Usually ,it’s only when situations get really do-or-die that they search for what their options are and often this means it is already too late, as some of the options are now inaccessible. There are a great many superb examples of this, however we’ll just examine at a couple of the most critical and how they can be applied to aid people in different situations. Many people with bad credit think they can’t get a new loan, however bad credit mortgage loans are available through various lenders under the right circumstances.

HELOC’s

A HELOC( a Home Equity Line of Credit) is a variety of mortgage, often (but not necessarily) a Second Mortgage, which offers a flexible facility to the mortgage loan holder by allowing them access to the built up equity they have in the house in the form of money. A Home Equity Line of Credit functions similarly to an overdraft – you can withdraw from it (up to an agreed) easily and only incurrs interest on the amount of money you’ve drawn down. This is a great way to unlock the built up equity you have in your house and use it for anything you require at the moment. This means you can rapidly pay back anything you draw down provided you have the money to. A Home Equity Line of Credit is not supposed to be a long term solution however and at an agreed period of time your line of credit must be fully repaid. Typically Home Equity Line of Credit rates are higher than normal home mortgage loan but not dramatically so. It’s well worth shopping around too – not all lenders are created equal – if one isn’t offering the sort of rates or terms you like, look around – online mortgage quotes are easy to get these days and give you a great place to startt when loan hunting.

The Cash out refinance alternative

Cash-Out Refinancing is actually a way of making your Home mortgage bigger, but in a favourable way. When you refinance with cash out you have the chance to take advantage of lower mortgage rates than you may currently have, and additionally you can release the accumulated equity you may have in the house and realise it as hard cash in your hand. This is then tacked on to your current home mortgage loan balance, and charged the same mortgage rate. The largest benefit to a cash out refinance is that you can use the cash released to pay for renovations and improvements to the house (thereby growing it’s market value) or pay off expensive debts like credit cards, payday loans, car loans and bank overdrafts. When carried out correctly a cash out refinance can actually wind up reducing your expenses each month than you’re currently paying and can eliminate the debts that are restricting you currently. It also has the benefit of not being a 2nd mortgage, which means the interest rate is significantly lower than a 2nd mortgage loan would be. It’s always vitally important to ensure you’re getting the best deal you can when you go for a cashout refinance as you have options – you don’t need to use the original lender so shop around, you could save yourself thousands in closing costs and/or interest payments.

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At some time you need to begin saving for your future.The first thought that always can come to mind is opening an IRA, investing in Mutual Funds or stocks quite possibly a few CDS. 1 spot which can at times can easily become over looked is investing in Silver Bullion. It is possible to buy a physical piece of Silver Bullion through a local dealer or online.

Any time the desire for any commodity is significantly greater than the supply, the price of the commodity increases. The present-day price of silver is up something like 20 percent since January 1, 2011 and, if you invested in silver in 2008 and kept it, your investment would have increased by 200 percent.

Among the finest factors pertaining to investing in silver bullion is that, unlike gold, the buyer and seller will not need to invest a substantial amount of money for an individual purchase. If the investor has just a little bit of money , she or he can purchase quite a few single one-ounce silver rounds or bars. On top of that, the individual could possibly invest in even bigger quantities such as ten-ounce, five-ounce or two ounce. Silver bullion is even accessible in more significant sums such as fifty or one hundred ounces.

Economists typically recommend some sort of as a hedge against inflation. Silver has traditionally maintained in spite of the manipulations used to inflate or flatten its value. Such manipulations might have a short-term influence but the market always adjusts such variances. That’s the reason, most look at silver a secure investment.

When purchasing silver bullion, one really should purchase bars and rounds with a hallmark. A hallmark is a recognizable stamping on the bar or round which dealers identify as being genuine, i.e. pure silver or accuracy and reliability of the weight quoted. Dealers quickly identify the U.S. minted silver eagle and today’s foreign issued commemoratives, which usually would make it easy for the investor to liquidate when this individual decides to sell. You may want to check to see just what the recent Price of silver Bullion will be.

When investing in silver bullion, the investor really needs to practice extreme caution regarding which dealers to have faith in. A lot of bogus dealers manage from a traditional store or the internet. People are counterfeiting or dealing in counterfeit coins. It mandates a precision scale and sometimes industry experts in order to figure out if a coin is genuine. Always verify with the Better Business Bureau prior to investing in from a organization.

If this is your first time purchasing silver bullion don’t worry about it. The perfect way to get started with everything is just do it. When you start investing in Silver Bullion it won’t take long for what commenced as investment will rapidly turn into a appreciation for the love of collecting. Knowing the history associated with a coin has develop into a pastime of mine I hope you get pleasure from it as much as I have.

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“You can’t eat it, drink it or use it directly for anything. It’s a poor substitute for wood when starting a fire. And yet we all work our butts off, 9-to-5, for it. Money. You know, that thing that really makes the world go round.”

By Nicki Mossavarrahmani, Staff Writer
Design by David Tal

You can’t eat it, drink it or use it directly for anything. It’s a poor substitute for wood when starting a fire. And yet we all work our butts off, 9-to-5, for it.

Money.

