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Dr. Robin McCutcheon
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No matter what Econ101 teaches us -- my tips for you: Follow the money - you'll always find the right answer. Do your own research - do lots of your own research so you know the truth when it hits you in the face. When the data points you in a particular direction, forget theory, go that direction.
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  • Let the Income Distribution Gap Make You Money

    Robert Reich just wrote an opinion piece regarding the dreadful, awful, horrible, very bad way that the income distribution has become more unequal since the early 1970s.  It probably just slipped his mind that Nixon took us off the Gold Exchange Standard August 15, 1971. But that is easy to see in this graph.

    It could be that being a Labor Economist, Dr. Reich has never bothered to study monetary policy or how money is created. Or, possibly, when he did study it, he studied under people who agree that debt being money is a good idea, people who promulgated the idea that monopoly ownership of the money supply is in the public’s best interest. The notion being how can the simple common man actually understand money in all its intricacies? The common folk must have someone far more educated to handle such issues. Right?

    So, how do you use this information to make money? Read on.

    Note that inherent in socialism are equal outcomes—it doesn’t matter from where you start as long as everyone else has what you have and if that does not hold then the system is unfair and unequal. People like Dr. Reich know that the best way to get there is via control of the money supply. Note also that the bottom line of capitalism is that there are NO equal outcomes, not of income nor of anything else. Socialism and capitalism are diametrically opposed ideas.

    So, in order for you to believe Dr. Reich and go along with his ideas you have to fundamentally believe that stealing from one group of people (“the rich”) in order to give to another, more deserving group of people (“the poor”) is morally right. In other words, you have to believe in and condone stealing. What’s a poor Middle Class family to do with all this unequal and unfair income distribution?

    What if you don’t believe Dr. Reich? What if you believe that your productive efforts, most often paid to you in the form of money, belongs to you and you alone? What if you come to see that it’s YOU, my reader, from whom Dr. Reich condones the theft. YOU, my reader, are the people from whom Dr. Reich says, “it’s ok for us, the government, to steal from you, because you’ve been far more productive than the deserving poor.” Or, how about this one, “if you are productive, then you must allow the government to take some of your productivity and give to people who are not as productive as you are.” If you believe this lie, you must stop reading now.

    Socialism and stealing from productive people in order to give to non-productive people walk hand in hand. Socialism and central banking are two sides of the same coin because both ideas allow for theft of your productivity. Socialism condones theft from you through the progressive tax system, i.e., the more productive you are the more is taken from you. And central banking condones theft from you by debasing your currency, so that in order for you to have the same purchasing power you must work longer hours.

    How would those graphs Dr. Reich loves so much look if we had still been on a Gold Exchange Standard? There would have been less printing of money for surely the populace would have seen through the lie that printing money means we can share more wealth. Less printing of money would have meant a stronger dollar, which would have insured a higher purchasing power, which means there would have been less of an income distribution gap. And in Dr. Reich’s world a smaller income distribution gap is better.

    Have you discovered the way I’m making profit on this, yet? First realize that all of Europe is struggling with massive over-borrowing. Standard issue monetary policy dictates that governments must tax and spend their way out of their mutual abyss. That means more income redistribution, only this time it’s redistribution from rich countries to poor countries. German people will not like this when it all finally hits them that they are the productive folks who will bail out the over-borrowed, under-productive countries like Greece.

    Second realize that even the Swiss National Bank is now debasing their currency and the Euro is now in full melt-down territory. It’s coming, you must get ready.

    All other currencies that are totally fiat, are totally subjective in value, and will be completely debased. All senior and junior gold miners are now the best buy. Barrick Gold (ABX), Goldcorp (GG), Yamana Gold (AUY), I AM Gold (IAG), Goldfields (GFI), and Harmony Gold (HMY), are good senior miners to invest in, while Paramount Gold and Silver (PZG) and Great Panther Gold and Silver (GPL) are good junior miners. I also like several penny-stock mini-miners, but they are risky and Seeking Alpha doesn’t let me mention them.



    Disclosure: I am long PZG, GPL.
    Sep 06 10:07 AM | Link | Comment!
  • Naked Profits on a Budget - Junior Gold Miners are a BUY!

    It would be nice to think that the Fed leadership is just not insightful, or perhaps just inept, when it comes to monetary policy, wouldn't it? Any other ideas would be horrible to contemplate, wouldn't they?

    Remember the story of "The Emperor Has No Clothes"? Wasn't it a commoner in the court who saw things as they were, didn't buy into the lie, and just spoke what he actually saw?

    You see, in order to be lied to, you have to first believe the lie. You have to convince yourself that the other person is right while you, yourself are incorrect, and that what you are seeing is not really what you are seeing. What happens if you don't buy into the lie?

    So, how do you use a naked Emperor to make more profit?

    First, you must know what the truth is. What is the truth about monetary policy? In our country, as in all others around the world, debt is money. The world’s monetary policies, the making and creating of money depends solely on people going into debt. Second, you must realize that monetary policy depends solely on people and governments borrowing and paying back the money they’ve borrowed using more borrowed money. All major governments of the world are heavily indebted, and the answer to that debt, they think, is to debase their currency. You must also realize that even forming a more perfect union in Europe won’t rid themselves of debt, as Gerhard Schroeder suggested on September 5, 2011.

    So, you can see that monetary policy will not work if there is no debt, for if there is no debt then there can be no money growth. Therefore, governments and monetary officials the world ‘round must, absolutely MUST print more money.

