A TEXT POST

U.S. Intervention in Syria: 21st Century Oil Shock

In the Name of National Security

August 21, 2013 was a black day for Syria. President Assad’s forces allegedly attacked a rebel dominated area in capital Damascus with chemical weapons killing hundreds and raising the specter of U.S. led intervention. Possible disruption of oil supplies sent oil prices skywards and tanked stock markets. Gold rose as it always does in precarious times.

Initial British and French war support for U.S. and Israel has waned. Nevertheless, Israel upped the ante by testing a U.S. backed missile system in the Mediterranean Sea on September 3. President Obama has sought Congress’ approval for such interposition under the guise of national security, but he can move ahead even without their support. 

Over 100,000 Syrians have died and over 4.5 million displaced in the U.S.-instigated Syrian civil war that has assumed genocidal dimensions. While the tyranny of Assad’s regime was never in doubt, U.S. intentions are. Syria is not oil rich, but is a strategic way station for oil and gas pipelines en route Europe. The U.S. threat is linked to geopolitical control.

A United Nations investigation team is yet to confirm Assad regime’s complicity in the chemical attack. The U.S. overlooks the massacre of thousands of Syrian Christians by fundamentalist Syrian rebels. And what about the thousands killed by Obama-sanctioned drone strikes in Pakistan?

National Security is a convenient pretext for promoting hegemony and selfish interests. All superpowers do that. When other excuses fail, war in the name of national security is made the instrument. And in it, lie the seeds of the superpower’s decline.

War versus Economy

Economy is the sum total of production, distribution, exchange, and consumption activities. War disrupts these activities. Manufacturing facilities are diverted for war production creating shortage of essential goods. Financing war through monetary expansion erodes the value of money. Price rise is thus fueled from both sides.

Present day economies are critically dependent on oil for energy and transport. Markets operate on sentiment and the mere possibility of oil supply disruption resulted in the following developments on August 27:

  • Oil surged by 2.9% or by $3.09 to $109.01 per barrel, the highest closing price since February 2012

  • Gold rose by 2% or by $27 to $1,420 an ounce. Expectations of a falling currency and financial turmoil always cause gold to appreciate

  • Dow Jones Industrial Average fell by 1.1%, S&P 500 Index shed 1.6%, and NASDAQ Composite dropped by 2.2%

Even ‘limited’ strikes will cost millions. The military does not have enough money and wants Congress to sanction additional expenditure. With $17 billion in debt and over $87 billion unfunded liabilities, how can a broke U.S. government finance the war? Increasing money supplies?

But then, we are already printing $85 billion a month. Any further expansion will be suicidal, for it will trigger runaway decline in the dollar’s purchasing power. The U.S. economy will lose its investment attraction further reducing the demand and the value of the dollar despite the recent growth of the U.S. economy.

In the short term markets can swing due to hysterical investor sentiment. They do strike a balance in the long run. If the experience in Iraq and Afghanistan is considered, any conflict in the volatile Middle East will be a long drawn affair. The long term will then be very, very long.

Bin Laden’s Ghost

It is widely whispered that the U.S. incited rebellions in Arab nations before killing Laden to engross the Arabs and prevent an angry reaction to Laden’s killing. This strengthened extremists. The U.S. hopes to counter this by promoting sectarian conflict – supporting Sunni regimes in Saudi Arabia and Egypt against Shi’ite Iran and Syria. Their energies are directed along sectarian lines, not towards the U.S.

Control over strategic resources is the driving force behind the U.S. threat. Conflict for resources and markets among European powers caused the two World Wars that eventually caused European decline. With Syria strongly allied with Iran and both these being supported by Russia and China, a wider outbreak of this conflict cannot be ruled out. Then, the ghost of Osama bin Laden will resurrect and haunt the U.S. for a long time to come.

A TEXT POST

Stop Making It Rain? – Return to Sobriety or Piece of a Larger Jigsaw?

Ifs and Buts

According to the minutes of the July 30-31 Federal Reserve’s meeting released on August 21, 2013, the Fed might reduce the purchase of treasury and mortgage bonds by the end of this year. These purchases release $85 billion a month into the U.S. economy and are a major reason for dollar devaluation.

Policymakers are divided over the timing of the cutback. In June this year, a total withdrawal was hinted by mid-2014 when unemployment would drop to 7% from the prevailing 7.4%. The minutes also indicated a continuation of the prevalent near-zero short term interest rates until unemployment rates fall below 6.5% subject to economic recovery.

