is a “Who owes you nothing?” I think the big beneficiary will be gold. The problem for the world’s economy is that just a trillion dollars—which is only about 1/6 of the dollars outside the U.S. alone—can buy a billion ounces of gold, even at $1,000 an ounce. But only about four billion ounces have ever been mined.
It’s an explosive situation. The one thing you can count on when there’s a crisis is that the government will “do something,” which means controlling its subjects—not, God forbid, itself. And that something is likely to be foreign exchange controls. A small straw in the wind is the new regulation making it illegal to export more than $5 worth of pennies and nickels, because their metal is worth more than their face value—even though there’s no longer much copper in the pennies or nickel in the nickels.
If an American doesn’t get significant assets outside the U.S. now, it may be impossible in the future. The best thing to do is buy real estate abroad, since it’s currently not reportable, like bank and brokerage accounts, and they can’t very well make you repatriate it. I expect, however, very few people will take my advice, even though they may agree with it. But everybody gets what he deserves, so it’s not a problem..
Q.: Looking at the broad picture, it seems like the U.S. government is facing nearly insurmountable odds. The cost of government has soared to something over 50% of GDP, weighing heavily on the private sector, yet there is no end in sight to the wide river of can’t-stop spending… on the military, on Social Security and Medicare—especially in the face of the baby boomers beginning to retire. How does the country manage to maintain that?
A.: Nothing lasts forever. I’ll be surprised if the U.S. is able to maintain its present geographic boundaries for this century. The Mexicans talk of the Reconquista; the gringos stole the Southwest from them in the 1800s, and they’re likely to take it back. What do you think the odds are that a young Latino male in California, 20 years from now, is going to pay 20% of his wages in Social Security and Medicare to support some old white broad in Massachusetts? Especially since he knows he’s never going to get an aluminum nickel back? Even today, polls show that more kids believe in aliens than believe they’ll see any Social Security money.
We’ve had really good times for a whole generation. People become fat and sassy, or in the case of Americans, obese and arrogant, during good times. They don’t think of hanging their leaders from lamp posts until things get seriously bad.
I don’t know how bad things will get. But when I’m asked, I’m prone to quip “Worse than even I think they’ll get.”
Q.: You and the team at Casey Research have been vocal about expecting a major inflation. Yet, other than occasional surprises—such as the 2% jump in the PPI for November—inflation doesn’t seem to be much of a problem. What gives?
A.: Things that you expect to happen usually take longer than you’d think. But once the process gets underway, they usually happen much more quickly. It’s like a boulder balanced on the edge of a cliff; nothing seems to happen until it happens all at once. Just adjust that analogy to the scale of a human lifespan.
The word "inflation" covers two different concepts, and it's important to keep them separate. One concept is monetary inflation, which is an increase in the supply of money that outruns growth in the supply of goods and services. The other concept is price inflation, which is an increase in the overall level of prices for goods and services.
The relationship between the two is the relationship of cause and effect. Monetary inflation causes price inflation. But while almost everyone sees price inflation when it happens, few people notice the monetary inflation that is causing it. And so they tend to blame the producers of goods and services for higher prices—rather than the money-creating government that is the true culprit.
We’re now experiencing a lot of monetary inflation, which eventually will be reflected in price inflation. What’s really going to tip this over the edge, however, is the rest of the world deciding to get out of dollars. A lot of those $6 trillion abroad are going to come back to the U.S., and real goods are going to be packed up and shipped abroad. Inflation will explode.
It’s just a matter of time. But I think it’s going to happen this cycle.
Q.: Last year you went on record early calling for gold to top $700, which it did. But you expected it to end the year at about $750. Currently, it trades at around $640. Why do you think it didn’t hold up? And, just for entertainment purposes, how high do you think it will trade in 2007?
A.: I’m sure the government, directly and indirectly, did everything it could to keep the price down. The last thing they want to see is a gold panic. So the short run is hard to predict. But we’re still relatively early, certainly in terms of price, in what will be a bull market for the record books.
It’s as if you can see the perfect storm brewing. Since I’ve been involved in the markets, there have been a number of times when things could have come unglued—‘70-‘71, with the stock market crash and the devaluation of the dollar, ‘73-‘74, with another market meltdown and financial crisis, ‘80-‘82, when commodities and interest rates both went through the roof, ‘87, ‘92, ‘98, the tech meltdown…
Throughout that time, I’ve always tended to be a bear. In other words, I’ve tended to make my money during the crises; it’s relatively easy to make money during good times. As the tech boom proved, any idiot who knows nothing about the markets or the economy, can do it.
My guess is that the next crisis is going to be breathtaking. And it’s not going to be just financial, but economic, social, military and political. Of course, I hope I’m wrong. If I’m wrong, I’m not likely to get hurt, for a number of reasons. But I don’t want to be inconvenienced if I’m right.
So where is gold going? I hate making predictions. I’m not a fortune teller. But I think this is the year gold goes over $1,000. And then the mania starts for the mining stocks…
Regards,
Doug Casey
...........
ciao for now,
fuBarrio
I've since received it in a couple of emails meant for a more general audience as a way to advertise his service so I feel ok reprinting it here for your perusal.
enjoy.
Make War Your Friend, Part II
Q.: What about Iran?
A.: I’m desperately looking for the time to visit Iran while that’s still possible. But my take, from reading and talking to overseas Iranians, of whom there are more than a million in North America alone, is that attacking it would be insane. One reason is that there’s plenty of restiveness among young people; they’ll likely, sooner or later, kick the mullahs out. Unless the U.S. attacks, in which case they’ll unite the way Americans would and try to find a way to counterattack.
Another reason is that Iran is a very large, sophisticated and well-educated place, with plenty of cash—although it’s cash that’s being badly managed, as is always the case with socialist economies. Since WW2, we’ve only invaded really small, poor, primitive places. Iran is big game.
Israel has threatened to act on its own if the Iranians build a nuke. I think that’s most foolish; nobody can hold back technology. But I’d let it be the Israelis’ problem, not ours. They’ve simply got to learn to get along with their neighbors. It’s too bad they live in such a bad neighborhood, but the location was their choice.
Q.: But isn’t Israel fighting for its survival?
A.: As hard as this may be to imagine, Jews, Christians and Muslims got on quite well in the Palestine before the aliyahs, the waves of Jewish immigration, began in earnest early in the 20th century. Then trouble started, as it does whenever there’s massive immigration from a different culture—especially if the newcomers are much better educated, cohesive and motivated than the locals. Things got out of hand when the Jews decided to transform Palestine into Israel in 1949. Israel’s formation is understandable, I suppose, in light of what the Jews had just been through during WW2. And what they’ve done is certainly nothing new in history, which, in addition to being little more than a compilation of the crimes, follies, and misfortunes of mankind, as Gibbon observed, is basically just a register of involuntary real estate transactions. Actually, if the Bible is to be believed, it’s the second time the Jews have done the same thing to the same people in the same place. The Promised Land and all that.
One thing seems baked in the cake: the Israelis aren’t going away voluntarily, and the Muslims, particularly the Arabs, particularly the Palestinians, are very unhappy about it. And the Muslims don’t need to fight to win; simple demographics would seem to guarantee their eventual victory at the ballot box. Democracy in action; that should make the U.S. Government happy. Meanwhile, as the recent Israeli/Hezbollah dust-up in Lebanon has demonstrated, even the military situation is turning against Israel. Their hi-tech, American-style weapons are great for fighting a conventional army. But they’re nearly worthless in asymmetrical, guerrilla-type warfare, where they’re not even fighting another state.
Q.: Isn’t that an overstatement?
A.: I think not. Another thing Osama has said is that he plans to beat the Americans by letting them bankrupt themselves—but Washington seems to have disregarded this statement as well. The math is quite simple. Their cost of fielding a fighter, typically a highly motivated teenager who feels he’s defending his family from alien invaders, is next to nothing. Our cost of fielding a U.S. soldier, typically a teenager looking for a college loan, or an adventure to help him grow up, is hundreds of thousands of dollars. Our cost for an M1 tank, or a Bradley fighting vehicle, is several million dollars. Their cost for an IED to blow up is next to nothing. Our cost for an F-16 to launch an air strike is maybe $40 million. Their cost for a SAM to bring it down is maybe $5,000.
Actually, it’s worse than that. The new Joint Strike Fighter will cost something like $300 million a copy. I can’t imagine who that’s supposed to be used against, besides the U.S. taxpayer. At best it’s an open provocation to the Russians and Chinese. And with the Persian Gulf, basically a shallow and narrow lake, full of U.S. warships at anywhere from $500 million to $5 billion per, it’s going to be a real shooting gallery for anyone who has a good supply of $1 million anti-ship missiles that can travel 2,000 mph. I’m sure the Iranians are planning on swarming the things. If the U.S. Navy isn’t careful, they’re going to wind up looking like the Japanese at Truk Lagoon.
It’s said that the generals always fight the last war. And that’s precisely what the U.S. military is prepared to do.
It’s perverse that the U.S. Government spends more than $400 billion per year on “defense,” almost as much as the rest of the world combined, and America basically has no defense at all. People are in a lather about North Korea launching missiles. This is a complete non-event. If the Koreans, or anyone else, want to attack a U.S. city, the last thing they’ll do is use a missile. Not only are they unreliable and inaccurate, but the victim can tell precisely where it came from, which is equivalent to the attacker signing its own death warrant. I have little doubt there will be one or more nuclear events in the U.S. over the next generation, but the delivery systems will be container ships or private yachts. Cargo plane or private jet. Or maybe FedEx. And nobody will know for sure who sent it. In today’s world, there is no military defense against attack.
Q.: So what should we do? Just roll over to the bad guys?
A.: Of course not. But it pays to think these things out beforehand, not jump around, hooting and panting like a chimpanzee the way Bush is doing. Start by noticing that the “bad guys” all sincerely see themselves as good guys. Even Hitler had the self-image of a man fighting for right against the forces of evil.
It’s insane to go out of your way to provoke people who can do you serious harm, especially if it serves absolutely no purpose. Remember “Bring it on!”? This is just one of several signs that Bush may be psychologically unstable, in addition to being demonstrably unintelligent, ignorant and thoughtless. The accelerating War on Islam has no upside. If it gets out of control, scores of millions of people could die. We’ll defeat them, of course, but it will be a totally Pyrrhic victory. The real winners will be the Chinese and the Indians.
So the wise course is to defuse the bomb before it goes off. Here’s what I suggest:
Withdraw all U.S. troops from foreign soil. As hard as it is for the average American to understand, foreigners like American soldiers running around in their country about as much as Americans would like an Islamic army here. Even if they were supposedly invited by Washington. Prognosis? This will eventually happen, but unfortunately, for pretty much the same reasons the Romans came home.
Cease meddling in other countries’ affairs. Despite our politicians’ certainty that they know what’s best for the natives, economic and military aid should stop. Not just because we have to borrow money from the Chinese to dispense it, but because it always makes steadfast enemies and gains only a fickle friend who has to stay bought. Prognosis? This will happen too, but only when the USG is forced to acknowledge bankruptcy.
Make a sincere and well-publicized apology to the Muslim world for having caused so much grief and promise it won’t happen again. Yes, I recognize the chances of this happening are about the same as those of Bush appointing me SecDef.
Return to the principles that made America unique and the world’s best-loved and most respected country. This is, of course, a complete pipedream.