    On September 1, 2011, CNBC presented a brief look at gold and the history of gold. James Grant, a CNBC guest that day, reiterated for those of us who’ve forgotten that gold is an objective standard by which humans have measured everything for thousands of years. 

    People instinctively know that fiat currency is worthless at best and we humans crave an objective standard by which to measure all other items of value. We humans have for over 6,000 years know that the valuable item is one that is rare, one that requires time, effort, and energy to produce or gather. We humans know, as if it were engrained in our DNA that gold IS that objective standard by which we measure the value of all other things. Gold is our North Star. Gold is the one fixed element, the objective standard by which we’ve valued everything else.

    In the meantime, some people are shouting from the mountain tops that the Emperor has no clothes. So, this is how you turn that small, but significant detail into more profit for you –in other words, this is how you use their model for your own purposes: Their model depends on you and your country borrowing more money. If you stop borrowing money their model fails. The model stops working if you and your country cease borrowing to finance your spending. Sooner or later people will figure this out.

    Buy gold, now while it’s cheap. If you are on a budget consider the Junior Miners Paramount Gold and Silver (PZG) and Great Panther Silver (GPL). Both of these companies have mines that are in relatively safe non-rioting countries

    I even like some penny-stock miners, but cannot mention them on Seeking Alpha.



    Disclosure: I am long PZG, GPL.
    Sep 06 9:10 AM | Link | Comment!
  • Bernanke Said "No - GOLD IS NOT MONEY" - how that helps in the debt crisis
    You have to admit that the long pause between Ron Paul's question, "Do you think gold is money?" and Ben Bernanke's answer, "No," was quite pregnant with expectation. (link to the conversation here, here, and here)

    Note that Dr. Bernanke takes a long time to answer Rep. Paul. Can you just hear the thought going through Dr. Bernanke's head? Hmmm...If I say yes, then central banks all over the world are finished, and the price of gold will skyrocket within minutes. But, it is an asset! Gold is an asset that we hold in our system as a financial reserve. An asset that for six thousand years men have imbued with intrinsic value BECAUSE we have to expend time, effort, and energy to dig it out of the ground. We don't hold diamonds or any other raw material if it doesn't have some unique physical properties. Unique physical properties that allow the asset in question, the substance, to be subdivided an unlimited number of times without changing the chemical make-up of that item. The substance must be scarce, difficult to obtain, must be resilient, and must be recognized as an item of value. The substance must be exchangeable for labor and for other goods and services. Even Keynes knew that gold was an unshakeable guardian of property rights; an idea that needed to be over thrown before Statism could continue its languid walk across the globe. Only Greenspan knew the secret of gold and economic freedom, and he’s nearly gone anyway. So, I cannot say “yes, gold is money.” I must say “No, gold is not money.”


    So, can you just hear that conversation going on in his head? How about the next set of questions from Rep. Paul? “Why do you hold gold as reserves?”

    “Well, it’s tradition, … long-term tradition,” replies Dr. Bernanke. That answer followed closely by the inside-the-head-conversation: Darn!! Why did I say ‘tradition’?!? Gosh it all…’tradition’ …sheesh! We hold gold in our vaults because it’s the money of last resort. That if/when this whole central bank idea gets flushed down the toilet, we’ll still have gold to back up the currency! We’re the bank of last resort, and we’ll still have gold, and more of it than anyone else, too, by the way, to do transactions around the world. Surely I could have come up with a much better answer than ‘tradition’! “People hold gold to protect against tail risk, really, really bad outcomes,” is what I said. Maybe no one will notice what I really said.

    And Bernanke thinks that Treasury Bills are not money, either! So, the head of our central bank doesn’t think that T-Bills are money, yet they’re traded on a minute-by-minute basis on the idea that they are money. It makes you wonder what Dr. Bernanke thinks money really is.

    Watch the video clips I've hyperlinked above and see if you see it on Bernanke's face like I did; the recognition that Rep. Paul finally got Bernanke that gold really, truly is money, that all central bankers think this way as well, and that sooner or later common folk will figure it out too.

    How does this help with the debt crisis? Dr. Bernanke doth protest too much about gold. At the end of the day, someone will realize that the Treasury has over 8,000 tonnes of gold in Fort Knox. With every minute closer to an impasse and no resolution to the debt debacle, gold goes up in dollar terms. Someone will realize that the US already has the asset to back its currency (much like the Swiss). In order to see the actionable advice here, you must read between the lines! You must be able to see that Dr. Bernanke just admitted that gold IS money. If you thought gold and silver were expensive three years ago, when they were averaging $800 and $15 per ounce, just think where the price will go when people figure out that prices coordinate supply and demand. It's going to be really difficult to break out of 6,000 years of habit while nations watch their debt pile up and the value of their currencies crash.

    At the time of this writing the price of gold and silver in nominal US dollars is $1630 and $40 per ounce. Now is the time to buy gold and silver stocks! Just based on fundamentals, I'm still long gold and silver stocks; Great Panther Silver, and Paramount Gold and Silver. (Fundamentals being that debt is debt; someone owing you money is not money.) You must know, however, that raising the debt limit does not eliminate the debt; the problem is not solved; the drama will continue.


    Both GPL and PZG are lively precious metals companies, coming off their 200-day moving averages. See my earlier post here.


     


    Disclosure: I am long PZG, GPL.
    Jul 15 11:56 AM | Link | Comment!
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