Economic Indicators

Resurgence of the mortgage sector is expected. Every month, 192,000 jobs were created in 2013 so far with July generating only 162,000 jobs.  Present unemployment of 7.4% is the lowest in last four-and-half years. Seekers of unemployment benefits are at the lowest level in the last five years meaning layoffs have declined and businesses may start hiring soon.

However, economy grew by a meager 1.7% in the April-June quarter. Inflation is back to the Fed’s threshold of 2% after plummeting to 1.1% in April. The contraction announcement is likely after the Fed’s policy meet in September or December. This declaration is likely to come without prior notice to prevent volatility in the stock and bond markets.

Consequences

Excessive liquidity travels to the stock markets and buoys them up. It makes bonds attractive and investors are ready to hold them at low rate of returns called yields. And because these investment avenues seem attractive, people temporarily lose interest in gold and silver.

August 21 saw the Dow Jones Industrial Average shed 105 points and yield on 10-year Treasury bonds rose from 2.81% to 2.86%. Yield on 10-year Treasury bonds has risen by 0.75%.  Increased bond yields push mortgage rates upward and average 30-year mortgage rates have climbed by 1% to 4.4% since May.

After the possibility of a cutback was repeated in June, the S&P Index lost 4.8% and 10-year U.S. Treasury bond yields rose from 2.19% to 2.54% within a week, gold and silver plunged, and assets in the emerging markets tanked.

The Broader View

Continuous monetary expansion that is not channelized into productive development, as is the case with us, benefits the Fed, large banks, governments, and colossal corporations. The Fed is a private institution owned by large banks. Why then would they talk of a taper? Prolonged money expansion is toxic for the economy, but when was public interest a priority with the private Fed?

Reversing the 29 year trend of selling reserve gold, central banks became net purchasers of gold from 2010. Most reserve gold is maintained with the Fed and the Bank of England. Germany demanded a return of its 350 tons of gold from the Fed in January 2013, but decided to spread out this withdrawal over 7 years. Why?

Central banks lease out such gold to bullion banks that either sell it or use it as collateral. These operations depress gold prices. Germany was asked to wait probably because its gold had been leased out. Immediate retrieval would require massive gold purchases bullion banks that would spike its prices.

It is no coincidence that the possibility of the Fed’s withdrawal from bond purchases became more pronounced in January, the same month of the German demand. The plot maybe as simple as – depress prices and then buy gold. Are these announcements by the Fed a part of this larger game considering that many of its owner banks might have leased gold from the Fed.?

Adversity, nay Opportunity

Be as it may, this presents a huge opportunity for the long term investor. Gold have already fell till large banks can inexpensively purchase it. As this phase begins, purchases will take it to much higher levels. Falling prices are, therefore, a purchase indicator, not one of distress sale.

A TEXT POST

Central Banks: Legitimizing Business Cycles

Birth Centenary: Time for Obituary?

One hundred years ago, the Fed was formed for determination of monetary policy i.e. the amount of money and credit in the American economy to maintain price stability, maximize employment, and maintain moderate long-term interest rates. Towards this end, it was granted monopoly rights for the issue of currency.

Since start-2013, the unemployment rate in the U.S. is hovering between 7% and 8%. Rising prices of food, apparel, shelter, apparel, and gasoline forced upward the Consumer Price Index for All Urban consumers (CPI-U) by 0.2% in July 2013. This marked a 2% hike in 12 month CPI-U. And, the benchmark bond yields in the U.S. are at a three year high of 3%.

Prima facie, the Fed appears to have failed in its objectives. Why then do we still regard the Fed as an institution that can solve our financial problems or at least mitigate the impact of crises. It certainly could not prevent the onset of the global economic crisis in 2008. It is high time we analyzed the effectiveness of the Fed in a cold, objective manner.

Symptom Treatment Mainstreamed

Central banks are those that enjoy near-complete national monopoly rights to issue paper currency. Under a fiat money regime that does not require currency supplies to be backed by tangible commodities such as gold or silver, central banks can virtually print money infinitely.

Such power allows them to play ‘lender of last resort’ for governments and banks in financial turmoil lending them the aura of ‘benevolent rescuer of our livelihoods’ in the public eye. The Bank of England was the first to play such a role, although grudgingly, in 1857.