You know, that thing that really makes the world go round.

But let’s start by taking a step back. What is money? How does it work?

Money is generally considered an object that circulates widely as a means of payment. Broken down further, there are actually two types of money: commodity money and fiat money.

Today, use of commodity money can be seen in prison. There, cigarettes can be used to trade for goods and services but it can also be consumed for ones utility. Then there is fiat money (i.e. a form of money, like a $20 bill, declared as legal tender by the government), which is intrinsically useless and does not have any direct utility. So then why would anybody want to hold fiat money?

Money has three functions: it’s a store of value, a unit of account and a medium of exchange.

To act as a store of value, money must be able to be reliably saved, stored, and retrieved.

A unit of account is a monetary measurement of the market value or cost of goods, services, or assets. It gives meaning to profits, losses, liability, or assets.

The third function of money, medium of exchange, is a sole feature of money. It thereby avoids the inefficiencies of a barter system, such as the ‘double coincidence of wants‘ problem.

This problem lies in the improbability of the wants, needs or events that cause or motivate a transaction occurring at the same time, same place and by the same people. For instance, an economics professor may have economics lessons to offer but in exchange would like to purchase a car. However, the student that would like to purchase a lesson cannot offer a car in return. This dilemma causes inefficiencies in the economy and leads us back to reasons as to which people prefer to hold money (as they can use it for any purpose).

The increased buying power, freedom and control consumers have using money is what motivates and maintains fiat money.

In fact, let’s assume for a second that we do not have money to use as a means of exchange and we revert back to the barter system. Let’s explore the consequences.

As individuals partake in fewer economic transactions the economy gets closer to what is called autarky. This represents a state when individuals are unable to make mutually beneficial trades and as a result each individual can only consume what he or she produces and nothing else.

Consumer theory holds us to that consumers prefer to have diversity in their consumption. For instance, farmer Joe produces only wheat but would like a variety of goods and services such as clothing, shelter, meat and furniture.

However, since the barter system brings us closer to autarky due to restrictions in trade, that means that farmer Joe will have lower variety of goods and services which translates into lower utility in his lifestyle. Therefore, when Joe is faced with the option of holding money versus barter, he will choose money.

But what is it about today’s fiat money—these easily destroyable pieces of paper—that makes it so valuable?

Simply our belief in its value.

If one believes that fiat money will not be valued in the future, then fiat money will have no value in the present. No one would be willing to give up goods and services for money. If people’s belief in the value of money disappears, it becomes a self-fulfilling prophecy.

So what happens when our belief in (fiat) money is shaken?

Inflation is a good example of something that deteriorates people’s belief in the value of money. If in the next period your money is worth less, you will be inclined to hold less of it. Therefore, inflation is one of many determining factor in how much money people would like to hold.

On the other hand, when people’s belief in money is strong, when we really love our money, people tend to hold onto their money. Some economists suggest that this is because the demand for money is a function of two variables: interest rates on close substitutes to money like bonds and the level of income.

Higher income means a higher demand for holding money as the number and value of ones transactions increase. On the other hand, if an individual sees a higher return from an interest-yielding asset instead of the interest given by the bank, the individual is likely to hold less money in liquid form (coins and bills).

Meanwhile, other economists believe that different motives (three in all) lie behind peoople’s desire for money. These motives include: the “transactions” motive (having sufficient funds for day-to-day individual and business purposes); the “precautionary” motive (having money on hand for unforeseen circumstances); and the “speculative” motive (holding money because prices of your desired goods may decrease).

Since people’s desires to hold money rely on these motives, when these motives grow stronger, people will hold on to more money, which results in a drop of total individuals and business expenditure.

On the other hand, when these motives weaken, you can see an increase in total expenditure.

In the end though, even if we were to abolish money, it would always be reinvented in some way. For money is not a particular thing.

Money is an Idea.

Dollars, pounds, lire, whatever it may be, as long as we are bound by markets, by trade to share resources, money in any of its forms will always be something we lust after.

ARB Team

Arbitrage Magazine

Business News with BITE

Arbitrage
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Readers who are searching through the web for info about the sphere of managed forex trading, please visit the link that was mentioned in this line.

Is the Financial System One Giant Pyramid Scheme?

OPINION ARTICLE from Arbitrage Magazine
David Tal, Staff Writer
Jennifer Lee, Designer

“I’m careful,” most think. “I know enough not to get mixed up in these things.”

These are the lullabies people say to comfort themselves. However, as you’ll see, it’s no defence.

Take the case of Bernard “Bernie” L. Madoff. He got caught inside a whirlpool last March, 2009, when he pled guilty to running an elaborate Ponzi scheme that fooled a highlight reel of celebrities, charitable organizations and what many considered to be ‘informed/professional’ investors. The fallout was many tens of billions worth of investments written off into the red—this included the life-savings of many who will now never know a comfortable retirement.

When such high profile scams make headlines, both the victims and the public are left to ask how so many high-powered, intelligent people could be duped so easily. In retrospect, it seems obvious that an eye of caution be directed upon people or corporations who offer inexplicably high or consistent returns on monies invested.