In light of what needs to be done but won’t be done, I think it’s prudent to prepare for some really rough times ahead.
Q.: So you expect more terrorism?
A.: First, let’s discuss that word. Bush calls what he’s doing now a War on Terror. Which is completely idiotic. Terrorism isn’t an ideology, it’s a method, a tactic. Having a war on terror is as ridiculous as having a war on cavalry charges or frontal assaults or commando raids. Terrorism may be defined as an attack on a society’s non-combatants, with the intention of weakening their support for the status quo. It’s a tactic that melds the political with the military, much as guerrilla warfare does. But what’s new or strange about that? Clausewitz pointed out that war is nothing but the continuation of politics by other methods. Anybody can use terror, and most combatants do. We used terror extensively in WW2 with the fire bombings of places like Hamburg, Dresden and Tokyo, when there was no military reason for it. Terrorism was what the Phoenix Program in Vietnam was all about. Everybody accuses his enemy of terrorism. It only seems illegitimate when the terrorist isn’t a recognized state.
One advantage of terrorism is its low cost. You don’t have to invest billions for cruise missiles to blow something up if you can get a guy to drive a truck full of explosives to the same place. It’s strictly PR to style only the latter as terrorism. Remember the old line “I’m a freedom fighter, you’re a rebel, he’s a terrorist”? You don’t hear it much anymore, I suspect, because it strikes too close to home. It sounds somehow seditious now that the war is underway. But this is to be expected. Truth is always the first casualty in war.
Q.: The current U.S. foreign policy would seem to be the containment of Iran and Syria. But containment turned out to be a failure in Vietnam. Why do you think we are trying it again in the Middle East?
A.: You know, you put people in a position of power, and they’ll predictably find some way to justify their existence by using that power as promiscuously, and therefore stupidly, as possible. It doesn’t matter if we’re talking about the lowliest bedbug working for TSA or the Secretary of State.
Containment was a moronic concept not only when it came to Vietnam, but the whole Soviet empire. These places couldn’t even feed themselves. Their factories were museums of industrial archaeology. Their citizens joked “They pretend to pay us; we pretend to work.” The USSR would have self-destructed decades before it did, were it not for the U.S. acting as a bogeyman, which united its numerous nationalities, all of whom hated one another, against a common enemy. Worse, the U.S. propped the place up with technology transfers and loans. The only thing the Soviets had going was a military, which bankrupted them. And even the military was a paper tiger, as the Afghans proved.
Vietnam had absolutely nothing, only what the Soviets gave them. Except for one thing: spirit, because they were fighting invaders from an alien culture. People will always fight for their homes against foreigners, even if the homes are hovels, and even if they have nothing but sticks and stones for weapons.
To me it just showed how little confidence the average American had, and has, in his civilization that he could actually feel threatened by a small, desperately poor bunch of peasants, who barely even knew that America existed. It’s proof of what Spengler said, that a civilization can’t be conquered from without until it’s already rotted from within.
We should let these people work things out for themselves. By sticking our nose in their business, we make fickle friends but really serious enemies. In fact, we should have let the Soviets and the Nazis sort things out after Hitler attacked in June of 1941. The chances are excellent both empires would have collapsed in exhaustion, and the Cold War, which barely escaped turning into a worldwide thermonuclear war, would have been avoided. No Korea. No Vietnam.
Q.: The ultimate price tag of the war in Iraq alone is estimated to top one trillion dollars. That’s real money. How does the country afford that, and what are the consequences to you and me as taxpayers?
A.: In pre-industrial times, wars could actually make economic sense, at least for the short run. You sent your army somewhere to steal valuable goods—gold, cattle, fabrics, artwork, women, slaves—and bring them back home. The folks back home liked the improvement in their standard of living. Better, after you killed the natives, you could distribute the land to your soldiers. And the natives who were left would be a source of continuing tax revenue. In those days, the most practical version of the Golden Rule was “Do unto others—and do it first.” There was a lot to be said for devastating your neighbors before they became large and powerful enough to devastate you. War, assuming it was successful, had some real advantages.
In today’s technological world, however, war is a totally different animal. Wealth is no longer something you can steal wholesale. This is why I never felt the Soviets would have invaded Western Europe—you can’t effectively steal businesses and technology, which are the main forms of wealth today. As economically illiterate as Marxists are, the Russians intuitively understood that.
The argument is made that we’re in Iraq to steal the oil, which is absolutely the only thing of value in the region. After all, Boobus americanus might self-righteously say to himself, “What’s our oil doing under their sand?” Of course it’s true that the Arabs wouldn’t even know what oil was, much less how to extract and use it, were it not for Western companies—which discovered and developed the deposits, only to have them stolen by the local governments. But in my view, that’s a problem for those companies’ managements and shareholders. It’s perverse to make it the problem of the U.S. taxpayer.
The direct cost of this war has been estimated at between one and two trillion. But who knows? The tab depends on how long the war lasts and how it mutates before the Americans have to abandon everything they’ve done in a panicked exit. Put it this way. Even if we were to ship out every drop of Iraqi oil, at zero production cost, that oil would still cost about $12 per barrel due to the war alone. It’s a ridiculous proposition from an economic point of view.
But the real costs are indirect. I’m not talking about the tens of thousands of permanently
maimed and disfigured U.S. soldiers who will have to be compensated. Or the hundreds of thousands of dead and disabled Iraqis who will never be compensated. Or the wholesale destruction of the country itself. After all, we did pretty much the same thing in Vietnam, and life went on. The problem here is that Bush may have started what amounts to WW3. Vietnam was a small, isolated, pitifully poor and backward place; so we could get away with destroying it… although we almost destroyed ourselves in the process.
The difficulty is that the Muslim world sees itself as a whole. The worldwide Muslim community, notwithstanding the Shia/Sunni conflict, very much sees itself as the ummah, which is somewhat
their equivalent of our term “Christendom,” a term that no longer has much meaning. Fortunately, for most Americans and Europeans, religion is largely a cultural artifact, a relatively insignificant accident of birth. I say fortunately because it liberates their minds to pursue things like science, technology and business; it allows them to think for themselves and not automatically see those who believe in other religions as infidels. Muslims, as a rule, take their religion much more seriously. It’s one reason the Muslim world is so backward.
We forget that the conflict between Islam and the West has been going on for over 1,300 years. Up to the Battle of Vienna in 1683 where the Turks were turned back, the Muslims actually had the upper hand, except for the interlude of the Crusades, when the Europeans invaded the Levant. But since the start of the Industrial Revolution, we’ve had the upper hand. And since the 19th century, most of the states of the Muslim world have been either European colonies or puppet governments. And we drew the boundaries.
It’s a history they resent. So would we.
Q.: Turning to other topics, do you think it is realistic that the U.S. dollar could lose its status as the world’s reserve currency anytime soon? What are the implications and how soon do you think it could happen?
A.: The U.S. dollar will eventually reach its intrinsic value; it’s simply a question of time. The Forever War is greatly accelerating the process. The whole idea of a reserve currency is meaningless if the currency is backed by nothing but the good will of the issuing government. That’s why gold has always been used as money; you don’t have to rely on anyone’s full faith and credit, good will, competence, trade surpluses, self-restraint or anything else. And it’s why gold will again be used, in everyday transactions, as money.
The dollar is a hot potato. there are trillions—nobody knows exactly how many—floating outside the U.S. But only Americans have to accept them, and only the U.S. Government can create them (although the North Koreans do their best). The Chinese have good reason to worry about all those dollars. When they tried to buy the Unocal oil company, they were turned away by the U.S. Government. So, obviously, their dollars weren’t good for that. When Dubai wanted to buy companies that manage six U.S. seaports, they found their dollars had no value.
At some point there’s going to be a panic out of the dollar. When it happens, it’s likely to be the biggest financial upset since the 1930s. Part of the question is what they’ll panic into. The euro? As I have said many times, if the dollar is an “I owe you nothing,” the euro is a “Who owes you nothing?” I think the big beneficiary will be gold. The problem for the world’s economy is that just a trillion dollars—which is only about 1/6 of the dollars outside the U.S. alone—can buy a billion ounces of gold, even at $1,000 an ounce. But only about four billion ounces have ever been mined.
It’s an explosive situation. The one thing you can count on when there’s a crisis is that the government will “do something,” which means controlling its subjects—not, God forbid, itself. And that something is likely to be foreign exchange controls. A small straw in the wind is the new regulation making it illegal to export more than $5 worth of pennies and nickels, because their metal is worth more than their face value—even though there’s no longer much copper in the pennies or nickel in the nickels.
If an American doesn’t get significant assets outside the U.S. now, it may be impossible in the future. The best thing to do is buy real estate abroad, since it’s currently not reportable, like bank and brokerage accounts, and they can’t very well make you repatriate it. I expect, however, very few people will take my advice, even though they may agree with it. But everybody gets what he deserves, so it’s not a problem..
Q.: Looking at the broad picture, it seems like the U.S. government is facing nearly insurmountable odds. The cost of government has soared to something over 50% of GDP, weighing heavily on the private sector, yet there is no end in sight to the wide river of can’t-stop spending… on the military, on Social Security and Medicare—especially in the face of the baby boomers beginning to retire. How does the country manage to maintain that?
A.: Nothing lasts forever. I’ll be surprised if the U.S. is able to maintain its present geographic boundaries for this century. The Mexicans talk of the Reconquista; the gringos stole the Southwest from them in the 1800s, and they’re likely to take it back. What do you think the odds are that a young Latino male in California, 20 years from now, is going to pay 20% of his wages in Social Security and Medicare to support some old white broad in Massachusetts? Especially since he knows he’s never going to get an aluminum nickel back? Even today, polls show that more kids believe in aliens than believe they’ll see any Social Security money.
We’ve had really good times for a whole generation. People become fat and sassy, or in the case of Americans, obese and arrogant, during good times. They don’t think of hanging their leaders from lamp posts until things get seriously bad.
I don’t know how bad things will get. But when I’m asked, I’m prone to quip “Worse than even I think they’ll get.”
Q.: You and the team at Casey Research have been vocal about expecting a major inflation. Yet, other than occasional surprises—such as the 2% jump in the PPI for November—inflation doesn’t seem to be much of a problem. What gives?
A.: Things that you expect to happen usually take longer than you’d think. But once the process gets underway, they usually happen much more quickly. It’s like a boulder balanced on the edge of a cliff; nothing seems to happen until it happens all at once. Just adjust that analogy to the scale of a human lifespan.
The word "inflation" covers two different concepts, and it's important to keep them separate. One concept is monetary inflation, which is an increase in the supply of money that outruns growth in the supply of goods and services. The other concept is price inflation, which is an increase in the overall level of prices for goods and services.
The relationship between the two is the relationship of cause and effect. Monetary inflation causes price inflation. But while almost everyone sees price inflation when it happens, few people notice the monetary inflation that is causing it. And so they tend to blame the producers of goods and services for higher prices—rather than the money-creating government that is the true culprit.
We’re now experiencing a lot of monetary inflation, which eventually will be reflected in price inflation. What’s really going to tip this over the edge, however, is the rest of the world deciding to get out of dollars. A lot of those $6 trillion abroad are going to come back to the U.S., and real goods are going to be packed up and shipped abroad. Inflation will explode.
It’s just a matter of time. But I think it’s going to happen this cycle.