Increased supply decreases the purchasing power of currency. Even otherwise, a financial system supported by fiat money, fractional reserve banking (FRB), and charging of exorbitant interest rates necessitates a continuous expansion of money that in turn makes the boom-bust business cycles inevitable.

Monetary expansion addresses the problem of deflation only for a short while and overshadows the real drivers of long term growth – productivity improvement and innovation. The Fed, therefore, is only an instrument that allows centralization of authority in the hands of those that own it.

Paper money is easy to carry around. But if these notes are not backed by gold or silver, a fiat currency regime is ushered in that brings with it the inflation-deflation cycle. The classical gold standard with 100% reserves was abandoned in 1913 because it is incompatible with fiat money and authorities hate gold because it cannot be hoodwinked.

Evolution

Central banks succeeded the erstwhile public banks that handled government finances. Raising war funds by purchasing government bonds was among their critical duties – Napoleon Bonaparte founded the Bank of France for this express purpose. Maximizing their owner’s profits was an important function, a role the Fed still fulfills for its private owners.

Under a free banking system, numerous banks issue specie-backed currency. They are supposed to accord equal treatment to other bank’s notes.  In theory, this prevents an over issue of currency because an over-issuing bank will not be able to redeem its notes and lose credibility. This is the principle of adverse clearings.

Monopolistic central banks are exempt from this principle and, therefore, can issue fresh money. Free banking was in place before the Fed and some scholars advocate its resurrection. Deflation durations during the pre-Fed era were less intense than those in the Fed era. However, free banking could not prevent an over-issue by all banks.

Finally …

Now that we have faced the full onslaught of an expansionary monetary regime that continuously erodes the value of our savings, it is time we ponder over rational alternatives. While a free banking system and dissolution of Fed will not solve our problems, a revival of the classical gold standard with 100% reserves can.

A TEXT POST

Whose Interests Are Being Promoted by Federal Reserve?

Deceptive Delusions

In the name of national security and public interest, numerous unwanted, bitter pills are forced down the public throat by governments, law makers, secret services, corporations, banks etc. Ironic but as usual, there are covert, private vested interests at play that profit at public expense, yet in the name of nation and people.

Our central bank, the Federal Reserve, was created in 1913 and was allotted the all important task of monetary policy regulation. Now, no other policy affects common citizens more conspicuously than monetary policy because it determines the prices of goods and services. Naturally, public authorities would be expected to own such an upholder of public interest.

Surprisingly, the Fed has been owned by a cartel of private bankers ever since its inception. The real shocker is the absolute unaccountability of the Fed. It is not accountable to government agencies or to Congressional Committees, no one. The activities and budgets of even our intelligence agencies are subject to oversight by Congress.

Ostensibly, such autonomy is necessary to prevent ‘interference’ of politicians who are prone to succumb to public pressure of expansion of money supply that provides short term relief from economic problems. But then, hasn’t the Fed been printing billions at least since the outbreak of the subprime crisis? And haven’t these measures failed to boost the economy?

Federal Reserve System

These answers require a glimpse into our central banking system that consists of:

-          The (National) Federal Reserve with a Board of Seven Governors

-          Twelve Regional Federal Reserve Banks in important cities across the U.S.

-          Federal Open Market Committee (FOMC) determines monetary policy. It consists of seven governors of the Federal Bank and the twelve presidents of the regional federal banks

-          Consumer Financial Protection Bureau established in 2010 under the Dodd-Frank Act

Operations of the regional Federal Reserve banks are similar to private corporations. They issue stock for their member banks. The real owners and controllers of the Fed are the entities that own these member banks. These include the financial elite viz. colossal investment banks, individuals, and corporations with their hands spread across the globe.

Their representatives sit on the FOMC.  Through control over the economy of the U.S. and a greater part of the rest of the world, they determine the course of politics and history. They support pliant politicians through campaign funds, hefty remunerations, and positive publicity through the media they own.

Perpetuated Prejudice

Our present financial system is based on fiat money, fractional reserve banking (FRB), and charging of exorbitant interest on loans. This system necessitates continuous monetary expansion. Debt and money are created together and thereby we have ever expanding debt and price-rise.

This structure was mainstreamed with the creation of the Fed in 1913. The same year saw the imposition of income tax because now government would never have enough money to settle debts. The beneficiaries are the Fed and its owners that print money at zero cost but make billions by loaning it to cash strapped governments, corporations, and, of course investment banks that get to use this fresh money before it enters circulation and loses value.

