[rohry]

"One has to think how much the financial world has changed over the last two decades. It appears that Washington and Wall Street have become fully infected by the ghost of John Maynard Keynes. The phrase by Richard Nixon that, “We are all Keynesians now.” has never been truer. The fact that financial markets have become inflated, there is a bubble in bonds, mortgages, and real estate and consumption, and that there is a record amount of debt in this country is looked upon as signs of a robust economy. Instead, it should be raising concerns and alarm bells that something has gone amiss in our society."

[rohry]

Market WrapUp is delivered...

[montag813]

Enjoy today's rally. We will sell off 500 Dow points into the end of the week.

[Willie Green]

On Creating Wealth
"Printing Money to Induce Wealth Effects
When interest rates are positive and policy actions lower them, one channel through which aggregate demand is raised is the wealth effect generated by higher asset prices. But if interest rates are at the zero bound, then there are no wealth effects from the open market operations in these assets. This leaves wealth effects operative only if the central bank can directly engineer increases in wealth either by purchasing assets at above market values or by “printing” money and somehow distributing it to the public as a transfer payment.

WEALTH: The net ownership of material possessions and productive resources. In other words, the difference between physical and financial assets that you own and the liabilities that you owe. Wealth includes all of the tangible consumer stuff that you possess, like cars, houses, clothes, jewelry, etc.; any financial assets, like stocks, bonds, bank accounts, that you lay claim to; and your ownership of resources, including labor, capital, and natural resources. Of course, you must deduct any debts you owe.

VALUE ADDED: The increase in the value of a good at each stage of the production process. The value that's being increased is specifically the ability of a good to satisfy wants and needs either directly as a consumption good or indirectly as a capital good. A good that provides greater satisfaction has greater value. In essence, the whole purpose of production is to transform raw materials and natural resources that have relatively little value into goods and services that have greater value.

SERVICE: An activity that provides direct satisfaction of wants and needs without the production of a tangible product or good. Examples include information, entertainment, and education. This term good should be contrasted with the term good, which involves the satisfaction of wants and needs with tangible items. You're likely to see the plural combination of these two into a single phrase, "goods and services," to indicate the wide assortment of economic production from the economy's scarce resources.

Wealth is created only by engaging in value-added activities. By the same token, Service sector activities do not create wealth, they merely transfer, redistribute and eventually dissipate wealth as consumption. Thus, as value-added activities move offshore and the U.S. labor force shifts to the Service Sector, wealth is dissipated, not created. And the U.S. standard of living declines as a result.

The Road to Productive Wealth

The only true key to wealth lies in production. While you can increase your own wealth at the expense of others, we all become wealthier when productive resources are increased. Greater wealth for our economy lies in increasing the quantity or quality of productive resources -- labor, capital, and natural resources. This is done by investing in education, capital goods, research and development, and technology.

What works for our economy, can also work for each of us. You can acquire wealth by education, buying productive capital goods, inventing a new product, and assorted other improvements in productive resources.

[Soren]

What does the US need? Oil and, if you believe recent reports, gold. The Howe/Bolser paper published last week shows a short position of 16,000 tons based on BIS numbers, the majority of which is most likely held by US bullion banks. We all know about the upcoming war in Iraq and those of us who are more skeptical, some would say cynical, can speculate on the real reasons. That covers oil. Now I ask myself, what is the endgame for the gold situation, which has the potential to blow up into a major financial crisis and scandal? We are talking about the financial wellbeing of the big money power center. These guys don't just pack it in and go home. Donning my tinfoil helmet, the first thing that came to mind is South Africa, one of the largest gold producers in the world. I've been keeping my eyes open over the last few months for any signs of creating a rationale for some kind of action. I recognize that this is highly unlikely, but these are desperate times. Today, there was a front page article in the WSJ titled "In South Africa Evidence of Al Queda Links". The article discusses, among other things, how South Africa loses 35 tons of gold a year from its mines due to smuggling and how Al Queda is shifting from cash into gold. I'm not saying this proves anything, BUT if there was some nefarious plan in the works, articles like this are exactly what I would expect as a first step.