Q.: Last year you went on record early calling for gold to top $700, which it did. But you expected it to end the year at about $750. Currently, it trades at around $640. Why do you think it didn’t hold up? And, just for entertainment purposes, how high do you think it will trade in 2007?
A.: I’m sure the government, directly and indirectly, did everything it could to keep the price down. The last thing they want to see is a gold panic. So the short run is hard to predict. But we’re still relatively early, certainly in terms of price, in what will be a bull market for the record books.
It’s as if you can see the perfect storm brewing. Since I’ve been involved in the markets, there have been a number of times when things could have come unglued—‘70-‘71, with the stock market crash and the devaluation of the dollar, ‘73-‘74, with another market meltdown and financial crisis, ‘80-‘82, when commodities and interest rates both went through the roof, ‘87, ‘92, ‘98, the tech meltdown…
Throughout that time, I’ve always tended to be a bear. In other words, I’ve tended to make my money during the crises; it’s relatively easy to make money during good times. As the tech boom proved, any idiot who knows nothing about the markets or the economy, can do it.
My guess is that the next crisis is going to be breathtaking. And it’s not going to be just financial, but economic, social, military and political. Of course, I hope I’m wrong. If I’m wrong, I’m not likely to get hurt, for a number of reasons. But I don’t want to be inconvenienced if I’m right.
So where is gold going? I hate making predictions. I’m not a fortune teller. But I think this is the year gold goes over $1,000. And then the mania starts for the mining stocks…
Regards,
Doug Casey
...........
ciao for now,
fuBarrio
Wednesday, January 24, 2007
"Fortune Favors the BALD!"
Perhaps the coolest thing ever happened this morning. One of my 
three readers sent me their rendering of the new fuBarrio mint coin. Now, with this little bit of homework out of the way, I can turn my attention to other pressing matters...like securing our abandoned oil rig, complete with .60 calibre, machine-gun turret and 30 year twinkie supply to wait out any "unintended consequences" of a complete thermonuclear holocaust.....like a disruption in the Hostess snack cakes supply chain!
three readers sent me their rendering of the new fuBarrio mint coin. Now, with this little bit of homework out of the way, I can turn my attention to other pressing matters...like securing our abandoned oil rig, complete with .60 calibre, machine-gun turret and 30 year twinkie supply to wait out any "unintended consequences" of a complete thermonuclear holocaust.....like a disruption in the Hostess snack cakes supply chain!Some of you may have noticed that this is only the "front".....We've run into some difficulty with cameras breaking while trying to get a picture of fuBarrio's backside that we can forward to the artist for a rendering.
Golden Lotus has kindly attributed this to "lax manufacturing standards". One photographer suggested just putting fuBarrio's *face* on the backside of the coin would work just as well. Anyways....I'm not sure, but I think he was trying to be a smart&ss.
ciao for now,
fuBarrio
Primer on Leverage
In my last post I gave a "teaser" talking about ways to "double" your money off of a positive move. I'd like to hedge that talk a little and just focus the discussion on "leveraging" your gains (or losses) on a move in an underlying. In this case, we will focus our discussion on the precious metals.
The reason I'm talking about the precious metals is that I view it as one way to "hedge" currency risk in the dollar. By "currency risk" I'm referring actually to inflation risk, or the expansion of money and credit creation spilling over into the things that you want to or need to buy in the future and thus making your savings less "valuable" to you, the saver.
Why leverage?
Leverage will accelerate the gains (or losses) in the underlying. The reason we are looking for leverage is that (if we are not speculators, and indeed hedgers) is that the insurance that we are looking to buy for our portfolio will be viewed as "dead money". In other words, it is an invest
ment that pays off primarily when things are going poorly for other asset classes.
Gold vs. the Dollar
While we are actually hedging losses in the dollar, I don't have any "hard and fast" data regarding dollar losses and gold (bullion) gains.
It is widely reported that the dollar has lost 30% of its value since 2001. During that same period, gold has nearly tripled.
Gold is money. These kinds of seemingly "outsized" gains have been caused by:
1.) an overadjustment down and up in gold based on recent dollar moves
2.) other currencies inflating or "debasing" along with the dollar thus masking part of the value that has been lost over the last 5 years.
Mining shares vs. Gold
Mining shares have shown to have *around* a 2.5-3 to 1 relationship to the underlying asset on the way up. However, in times of *serious* panic, the shares will probably not do as well in the short run as bullion. If people get comfortable that the sky is not going to fall, and that the mines will have the time to extract their metal without worrying about little things like nuclear winter and a ready market to sell their product to, they will outperform.
I took down some information from the markets and yesterday's movement in gold and silver which was quite strong in order to give you an idea of the relative movements of some of the vehicles for trading the metals market. I will include them in my next post, when we get down to "brass tacks" (no pun intended).
Shares vs. Options
A further way to leverage your price movement is through the use of options (or warrants for Canadian investors). For the purposes of our discussion I will limit myself to options.
Options are exactly that...options to buy (a call) or sell (a put) a specified security at a specified price (or strike price) on or before a specified date (the expiration).
For a call option, the lower the strike and further out the expiration, the more expensive the option. Makes sense if you think about it.
However, just so things are too simple for you, the options' pricing doesn't usually move in a one to one relationship with the underlying stock. For example, if the stock is "way out of the money" or at a price significantly above the current price and it is questionable whether the stock will reach the strike before expiration, the stock will understandably not move up on a 1 for 1 basis with the underlying stock movement.
So why buy them?
Well, a stock that is trading at 50, could have an option to buy at 55 trade for as little as $1 (or less), depending on time to expiration and prospects for future price improvement. In this case, a 12% move in the underlying before expiration and you would double your money. Conversely, if the stock does not move up at least 10%, you would lose your investment.
The discussion of leverage vs. risk management could fill the library of Congress, so I'll just stop there before losing the one person that actually go to this point in the post. In my next post, I'll be more specific about a couple of different strategies, try to outline the risks, and talk about who such strategies may be appropriate for.
Ciao for now,
fuBarrio
The reason I'm talking about the precious metals is that I view it as one way to "hedge" currency risk in the dollar. By "currency risk" I'm referring actually to inflation risk, or the expansion of money and credit creation spilling over into the things that you want to or need to buy in the future and thus making your savings less "valuable" to you, the saver.
Why leverage?
Leverage will accelerate the gains (or losses) in the underlying. The reason we are looking for leverage is that (if we are not speculators, and indeed hedgers) is that the insurance that we are looking to buy for our portfolio will be viewed as "dead money". In other words, it is an invest
ment that pays off primarily when things are going poorly for other asset classes.
Gold vs. the Dollar
While we are actually hedging losses in the dollar, I don't have any "hard and fast" data regarding dollar losses and gold (bullion) gains.
It is widely reported that the dollar has lost 30% of its value since 2001. During that same period, gold has nearly tripled.
Gold is money. These kinds of seemingly "outsized" gains have been caused by:
1.) an overadjustment down and up in gold based on recent dollar moves
2.) other currencies inflating or "debasing" along with the dollar thus masking part of the value that has been lost over the last 5 years.
Mining shares vs. Gold
Mining shares have shown to have *around* a 2.5-3 to 1 relationship to the underlying asset on the way up. However, in times of *serious* panic, the shares will probably not do as well in the short run as bullion. If people get comfortable that the sky is not going to fall, and that the mines will have the time to extract their metal without worrying about little things like nuclear winter and a ready market to sell their product to, they will outperform.
I took down some information from the markets and yesterday's movement in gold and silver which was quite strong in order to give you an idea of the relative movements of some of the vehicles for trading the metals market. I will include them in my next post, when we get down to "brass tacks" (no pun intended).
Shares vs. Options
A further way to leverage your price movement is through the use of options (or warrants for Canadian investors). For the purposes of our discussion I will limit myself to options.
Options are exactly that...options to buy (a call) or sell (a put) a specified security at a specified price (or strike price) on or before a specified date (the expiration).
For a call option, the lower the strike and further out the expiration, the more expensive the option. Makes sense if you think about it.
However, just so things are too simple for you, the options' pricing doesn't usually move in a one to one relationship with the underlying stock. For example, if the stock is "way out of the money" or at a price significantly above the current price and it is questionable whether the stock will reach the strike before expiration, the stock will understandably not move up on a 1 for 1 basis with the underlying stock movement.
So why buy them?
Well, a stock that is trading at 50, could have an option to buy at 55 trade for as little as $1 (or less), depending on time to expiration and prospects for future price improvement. In this case, a 12% move in the underlying before expiration and you would double your money. Conversely, if the stock does not move up at least 10%, you would lose your investment.
The discussion of leverage vs. risk management could fill the library of Congress, so I'll just stop there before losing the one person that actually go to this point in the post. In my next post, I'll be more specific about a couple of different strategies, try to outline the risks, and talk about who such strategies may be appropriate for.
Ciao for now,
fuBarrio
Tuesday, January 23, 2007
Pigs get Fat...
Pigs get fat, hogs get slaughtered.
The line goes something like that. I think it's supposed to be an analogy to warn people to not be "too" greedy.
But, what about chickens?
Beyond the obvious symbolic significance of these animals, it turns out that they have "standing" in Chinese astrology, where a twelve year cycle is symbolized by various animals. Next year, 2007, commencing in February, is the year of the Pig.
Dorothy Kosich in her part-in-jest article entitled “Will Chinese go hog wild for gold in 2007?” noted the Year of the Pig is the last and luckiest year of the 12-year rotation of the Chinese lunar calendar, and is also, by coincidence, a year related to metals on a five-year elemental cycle. Given that pig years are considered to be the lucky years, the combination of the year of the pig and a metals year could well stimulate some demand for precious metals – gold, silver and platinum.
While it's hard to believe that birthyears can effect temperment, the Chinese seem to believe it. Some "hardcore" believers will even tinker with their reproductive cycle in hopes of having a baby born in the year of the dragon.
It comes as no suprise to many who know fuBarrio that he was born under no such "lucky star". fuBarrio it seems was born in the year of the "cock" (curious it wasn't the year of the dog). While he sometimes acts "cocky", it's usually just a cover for his true chicken self. At times, the Chinese are kind and refer to the chicken as a "phoenix" and make it sound exotic. But, if it walks like a chicken....
So what does all this mean?
If you've been playing along at home, you may have noticed that fuBarrio's aggressive gold buys a couple of weeks ago are now up about 5% (605ish to 635ish).....so if he sells now is he a pig, or a chicken? If he holds on for a bigger move is he a pig or a hog? And furthermore, don't all three basically get slaughtered anyways?
If fuBarrio was always this accurate and timely with his calls, he could easily triple his money each and every year without leverage or funky derivative instruments! In probably 8 or 9 years he would own all the money in the world and mint gold coins emblazened with his image from his independently governed oil platform conveniently located offshore from a massive state-side twinky stash.
Unfortunately, he is not very accurate at all....hence the landbased address, late-night posts bordering on lunacy, and lack of faithful fuBarrio images on numismatic gold pieces. In fact, if fuBarrio's typical accuracy holds true, he should be right about as often as he is wrong and should end the year of 2007 with about a 5% gain (all gained in the first 3 weeks of the year). Even more unfortunate, fuBarrio's accountant (Golden Lotus) informed him that a 5% return on $57 is less than $3, and that is probably only good enough to sustain him at his current rate of cash consumption for about an hour and a half.