Monetary expansion by the Fed has not worked because money is not being channelized into employment generation and productivity improvement, but into excessive, speculative, and misdirected investments called bubbles. These fuel more inflation and concentration of wealth. By the time money reaches the commoners, it has lost value. Naturally, they do not spend and do not create demand, defeating the very purpose of monetary expansion.

The Road Less Taken

Addressing a century of entrenched dominance and prejudice is difficult but not impossible. The present economic slowdown was created through the greed of the financial elite. It is time we opened our eyes and started asking for reforms that address the underlying malaise, not the symptoms. We can start by studying the merits of the full gold standard.

A TEXT POST

Price Manipulation

Curious Contradiction

Monetary expansion has been the norm since early 2008 with central banks across the world trying to print their way out of the global economic slowdown. Excessive supply erodes the purchasing power of fiat-paper currencies and asset classes denominated in these currencies.

People then turn to gold and silver, the time-tested assets that can store and amplify wealth during such tumultuous times. Demand for physical gold is on the rise not only in Asian countries culturally close to gold, but also in the U.S., Russia, and the Middle East.

If the fundamentals for gold are so strong, it should appreciate, not fall as it has recently. Obviously, there are powerful forces that distort the foundational forces of demand and supply to create a colossal contradiction.

Manufactured Consent

In the first quarter of 2013, the net demand for gold fell to 963 tons valued at $50.5 billion. This represented a 13% decline in terms of tonnage and 16% in terms of value as compared to corresponding statistics of Q1 2012. The decline was mainly on account of outflows from gold exchange traded funds (ETF).

Also noted was a shift of institutional investors from gold ETFs to physical gold. While this outflow represented only 7% of the total gold ETF holdings in Q1 2013, developments in the stock market exert a more-than-commensurate influence on market sentiment and, therefore, on prices.

Central banks hold an average 15% of their reserve assets in gold. This average climbs to 40% for developed nations that were on a gold standard before and are aware of the merits of the golden inventory. Developing nations maintain only 5% of their reserve wealth as gold.

Instead of letting this gold sit idle, central banks lease it to bullion banks at 0.25% – 0.5% a year that either sell this gold or use it as collateral. The proceeds are usually invested into securities yielding 5%-9% returns. Such sales depress the price of gold.

Rehypothecation results when an asset belonging to one party is used as collateral by another entity for availing credit. These parties may be related as borrower-lender or as lessee (user) – lessor (owner). The same asset serves as collateral for more than one credit transaction. In case of a foreclosure, total recovery is impossible.

Between 1979 and 2009, central banks were net sellers of gold. Progressive depreciation of paper currencies made central banks reverse this and turn into net buyers of gold in 2010. They purchased 457 tons in 2011 and 533 tons in 2012.

Most of world’s reserve gold is held with Federal Reserve and the Bank of England because these were the clearing houses during the gold standard era. August 17, 2011 saw Venezuela demand a return of the 99 tons of gold that it held at the Bank of England. This spiked gold prices.

Then, on January 14, 2013 the German central bank announced plans to retrieve 350 tons of gold from Paris and 300 tons from the Fed. Two days later, they announced a seven year time-table for the implementation of this transfer, a clear indication of rehypothecation precluding immediate retrieval.

Bullion banks cannot immediately purchase such huge amounts of gold to return to the central banks, for prices will shoot up and make these purchases un-affordably expensive. Therefore, they sold gold ETFs and redeemed them for physical gold. Falling prices force small investors and margin traders to sell causing further depreciation.

For the Smart Investor

It is no coincidence that gold prices started falling from mid-January 2013 onwards. These banks will pick up gold when it hits bottom. Then, prices will shoot up. As a proactive investor who can see through this wily game, you can go against the tide and start investment in physical gold and silver.

A TEXT POST

Bankrupted Detroit

Riches to Rags

Once amongst the prime movers of the U.S. economy, Detroit, Michigan, is now broke. With a debts and liabilities load of over $18 billion, the July 18 bankruptcy application was the financially largest bankruptcy ever filed by a public entity in the U.S. The city has been in decline for over five decades and the application formally stamps a well established fact.

Retired city workers such as police officials, fire fighters, emergency responders, and municipal workers stand to lose the most through pension cuts and have taken on the city politicians in a legal battle. Bond holders are the number one creditors and expect preferential repayment treatment lest the city be abandoned by investors in future.