Haven’t these people ever heard the adage that if something sounds too good to be true, it usually is? Such questions generally conclude with people mumbling another adage—buyer beware—and then believing that the same thing could never happen to them.

But what if it can?

What if you, dear reader, are already in the clutches of a similar scam to the one suffered by Madoff’s investors? And what if everyone is in on it, both as victims and perpetrators of the largest financial scam known to human history?

To be more blunt, what if our entire financial system—as it exists today—is a scam, one that’s hardwired to funnel wealth from the masses to an elite few?

Don’t want to believe it?

Well, before you stop reading, how about we play around with this theory?

To start, if we are going to put our financial system on trial, it is necessary to define the parameters of this charge.

SET UP

For one, how should we define our present financial system?

Well, we can start by focusing on the financial system that the modern world’s majority uses: Monetarism. This is a theory whereby, according to the American Heritage Dictionary, “economic variations within a given system, such as changing rates of inflation, are most often caused by increases or decreases in the money supply—usually enacted by controlled government policy.” (For those new to economics, don’t worry. This will be explained more simply soon enough.)

No matter the country, nor the dominant ideology we ascribe to—be it communist, socialist or capitalist—they all use a monetary system; only the degree of government intervention in the system varies.

Next, what kind of scam are we charging our financial system of resembling? For the purposes of this article, we will use a pyramid scheme as a model (albeit the most sophisticated pyramid scheme ever devised).

Briefly, a pyramid scheme is a scam where one ringleader (sometimes a team) convinces a number of individuals to invest money into a ‘new money making system,’ which requires these new investors to work—usually on a kind of commission—to recruit others to then invest money back into the said ‘system.’ Those new recruits are then encouraged to lure even more individuals into this system and so on.

This scheme is called a pyramid scheme because of its shape: if one person recruits ten people and those ten each recruit ten others and so on, the pyramid could potentially involve everyone on earth within ten rounds of recruiting—with most or all the money being funnelled to the top.

That said, such schemes never make it to this level, as once it reaches a certain size, there will always be a few who begin to smell a fish.

So with these parameters set, let’s turn our attention to some of the prominent reasons why people get caught up in financial schemes. According to Skepdic.com, greed is probably the underlying factor. The desire for wealth and power are easy levers that the crafty can wield against most anybody.

This greed, or even just a basic desperation for money, can lead to varying states of wishful thinking, where even the smartest of those involved forsake logic and reason for the hope that this ‘money-making system’ is actually legitimate. As a result, asking those worthwhile questions that can save one’s wallet all of a sudden begins to feel uncomfortable or impolite.

Even those few who catch on to what they’ve gotten themselves into continue playing along, thinking, “Hey, I’m not at the bottom of the pyramid; I’m near the top. I can still get out of this making a profit!” Housing Meltdown, anyone?

Finally, one should also consider that it often isn’t a shifty looking man in a trench coat trying to recruit you into these get-rich-quick-schemes, but normal, honest-looking people. These people are quite often educated and/or well-respected, like teachers, investors (ala Bernie) and even police officers. Anyone is susceptible, and the more the initial ringmaster can attract respected participates into this system, the more it wraps around itself an air of legitimacy borrowed from such individuals. This makes the system that much more attractive to future recruits.

FOUNDATION

Now that we’ve explored how average financial schemes scam people, it’s about time we investigate our present financial system to see how it scams people in a positively above-average way. To do this, we first need to explore the system’s innards, i.e. shed light on how money is created, how it’s manipulated, and how you and I and all of society are bound inside its cage.

To begin, let’s show how money is created.

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Visit this infographic to see HOW MONEY IS CREATED:
http://www.arbitragemagazine.com/features/all-the-world-is-a-cage/attachment/infographica/

*The new money created is created out of debt, i.e. the Central Bank created the 10 billion with the expectation that it will all be paid back. So essentially, MONEY = DEBT. [In fact, under our current system, one cannot exist without the other. If everyone paid off all their debt, there would be no money for the economy to function. The crazy thing is, the world doesn’t even have enough money to pay off all the debt that exists (sidebar B will answer why this is so).]

*Once the 10 billion is deposited into a bank, that bank can then lend out that money. The only limit being said bank needs to keep a percentage of the original deposit on hold as a “reserve” (usually around 10%); e.g. out of the 10 billion deposited, the bank can now lend out 9 billion. [This process is referred to as “Fractional Reserve Banking.”]

*However, while logic would have you think that banks lend out that 9 billion from the original 10 billion, the truth is that 9 billion is lent ON TOP of that original 10 billion. That’s right, 9 billion in brand new money is created into the economy simply because there is a demand for this loan and there is enough money in the bank to fulfil the reserve requirements. So basically, after the bank asks you for assets (e.g. your car) to back up your mortgage, the bank in turn creates and lends you money from nothing, money that’s backed up by nothing except a hypothetical liability: money that you’re expected to pay back and then some.
*The implications of this are huge, as this process will happen all over again in the bank where that 9 billion is next deposited (minus the 10% reserve) and again in the next bank and the next, etc.