Drat!
However, fuBarrio has a plan. He is going to leverage his calls in a desperate hope that he will be correct. His hope is to DOUBLE his money on one right call this year and make enough to offset the ravages of inflation on his food stamps' purchasing power.
How does fuBarrio intend to pull off a DOUBLE on one correct move? Tune in tomorrow....At the very least, this could be good for a healthy dose of schaudenfraude.
ciao for now,
fuBarrio
p.s. for anyone taking these comments seriously, please note fuBarrio's oft-mentioned first theorem of bad luck, which in a nutshell states that anything fuBarrio is cocky enough to mention in his blog is probably ripe for a pullback in price!
The line goes something like that. I think it's supposed to be an analogy to warn people to not be "too" greedy.
But, what about chickens?
Beyond the obvious symbolic significance of these animals, it turns out that they have "standing" in Chinese astrology, where a twelve year cycle is symbolized by various animals. Next year, 2007, commencing in February, is the year of the Pig.
Dorothy Kosich in her part-in-jest article entitled “Will Chinese go hog wild for gold in 2007?” noted the Year of the Pig is the last and luckiest year of the 12-year rotation of the Chinese lunar calendar, and is also, by coincidence, a year related to metals on a five-year elemental cycle. Given that pig years are considered to be the lucky years, the combination of the year of the pig and a metals year could well stimulate some demand for precious metals – gold, silver and platinum.
While it's hard to believe that birthyears can effect temperment, the Chinese seem to believe it. Some "hardcore" believers will even tinker with their reproductive cycle in hopes of having a baby born in the year of the dragon.
It comes as no suprise to many who know fuBarrio that he was born under no such "lucky star". fuBarrio it seems was born in the year of the "cock" (curious it wasn't the year of the dog). While he sometimes acts "cocky", it's usually just a cover for his true chicken self. At times, the Chinese are kind and refer to the chicken as a "phoenix" and make it sound exotic. But, if it walks like a chicken....
So what does all this mean?
If you've been playing along at home, you may have noticed that fuBarrio's aggressive gold buys a couple of weeks ago are now up about 5% (605ish to 635ish).....so if he sells now is he a pig, or a chicken? If he holds on for a bigger move is he a pig or a hog? And furthermore, don't all three basically get slaughtered anyways?
If fuBarrio was always this accurate and timely with his calls, he could easily triple his money each and every year without leverage or funky derivative instruments! In probably 8 or 9 years he would own all the money in the world and mint gold coins emblazened with his image from his independently governed oil platform conveniently located offshore from a massive state-side twinky stash.
Unfortunately, he is not very accurate at all....hence the landbased address, late-night posts bordering on lunacy, and lack of faithful fuBarrio images on numismatic gold pieces. In fact, if fuBarrio's typical accuracy holds true, he should be right about as often as he is wrong and should end the year of 2007 with about a 5% gain (all gained in the first 3 weeks of the year). Even more unfortunate, fuBarrio's accountant (Golden Lotus) informed him that a 5% return on $57 is less than $3, and that is probably only good enough to sustain him at his current rate of cash consumption for about an hour and a half.
Drat!
However, fuBarrio has a plan. He is going to leverage his calls in a desperate hope that he will be correct. His hope is to DOUBLE his money on one right call this year and make enough to offset the ravages of inflation on his food stamps' purchasing power.
How does fuBarrio intend to pull off a DOUBLE on one correct move? Tune in tomorrow....At the very least, this could be good for a healthy dose of schaudenfraude.
ciao for now,
fuBarrio
p.s. for anyone taking these comments seriously, please note fuBarrio's oft-mentioned first theorem of bad luck, which in a nutshell states that anything fuBarrio is cocky enough to mention in his blog is probably ripe for a pullback in price!
Monday, January 22, 2007
Santiago! The Good, the Bad, the fUgly
In an effort to do a more rounded job of reporting on our time in Chile, I've decided to break this post up into three small sections focusing on our time in Santiago - the capitol of Chile.
The Good
Chile truly does have some fantastic sites. While in Santiago, GL and I climbed to the top of a hill which has been set aside as a public park. The hill was some sort of fortification in the past and was also adorned with magnificent water features, sanctuaries, staircases, plazas and vistas.The first photo is just past the first stairway. The second photo is about 2/3 of the way up the hill where there is a magnificent plaza overlooking large stretches of the city.
The Bad
Santiago is set at the foot of the mighty Andes mountains. While this technically could/should be a "good" the smog and desert dust in the air made the visibility very low and the mountains remained almost invisible for much of our visit.
Everytime I tried to capture a decent picture of them it wouldn't turn out. It's a shame because they truly look magnificent and *very* close...The one time I was able to get a shot (from the top of the aforementioned hilltop park) there was so much junk in the air, it makes them look a lot more distant than the reality.
The fUgly
This is admittedly a scrappy picture....taken from a moving bus window. I wanted to capture this though:
Cookie-cutter cul de sacs sprinkled with identical stucco sh*t-boxes -- sigh.... For those that don't speak Spanish "ventas" means "sales". Basically, just more overbuilding of stucco boxes in the middle of the desert in the outskirts of the capital and within view of the freeway. Don't we have enough blight like this covering the *North*American desert? Did we really need to go and overbuild the *South*American desert too?
ciao for now,
fuBarrio
Saturday, January 20, 2007
"Everything has proceeded as I have foreseen"
In a little reported bit of news Ben Bernanke told Congress that the Sh*t is "en route" the fan....Duh. And yet, I find no joy in being "right"....again! :) Yeah, I know. Not exactly an act of clairvoyance on my part. Third grade addition, accounting 101, and a 14 year old's insight on human motivation leads one to the same conclusions....I think if I was Bernanke, instead of testifying before congress, I'd just re-enact the SNL bit, "stop buying stuff you CANNOT afford".
While it's clear that there would be even less joy in being wrong (again!), especially as my money is at stake, I truly don't wish for the US to continue on the well-worn path to overexpansion, overspending and eventual empire collapse.
All of these conflicting thoughts have led me to consider a "career" change.
I know what you are thinking, "but fuBarrio, 'unemployed' isn't really a career is it?"
Technically, no....but let's set that aside for the moment. I need to find a career that will allow me to "change the world". Of course, as I peruse my resume it becomes apparent to even the self-deluded that I have no marketable skills.
Given the small "no marketable skills" hurdle I immediately consider a career as "fascist dictator". And, given my location in a small, cohesive latin american country, I think I'm on to something! After a little further research however, I learn that "charisma" is one of the contributing factors to a successful run as fascist dictator....
After discussing these facts with Golden Lotus, we determine that my utter lack of sincerity, likeability, bathing habits, hair, or an army big enough to take power by force, would probably make my "fascist dictator" aspirations difficult to realize for the time being....Besides, given what we've seen in the US, it seems that nepotism plays a big role in the "fascist dictator" position placements....sigh....
For now, I guess I'll have to be happy with Sith Lord.
ciao for now,
fuBarrio
Friday, January 19, 2007
Want some FUBAR? Think "FuBarrio.com" !
Some of you may have noticed that my old blogspot address: http://fubarrio.blogspot.com will automagically forward you to www.fubarrio.com now.
One more small step in my quest to OWN the market for FUBAR. :) For a more clear explanation for my plans for the fubarrio site, I reprint (without consent, neither expressed nor otherwise) this exchange I had with "Copperhead" on the sociedadsouthron site:
"
Copperhead wrote:
So the trip to Chile was basically FUBAR? Hmmm how ironic.Glad to have you back in town T.Copperhead,
fuBarrio wrote:
All part of my master plan to OWN the word "FUBAR" in the customer's mind. While first mover advantage went to the GI's in WWII (I think), the GI's diluted their brand equity by associating with too many things. I, on the other hand, am completely committed to being "first in the mind" of the consumer when it comes to "FUBAR"....therefore everything I do is FUBAR, including my "vacations"!
Imagine this scenario:
(mr. "grey flannel suit"): "Honey, kids, I'm home!"(wife in pearl necklace and heels): "Hello honey, how was your day at your nondescript paper pushing job in a nondescript manufacturing facility of some kind that could only exist in late 50's TV land?"
"Great! But I'm famished...what's on the stove?"
"Oh...well, Jimmy's little league team won today and I'm thinking we should take the family out for a treat of FUBAR!!!"
"that's a great idea, honey, but where can we get FUBAR here in pristine safety of our homogoneous suburb???"
"why, at fubarrio.blogspot.com ....that's where!!!"
"That's great!"
....I'm still working on the jingle."
ciao,
fuBarrio
One more small step in my quest to OWN the market for FUBAR. :) For a more clear explanation for my plans for the fubarrio site, I reprint (without consent, neither expressed nor otherwise) this exchange I had with "Copperhead" on the sociedadsouthron site:
"
Copperhead wrote:
So the trip to Chile was basically FUBAR? Hmmm how ironic.Glad to have you back in town T.Copperhead,
fuBarrio wrote:
All part of my master plan to OWN the word "FUBAR" in the customer's mind. While first mover advantage went to the GI's in WWII (I think), the GI's diluted their brand equity by associating with too many things. I, on the other hand, am completely committed to being "first in the mind" of the consumer when it comes to "FUBAR"....therefore everything I do is FUBAR, including my "vacations"!
Imagine this scenario:
(mr. "grey flannel suit"): "Honey, kids, I'm home!"(wife in pearl necklace and heels): "Hello honey, how was your day at your nondescript paper pushing job in a nondescript manufacturing facility of some kind that could only exist in late 50's TV land?"
"Great! But I'm famished...what's on the stove?"
"Oh...well, Jimmy's little league team won today and I'm thinking we should take the family out for a treat of FUBAR!!!"
"that's a great idea, honey, but where can we get FUBAR here in pristine safety of our homogoneous suburb???"
"why, at fubarrio.blogspot.com ....that's where!!!"
"That's great!"
....I'm still working on the jingle."
ciao,
fuBarrio
We're #10! We're #10! We're #10!....
from intl living postcards....
"Thursday, Jan. 18, 2007
Dear International Living Reader,
Drum roll, please… The cheapest country in the world, according to our just-published Quality of Life Index, is… Narau, formerly Pleasant Island.
But this tiny South Pacific republic taking top honors in the Cost of Living category has little else to recommend it: dangerous waters, a heartland laid to waste by phosphate mining, and an offshore detention center for Australia…not even an official capital.
Hmm…that doesn't sound too appealing. What's next on the list of our "cheapest in 2007" report? Turkmenistan. A government which outlaws opposition. A landlocked country, 80% desert. Inflated "official" economic statistics. A 470-mile border with Afghanistan.
Looks like we'll have to skip down a few places, to #10, before we get the perfect balance of cost of living against quality of life.
But first, a word about our Western bias. In researching and preparing the 2007 Quality of Life Index, our sources, staff, and contributing editors all have definite, preconceived ideas about what constitutes a high or low standard of living. Please also remember that statistics obtained from official government sources are not always current, accurate, or reliable. And some statistics are highly subjective. Since the statistics we gathered don't always reflect our own experiences, we sometimes interject a subjective factor to make the numbers better reflect reality.
That said, the 10th cheapest country in the world, and our top pick, is Uruguay, one of Latin America's First World countries; a country with one of the continent's highest standards of living, lowest levels of corruption, best infrastructures, and lowest cost of living. Uruguay beats every other country in Latin America in our Cost of Living category.