Although Kevyn Orr appointed by Michigan Governor Rick Synder in March this year as Detroit’s emergency manager promised to distribute the burden evenly, many believe a repeat of the 2011 Central Falls, Rhode Island, case where bond holders were preferentially treated while pensions were cut up to 55%.

Decline and Collapse

Detroit boomed with the upsurge of the automobile sector after World War I. This lasted till the early 1950s when Detroit was among the five largest U.S. cities. Slowly, auto industry migrated outside Detroit – suburbs, rural areas, other states, and even overseas – to bypass its powerful unions. Japanese auto imports hurt auto jobs in U.S.

These developments have to be seen in the overall context of the structural shift of U.S. economy from manufacturing to services. The city also failed to diversify into other sectors the way manufacturing towns such as Pittsburg and Cleveland did.

Racial strife intensified with falling economy. Many African Americans had migrated as workers during the boom and currently comprise 83% of its population of 700,000. Strife led to outmigration and now lesser number of workers contributed to retirement benefit funds. The global financial crisis further eroded returns from investment of these funds.

What added to the payload were pensions being paid to young retirees and the benefits being adjusted for inflation. Then again, pension fund officials have been accused of bribery to influence investment decisions.

Litigation

Pleading bankruptcy allows public entities to rewrite contracts with creditors viz. public employees and bond holders. Simultaneously, a breather in the form of a stay on payment of all liabilities allows public entities to analyze their finances and put together a financial reconstruction plan.

Unfair treatment, real or perceived, to one group of creditors often leads to lawsuits. Pension is deferred income and the Michigan Constitution says pensions are ‘a contractual obligation … which shall not be diminished or impaired’. Retirees have gone to the federal bankruptcy court citing this provision.

If the court overrules this provision on the ground of primacy of federal law over state legislation, two questions will appear. One, how will unions negotiate contracts for retirees in future? And, how can retirees such as police and firefighters in Michigan who do not contribute or receive from Social Security because their pensions are / were guaranteed, make ends meet?

Past and Future

Although the stigma associated with bankruptcy has been fast fading, attracting investment into such cities is difficult and makes reorganization tougher. This is precisely why bond holders, many of whom are sophisticated strategic investors, are accorded special treatment.

As the local government and retirees slug it out in court, the billion dollar question that emerges is: how much does Detroit owe to its former generation that helped build the city and how much should it allot for the future, the new generation in Detroit that cannot do without investment. Politics is often about tough choices, but it is also the art of the possible.

A TEXT POST

Wall Street: An Insatiable Behemoth?

Dark financial clouds gathered over the global economic horizon in early 2008. As yet, they refuse to let the sun through. A yet-to-be-released report by the law firm Labaton Sucharow reveals the true colors of Wall Street that refuses to mend its rapacious ways despite five years of financial turmoil they created in the first place.

Blatant, Persistent Greed

Labaton Sucharow interviewed 250 responders that included investment bankers, traders, financial analysts, investment advisers, portfolio managers, hedge fund professionals and others from numerous financial companies. There were two real shockers:

  • 24% said they would have no qualms with insider trading if they could get away with $10 million. For those with under 10 years experience, this percentage jumps to 38% meaning the next generation is highly ethics-insensitive

  • 28% opined the financial industry is self serving while relegating the interests of the clients meaning the problem is more widespread than just a few black sheep

Other startling findings included 23% of the respondents having observed or having firsthand knowledge of malpractices. And, 26% believe the structure of remuneration and bonus packages promotes illegal and unethical practices – a systemic defect that institutionalizes fraud.

Work cultures percolate from top. 17% expected the top brass to ignore insider trading by top performers. Human suffer from the ‘in-group bias’ that makes them adhere to the conventions practiced by their peers. Another psychological bias is people regarding themselves as more ethical than the rest – 52% believed their competitors to be engaged in obnoxious customs.

Paper Ethics and Half Measures

Financial institutions talk about rigorous compliance with an ethical code of conduct. MBA courses come with mandatory classes in ethics. In 2008, management students pledged a voluntary MBA Oath for responsible and ethical conduct. Today, about 6,000 volunteers have signed it.

This report was prepared at the initiative of Jordan Thomas, a partner at Labaton Sucharow. Mr. Thomas is the former assistant director and assistant chief litigation counsel in the enforcement division of the Securities and Exchange Commission (SEC).