*If this process runs its course, that initial 10 billion the Federal government called into existence has the potential to add another 90 billion into the economic system. All of this is money created out of nothing.

*But if the money came from nothing, where does it get its value? The only place it can: from the existing money supply. The new money steals value from the existing money supply, expanding the money supply irrespective of the demand, thus reducing its worth and creating inflation. This means that our Fractional Reserve System is inherently inflationary, thus reducing the buying power of our money.

*This inflation acts as a built in tax upon society and is a built in trait of our financial system.

————————————————-

Now that we know how money is created, let’s take it one step further. Aside from the inflation that’s structurally built into our financial system (thanks to the Fractional Reserve System), there is another factor, one that makes this system thoroughly unstable and perpetually in need of government intervention—like a crack fiend’s constant search for another fix.

Interest.

Sometimes called usury, interest (the charging of a fee for the use of money) was once banned in the ancient world. All Abrahamic belief systems (i.e. Judaism, Christianity & Islam) likened it to a sin and even philosophical titans like Aristotle deemed it unnatural. It was only until late into the 16th century that interest slowly began to gain acceptance (primarily due to a push from the business classes), until charging interest became normalized in the 17th century.

Now while the concerns about interest being sinful may be a tad antiquated, the way it affects and distorts our financial system, our personal lives and our freedoms are very real.

To explain, think back to the previous sidebar that explained how money is created and now add on top of it the next sidebar that explains the effect of interest.

*Check out the THE EFFECT OF INTEREST infographic here: http://www.arbitragemagazine.com/features/all-the-world-is-a-cage/attachment/graph_interest/

From what The Effect of Interest infographic shows us, interest has no place in a perfectly stable and sustainable monetary system, as its presence is an inherently destabilizing influence that works to undermine the viability of a stable economic system.
This is because not only is new money generated out of nothing (ala sidebar A), but the money needed to pay back the interest applied to this new money doesn’t even exist!

So where does society find all this non-existent money to pay down the interest on the money that was created out of nothing?

It can’t.

The system in place now has a built-in perpetual deficit, one that is destined to collapse the entire system unless measures are taken to avoid it.

As luck would have it though, there are two options to deal with this flaw. Individually, those who don’t have the power to print more money and can’t pay their debts or interest can simply go bankrupt and have their assets liquidated. Meanwhile, governments, which can print more money, do so, and do so excessively (as we saw governments do following the late 2008 Housing Meltdown).

Thus, on a micro level, the ill effect of both fractional-reserve banking and interest is that a percentage of the population is destined for financial disaster. Meanwhile, on a macro level, the expansion of the money supply, leads to a reduction in buying power (i.e. structurally built-in inflation) and as already mentioned, a hidden and ever-growing tax upon all society in the form of inflation.

A CAGE UNMASKED

On one hand we have a structurally flawed financial system and on the other, we have a pyramid scheme. How do the two relate?

To start, we must ask, “Who’s at the top of this pyramid?”

The simple answer is: those who control the world’s banks (especially the privately owned central banks, like the US Fed) and thus have the power to print money. Now, before this writer enters the realm of conspiracy theory, let me add an extra dimension to this answer: that unlike your average pyramid scheme, there’s actually no one person or group at the top.

People come and go, just as fortunes come and go.

Instead, what you’ll see at the pyramid’s precipice is a system, one that promotes profit maximization above all other values. This single-minded drive is what the majority of global society has bought into and what the majority refuses to give up.

Why?

Because we all want to be at the top of that pyramid.

That’s the genius of this system. There is no one individual to point our fingers at because, at the end of the day, we’d only be pointing fingers at ourselves.

Until we, as a collective society, choose not to live under a system where power through the accumulation of money is the core value—a system where greed and corruption aren’t built in—we will forever be beholden to a system where only a small minority at the top prosper and the mass at the bottom struggle or go without.

But some may counter, “Okay, there might be people who let themselves be leashed by greed, but what about the rest of us? How can one system, or pyramid scheme, actually control the majority of the planet’s population?

The answer lies in how money is created and the existence of interest (both previously discussed). Essentially, this pyramid scheme creates money through banks that it gives out on mass, encouraging all individuals within the monetarist system to spend that money, thereby increasing their debt and forcing them to pay back said money, with interest or through various forms of bankruptcy.

For the minority of the world’s population who can pay these debts and remain debt free, this arrangement is of no consequence. But for the gross majority, those who can’t pay off 100% their debts by the month’s end or are living paycheque to paycheque, this system ensures a subtle form of veiled servitude—what some might call slavery.

If you don’t work, you won’t be able to pay your debts. If you can’t pay your debts, you won’t be able to keep your possessions and the standard of living to which you’ve grown accustomed. This fear of losing everything is what keeps the world in toe and what ensures the wealth of the bottom continues to flow upward to the banks and those who control them.