Lee Harrison, IL's Roving Latin America Editor recently bought property here. Here's what he reported back to us while he was scouting:
"It's a gorgeous spring day in the Southern Hemisphere, and I just came from looking at an apartment in the old section of Montevideo that was listed for $19,000. I made a three-cent phone call to set up the appointment, and while I was waiting I had a cheeseburger which cost me 43 cents. A bottle of good cabernet wine is $3.20, and cigarettes cost a buck."
Uruguay is a paradox. South America's second-smallest country--about the size of Missouri--looks like Europe, and it feels like Europe, but with Third-World prices. Wedged between Brazil and Argentina, Uruguay has the lowest poverty level in Latin America and the highest life expectancy. The literacy rate is 98%.
If you love the coast, you'll find Uruguay irresistible. The 210-mile stretch of coastline between the Brazilian border and the Uruguayan capital of Montevideo is among the finest in South America, with endless white-sand beaches, lonely stretches of highway where the woods go right to the water, wildlife preserves, and dazzling resorts. It's a good place to live and invest, and--thanks to the spillover of the Argentina financial crisis--a place where your dollar still goes a long way. Right now, you could buy a large beachfront home here for just $125,000.
With a stable economy and a strong commitment toward outside investment, Uruguay offers a great deal of reliability. The monetary currency is the Uruguayan peso. After the large Argentine devaluation in 2002, Uruguay had a gradual devaluation of its currency. Although the U.S. dollar weakened with respect to the Uruguayan peso in 2005, you will find the general cost of living to be about 30% to 40% cheaper than in the U.S.
The World's Lowest Cost of Living
There's no country in the world like Uruguay.
Uruguay has been granted the qualification of "investment grade," as dispensed by recognized companies, such as the British IBCA and the American Duff & Phelps. This demarcation indicates that Uruguay is considered a country free of risk for investment. It ranks as one of the top three countries in Latin America for the ability to pay its external debt.
Editor's note: Laura Sheridan is the managing editor of International Living, and wishes people would stop coming up to her in the street to give her a pop quiz on what country has the most favorable income tax…who charges the least for a basket of expat essentials…where to find the most museums…and thousands of other statistics, surveys, facts, and stories absorbed in the interest of compiling IL's annual Quality of Life Index. Instead, read the Index, out now, for yourself."
fubarrio's note: some of Lee's prices are out of date, or just plain exaggerated a bit for any neighborhood you'd actually want to live in. it's interesting to note that while Lee goes to Ciudad Vieja and Centro in Montevideo for prices, *his* home purchase was in Punta Del Este :) -- the most expensive town in all of Uruguay. Smart man.
"Thursday, Jan. 18, 2007
Dear International Living Reader,
Drum roll, please… The cheapest country in the world, according to our just-published Quality of Life Index, is… Narau, formerly Pleasant Island.
But this tiny South Pacific republic taking top honors in the Cost of Living category has little else to recommend it: dangerous waters, a heartland laid to waste by phosphate mining, and an offshore detention center for Australia…not even an official capital.
Hmm…that doesn't sound too appealing. What's next on the list of our "cheapest in 2007" report? Turkmenistan. A government which outlaws opposition. A landlocked country, 80% desert. Inflated "official" economic statistics. A 470-mile border with Afghanistan.
Looks like we'll have to skip down a few places, to #10, before we get the perfect balance of cost of living against quality of life.
But first, a word about our Western bias. In researching and preparing the 2007 Quality of Life Index, our sources, staff, and contributing editors all have definite, preconceived ideas about what constitutes a high or low standard of living. Please also remember that statistics obtained from official government sources are not always current, accurate, or reliable. And some statistics are highly subjective. Since the statistics we gathered don't always reflect our own experiences, we sometimes interject a subjective factor to make the numbers better reflect reality.
That said, the 10th cheapest country in the world, and our top pick, is Uruguay, one of Latin America's First World countries; a country with one of the continent's highest standards of living, lowest levels of corruption, best infrastructures, and lowest cost of living. Uruguay beats every other country in Latin America in our Cost of Living category.
Lee Harrison, IL's Roving Latin America Editor recently bought property here. Here's what he reported back to us while he was scouting:
"It's a gorgeous spring day in the Southern Hemisphere, and I just came from looking at an apartment in the old section of Montevideo that was listed for $19,000. I made a three-cent phone call to set up the appointment, and while I was waiting I had a cheeseburger which cost me 43 cents. A bottle of good cabernet wine is $3.20, and cigarettes cost a buck."
Uruguay is a paradox. South America's second-smallest country--about the size of Missouri--looks like Europe, and it feels like Europe, but with Third-World prices. Wedged between Brazil and Argentina, Uruguay has the lowest poverty level in Latin America and the highest life expectancy. The literacy rate is 98%.
If you love the coast, you'll find Uruguay irresistible. The 210-mile stretch of coastline between the Brazilian border and the Uruguayan capital of Montevideo is among the finest in South America, with endless white-sand beaches, lonely stretches of highway where the woods go right to the water, wildlife preserves, and dazzling resorts. It's a good place to live and invest, and--thanks to the spillover of the Argentina financial crisis--a place where your dollar still goes a long way. Right now, you could buy a large beachfront home here for just $125,000.
With a stable economy and a strong commitment toward outside investment, Uruguay offers a great deal of reliability. The monetary currency is the Uruguayan peso. After the large Argentine devaluation in 2002, Uruguay had a gradual devaluation of its currency. Although the U.S. dollar weakened with respect to the Uruguayan peso in 2005, you will find the general cost of living to be about 30% to 40% cheaper than in the U.S.
The World's Lowest Cost of Living
There's no country in the world like Uruguay.
Uruguay has been granted the qualification of "investment grade," as dispensed by recognized companies, such as the British IBCA and the American Duff & Phelps. This demarcation indicates that Uruguay is considered a country free of risk for investment. It ranks as one of the top three countries in Latin America for the ability to pay its external debt.
Editor's note: Laura Sheridan is the managing editor of International Living, and wishes people would stop coming up to her in the street to give her a pop quiz on what country has the most favorable income tax…who charges the least for a basket of expat essentials…where to find the most museums…and thousands of other statistics, surveys, facts, and stories absorbed in the interest of compiling IL's annual Quality of Life Index. Instead, read the Index, out now, for yourself."
fubarrio's note: some of Lee's prices are out of date, or just plain exaggerated a bit for any neighborhood you'd actually want to live in. it's interesting to note that while Lee goes to Ciudad Vieja and Centro in Montevideo for prices, *his* home purchase was in Punta Del Este :) -- the most expensive town in all of Uruguay. Smart man.
Thursday, January 18, 2007
Gold is Money
This is starting to feel like I'm beating horse's bleached bones, but I feel like some people still aren't "getting it".
While it clearly has a use as jewlery. And, although it's used in industry, it doesn't really qualify as a commercial commodity.
While it clearly has a use as jewlery. And, although it's used in industry, it doesn't really qualify as a commercial commodity.
Gold is Money.
The same amount of gold that bought a loaf of bread, and as bought a nice suit in the the time of Jesus, will buy a nice suit, and a loaf of bread now.
It's price (as expressed in dollars) should be thought of as an "exchange rate". While it takes much labor effort and energy to extract an ounce of gold from the ground. Which is why gold's value isn't inflated away. Dollars (and credit for dollars) can be created out of "thin air". This fact alone means that you are betting on the restraint of fallable humans to keep your dollars valuable.
Because Gold is money, it has been known to move up in value during inflationary times -- more dollars are available to chase a smaller amount of gold.
The seemingly paradoxical happens during a DE flationary environment when money of all kinds in horded, and gold goes up in value again (being oft regarded as the 'safest' of all 'safe havens') That is the reason that interest in gold and gold mining shares soared not only during the deflationary 30's, but also the inflationary 70's.
So today the Nasdaq cracked pretty hard. Whether this is the beginning of a more complete "route" in the tech shares or not, I can't even begin to guess. The reason? Without seeing the mainstream media explanation (usually bogus) the only thing i saw that could begin to explain was that we are starting to recognize that we are living in an inflationary environment now.....Or, better put, maybe the evidence is so obvious that the Fed can't pretend that they don't see price inflation any more and may have to do something.
Ok...now, here is where I might actually say something worth your time. Raising the short term rates 1/4 point (or whatever) isn't going to halt inflation if they keep creating money and credit!!! Reread that last line 10 times. Live it. Learn it. Love it.
If you pay attention to the MSM, you will be given stories (over and over and over again) that will explain things in a different light, and eventually you may actually start to believe them. Don't. If cash and credit are growing at a rate faster than the economy can be grown you'll eventually see price inflation.
Price inflation will erode your savings' ability to pay for things in your old age (or earlier) and make all that diligent working and saving a fruitless/worthless effort. Inflation (or the printing of additional dollars and credit) will be an invisible "tax" on your energies and efforts because the govt can print dollars. You can't. It's that simple.
*If* the break in the tech shares was caused (even partially) by a slight inflation scare, it's almost comical that even gold and gold shares were under water today....In a real scare, we're not there yet, people often raise cash first....dollars.....even before they realize that the dollar is exactly what they probably *don't* want to be holding longer term.
While I'm happy with the buys in the 605 area for gold that I posted about on here a week or so ago, I still think one week before Chinese New Year (Feb 18th minus 7 days = Feb 11th) is probably about the right time to be swinging the "big meat" We'll see how I feel as the day approaches.
Peace,
fuBarrio
Tuesday, January 16, 2007
Chilean Water Torture
.....This post will cover the first night and first full day in Chile.
When I we last left you, we were being mercifully driven away from the "Indian Best Western" (Best Eastern?)
In the cab, fuBarrio quickly assured Golden Lotus that our quick inspection of the room probably wasn't enough exposure to need a delousing, but couldn't help unconciously scratching.
A $20 cab ride later, and we ended up in a nice, upscale neighborhood in Santiago called "Provedencia". If you are going to stay in Santiago as a tourist, you should probably put this neighborhood on your "short list". Unfortunately, I can't say the same thing for our hotel.
While worlds better than our previous choice, this hotel's main building was actually full when we arrived. However, they had a separate building that they called their "express"....The "express" rooms were spacious, *relatively* clean, and at 3:00 a.m., after calling 5 different hotels and finding them all full, little details like sheets so worn they are see-through become less of an issue. We woke up six hours later, in time to shower, eat breakfast, and check out.
The bathroom was large and had an inexpensive redecoration done on it recently....the wallpaper was mildewing and peeling slightly. At this point, it wasn't clear why there would be a water problem in a newly redecorated bath. We were so tired when we got in that I didn't even notice the dripping of the shower faucet until the next morning....that is until the maid knocked, entered before we could tell her to go away, and inquired how many people were sleeping in the room -- at 8:30 (grrrr!!!)
I tried to be kind and suggest that she was going to ask if we needed more towels....Golden Lotus insisted that she had assumed "fuBarrio" was a Mexican name and we had an extended family of 12 in the room. I used her visit as an unwelcome wakeup call.
When I turned on the shower, I was relieved to find that the water pressure was nice and strong. Unfortunately, part of the shower head, the part that holds it in place apparently was cracked and half-missing. The force of the shower would, after a spell, push the shower head up and spray water forcefully, directly into the ceiling of the bathroom.