Mr. Thomas was also instrumental in framing the $500 million whistle-blower program of the SEC under the Dodd-Frank Financial Overhaul Law that bestows 10-30% of the penalties collected from perpetrators of financial irregularities to whistle blowers. Unsurprisingly, $450 is still lying idle.

Why So?

Land, labor, capital, and enterprise are the four factors necessary for production. Unless capital is available, the other three cannot be arranged and the financial sector provides capital. Furthermore, our financial system favors continuous, parasitic enrichment of the financial sector at the cost of the productive sector that is the real creator of wealth.

Then again, finance is at the center of the economy – transferring surplus funds of savers and investors to capital-hungry industry and business. Often, aid and assistance has to be channelized through them. This gives them the arrogance to tread along self-enriching detours with impunity.

Consider this. The demarcation between the Wall Street and the Washington elite has vanished to the horror of common Americans – 1% of Americans own 40% of American wealth. If the financial sector employs 3000 lobbyists (over five times the number of congressmen), will financial laws reflect ethics?

Since the 1970s, paychecks of top American CEOs increased 4 times while that of non-supervisory workers dropped by 10% (both figures adjusted for inflation). And if Henry Paulson, the ex-CEO at Goldman Sachs, becomes U.S. Treasury Secretary where will the code of conduct documents end up?

Finally

In the battle of good versus evil, the odds are usually stacked against the good. They still are, but the chronic economic crisis is making people take interest in financial intricacies and search for solutions. Reports such the one by Labaton Sucharow will further propel people in the right direction.

A TEXT POST

Dr. Chan interviewed by The Reading Cat

Have you developed a specific writing style?

Due to the fact that I wrote a business book, on a specific niche, investments, I don’t think I have developed a personal writing style. However, as it would be normal, the book follows a business writing style, providing information on certain topics, information based on a thorough research and data analysis.

What is your greatest strength as a writer? 

I believe that my greatest strength as a writer isresearching truth. When I was preparing to write “The Critical Flaw: How to profit and protect wealth in history’s greatest opportunity”, I have made tons of research on the topic and data analysis in order to provide an objective approach to my readers. The work deployed in this book was tremendous, but now, as it’s published, I believe that it will help people to make informed decisions and to protect their assets.

Have you ever had writer’s block? If so, what do you do about it?

I did come across a few writer’s blocks with respect to how to structure the book during the initial phase. It happened mainly because I had too much information and research to present as organizing into a logical manner and interesting format which was quite challenging. I overcame it by identifying the top 15 questions that most people will ask that is relevant to today’s economic landscape and use them as main chapter subjects. Once the chapter subjects were arranged into a logical flow, I approached each chapter in 1 of 2 ways I’ve learned in graduate school and during my practice.

1) Each chapter as its own research paper, contain abstract, objectives, methods, statistics, discussions and conclusion.
2) Each chapter as its own patient, SOAP- Subjective, Objective, Assessment, Plan.

Can you share a little of your current work with us? 

In order to share my work and develop a strong community on this subject, I started a blog,www.thecriticalflaw.com/blog, where people can see some of my work. Please enter and read the resources I’ve shared over the time. It’s a good read!

How did you come up with the title? 

I came with the title from the Federal Research Bank Chairman.

How did you develop your plot and characters, if any?

I have written non-fiction, therefore all the information provided in my book is based on real facts and statistics taken from history.

Who designed the cover? 

Layout, manuscript design, and cover design are made by Corina Kellam.

Who is your publisher?

My publisher is E.J. International Press.

Why did you choose to write this particular book? 

First of all, I would like to develop a close community who wishes to broaden their know-how, resulting in a global learning environment, where people would share their stories and develop strategies for protecting and increasing their net worth

In the same time, I’m on a mission to increase awareness of the global unsustainable macroeconomic forces and help concerned individuals take actions today before an increasingly likely currency crisis occurs. We will soon witness the greatest opportunity ever seen, as countries worldwide realize they need to revert to monetary systems backed by real money (i.e., the gold and silver). People who are acquiring gold and silver beforehand will not only have their wealth preserved and protected when existing fiat currencies collapse, but will see staggering increases in their purchasing power hence profiting from this opportunity.

What was the hardest part about writing this book? 

I believe the most challenging about writing a book is to stop procrastinating and overcome your writing blocks.