So let’s recap:

Pyramid Scheme Current Financial System

1) Who’s at the top
Pyramid scheme: Ringleader
Financial System: Banks

2) How people are lured into the scheme
Pyramid scheme: Ringleader convinces a number of individuals to invest money into a ‘new money making system,’ by promising easy returns on investment (a “get-rich-quick” scheme)
Financial System: Most of today’s global population were born into the current financial system, one which convinces society that everyone has the potential to be rich if they work hard enough

3) How the scam works
Pyramid scheme: Ringleader encourages new recruits to work to recruit others to invest money back into said ‘money making system.’
Financial System: Banks create and give out money on mass, encouraging all individuals within the system to spend that money, thereby increasing their debt and forcing them to pay back said money, with interest. The culture of consumerism this system fosters is another draw.

4) How the scheme spreads
Pyramid scheme: The ringleader’s pyramid could potentially involve everyone on earth within 10 rounds of recruiting—with most or all the money being funnelled to the top.
Financial System: Over centuries of growth, the current financial system now envelops most of the world’s population within its monetarist system, with money gradually being funnelled from the bottom to the top, continuously.

5) Why people stay with the scheme
Pyramid scheme: People stay in the scheme because of the air of legitimacy it borrows from its high-profile members or simply out of greed or desperation.
Financial System: People stay vested in the current financial system because of its legality, the legitimacy it borrows from its many high-profile proponents and out of fear of losing their established quality of life.

At this point, a final question begs answering: “If the financial system is just another fancy pyramid scheme, then why hasn’t it failed like all other pyramid schemes?”

The simple reason is that, for centuries, this scheme worked.

Yes, the system is far from balanced and the gap between rich and poor is large and growing everyday, but for all its flaws, the monetarist system of playing to people’s self-interest (greed and the pursuit of power) has resulted in a world far richer and better off today than in any time in human history.

THE RED PILL

But here’s the catch. While it’s true our monetarist system has provided humanity unprecedented wealth, it is also true that it was bankrolled almost entirely by our largest and oldest benefactor: the Earth.

To be clear, in order for the economy to continue growing, in order for it to avoid collapsing under the money supply’s constant expansion, more and more economic resources need to be mined from the earth, processed by man and commercialized by our markets.

Doing this produces enough new wealth fast enough to pay down all those new, interest-laden loans the banks are generally all too happy to give. It’s also what has allowed the human population to grow as much as it has, providing ever-growing numbers of new consumers for the system to exploit and grow.

In all, the flow of resources ensures the music continues to play.

So there you have it:

Debt + Interest + Inflation + ever increasing amounts of raw material and a growing population = the Superstructure of the Invisible Pyramid Scheme every member of society lives under.

To understand this process, visit this infographic: MONEY CREATION & THE BASIC SHAPE OF THE ECONOMY
http://www.arbitragemagazine.com/topics/infographics/map-of-the-worlds-economic-system/

It’s no different than what happens to a caribou herd when they discover a new land, one rich in food: they feed, multiply and prosper.

So too with humans.

When we learned the art of agriculture, it allowed us to produce an excess of food from the Earth’s soil and in turn, allowed us to shed off our nomadic lifestyle and commit to and develop communal living (i.e. families, villages, townships, cities, countries). Millennia later, humanity discovered how to harness energy from coal, leading to the first Industrial Revolution. A century later, humanity learned how to harness energy from oil and so the modern age began.

With each new discovery of how to use the Earth’s abundant resources, humanity fed, multiplied and prospered to new heights.

In fact, from the discovery of agriculture (approx. 8000 BC) to the Industrial Revolution (approx. 1800s), global human population gradually grew to around 800 million. Then within only 100 years after the Industrial Revolution, the population grew to one billion. Then after learning to truly harness oil, the most abundant and versatile energy source humanity ever discovered, global population exploded to roughly 6.3 billion and counting.

Sad thing is, when the caribou herd grows to a point where they exhaust their land’s richness, the prosperity ends. Swaths of caribou starve and the herd shrinks back down to a level the land (Earth) can support. The herd may try and search for a new, richer land, but in the end, the cycle always repeat itself.

And again, so too with humans.

Soon, a time will come when events transpire to alter the very nature of modern society and “the system” as we know it. For pyramid schemes only continue expanding so long as there are more recruits and more money (resources) to pull into its sphere of influence. In other words, such scams can only continue existing in a world of infinite growth.

Sadly, that’s not the world we live in.
While modern economics and society in general choose to assume otherwise, the reality is that we live inside a finite world, a world with limits, both on the number of human beings it can support and the amount of resources it has available for consumption.

Eventually, something’s gotta give. And that something’s going to give within our lifetimes.

CRYSTAL BALL

So how exactly will an economic system that survived for centuries and has seduced the world’s majority into its tentacles’ embrace suddenly fail?
Answer: there are two trends slowly converging into one chaotic mess: resource scarcity and demographics.

The first trend, resource scarcity, was discussed in detail in the previous issue of the Arbitrage (Winter 2010) and so I won’t go into the specifics here.

But to put the matter into perspective, we can think of the Malthusian trap (the theory that the human population growth rate will outpace humanity’s ability to farm enough food to feed this growth). For many decades, the world avoided mass Malthusian starvation because we’ve consistently developed new agriculture technologies to grow higher yields of food. Similarly, the world economy continues to grow because we too freely and cheaply reap from the Earth untold amounts of raw materials that we then turn into riches.