Due to the fact that fuBarrio is of greater than average height (when standing on his hind legs) shower heads in cheaper bath/shower combos (like those found in cheap hotels) typically hit him about mid-chin.
When a shower is functioning properly, it is a minor inconvenience of slouching (more than usual!) or squatting down to wash his wisp of white hair on top of his head.
However, on this occasion, the forcefulness of the showerhead, coupled with height, gave fuBarrio a couple of early morning "nose enemas" on those unfortunate occasions he was stupid enough to be facing the showerhead.
About 45 minutes later when the water draining from fuBarrio's sinuses slowed to a merely "embarrassing" trickle, GL and fB went to the breakfast buffet and make plans for their next night's accomodations.
fuBarrio's main protein source at breakfast were slimy half-cooked scrambled eggs encased in a 4 day old pie crust that the help staff kept replenishing with equally slimy eggs....GL informed fB that one could "tell" how old the pie crust was by the white blisters the liquid had raised on the surface of the crust's bottom.
GL, a coffee nut, after such a long first night, asked where the coffee was. Unlike fuBarrio, GL was not raised on processed food, and was a little confused to find that the coffee was actually a pot of hot water and a small bowl of freeze dried crystals next to it.
fuBarrio tended to stick to the Chilean breads, but after nearing chipping a canine on the surface of one particular piece, he decided to call it a "wrap" on their first breakfast.
At this point, fuBarrio was starting to get the feeling that they were going to have to go a little further "upmarket" in the hotel category to acheive the kind of rest and relaxation he was after....
....After calling around Santiago, we found many of the hotels full in January. fuBarrio found vacancies at the Crown Plaza and Radisson (the Sheraton was hosting a boat cruise and had no vacancies -- very strange for a town without a seaport, but this wasn't the first cruise group we ran into in Santiago).
We decided on the Crown Plaza -- a very nice hotel, and if we hadn't have felt like we needed to leave our cocoon of safety and see the rest of Chile, fuBarrio would probably still be sunning his spotted skin poolside as I type this.
Ciao for now,
fuBarrio
When I we last left you, we were being mercifully driven away from the "Indian Best Western" (Best Eastern?)
In the cab, fuBarrio quickly assured Golden Lotus that our quick inspection of the room probably wasn't enough exposure to need a delousing, but couldn't help unconciously scratching.
A $20 cab ride later, and we ended up in a nice, upscale neighborhood in Santiago called "Provedencia". If you are going to stay in Santiago as a tourist, you should probably put this neighborhood on your "short list". Unfortunately, I can't say the same thing for our hotel.
While worlds better than our previous choice, this hotel's main building was actually full when we arrived. However, they had a separate building that they called their "express"....The "express" rooms were spacious, *relatively* clean, and at 3:00 a.m., after calling 5 different hotels and finding them all full, little details like sheets so worn they are see-through become less of an issue. We woke up six hours later, in time to shower, eat breakfast, and check out.
The bathroom was large and had an inexpensive redecoration done on it recently....the wallpaper was mildewing and peeling slightly. At this point, it wasn't clear why there would be a water problem in a newly redecorated bath. We were so tired when we got in that I didn't even notice the dripping of the shower faucet until the next morning....that is until the maid knocked, entered before we could tell her to go away, and inquired how many people were sleeping in the room -- at 8:30 (grrrr!!!)
I tried to be kind and suggest that she was going to ask if we needed more towels....Golden Lotus insisted that she had assumed "fuBarrio" was a Mexican name and we had an extended family of 12 in the room. I used her visit as an unwelcome wakeup call.
When I turned on the shower, I was relieved to find that the water pressure was nice and strong. Unfortunately, part of the shower head, the part that holds it in place apparently was cracked and half-missing. The force of the shower would, after a spell, push the shower head up and spray water forcefully, directly into the ceiling of the bathroom.
Due to the fact that fuBarrio is of greater than average height (when standing on his hind legs) shower heads in cheaper bath/shower combos (like those found in cheap hotels) typically hit him about mid-chin.
When a shower is functioning properly, it is a minor inconvenience of slouching (more than usual!) or squatting down to wash his wisp of white hair on top of his head.
However, on this occasion, the forcefulness of the showerhead, coupled with height, gave fuBarrio a couple of early morning "nose enemas" on those unfortunate occasions he was stupid enough to be facing the showerhead.
About 45 minutes later when the water draining from fuBarrio's sinuses slowed to a merely "embarrassing" trickle, GL and fB went to the breakfast buffet and make plans for their next night's accomodations.
fuBarrio's main protein source at breakfast were slimy half-cooked scrambled eggs encased in a 4 day old pie crust that the help staff kept replenishing with equally slimy eggs....GL informed fB that one could "tell" how old the pie crust was by the white blisters the liquid had raised on the surface of the crust's bottom.
GL, a coffee nut, after such a long first night, asked where the coffee was. Unlike fuBarrio, GL was not raised on processed food, and was a little confused to find that the coffee was actually a pot of hot water and a small bowl of freeze dried crystals next to it.
fuBarrio tended to stick to the Chilean breads, but after nearing chipping a canine on the surface of one particular piece, he decided to call it a "wrap" on their first breakfast.
At this point, fuBarrio was starting to get the feeling that they were going to have to go a little further "upmarket" in the hotel category to acheive the kind of rest and relaxation he was after....
....After calling around Santiago, we found many of the hotels full in January. fuBarrio found vacancies at the Crown Plaza and Radisson (the Sheraton was hosting a boat cruise and had no vacancies -- very strange for a town without a seaport, but this wasn't the first cruise group we ran into in Santiago).
We decided on the Crown Plaza -- a very nice hotel, and if we hadn't have felt like we needed to leave our cocoon of safety and see the rest of Chile, fuBarrio would probably still be sunning his spotted skin poolside as I type this.
Ciao for now,
fuBarrio
Is this a Buque or a Bus?
Wind whipped through fuBarrio's sundrenched highlights. His tanned face accentuated the impossible whiteness of his perfect smile as he steered his 40 ft Chris Craft Stinger with himself and Golden Lotus across the wake of a passing cruise ship. The boat lept majestically in the air repeatedly crashing down and sending a spray of warm ocean water onto fuBarrio and GL as cheesy sythesizers and guitars played in the background.The wind generated by his vessel's 70 nauts quickly dried the moisture from his pink tank top and white linen jacket. Meanwhile the sun basked him in it's warmth, and he felt quite comfortable...all except for his feet, which he attributed to his leather weave "wicker" shoes. fuBarrio pushed the sleeves of his jacket up higher on his forearm to check the time.
"We should be pulling into Montevideo any second now," fuBarrio said to Golden Lotus as he pointed to his gleeming, oversized rolex.
Just then, Golden Lotus, nodded and pointed out their white Ferrari Testarossa waiting for them onshore....fuBarrio flashed a smile back to her through his five o'clock shadow and wayfarer sunglasses....
Something was amiss however.
Why did fuBarrio have hair and straight teeth? Where did fuBarrio get enough scratch together for a $600k cigarette boat? Why did Golden Lotus have an afro and look like "Tubbs"? And, most telling, why in the world would fuBarrio be wearing *pink*?!?!
Suddenly, the boat lept up in the air off a monstorous wave and crashed down into the bay jolting fuBarrio awake.
It was nighttime. fuBarrio quickly looked in the reflection cast off of the inside of the window of buquebus seat 7d in horror.
Damn! Still bald!
fuBarrio saw his whisp of white hair, scraggly teeth and spotted grey skin looking back at him through his own empty grey eyes. Golden Lotus sat next to him in seat 7c, restored to her former beauty.
But, where was he?
fuBarrio found himself on the ferry boat/bus combination linking Montevideo to Buenos Aires. While mistaking the ferry ride for a drug running caribbean speed boat would have been a bit strange, the reality was this was the *bus* leg of the journey between Colonia and Montevideo!
The bus continued to course and cruise past anyone crazy enough to stay on the road, and power into the passing lane without regard to oncoming traffic anytime it approached anyone doing less than 75MPH in its path.
The lack of shocks on the BuqueBus meant that what might otherwise be regarded as small inconsistencies in the surface of the highway meant that the entire bus would jump and leap and lurch and bounce like a giant whale, or Don Johnson's boat from Miami Vice cruising through the harbor circa 1984.
fuBarrio rubbed his eyes with the back of a paw as the Bus neared Montevideo city. Still thick with a full day of travel and the fog of sleep, fuBarrio could have sworn that he saw Keanu Reeves leaning over and giving navigational advice to Sandra Bullock.
Regardless of the sharper turns, more traffic and generally tighter navigation paths, there seemed to be some sort of imperative that under NO CIRMCUSTANCES could the bus go under 50MPH!fuBarrio imagined that Dennis Hopper had rigged the BuqueBus with a bomb that would explode if it dared slow down. But, when the bus glided to a stop at the tres cruces bus terminal, rather than gaining altitude during a leap across a highway overpass and thus defying the laws of gravity, fuBarrio assumed it was safe to "disemBus".
Alas, in the end, the adventure was captured on neither the small screen nor the silver screen....just another insight into life in Montevideo to be shared with all three readers of his forgotten blog (i added one last week!)
If you get motion sick easily, like Golden Lotus, beware the BuqueBus -- the "Bus" part. Believe it or not...the "buque" is pretty smooth.
(as an aside, I guess I found something that is better in Chile than Uruguay! While Uruguay's buses aren't that bad, Chile's buses are top-notch, comfortable, run on time and are VERY cheap relative to other forms of transportation there.)
Ciao for now,
fuBarrio
Monday, January 15, 2007
Suddenly fuBarrio realizes the value of a garage!
It's "desk clearing" time! All the photos I wasn't able to post while traveling I'll try to get posted in the next couple of days.
This picture was actually taken a couple of weeks ago after a relatively violent windstorm here in Montevideo.
The oak tree in question (outside my home at the time) had caught a disease and stopped producing new leaves. While there hadn't been any immediate urgency to cut it down, the windstorm that whipped through, downed a pretty mature branch.
I missed the damage, but what you can see hopefully) is the outline of where a car was parked on the side of the road underneath where the branch fell. oops.
ciao,
fuBarrio
fuBarrio's "back of envelope" Uruguayan Real Estate Analysis
Ok....
Probably the number one request from all my loyal readers (other than, "take down that "fugly" profile picture of yourself and put up some more of Golden Lotus") has been my take on the real estate market in Uruguay.
Since I know very little about Uruguay outside of Montevideo, I will confine my comments to the Montevidean RE market and single family residences.
In addition, since I'm *very* lazy and only have an hour or so before the daily "10:30 beatdown" in precious metals, I will just try to get my main point across without a lot of historical data to back up my point.
In the states, RE prices can be "back of the envelope" analyzed to be "overvalued" or "undervalued" based on a couple of metrics that tend to hold steady over time.
One of the most straightforward is a Rent vs. Own calculation. While local taxes, maintenance costs, Fed tax writeoffs for interest payments (which vary in value depending on your bracket) will make the calculation a little more difficult, it is usually pretty easy to see when the ratio is COMPLETELY out of whack. In Southern California (and a number of other locations I imagine) one can rent a house for about 1/2 of what it costs to "buy" (pay the bank for the "right" to pay taxes and maintain their home) a similar home. That is an example of "out of whack".