Personally, I did come across a few writer’s blocks with respect to how to structure the book during the initial phase. Due to the overwhelming amount of information and research I had, I found it really challenging to structure and organize all the information in a logical yet appealing format.

Did you learn anything from writing this book and what was it? 

I believe that every activity you deploy will result in a personal added value. Writing this book not only equipped me with a comprehensive approach on macroeconomics, making me able to deploy informed business decisions but also taught me that “Anything is possible”!

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* I take the opportunity to thank the wonderful team at The Reading Cat for featuring me in one of their interviews. It was a nice session and I enjoyed every moment.

You can read the interview here!

A TEXT POST

Author Interview – Dr. Chan interviewed by Ravina at Mommy Adventures

Tell us a bit about your family. 

I was born in a family of 4, in Hong Kong, China but currently live in San Francisco Bay Area, USA. My family owns trading businesses in Hong Kong but immigrated to USA in late 1990s in seek of better education opportunities.

I am newly and happily married and expecting a new member of the family by late 2013. My wife is a graduate student at Pepperdine University and she is working on a start-up project. She was a former private financial adviser at Morgan Stanley San Francisco headquarter.

What is your favorite quality about yourself? 

I am a Go-Getter. When I know what I want, I am always determined to achieve it despite what other may say. I am also very analytical at the same time, which allows me to accomplish what I want accurately.

What is your least favorite quality about yourself?

I could say that my least favorite quality is that I like Scotch and I’m a “Type A” individual.

What is your favorite quote, by whom, and why? 

My favorite quote is: “I’ve commended you to be strong and brave. Don’t ever be afraid or discouraged! I am your Lord your God, and I will be there to help you wherever you go” – Joshua 1:9.

I believe that faith and trust is important in life and as a matter of fact, in anything we do. There are too much fear and worry in the world that just get in the way of productivity.

What are you most proud of accomplishing so far in your life? 

I am quite proud of what I’ve achieved until now. Despite being young, I have made plenty of business mistakes but the key point and in the same time my UKP (unique key preposition) is that I’ve learnt from my business and investment mistakes and I had the opportunity of turning that experience to success.

What is your favorite color? 

I can’t really say I have a favorite color. I wear clothes that I feel comfortable wearing and I am not choosing those depending on a certain color.

What is your favorite food?

I am not picky; I eat anything, depending on my mood! If I were to choose something, I would go with the food my wife cooks for me.

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* Thank you Ravina for the quick Q&A session! It was a pleasure talking to you and your readers.

You can read the entire interview on Mommy Adventures!

A TEXT POST

Dr. Chan’s Interview with Indie Mirror

Dr. Alan Chan, Pharm.D, has been a precious metals investor since 2006. After receiving his doctorate in Pharmacy from University of the Pacific, he was involved in start-ups, real estate and private investments. When his real estate portfolio lost seventy-five percent of its value in 2008, Dr. Chan learned firsthand how dangerous these bubbles can be. In trying to recover from that major setback, he became an advocate of wealth protection in the form of precious metals. Subsequent years spent researching the financial system and macroeconomics resulted in his theories, which act as a wake-up call to those with concerns about more bubbles in the future.

Hello, Dr. Chan. Tell us, what interested you in writing books, like The Critical Flaw: How to profit and protect wealth in history’s greatest opportunity?
I have started research and writing in 2008, after I was impacted by the financial crisis, having lost then around 75% of my business portfolio. I began writing with the goal to increase awareness on the impact a financial crisis has on ones business assets and now I regard my book as a valuable investing tool which will enrich its readers with in depth economic knowledge and proven strategies on how to invest in precious metals in order to protect their wealth. Presently, I would like to develop a close community who wishes to broaden their know-how, thus resulting in a global learning environment, where people would share their stories and develop strategies for protecting and increasing their net worth. I am an entrepreneur myself and I don’t plan to use my book as a ‘get rich tactic’; on contrary, my book was written with the sole purpose of informing people on what happened in the past and as history tends to repeat itself in the same manner, it’s best to be informed, as knowledge is power.

What was it that sparked your interest in investing, economics, and more specifically, precious metals?
The financial crisis caused by massive economic bubbles in 2008 left my business and real estate portfolio wounded, having lost then around 75% of it. That was the moment I found out and realized that most people are not aware of the flaws of our financial system or are not aware of the implications it will have on their portfolio.