But how much longer can this go on?

Outlined in the Arbitrage’s previous issue, the reality of a finite world is that it will run out of many of its non-renewable resources (especially oil) within the next 50 years or so. And over the next decade, we will begin to see the effects of this growing scarcity in the form of increased prices (inflation) on just about everything we buy.

Meanwhile, when talking about demographics (the subject of the Arbitrage’s next issue), the well known, Comte adage holds true: demographics is destiny.

Economists have few ideas about how to maintain a country’s economic growth if its population is in decline. Remember, our present financial system is predicated on infinite upward growth in resources and population. So without either, the columns of the system begin to crack.

Presently, the birth rates for much of the developed world average out to 0.1%, far below the 2.1% needed for a population to replenish itself (sourced from the Population Reference Bureau’s 2006 World Population Data Sheet).

Roughly speaking, with less people, the labour force shrinks, leading to higher wages whose cost is past on to the consumer; this inflation leads to reduced demand, cut backs in the private sector, layoffs and may lead into a downward recessionary cycle.

Likewise on the government side: a country’s tax base shrinks, causing a nasty chain reaction that weakens its ability to pay for pension plans and public services. This leads to across the board government sending cuts, meaning greater unemployment and increased employment insurance costs that the government won’t be able to afford. This will then lead to the government continually turning to the central bank for loans to pay for needed public services, and in time, once a country reaches the point where it’s borrowing to pay down debts of borrowed money, that’s one step away from a country going bankrupt.

There are no crystal balls, but the fact remains that these two trends are real, well documented, and their effects are generally easy to predict: a gradual reduction in economic and population growth and a possible breakdown in the current financial system’s ability to continue functioning.

ALTERNATIVES?

Given what we know, in order for the world to avert catastrophe, we must shift to a financial system that doesn’t depend on constant growth to function. We need a new, stable, and resilient system. One that can both efficiently manage the world’s growing resource scarcity, while thriving amongst a steadily declining population.

In all, we need something radical enough to save us, but familiar enough to be accepted by a world population that may become increasingly sceptical and fearful of change.

From this writer’s perspective, there are two core options/directions a future financial system may evolve towards in order to meet the challenges of tomorrow. In order of least to most disruptive and familiar, these options include: a financial system influenced by Demurrage (using a kind of Scrip currency) and a Resource Based Economy.

Unfortunately, detailing how each may work will each take an article unto themselves. That’s why two further articles will be published in future Arbitrage issues that will comprise a series exploring the different alternatives our flawed financial system may evolve into and how each may change the world and how we will live in it.

Such a change may seem impossible now. To imagine a world where a whole other financial system takes over, one entirely different from what has claimed dominance for so many generations, certainly seems inconceivable. But as every historian can tell you, what seems impossible today may just become the commonplace reality of tomorrow.

100 years ago, who knew that man would be able to fly and then land on the moon? In our generation, who knew that computers and the Internet would revolutionize nearly every dimension of human existence?

And so too with our financial system.

Nothing is meant to last forever. In the end, a revolution happens roughly every quarter century in some form or another— and we’re about due for the next one. So when it happens, don’t be surprised if it changes everything.

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These do the job in tandem to kill the financial system in the country. As each one stakes their claim on the economy, most men and women have been able to stay away from the difficulty all together. Initially, take a second to fully grasp the problem and then you can look at the resolution.

There is normally a period of time of abundance before an economic downturn. This starts off with credit. Low interest charges give people a motive to access funds. As they borrow money, much more money floods the financial system.

The economy expands and grows. However, the expansion is based mostly on credit and not genuine capital. This leads to a dilemma when interest rates rise.

After some time, men and women are indebted, and the economy has expanded nicely past its means.All at the same time, there is very little outright ownership. Men and women have borrowed funds for real estate, products and personal reasons. The cash has to be paid back, or the things can be lost.

Times of unemployment and inflation work together to trigger problems. When price ranges are inflated, people sell less. When they promote less, they make less, which means they have to lay off employees. This leads in to larger unemployment rates throughout a great recession.

Companies are unable to manufacture supplies with no staff and they are operating with the bare minimum immediately after layoffs. This produces a viscous cycle. More layoffs arise, men and women are rehired and then additional layoffs arise. Companies struggle to find a balance involving workers and production, and staff are caught in the middle.

Understand that the brick and mortar shop is losing its appeal. It costs more to maintain and there is an increased need for significant numbers of staff workers.

Folks who have been able to avoid the recession are individuals who have turned to the web. The web gives protection that men and women will never ever be able to receive from brick and mortar store fronts. Simply because of that, quite a few folks who have their companies on the web are experiencing development. They are not sufferers to the tough economy. They still make cash and do nicely for themselves.

This is one thing crucial to comprehend and gain benefit of. Employing the world-wide-web can make you tough economy proof. To utilize the world-wide-web, though, you need to know appropriate SEO techniques. You must critically take into account using an SEO expert services organization so your business enterprise will get observed on the net.

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That’s what has drawn China to build one of the biggest foreign investment projects in Afghanistan’s history. It’s securing supplies of one metal that is essential to the massive energy grid China is building, not to mention homes and workplaces for hundreds of millions of its people.

