THE RAPING OF THE AMERICAN INVESTOR
By Joan Veon
October 13, 2008
Transferring wealth through the myth of buying and holding an investment
When I was a college student, I had a gall bladder attack late in the evening and went to the Emergency Room. There a good looking intern became my temporary doctor. Not only did he check me out, but he called in 3 or 4 of his colleagues to also check me out. It was not until 10 years ago, that I realized I had been severely violated in the name of medicine by four young men looking for fun during their shift.
The American people have just been severely violated in the name of the 2008 Credit Crisis. In the arena of investing, the concept of “buying and holding” a security has been gold. The idea being that the “market always comes back.” However, the problem is that you have to wait for the market to come back which may take years and you might break even. Last Friday one of the business channels interviewed a financial expert said that buy and hold was best. How could she even think that when stocks dropped 18% for the week? And the month before, they dropped 20%. Friday, October 10, saw a new historic high and low in intraday market swings totaling over 1000 points. Maybe if we use inflation, it is equal to the October 1987 market crash of 500 points. However, both the market and you and I are in new territory. For those of us who did not live during the Great Depression, this is new.
People who adhere to a “buy and hold” strategy don’t realize that in a time of market declines the ones that sold took your gain as they realized the gain. Those who hold their investments watch as it declines and their gains vanish. Selling high is one of the easiest transfers of wealth. To illustrate this principle, think of the market as a glass of root beer. At the top you have the fizz and underneath the fizz is the liquid. Buy and hold is the liquid as it supports the fizz. The people who trade in order to lock up gains and minimize losses comprise the fizz. In order for the fizz to fizz, it is dependent on the liquid in order to do take their gains. When I posed this question a number of years ago to a panel of imminent economists and even a U.S. Congressman at the World Economic Forum, they did not want to address my question.
In the last twenty or so years, more people have gotten into the market due to the fact that our government passed the Monetary De-Regulation Act in 1980. That law did several things: (1) it erased any ceilings of interest that a bank had to pay on deposits and (2) it allowed them to charge the going interest rate that the market would bear. It also allowed Americans to invest overseas and for foreigners to invest in America. In reality, it facilitated a flood of investors into the stock market who normally would have stayed in the bank, but because the interest was so low, they took the risk and went into the stock market. The 1980 law also facilitated Mafia rates on credit cards because it allowed banks to pay going rates. This was a win-win for the market.
Interestingly enough, the dollar dropped to historic lows against the euro over the past three years and now, surprisingly, it is strengthening—just in time for those who bet on the euro to take their gains. Foreign money coming into the U.S. from all the other countries who have also suffered large declines in their stock market will flee to a bigger, safer country. How fortunate for the U.S. that our dollar has turned around at this fortuitous time.
The investors which sold all or part of their positions now have cash and a higher return than those who held, and with their cash, they can now capitalize on the next up in the market. The only way those who held can take advantage of the next market rise is to sell at huge losses. You know what they say, cash is king.
However, the situation we find ourselves in is not only with the hugh loss in potential profits, but a complete devaluation of everything we own: real estate, stocks, bonds, antiques, art, houses, cars, etc. Once the American people realize what has happened, they will sell when it is too late, thus fueling another 1929.
Is world government political only or is it financial? In the case of a communist take over, it is political first and then financial. However, in the case of a banking or credit crisis, it is economical. No guns, no bullets, and no physical invasion. This time it is not Marx, Lenin, Trotsky, or Mao that have won, it is the banking system that has won. They will take all the spoils, not country by country, but globally!
As I have written before, the process to transfer us into total world government is not over. First we had the banking crisis which has now facilitated the stock market drop. While some of the business channels led us to believe we would have a market rally after the bailout bill was passed, we did not. Instead the market dropped 18%. The stage is now set for step two of the Paulson Punch: the adoption of the Treasury Blueprint for a Modernized Regulatory System. When implemented, the Federal Reserve, a private corporation, will take direct control of various pieces of America’s financial assets: the insurance system, the mortgage system, the Payment and Settlement System of Wall Street, and they will become the Market Stability Regulator (www.ustreas.gov). They will also transfer all credit unions, savings and loans, State chartered banks, and thrifts to their oversight. While I don’t know the exact value, the Blueprint document states $31T for everything but the real estate. In other words, when Congress passes the Blueprint, every aspect of our financial system and holdings will be under Federal Reserve control.
Again, this is without any physical violence. The banking system is about to become the biggest victor in world history. Recently former Federal Reserve Governor Alice Rivlin indicated that the structure of government would have to change, given what is occurring in the financial system. It is very obvious that once the Federal Reserve has control of all our assets that Congress will not be necessary but to rubberstamp, as they have done in the past, anything the Federal Reserve wants.
The young men who violated me probably laughed and made jokes that a young, naïve woman did not understand what they were doing. Hopefully it will not take America 20 years to figure it out the real truth of what is happing to them today.