Understanding The Credit Crisis

This is worth 10 minutes of your time. Understanding The Credit Crisis.

Teddy Roosevelt, Debt Foregiveness and Second in Command

Dear Friends:

I have been overwhelmed by your replies concerning the current financial crisis. I was most touched by a good friend who shared a Teddy Roosevelt quote, "In any moment of decision, the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing." Good advice, no?

In reading the book "Outraged" this summer, I was struck by the number of people who lose their homes because they can't pay their mortgage due to medical bills. If we are not going to toss people out of their homes who took out mortgages they could never pay for in the first place, how we can foreclose on people who lose their homes for medical reasons? Seems to me that we should just forgive everyone's debt as of a certain date and start over in this country. I don't know if that is the right thing or the wrong thing but it is certainly something.

At the risk of ending on a political note. Please be aware that John McCain will not participate in the first presidential debate because he believes that he should be in Washington focused on our country's financial crisis. Barack is planning to attend the debate and has said that he will remain "available" in case anyone in Washington needs him. However, Barack will not be on the stage alone as McCain will send Palin to debate him because that's what Vice Presidents do when the President is otherwise unavailable.

Dear Friends:

http://www.chrismartenson.com/future_shock Chapter 19.

PLUS:::::I had an extraordinary opportunity to spend some time with a former government employee:

The conversation was mainly around China as he has been involved with the olympics ... Here is some snippets of the discussion that really stuck with me:
(1) The US is a pacific rim country-- look at the map.
(2) Taiwan now has a government that the Chinese feel is predictable. Predictability leads to peace.
(3) The success of the US is inextricably tied to the success of China and vice versa. Neither can fail.
(4) China is buying up the mineral rights in Africa with cheap loans, outright gifts and chinese technology and labor. US debt and US assets are being bought by China.
(5) The Chinese military is more formidable than anyone thinks and it has little to do with technology. They can muster a fighting force equal to the size of the entire US population.
(6) The Chinese are extremely proud of their country -- a feeling that is falling out of fashion in the US.
(7) The Bejing olympics must be successful (I spoke to him in July '08).
(8) The Chinese government are unelected communists. For them to stay in power, they must keep their population happy. This they will do at all costs.
(9) The largest problems (in priority order) for the Chinese government is Pollution, Water and Food. "You are dead if lack 3 minutes of air, 3 days of water, 3 weeks without food".

I asked him about the China judicial system, property rights and the educational system. My sense was that people's rights, like those in the US, are not top of mind because the needs of the population are so basic. However, the educational system is highly advanced and focuses on specialization rather than broad learning (like the US). What this means is that parents or the government predetermine what a child will be when they grow up and then send them away to the appropriate school.

There was a woman from Hong Kong in the conversation circle and she said; "China and the US are like husband and wife. Both sleeping in the same bed but dreaming different dreams." I don't know exactly what she meant; but I sure wish I could think of cool things like this to say.

Gold or Food

Dear Friends:

Well, my last note referenced that $765 gold was looking cheap.

You all must have went out and bought thus moving the gold market up 12% in 3 days. Thank you.

One of you replied to me that perhaps buying food is a better choice as it is much more easily bartered than gold. Hmmm, knowing the social circles that some of you travel in, my guess is that you would be storing upscale food. Therefore, I offer you the following..... http://www.thereadyproject.com/

On The Money

Dear Friends:

Dr. Martenson completed chapter 18 last week. If you have not been taking his crash course (and I suggest you consider taking the time to do so), this chapter is a good summary of all that was covered before. Try it.

http://www.chrismartenson.com/environmental_data

Now, this weekend the US Government is trying to decide how to help Lehman (and probably WAMU). If you don't think something big is happening then you may be blinded by the political news which taking the oxygen out of really important news. The Fed has printed almost a Trillion Dollars this year to maintain the money supply and do the financial bail out of Bear Sterns, Fmac, Fmae. Seems inflationary to me and I think a sound personal financial strategy now needs to consider future inflation.

I know some of you will say that we really didn't print the money but rather provided US government backing to cover the losses. So let's add this to other off-balance sheet financing like Social Security and Medicare. So do the math: If the US government took 100% of all salaries, wages and corporate profits, it can barely meet its obligations on an annual basis-- this is a tipping point.

Gold is starting to look pretty cheap at $765/oz.