That metal is copper, one of the most popular binary options trades. While most Americans take it for granted, you would make a serious mistake if you did so, not to mention miss out on one of the best investment opportunities around.

The China Metallurgical Group paid $3.4 billion for the rights to a copper deposit near Kabul, outbidding the U.S., Canada, Russia, and Kazakhstan by $1 billion. Obviously, China wanted to make sure it won the auction. Reportedly, China even sealed the deal with a $30 million bribe to the Afghan Mining Minister!

Apart from dealing with huge security problems, China must build all the infrastructure to support the copper mine—a smelter to refine the ore, a 400-megawatt power plant to power the smelter, a coal mine to fuel the power plant, a railway to take the coal to the power plant, and another railway to ship the copper to China.

But China doesn’t mind. It knows how scarce copper will be in a few years, and how expensive it will be. Copper may become the next new precious metal.

This past week, the IMF downgraded its expectations for U.S. growth. Our economy is likely to expand by only 2.6% this year and 2.3% next. But before you get too depressed, I must also point out that the IMF did not lower its estimates developing nations such as China. That’s because China is expected to grow at a blistering annual pace of 10.5% for 2010 and 9.6% for 2011. It also means that global demand for commodities will continue to grow since developing nations are the main source of demand growth.

Meanwhile, since the U.S. can’t conceive of copper prices much above where they are today (roughly 4X what they were in 2003), copper isn’t on our government’s list of critical metals that should be stockpiled. So, in a few years, we could be paying sky-high copper prices if we want to build hybrid cars, homes, or new energy supplies. The only bright spot in all this is that you stand to make a fortune with binary options if you invest today in companies that own large and growing copper reserves. Right now, there are only a handful of good copper stocks. Four of the most promising copper stocks have large reserves located in much safer places than Afghanistan. All of them have performed nicely over the past few months as copper prices have climbed from their 2008 lows. But the fundamental and technical analyses suggest that their biggest moves are still to come.

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One of the leading economic indicators is the durable goods report. This number is released by the U.S. Census Bureau around the 20th of every month and contains data for the previous month. Also known as the Advance Report on Durable Goods Manufacturer’s Shipments, Inventories and Orders, the report states new order data from over 4000 manufacturers of durable goods. Durable goods are usually higher priced products that have a “useful” life of more than three years. Some examples of durable goods would be cars or refrigerators. Non-durable goods would be gasoline or food.

Several valuable aspects of the report are that is supplies information on inventories, shipments, unfilled orders, industry breakdowns and other forward looking data. The industry breakdown is very meaningful since the overall number can be very volatile when sectors like airlines or military and government orders are factored into it. Durable goods such as airline and vehicle orders both from the government and the private sector usually come in bulk orders and can distort the number giving an unrealistic view of overall spending in the manufacturing component of the economy. Additionally, prices for these goods are generally much higher than in other sectors and can therefore dramatically change the final number. To get the most accurate view of the number many traders with remove defense and transportation orders from the overall number.

Since this number is so volatile and the report does not provide a statistical standard deviation, there are other methods that experienced traders and economists will use to get an accurate picture. When analyzing the number a trader should always use moving averages of varying time lengths to determine trends. Instead of comparing the number month to month, traders should use year over year comparisons and year to date estimates. Revisions to previous numbers are also included in the report and very large changes should be looked at closely.

So as an investor what should you take away from this report? Investors look at this report not only in the nominal terms of orders, but also as a condition of business as a whole. This number is a leading indicator of capital spending and industrial production and is a window into the manufacturing sector which is one of the largest components of the economy. The capital goods figures are representative of business upgrades that companies are spending money on and may show either an increase or decrease in the confidence they have in business conditions. This will affect sales at different points in the supply chain and hours worked in non-farm payrolls.

So how do the markets trade on this report? A weak durable goods number can be an indication of a weakening economy or dip in the business cycle so bonds will usually rally, while the stock market may fall. While a strong number should have an inverse effect and signify a strengthening economy. The value of durable goods and the increase or decrease in orders can also provide valuable insight into future earnings of companies particularly in the machinery, technology, transportation and manufacturing sectors.

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Dear Mr. Rudd,

I supported you for “Kevin ‘07” like millions of other Australians and I have not been disappointed with my choice.

Last week you imposed a 25% levy on all tobacco products and while this affects me greatly, I don’t approve of this action not only because it will take away one of life’s few pleasures for me on the off-chance it will save my life but rather because you bowed to popular opinion and want to ban cigarette smoking because some people don’t like the smell. It is their right to disapprove of people who smoke the same as it is my right to smoke. This is a personal choice and is quite consistent with my life philosophy.

1.My philosophy being as long as I am not hurting or purposely offending someone else, then what I do with my life is my own choice. If I respect the rights of others and don’t smoke around them, what right do they have to say I should stop altogether? Or was this just a tax grab garbed in popular opinion clothing?

