ja_mageia

Due to the financial crash that has taken place over the past few weeks, any definition of the word “risk” that anyone had previously believed in, has since gone out the window. The world’s largest risk manager, AIG, an insurance monolith of the American financial empire, is now bankrupt. Let’s think about this for a moment... Was there a catastrophic hurricane, earthquake, tsunami, or drought? No…

No act of God could be a plausible explanation for the ‘evaporation’ of their $300 Billion USD. Remember over the last few years, AIG was actually worth that much. Merrill Lynch, Bear Stearns, Fannie Mae and Freddie Mac, Washington Mutual, Lehman Brothers, are also now all broke. Even General Motors is worth less than it was worth in the 1930’s. It ‘seems’ as if the pillars of American capitalism are crumbling into dust, yet the executives of these corporations are still collecting 10’s of millions of dollars. AIG spent a cool half mill  at a California beach retreat right after the Government bailout, sellout, wherever, I guess the traditional ‘risk free’ investment of banks and mortgage companies don’t quite fit our previously held definition of ‘risk’ anymore.

So, what caused this catastrophe?

Leverage - This is what created the whole problem in the first place. One dollar as a deposit, mortgage, or any other tangible asset was allowed to be turned by banks into twenty, thirty, or even more to lend people who didn’t need it or couldn’t manage it. Once the assets, real estate, then stocks or any other financial asset began to collapse, momentum increased as margin calls and redemption required more and more cash.

The Cure? 

Print more money, bail out whoever, or do whatever it takes. The latest bailout is $750 Billion of hard earned tax payers cash. Oh yeah, the US Treasury’s Secretary gets to play God - buy garbage paper for good old cash. Meanwhile, what about the Bob Cratchit and Tiny Tim who finally thought they could own a little cubby-hole in some suburban wasteland? I guess Scrooge (The Federal Reserve, private banks, etc.) will see that there is no Christmas for them. The foreclosures continue for the hard working American families as Wall Street laughs at the people who built the country that once stood so proud. This is the largest swindle of taxpayers dollars the world has ever seen.

Again the powers-that-be believe that if we just keep printing money, everything will be ok. Like everything else in life, The more you have of something (supply) the less valuable it becomes.

"U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation."

Ben Bernanke, 14th Chairman of the Federal Reserve

Bernanke also said he’d throw dollars from helicopters if that’s what it would take to save the system.

Our Objective

Based on this rather simplistic scenario, we believe this lack of trust, (who owes who what?) the debasement of currencies by excessive bailout, and the general market fear should make us demand something real. Monopoly money just won’t cut it anymore. This is why we at withouttherisk.com are focusing on finite tangible assets – Energies, Precious Metals, and food.