Commonly held false data

Please don't shoot the messenger, we didn't invent the facts below. Political opinions are labeled when stated.



False data     True data

It's different this time, or _____ always goes up and I can't lose.       That was said in the late 1920's and the late 1990s in the US stock markets, as well as many times in history like the Tulip Mania in Holland in the 1600s, the South Sea Mania in the 1700s, the banking sector stock issue in Israel in 1983, Coins in the late 1980s in the US, or even California real estate and especially Japanese stocks in the late 1980s. Nothing goes up (or down for that matter) forever in the material universe.

Legendary investor Warren Buffet once remarked, “it wasn’t raining when Noah built the ark.”

And this one from John Maynard Keynes, the economist, also seems to apply and in both up and down moves - "Markets can remain irrational longer than you can remain solvent".

Another way to state it is to be very wary when its fashionable or trendy for the delusional to refer to their fellows as those who ‘get it’ and to dismiss everyone else.

The average income in the US is way up since the 1970s.       Per Fortune magazine in 1999, the average annual individual salary in the US went from $32,522 in 1970 to $35,864 in 1999. Both numbers are expressed in 1998 dollars (in other words, corrected for inflation as of 1998). See inflation data here.

Rising interest rates are bad for gold & silver long term prices.        See the popup chart here. It shows 10 year bond rates going from 5% to 15% while gold went from $35 to $850 during the period 1971 to 1980, and then rates going down from 15% to 5% while gold dropped to $255 in 2001.

You can only lose money or stand aside in cash if the stock market is moving down.     With options, ETFs or futures one can make profits in a down market. There are also more than a few mutual funds that gain when the market falls - some symbols of those funds are (no recommendation intended): USPIX, URPIX, RRPIX, RYJUX, RYURX, RYVNX, PSAFX, GRZZX, CPFAX, DRCVX, SHPIX, POTSX, PDOSX, RYAIX, RYTPX, RRPIX & BEARX.

The ETF or option symbol for the Dow is DIA, the S&P 500 is SPY & QQQQ for the NASDAQ 100 (An option contract is for 100 shares of the underlying asset. A put is an option to sell, a call is an option to buy).

U.S. unemployment figures are accurate.     The actual explanation of what the Bureau of Labor Statistics is doing is here and here. If it makes sense to you as far as increasing accuracy, so be it but we sure don't see it. The chance for abuse and inaccuracy is too high for our taste.

Gold is more rare than silver.     While it is true that the average ratio of gold to silver is about 9:1 in Earth's crustal rock, actual above ground stocks and ownership show a very different picture. Per the World Gold Council, somewhere around 4-5 billion ounces of gold exist. Per the Silver Institute and others, .5-1 billion ounces of silver exist in the world.

Using average 2004 prices, the gold to silver ratio for available inventory is over 300:1. On an historical basis, silver is quite undervalued.

The central bank of the U.S., the Federal Reserve Bank, is part of and owned by the U.S. government and its people.     The Federal Reserve Bank is a private company, authorized in 1913 by a Congressional Act called the Federal Reserve Act of 1913. In a very real sense, it outsourced the control of U.S. money and banking. Some of its owners as of the mid 1990's, in no particular order and who have at least 2/3 of its stock, are:
  • Citibank
  • J.P. Morgan
  • Goldman, Sachs
  • UBS Warburg
  • Chase Manhattan/Chemical
  • Bankers Trust
  • Lehman Brothers
  • Kuhn Loeb Bank
  • Rothschild Banks in Europe
  • Lazard Brothers of Paris
  • Israel Moses Seif Banks of Italy
Political opinions follow:
James Madison in 1808 said "History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible, to maintain their control over governments, by controlling money and its issuance."

Thomas Jefferson, another one of the founding fathers of the U.S., had this to say about private central banks: ""I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them." and "The issuing power (of money) should be taken from the banks and restored to the people, to whom it properly belongs/"

That's a bit too bleak, but it does address the current credit/borrow almost mania of much of the U.S. populace. More data and specifics are available here. A 3.5 hour long video, that goes much more deeply into the area of international private bankers and their negative effects in the last few hundred years, offers some good answers and alternatives. It is quite controversial and has been split into two pieces for easier download. Part 1 is available here and part 2 is here (approx. 50MB each). It is free but the quality of sync between video and audio leaves something to be desired. Do your own research and make up your own mind, as usual. If you think we're conspiracy nuts, that's fine too.