Another is the median income vs. median home price. This is primarily an artifact of someone's ability to repay on a standard 30 year loan (a loan whose popularity is still on the wane in the US) It is still enlightening (for reasons I'll explain later) -- even in a place like Uruguay where loans for residential RE are *very* rare. Typically, 3x median or so is a "safe" number. This dovetails with the "30% of gross salary" that banks used to use as a guideline to determine whether a borrower had the ability to repay a loan. If most people don't make enough repay on a note for a median home, most people can't afford the homes in the area they live. Upside can be limited ano further appreciation is driven by invetors, speculators, and 2nd home purchasers from "out of town".
Another interesting metric is the "cap rate". While different people calculate this somewhat differently, the basis of the calculation is "how much return will I get for invested capital?" For a rented unit (apt or house) an investor would look at the amount of return they could expect (absent appreciation) in the form of gross rent receipts. If the return drops dramatically below what the investor could potentially get elsewhere, it will limit investors, and the only new money entering a market will be speculators -- or people betting on a rise in the underlying asset's value to make up for limited return from rents.
OK....I could drone on and on (as anyone who reads this blog can attest), but I'm flying "slightly" blind in that stats on the Uruguayan RE market are hard to come by....While casas.com.uy can give you an idea on "asking prices", divided by neighborhood, I haven't found a good place that shows me cleared transactions for the city.
But, fuBarrio's "kentucky windage", back of the envelope number (both imperical and anecdotal) puts the median home in Montevideo proper somewhere above US$60k for a SFR (not apartments).
If you were to look around you'd have a DIFFICULT time finding anything fitting the description of "liveable" for under 40k actually, but locals tend to be more forgiving, live in neighborhoods that most foreigners wouldn't and subsequently own cheaper houses. Besides, I'm purposely trying to "lowball" the number to make a point here....
The median income for Montevideo I'm going to put at *around* $5-6k/year. This is at the highend (believe it or not) from everything I've read/heard.
So, of course, *where* you want to live in the city effects the cost of your home pretty dramatically.
For higher end city dwelling Pocitos or Punta Carretas are a couple of neighborhoods that foreigners and better paid young professional Uruguayos select.
"Tres Cruces" I'm going to use as my "middle class" Uruguayan neighborhood. It is close to services, but doesn't have any beach or outstanding features to lure many foreigners.
I'll use "centro" -- downtown -- as a lower end neighborhood. It'll be higher than the cheapest of the burbs likely, but it is not much more expensive than the cheapest of cheap neighborhoods and the cheapest a foreigner is going to feel comfortable in.
The median for a 2bdrm apt in Pocitos is $80k.
A house is little more than twice that (around $180k).
Tres cruces 2bdrm apt is $37k
Tres Cruces for a house is $70k
Centro a 1brdm apt is $32k
Centro a 2bdrm apt is $41k (this is used in place of "house" since there are so few houses in centro.
A quick "back of the envelope" will tell you that in a "middle class" neighborhood the median houses are selling for in excess of 10x median. If you look at a small 2bdrm apt, you are closer to 7-8X median.
If you also consider the fact that financing is rare for RE purchases, one is driven to the conclusion that the recent rise in RE prices is being driven by speculation and in large part by "second home" buyers with sources of income outside of Uruguay.
So what is the outlook for Montevideo Real Estate?
While MVD RE will still look cheap to an outsider, I think given the factors discussed above, the future price outlook depends *mightily* on economic conditions in western Europe, North America, and Argentina. And, further, I think the pricing depends *more* strongly on Real Estate conditions in North America and western Europe.
I *suspect* that a lot of second home buyers (especially those that don't rent the homes part time and just use them as partial year residences) are using equity withdrawal from existing RE in other parts of the world to fund cash purchases of Uruguayan Real Estate.
If the spigot gets turned off on the "equity locusts" you will see a necessary slowing of $200k+ cash purchases in the more "desirable" neighborhoods.
On the other hand, since Uruguayans, for the most part, purchase in cash the low to middle end apartments and homes continue to rent out for about 1/100th of their purchase price per month -- which is about right. They will continue to hold up, however, to accelerate upwards there would need to be a big lift in median incomes to support higher prices.
ciao for now,
fuBarrio
Probably the number one request from all my loyal readers (other than, "take down that "fugly" profile picture of yourself and put up some more of Golden Lotus") has been my take on the real estate market in Uruguay.
Since I know very little about Uruguay outside of Montevideo, I will confine my comments to the Montevidean RE market and single family residences.
In addition, since I'm *very* lazy and only have an hour or so before the daily "10:30 beatdown" in precious metals, I will just try to get my main point across without a lot of historical data to back up my point.
In the states, RE prices can be "back of the envelope" analyzed to be "overvalued" or "undervalued" based on a couple of metrics that tend to hold steady over time.
One of the most straightforward is a Rent vs. Own calculation. While local taxes, maintenance costs, Fed tax writeoffs for interest payments (which vary in value depending on your bracket) will make the calculation a little more difficult, it is usually pretty easy to see when the ratio is COMPLETELY out of whack. In Southern California (and a number of other locations I imagine) one can rent a house for about 1/2 of what it costs to "buy" (pay the bank for the "right" to pay taxes and maintain their home) a similar home. That is an example of "out of whack".
Another is the median income vs. median home price. This is primarily an artifact of someone's ability to repay on a standard 30 year loan (a loan whose popularity is still on the wane in the US) It is still enlightening (for reasons I'll explain later) -- even in a place like Uruguay where loans for residential RE are *very* rare. Typically, 3x median or so is a "safe" number. This dovetails with the "30% of gross salary" that banks used to use as a guideline to determine whether a borrower had the ability to repay a loan. If most people don't make enough repay on a note for a median home, most people can't afford the homes in the area they live. Upside can be limited ano further appreciation is driven by invetors, speculators, and 2nd home purchasers from "out of town".
Another interesting metric is the "cap rate". While different people calculate this somewhat differently, the basis of the calculation is "how much return will I get for invested capital?" For a rented unit (apt or house) an investor would look at the amount of return they could expect (absent appreciation) in the form of gross rent receipts. If the return drops dramatically below what the investor could potentially get elsewhere, it will limit investors, and the only new money entering a market will be speculators -- or people betting on a rise in the underlying asset's value to make up for limited return from rents.
OK....I could drone on and on (as anyone who reads this blog can attest), but I'm flying "slightly" blind in that stats on the Uruguayan RE market are hard to come by....While casas.com.uy can give you an idea on "asking prices", divided by neighborhood, I haven't found a good place that shows me cleared transactions for the city.
But, fuBarrio's "kentucky windage", back of the envelope number (both imperical and anecdotal) puts the median home in Montevideo proper somewhere above US$60k for a SFR (not apartments).
If you were to look around you'd have a DIFFICULT time finding anything fitting the description of "liveable" for under 40k actually, but locals tend to be more forgiving, live in neighborhoods that most foreigners wouldn't and subsequently own cheaper houses. Besides, I'm purposely trying to "lowball" the number to make a point here....
The median income for Montevideo I'm going to put at *around* $5-6k/year. This is at the highend (believe it or not) from everything I've read/heard.
So, of course, *where* you want to live in the city effects the cost of your home pretty dramatically.
For higher end city dwelling Pocitos or Punta Carretas are a couple of neighborhoods that foreigners and better paid young professional Uruguayos select.
"Tres Cruces" I'm going to use as my "middle class" Uruguayan neighborhood. It is close to services, but doesn't have any beach or outstanding features to lure many foreigners.
I'll use "centro" -- downtown -- as a lower end neighborhood. It'll be higher than the cheapest of the burbs likely, but it is not much more expensive than the cheapest of cheap neighborhoods and the cheapest a foreigner is going to feel comfortable in.
The median for a 2bdrm apt in Pocitos is $80k.
A house is little more than twice that (around $180k).
Tres cruces 2bdrm apt is $37k
Tres Cruces for a house is $70k
Centro a 1brdm apt is $32k
Centro a 2bdrm apt is $41k (this is used in place of "house" since there are so few houses in centro.
A quick "back of the envelope" will tell you that in a "middle class" neighborhood the median houses are selling for in excess of 10x median. If you look at a small 2bdrm apt, you are closer to 7-8X median.
If you also consider the fact that financing is rare for RE purchases, one is driven to the conclusion that the recent rise in RE prices is being driven by speculation and in large part by "second home" buyers with sources of income outside of Uruguay.
So what is the outlook for Montevideo Real Estate?
While MVD RE will still look cheap to an outsider, I think given the factors discussed above, the future price outlook depends *mightily* on economic conditions in western Europe, North America, and Argentina. And, further, I think the pricing depends *more* strongly on Real Estate conditions in North America and western Europe.
I *suspect* that a lot of second home buyers (especially those that don't rent the homes part time and just use them as partial year residences) are using equity withdrawal from existing RE in other parts of the world to fund cash purchases of Uruguayan Real Estate.
If the spigot gets turned off on the "equity locusts" you will see a necessary slowing of $200k+ cash purchases in the more "desirable" neighborhoods.
On the other hand, since Uruguayans, for the most part, purchase in cash the low to middle end apartments and homes continue to rent out for about 1/100th of their purchase price per month -- which is about right. They will continue to hold up, however, to accelerate upwards there would need to be a big lift in median incomes to support higher prices.
ciao for now,
fuBarrio
Friday, January 12, 2007
"Hey, let's do MORE of what's NOT WORKING!"
Ok....this is but a brief break from your previously scheduled programming (misadventures of my Chilean "vacation")
I admit that I've been blissfully "out of touch" the last couple of weeks, but I kept seeing reports that President Bush was recommending a troop *increase* among some other tactical changes in Iraq.
Uh....ok, I gotta admit, I really don't have the patience to givto e his proposal a "fair hearing" so I'll just give my first impressions and apologize if it's already been "said to death" in the mainstream media (which I've not yet been subjected to).
This is the trader's equivalent of catching a falling knife.
The market (world in this case) has proven you wrong. So, your "solution" is to just do more of it. Remarkable as it seems, this is a VERY COMMON response to all kinds of problems -- not just trading.
I guess sometimes stubborness actually works. After all, without some amount of pushing, struggling, testing, failing, trying again we never woulda climbed out of the primordial ooze. But the key here is trying something *different* after one things been shown to fail. I'm sure Bushes team is casting this as trying something different, but it just sounds like more of the same right now.
...and didn't Johnson pull something very similar in Vietnam around 1968 with a dramatic escalation in the face of an unpopular/losing war.
As "V for Vendetta" points out, you can't kill an idea.
That's why the "war on terrorism" will never be won.
I highly doubt all those ivy league grads who profit from the military/industrial complex aren't keenly aware of that fact....Winning the "war", or permitting it to end, means another recession in the industry that feeds them, their associates/friends, and their families.
....don't even get me started on the "war on drugs", ugh.
ciao,
fuBarrio
I admit that I've been blissfully "out of touch" the last couple of weeks, but I kept seeing reports that President Bush was recommending a troop *increase* among some other tactical changes in Iraq.
Uh....ok, I gotta admit, I really don't have the patience to givto e his proposal a "fair hearing" so I'll just give my first impressions and apologize if it's already been "said to death" in the mainstream media (which I've not yet been subjected to).
This is the trader's equivalent of catching a falling knife.