Bubble is a term that is tossed around by the politicians and media with almost little meaning. Experts often explain too much money rushing into a speculative investment causes economic bubbles. Although that is partially the answer, it does not explain why these bubbles get exponentially larger and more lethal. The goal of The Critical Flaw is to explain the fundamental mechanism of macroeconomics that we all take for granted showing with historic evidence why and how this have happened many times over in the course of human history and in addition, show you a way in how to profit and protect yourself from the next massive bubble burst. The short and simple answer: precious metals. They have always been the choice of a true free market when fiat money destabilizes the economy throughout human history.

As a result, I’ve enrolled on a mission with the goal to increase awareness of the global unsustainable macroeconomic forces and help concerned individuals take action today before an increasingly likely currency crisis occurs once again.

What is it about investing that you wish the “average person” would be more aware of?
The fundamentals of all paper investments are built on a flaw financial system, thus consider your long term investments carefully.
Be advised:
o Paper currency ≠ Money. Paper Currency = a representation of Money.
o Money in your bank is not yours (as the people in Cyprus recently learned).
o Democracy is superficial. Printing Money = increase in invisible taxes (thru inflation) that are never voted for.
o ↑↑↑ Debt = ↑Growth / GDP. Debt ceiling will always have to increase. Austerity will never work. We as a country must not pay off our debt because financial system will implode within. Hints: FRB, interests, derivatives… all a revolving door. (Remember recently Obama announced proudly to cut $85billion in expenses annually? Did you know the government is printing $85 billion monthly?).
o ↑ Paper Money = ↓ Value of Money = ↑↑↑ Work. Slave to paper money. Our next generation will work much harder for the same piece of bread we work for today. (Remember last generation, 1 average income stream can take care of a family of 4?)
o Free market does not exist under our current financial system. Gold and Silver is pro-free market, therefore is sort of the “politicians & bankers enemy”.
o Gold and Silver spot prices are largely determined by paper gold and silver, not real physical gold and silver.
o A global malignancy. Why is Europe is failing apart? Japan and China is not too far away at this rate.
o Many more…

What do you think of government spending at the moment?
We all know the obvious answer to this. The more important question is Why? How fiscally sustainable is our government and local governments would be if money couldn’t be printed? How would that compare if we are on a gold standard?

Generally speaking, we are digging ourselves in a deeper and deeper hole as every country in the world prints together.

Do you believe that the current economic crisis is really a chrysies? Or is this one of the greatest opportunities to gain wealth?
If you hold real money such as gold and silver, you will be the real winner of this game when world’s paper money becomes worthless. This is the greatest opportunity in history due to unprecedented among of wealth will transfer into gold and silver as they account for all outstanding paper money, credit, loans…etc that were merely created out of thin air.

Imagine everything we know about money and finance is like a game of special Monopoly. Special banking rules applies:
1. Bank granted authority to print or issues money.
2. Bank able to issue loans, debts and credit.
3. Bank 10% reserve requirement.
4. Bank must apply interest to outstanding loans.
5. Allow players to swap and trade mortgages and advance derivatives.

These rules make the game interesting. As you can see, the amount of paper money you have worth less and less with each round of printing. The prices of your properties will have to go up to absorb all the money flowing around. Eventually, the winner will be the ones with the most properties because as the paper money becomes worthless, this is the only thing of value in the game. But what if this is real life? And you work hard for your money?
How much of your money is in stock market? Or anything that is consider paper assets? Why and how are the stock markets keep reaching record highs every month? Why are real estate prices going up again? Are quality jobs that plentiful today? And the questions go on….

Most importantly, what can be used as money that cannot be printed? Just look back in history. Many human tragedies such as wars and revolutions are directly linked to lost of confidence in an economy caused by collapse of too much fiat or paper money. When a country goes back on to silver or gold standard, that is when everything stabilizes once again.

Thank you for speaking with us, Dr. Chan. Is there anything you would like those reading to know before you continue with your day-to-day?
There is a global crisis coming that mankind cannot imagine. The Critical Flaw can help paint a better picture of what’s going on and in turn, help you make an informed, educated decision for your future.

Also, I would like to say to my readers “Everything is possible as long as they do something to pursue their dreams! Just do it!” Stop procrastinating and follow your dreams. With passion, determination and a clear objective, everybody has the ability to reach success as long as they strive for excellence.

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* Thank you Indie Mirror for the opportunity to talk to your readers. It was a pleasure and I hope to repeat the experience as soon as possible.

You can read the interview here!