2.Next, I won’t die before my time and I won’t die one second after my time. God alone knows when my time will come and that’s it. So to insist that I stop one of my life’s pleasures is not fair and is trying to usurp God’s place in my life. To use common Australian vernacular “Bugger off”

Now I want to comment on the Super Profits Resource Tax (SPRT) or as some have labelled it, resource rent tax. I thoroughly applaud you for this as I think it is long overdue. We all know that you are going to have a vicious fight to get this through Parliament, but I believe if people stop and think about it for three seconds, they also will realise that it is for Australia’s benefit.

In the past, multinational mining companies have been able to contribute huge funds to all Australian political parties and in return, receive huge tax concessions, unfair mining concessions on designated Aboriginal land or any number of other financial benefits.

This has been capitalism at its worst and has had nothing to do with our democracy.

Australia is a democratic country and this warping of our democratic principles has offended the quiet majority of the Australian people. Just because most Australian people are silent and don’t express their opinions unless pushed, doesn’t or shouldn’t give any political party or multinational corporation “carte Blanche” to get or do as much as they can get away with.

My friends and family support you in this Super Profits Resource Tax wholeheartedly and hope you have the determination and guts to fight the viciousness that will ensue from the vested interests opposed to this law. Australia is depending on you and your colleagues to fight well for us please.

Sincerely,
etc….

Most Australian people have never visited these remote regions of Australia where these huge mining operations are taking place. They are extremely remote, barely populated, hot, dry and very beautiful. Their beauty is one of colour and form and may not appeal to everyone. But they captured my heart and soul as no other Australian landscape has managed.

I am not against mining and appreciate the efforts that many of the mine sites go to with their re-vegetation efforts. I have seen reclaimed land after the mine has petered out and if I hadn’t been told that there had been a mine there, I would have been none-the-wiser.

It is time that the multinational mining conglomerates were held to account and Australia is not adverse to leading the way. Go Kevin ~ “Ring the bell and give ‘em hell”

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Bankruptcy is very good for wiping out credit card debt. Unless you have a special secured credit card, your credit card balance is an unsecured debt. That means that the credit card company has no hold on anything that belongs to you if you do not pay back your debt. This is specifically the kind of debt that bankruptcy is designed to remove. Apart from credit card debt, you may have other unsecured debts, and bankruptcy can eradicate these as well. However, bankruptcy will not discharge your obligations to some other kinds of debts, including child support, alimony, tax debts, student loans, and any secured debts.

If you are reading this then the chances are that you are considering filing for bankruptcy. Your debts have got to the point where you cannot afford the monthly payments that your creditors are demanding. However, there are numerous bankruptcy alternatives. The most important thing is not to panic and to sit down and look at your financial situation.

If you reach the stage where you are in so much debt that you are considering bankruptcy then there are a number of measures that you can take to avoid bankruptcy. Firstly, you should cut up all of your credit cards. This may seem drastic, but it is the only way to avoid bankruptcy by guaranteeing that you do not increase your level of debt by charging more onto your credit cards.

All lenders would prefer to receive some money rather than none at all and when you file for bankruptcy a number of your creditors will receive little or none of the proceeds. This is especially the case with your unsecured loans, such as credit cards. You should contact all of the people that you owe money to and explain the situation. Most will work out a repayment schedule with you as a bankruptcy alternative, giving you longer to pay off what you owe and sometimes even freezing the interest.

So what is ‘Credit card debt consolidation’?

Credit card debt consolidation is the process/strategy to consolidate debt from multiple credit cards into lesser number of credit cards (ideally one or two credit cards). Credit card debt consolidation is sometimes also referred as a balance transfer where you transfer your balance on one credit card to another credit card. Generally, the balance transfer (or credit card debt consolidation) is done from credit cards with higher APR to credit cards with lower APR. Credit card debt consolidation can also be achieved by going for a bank loan (at a lower interest rate) and using that towards paying the debt on the higher APR credit cards. This loan is then paid-back to the bank in the form of monthly instalments.

As you would have noticed, a lot of credit card suppliers and banks keep coming out with attractive offers for Credit card debt consolidation (or balance transfers). There is no dearth of 0% APR offers for credit card debt consolidation. However, credit card debt consolidation is a serious exercise and you must exercise caution so that you don’t get into deeper trouble. When going for credit card debt consolidation, you must properly analyze the offers from various banks and credit card suppliers. Check the time period for which 0% APR is being offered and also the APR that would be applicable after the lapse of that period. Generally, 0%APR is valid for a 6-12 month period only. So, if you are confident of paying back a considerable amount of debt in that period, this kind of credit card debt consolidation will work for you even if the APR (post 0% period) is a bit higher. However, if that is not the case, the long term APR is going to be the most important thing for you. If the long term APR is more than the APR for your current credit card, this kind of Credit card debt consolidation will be futile for you. Also, check processing charges etc before you actually go for balance transfer or credit card debt consolidation with another supplier/bank. Another good idea is to check with your current credit card supplier and see if they can offer a lower APR to you in order to help you in clearing off your debt (you would be surprised that they do oblige at times and hence eliminate the need for credit card debt consolidation).

It’s important that, with credit card debt consolidation, you also inculcate good spending habits; otherwise credit card debt consolidation would really be of no use to you.