The market (world in this case) has proven you wrong. So, your "solution" is to just do more of it. Remarkable as it seems, this is a VERY COMMON response to all kinds of problems -- not just trading.
I guess sometimes stubborness actually works. After all, without some amount of pushing, struggling, testing, failing, trying again we never woulda climbed out of the primordial ooze. But the key here is trying something *different* after one things been shown to fail. I'm sure Bushes team is casting this as trying something different, but it just sounds like more of the same right now.
...and didn't Johnson pull something very similar in Vietnam around 1968 with a dramatic escalation in the face of an unpopular/losing war.
As "V for Vendetta" points out, you can't kill an idea.
That's why the "war on terrorism" will never be won.
I highly doubt all those ivy league grads who profit from the military/industrial complex aren't keenly aware of that fact....Winning the "war", or permitting it to end, means another recession in the industry that feeds them, their associates/friends, and their families.
....don't even get me started on the "war on drugs", ugh.
ciao,
fuBarrio
Thursday, January 11, 2007
Chile on the "cheap"
...sigh....it is with a twinge of sadness, and an inappropriate touch of nostalgia that i type this entry and remove "30 days in Chile" from the top of my blog. Now, unfortunately, only those new visitors crazy enough to read past the first posting will be able to drink from the "vast pool" of my (newfound) knowledge -- all unfortunately focused on Radisson hotels' international calling rates.....(but hey, i hear it pays to specialize!)
Alas, it still remains a story deeply in need of being told, and yet i must move on....and talk about all the *other* crap that turned me off to Chile! :)
Golden Lotus kindly points out that His Holiness the Dalai Lama would say that "holding on" is what leads to suffering, and i should just let the whole Chilean experience go.
I quickly retort my readers (both of them!) tell me that they need new content! Fresh meat! A $172 phone call is yesterday's news! Besides, I already have a tattoo of some Asian symbols that say "peace" or something....So, I'm clearly already enlightened. What do I need with the Dalai Lama's ramblings now? (although i do dig his "baldness")
(Before I go on with my next anecdote, I should point out, out of fairness to the Radisson hotel chain and the country of Chile, that from time to time some parts of my posts may be dramaticized and embellished for the purposes of making a story more entertaining -- for instance, the fact that the front desk at the Radisson I jumped on top of prior to my bomb threat was actually made of maple, not mahogany as I reported.)
Since I don't know where to start, I'll simply start from the beginning....
When we arrived in Santiago, it was late....after midnight. After waiting in line for the better part of 15 minutes or so we arrived at the front of the line only to be told that we had missed a previous stop where we were supposed to pay for an entry visa.
The place to pay for entry was buried behind some stairway (not visible) from the normal flow of traffic moving toward customs, and was in the bowels of the airport. There were no lounges, or even chairs, just hard tile floors
By virtue of the fact that both Golden Lotus and I were holding US passports we were required to pay $100 each to enter Chile. Since I had read about this beforehand, I came prepared with my greenbacks, however there was a woman ahead of us in the line that was having some problems. We were the only three that had to pay for entry.
The woman in front of us was from Mexico. She hadn't been so well briefed and only had Mexican pesos and a cash card. The woman collecting payment for entry wouldn't accept the Mexican pesos. The person at the money changing desk had long since gone home. There were no cash machines. The woman was stuck in "no man's land" -- and the Chilean woman working the visa sales desk had no intention of finding a solution for the woman outside of sleeping on the hard tile.
I agreed to pay for the Mexican woman to get out of "hock", and was relieved to find out that her price was only $15....then angered that her price was only $15... :)
As Golden Lotus pointed out at the time, this entry to Chile, while seemingly inocuous as I retell the story on my blog, didn't give her a "warm fuzzy" feeling about the country or it's attitude towards tourists.
....
We hired a car easily on the other side of customs and were driven to our hotel (booked online for $80/night). It was a "Best Western" if I remember properly. Booking online is so "hit and miss" that I had attempted to get a franchisee of a "so-so" US chain so that I could at least manage the "downside", get something with a pool, and rest up after a late arrival to check out the other hotel options in Santiago.
When we arrived well after midnight the entire building, parking lot, and lobby were pitch black. The cabbie flashed his lights and honked his horn and eventually a floodlight came on in the parking lot.
The "Best Western" was...."interesting"
Some indians (with a dot) had taken over ownership, and apparently as long as you are paying the franchise fees there isn't a lot of influence over the QC of their South American establishments. The interior of the lobby actually had a funky / exotic feel to it, but our room was a bit too "authentic" (indian) for my tastes.
The bellhop took GL's bags up the stairs to the second floor leaving me to haul my bags up the steps myself. I assume the elevator was broken (?)
I'm sorry that I didn't have my camera handy when we arrived at the room, but let's suffice it to say that it was in the top 2 or 3 worst rooms i've ever seen in a lifetime of budget travel in asia, europe, north, central and south america.
The room was *tiny* two impossibly small single beds had been crammed into a room of even more cramped dimensions with ridiculously mismatched and haphazard bedcovers....almost as if they had been custom built to fit in this hovel.
The carpet was low, industrial grade blue with no pad beneath it and unbelievably stained. There was an AC (!), BUT the AC was an old school floor mounted variety circa 1960-something (?) It took up what little space there was at the foot of one of the beds and had greasy dirty ductwork taking the exhaust from the AC to the window that looked out at an interior wall. The furnishings, doors and bathroom were "late 70's trailer". To be fair, in the 60 seconds i spent in the room, i saw no animals (dead or alive).
I pointed out to the bellhop that this couldn't possibly be our room because I had "reserved" a matrimonial bed....In other words, a Queen or something that wasn't separated.
The bellhop basically didn't want to talk to me about it and was more than a little rude in suggesting that I take it up with the manager. As it turns out, they had given my room away, even though I had already reserved it with a credit card.
I kindly told them (really, i hadn't "lost it" yet...it was only the first day) that the room wouldn't do and i'd have to ask them for a recommendation of a competitor. The manager understood, and the bellhop was quick to point out that not all their rooms looked like that. Apparently, he was a little embarrassed by it too (?)
They called us another cab and called ahead to another hotel of similar price to ask about availability for us. The kindest thing I can say about the place we ended up for the night was that it was cheaper (75/night) cleaner (if you didn't look to close at the carpet) and quiet....but the full details of our first 24 hours in glorious Chile will have to wait for the next installment.
Until then.
ciao for now,
fuBarrio
Alas, it still remains a story deeply in need of being told, and yet i must move on....and talk about all the *other* crap that turned me off to Chile! :)
Golden Lotus kindly points out that His Holiness the Dalai Lama would say that "holding on" is what leads to suffering, and i should just let the whole Chilean experience go.
I quickly retort my readers (both of them!) tell me that they need new content! Fresh meat! A $172 phone call is yesterday's news! Besides, I already have a tattoo of some Asian symbols that say "peace" or something....So, I'm clearly already enlightened. What do I need with the Dalai Lama's ramblings now? (although i do dig his "baldness")
(Before I go on with my next anecdote, I should point out, out of fairness to the Radisson hotel chain and the country of Chile, that from time to time some parts of my posts may be dramaticized and embellished for the purposes of making a story more entertaining -- for instance, the fact that the front desk at the Radisson I jumped on top of prior to my bomb threat was actually made of maple, not mahogany as I reported.)
Since I don't know where to start, I'll simply start from the beginning....
When we arrived in Santiago, it was late....after midnight. After waiting in line for the better part of 15 minutes or so we arrived at the front of the line only to be told that we had missed a previous stop where we were supposed to pay for an entry visa.
The place to pay for entry was buried behind some stairway (not visible) from the normal flow of traffic moving toward customs, and was in the bowels of the airport. There were no lounges, or even chairs, just hard tile floors
By virtue of the fact that both Golden Lotus and I were holding US passports we were required to pay $100 each to enter Chile. Since I had read about this beforehand, I came prepared with my greenbacks, however there was a woman ahead of us in the line that was having some problems. We were the only three that had to pay for entry.
The woman in front of us was from Mexico. She hadn't been so well briefed and only had Mexican pesos and a cash card. The woman collecting payment for entry wouldn't accept the Mexican pesos. The person at the money changing desk had long since gone home. There were no cash machines. The woman was stuck in "no man's land" -- and the Chilean woman working the visa sales desk had no intention of finding a solution for the woman outside of sleeping on the hard tile.
I agreed to pay for the Mexican woman to get out of "hock", and was relieved to find out that her price was only $15....then angered that her price was only $15... :)
As Golden Lotus pointed out at the time, this entry to Chile, while seemingly inocuous as I retell the story on my blog, didn't give her a "warm fuzzy" feeling about the country or it's attitude towards tourists.
....
We hired a car easily on the other side of customs and were driven to our hotel (booked online for $80/night). It was a "Best Western" if I remember properly. Booking online is so "hit and miss" that I had attempted to get a franchisee of a "so-so" US chain so that I could at least manage the "downside", get something with a pool, and rest up after a late arrival to check out the other hotel options in Santiago.
When we arrived well after midnight the entire building, parking lot, and lobby were pitch black. The cabbie flashed his lights and honked his horn and eventually a floodlight came on in the parking lot.
The "Best Western" was...."interesting"
Some indians (with a dot) had taken over ownership, and apparently as long as you are paying the franchise fees there isn't a lot of influence over the QC of their South American establishments. The interior of the lobby actually had a funky / exotic feel to it, but our room was a bit too "authentic" (indian) for my tastes.
The bellhop took GL's bags up the stairs to the second floor leaving me to haul my bags up the steps myself. I assume the elevator was broken (?)
I'm sorry that I didn't have my camera handy when we arrived at the room, but let's suffice it to say that it was in the top 2 or 3 worst rooms i've ever seen in a lifetime of budget travel in asia, europe, north, central and south america.
The room was *tiny* two impossibly small single beds had been crammed into a room of even more cramped dimensions with ridiculously mismatched and haphazard bedcovers....almost as if they had been custom built to fit in this hovel.
The carpet was low, industrial grade blue with no pad beneath it and unbelievably stained. There was an AC (!), BUT the AC was an old school floor mounted variety circa 1960-something (?) It took up what little space there was at the foot of one of the beds and had greasy dirty ductwork taking the exhaust from the AC to the window that looked out at an interior wall. The furnishings, doors and bathroom were "late 70's trailer". To be fair, in the 60 seconds i spent in the room, i saw no animals (dead or alive).
I pointed out to the bellhop that this couldn't possibly be our room because I had "reserved" a matrimonial bed....In other words, a Queen or something that wasn't separated.
The bellhop basically didn't want to talk to me about it and was more than a little rude in suggesting that I take it up with the manager. As it turns out, they had given my room away, even though I had already reserved it with a credit card.
I kindly told them (really, i hadn't "lost it" yet...it was only the first day) that the room wouldn't do and i'd have to ask them for a recommendation of a competitor. The manager understood, and the bellhop was quick to point out that not all their rooms looked like that. Apparently, he was a little embarrassed by it too (?)
They called us another cab and called ahead to another hotel of similar price to ask about availability for us. The kindest thing I can say about the place we ended up for the night was that it was cheaper (75/night) cleaner (if you didn't look to close at the carpet) and quiet....but the full details of our first 24 hours in glorious Chile will have to wait for the next installment.
Until then.
ciao for now,
fuBarrio
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