A gold backed currency is the answer to the problems with the dollar and inflation, or any other fiat currency.     Political opinions follow:
It appears at first glance that locking a currency value to an amount of gold is a great way to limit the ability of government or central banks to print too much money and create inflation, and of course there's some truth to that... and a partial truth can be very dangerous.
  1. The primary economic point, and based on the definition of inflation and deflation is since there's a very limited total amount of gold on Earth and there's virtually no limit to how much man can produce (as witness the huge standard of living increase in the last 100 years), the amount of production would either have to be limited to the amount of gold available OR the value of gold would have to increase every year to keep up with production levels.
  2. The idea of course is to keep the dollar or any currency at a stable value.... and guess who own 33-50% of the gold on Earth - central banks and world banking organizations. They would get rewarded for doing almost nothing, which isn't our idea of fair.
  3. If nothing was done, and the currency increased in value on a regular basis, why would someone invest in something to raise the standard of living when by doing nothing and holding the currency, it gets more valuable every year? Sure, there would be some investing going on but it sure would severely lower the incentive if doing nothing paid well.
  4. Better than a gold or silver backed currency is a constitutional amendment, along with at the very least removing the Federal Reserve Banks from private hands.
Also see William Jennings Bryan's "Cross of Gold" speech from 1896 when the country was still on a gold standard.

A nuclear strike on the U.S. is impossible.     As incredibly horrific as it would be and even to contemplate, here's a small extract of what former Secretary of Defense Robert S. McNamara had to say in the May/June 2005 issue of Foreign Policy magazine:

"Indeed, just last summer, at a meeting of the National Academy of Sciences, former Secretary of Defense William J. Perry said, “I have never been more fearful of a nuclear detonation than now.… There is a greater than 50 percent probability of a nuclear strike on U.S. targets within a decade.” We share his fears, and also note that August 6th is the anniversary of Hiroshima.

Federal Reserve Central Bankers tell the truth.     "The last duty of a central banker is to tell the public the truth."

Alan Blinder, Vice Chairman of the Federal Reserve, on PBS’s Nightly Business Report in 1994.

Oil companies are making obscenely high profits.     We're no big fans of multi-national oil companies but the recent large price increases have caused an outcry - it's time for a few facts too. Yes of course it's true that profits have been in the range of many tens of billions of dollars, but did you know that their net profit is about 9% as of late 2005? Throughout the '90s, the average oil company was making about 5% net profits, less than what was being earned on a CD with very little risk and certainly was way less than what was earned in the average stock market account. Or, did you know that Coca-Cola makes about 22% and Microsoft makes about 32% net profit? How about the Disney amusement parks at over 30%? Where's the outcry on them?

There's lots more to the full story than what we've stated above and the over simplification from the outcry and comments on obscene profits does little except help to obscure the truth even more, and cause more upset.

Blaming China, etc.     "Who is to blame for America’s negative personal saving rate? For its newfound asset-based saving strategies? For record levels of household sector indebtedness that are required to convert such saving into spendable purchasing power? In my view, the responsibility for these behavioral shifts rests solely on the back of the American consumer. It would be ludicrous to place the blame for the excesses of US consumerism on foreign economies."

-- Stephen Roach, Chief Economist, Morgan Stanley

Gold is a barbarous relic.     "In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."

-- Alan Greenspan, Federal Reserve Chairman 1987-2006, from a 1966 article

The financial condition of the U.S. and world is fine.    
  • Total US credit market debt, both financial and non-financial, has expanded 40.4% and 48.9% since the end of 2000, respectively. In the meantime, over this same period nominal national income has risen 24.4%, roughly half the rate of total debt increases. Remarkably, many insist that these developments are the basis for a robust, riskfree future.
  • More international debt has been issued in the third millennium this far (BIS Table A85 which carries statistics up to June 30, 2005) than in the entirety of human financial history that has gone before. The total outstanding stock of these international debt instruments (exclusive of domestic bonds) figured in US dollars more than doubled to a total of $14 trillion USD between end- 2000 and June 30, 2005 ... a period of only 4½ years!
  • While the average income of everyone on the planet between 1982 to 2004 (according to the World Bank) has risen from $2,147 per capita to approximately $6,440, the total "financial position value" has risen from $1,920 per capita to $61,443 by the end of December 2004, almost 10X underlying annual income... Is that trend sustainable? Only if everyone in the world becomes a trader or broker.
Source data, Source article

There's nothing wrong with a little inflation.     There has never in recorded history been a paper currency that eventually was not inflated/devalued so much that it became worthless.

“Paper money eventually goes down to its intrinsic value – zero.”
-- Voltaire, 1729

"Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become 'profiteers,' who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.

Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose."

-- John Maynard Keynes, "Economic Consequences of the Peace" (1919)