LIVING OFF DIVIDENDS & PASSIVE INCOME

In July and August, the USD has actually become stronger against most other currencies, on apparently no news. Gold had also dropped as low as $790/oz from a high of $1030/oz this year, even though there is a shortage of physical gold in the US and the US mint had stopped selling gold coins like the American Gold Eagles. I was wondering if there was some manipulation going on in these markets.

Hedge fund manager John Lee thinks that gold prices are being manipulated in an effort to keep up the dollar afloat.

According to an article on Forbes, the central banks of the US, Europe and Japan planned in mid-March to prop up the US Dollar if it continued to slide.

Officials from the U.S. Treasury Department, Japan’s Finance Ministry and the European Central Bank reportedly drew up a currency contingency plan over the weekend of March 15-16.

The officials did not specify an exchange rate for initiating the dollar rescue plan, but in the event of a free-fall they agreed to aggressively buy the greenback and sell yen and euros.

Japan was to supply yen necessary for the underlying currency swaps. The plan also called for using a previously established swap mechanism between the United States and Europe.

Analysts said even though a rescue never took place, the fact that global monetary officials had agreed on action would be important in the future if the dollar were to tumble again or other exchange rates move very sharply.

Hmmm…who are these analysts and why should we trust what they say?

The Government and Wall Street has been less than forthright in the past. The CEO’s of Fannie Mae and Freddie Mac said a few months ago that they’re in no danger, but Buffett just declared game over for those two.

I’m getting tired of the bankers and government interfering in the natural course of things. They’re bailing out some market participants to the detriment of the taxpayer. People aren’t facing any adverse effects for taking on insane amounts of risks. If it pans out, they give themselves a bonus. If not the US taxpayer bails them out! Effectively, they’re socializing losses while privatizing profits.

Fannie Mae’s CEO claims that they make housing affordable for millions of Americans. However, if they went bankrupt, there would not be money available for huge home loans and home prices would fall. THAT would make home prices more affordable. Yes, it would be difficult for people to get a mortgage to buy a home, but it would encourage regular saving and it would take longer for people to buy their first home. But in the long run, housing would be a lot cheaper with lower payments towards mortgage interest and thus lower effective home costs.

The fact that the two CEOs of Fannie Mae and Freddie Mac took home $32 million last year while saddling the US Taxpayers with $500 Billion in losses means they can’t be trusted. If this isn’t outright theft, then at least it’s either gross misrepresentation, negligence or stupidity and they ought to refund their salaries, if not do serious jail time.

And talking about government manipulation, the Pakistani Government just introduced price controls on the most popular Karachi Stock Exchange Index. They got tired of watching the stock market drift lower every day, so until the officials decide otherwise, the KSE-100 cannot go below yesterday’s two-year low of 9,144!

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Related Posts

• August 1, 2008 -- Cartoon Capitalism
• April 1, 2008 -- Cheney Betting Against The Dollar
• March 14, 2008 -- Gold Cracks $1000/Oz: Investing For A Recession
• November 5, 2008 -- Heard On The Street
• August 15, 2008 -- Rogers Still Bullish On Commodities
• July 16, 2008 -- Fannie Mae & Freddie Mac Collapse
• June 11, 2008 -- Mortgage Crisis Not Limited To Subprime