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Saturday, August 20, 2011

BookDaily Update

 
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BookDaily Update
Sunday August 21, 2011

Infinite Exposure

By Roland Hughes
ISBN: 9780977086696
 

It's not every morning you wake up with armed men kicking in your door and rushing into your bedroom, but that's certainly how this morning started. All because he really wanted a new computer. Not just a new computer, the best system Dell was shipping. But that want was satisfied over a decade ago. Today, he couldn't even sell that computer on eBay. Today, it was a trip with a bag over his head, wearing handcuffs to an interrogation room.

He had quite a while to think that morning. They left him alone for what seemed like hours. The stone room had no windows and must have been well below ground judging from the chill and dampness. Best not to think about wells, he ...

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Purple Knot

By Raquel Byrnes
ISBN: 9781611160888
 

I lurk in the shadows of the normal world. A recorder of sins, I dwell in the gray of secrets and lies. I capture images of infidelity, and follow the printed trails of stolen promises. Nothing stays hidden from me, no matter how deeply it’s buried. I am a purveyor of all that is protected, and I am very good at my job.

That is how I came to be on the fourth floor of an abandoned carpet warehouse with my camera on its tripod and a foam cup of coffee in my hand. A client, for whom I’ve done numerous jobs, asked me to keep an eye on his business partner. For the last four weeks, I’d tracked balding, middle-aged, Norman Bower from his lunch meetings to his handball ...

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Today's Business & Economics Chapter

 
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Business & Investing
Sunday August 21, 2011
When the Rivers Run Dry: Water--The Defining Crisis of the Twenty-first Century
by Fred Pearce
 

The Human Sponge

Few of us realize how much water it takes to get us through the day. On average, we drink no more than a gallon and a half of the stuff. Including water for washing and for flushing the toilet, we use only about 40 gallons each. In some countries suburban lawn sprinklers, swimming pools, and sundry outdoor uses can double that figure. Typical per capita water use in suburban Australia is about 90 gallons, and in the United States around 100 gallons. There are exceptions, though. One suburban household in Orange County, Florida, was billed for 4.1 million gallons in a single year, or more than 10,400 gallons a day. Nobody knows how they got through that much.

We can all save water in the home. But as laudable as it is to take a shower rather than a bath and turn off the faucet while brushing our teeth, we shouldn't get hold of the idea that regular domestic water use is what is really emptying the world's rivers. Manufacturing the goods that we fill our homes with consumes a certain amount, but that's not the real story either. It is only when we add in the water needed to grow what we eat and drink that the numbers really begin to soar.

Get your head around a few of these numbers, if you can. They are mind-boggling. It takes between 250 and 650 gallons of water to grow a pound of rice. That is more water than many households use in a week. For just a bag of rice. Keep going. It takes 130 gallons to grow a pound of wheat and 65 gallons for a pound of potatoes. And when you start feeding grain to livestock for animal products such as meat and milk, the numbers become yet more startling. It takes 3000 gallons to grow the feed for enough cow to make a quarter-pound hamburger, and between 500 and 1000 gallons for that cow to fill its udders with a quart of milk. Cheese? That takes about 650 gallons for a pound of cheddar or brie or camembert.

And if you think your shopping cart is getting a little bulky at this point, maybe you should leave that 1-pound box of sugar on the shelf. It took up to 400 gallons to produce. And the 1-pound jar of coffee tips the scales at 2650 gallons-or 10 tons-of water. Imagine taking that home from the store.

Turn these statistics into meal portions and you come up with more than 25 gallons for a portion of rice, 40 gallons for the bread in a sandwich or a serving of toast, 130 gallons for a two-egg omelet or a mixed salad, 265 gallons for a glass of milk, 400 gallons for an ice cream, 530 gallons for a pork chop, 800 gallons for a hamburger, and 1320 gallons for a small steak. And if you have a sweet tooth, so much the worse: every teaspoonful of sugar in your coffee requires 50 cups of water to grow. Which is a lot, but not as much as the 37 gallons of water (or 592 cups) needed to grow the coffee itself. Prefer alcohol? A glass of wine or beer with dinner requires another 66 gallons, and a glass of brandy afterward takes a staggering 530 gallons.

We are all used to reading detailed technical information about the nutritional content of most food. Maybe it is time that we were given some clues as to how much water it took to grow and process the food. As the world's rivers run dry, it matters.

I figure that as a typical meat-eating, beer-swilling, milk-guzzling Westerner, I consume as much as a hundred times my own weight in water every day. Hats off, then, to my vegetarian daughter, who gets by with about half that. It's time, surely, to go out and preach the gospel of water conservation. But don't buy one of those jokey T-shirts advertised on the Internet with slogans like "Save water, bathe with a friend." Good message, but you could fill roughly twenty-five bathtubs with the water needed to grow the 9 ounces of cotton needed to make the shirt. It gives a whole new meaning to the wet T-shirt contest.

Let's do the annual audit. I probably drink only about 265 gallons of water -that's one ton or 1.3 cubic yards-in a whole year. Around the home I probably use between 50 and 100 tons. But growing the crops to feed and clothe me for a year must take between 1500 and 2000 tons-more than half the contents of an Olympic-size swimming pool.

* * *

Where does all that water come from? In England, where I live, most homegrown crops are watered by rain. So the water is at least cheap. But remember that a lot of the food consumed in Britain, and all the cotton, is imported. And when the water to grow crops is collected from rivers or pumped from underground, as it is in much of the world, it is increasingly expensive, and its diversion to fields is increasingly likely to deprive someone else of water and to empty rivers and underground water reserves. And when the rivers are running low, it is ever more likely that the water simply will not be there to grow the crops at all.

The water "footprint" of Western countries on the rest of the world deserves to become a serious issue. Whenever you buy a T-shirt made of Pakistani cotton, eat Thai rice, or drink coffee from Central America, you are influencing the hydrology of those regions-taking a share of the Indus River, the Mekong River, or the Costa Rican rains. You may be helping rivers run dry.

Economists call the water involved in the growing and manufacture of products traded around the world "virtual water." In this terminology, every ton of wheat arriving at a dockside carries with it in virtual form the thousand tons of water needed to grow it. The global virtual-water trade is estimated to be around 800 million acre-feet a year, or twenty Nile Rivers. Of that, two thirds is in a huge range of crops, from grains to vegetable oil, sugar to cotton; a quarter is in meat and dairy products; and just a tenth is in industrial products. That means that nearly a tenth of all the water used in raising crops goes into the international virtual-water trade. This trade "moves water in volumes and over distances beyond the wildest imaginings of water engineers" says Tony Allan, of the School of Oriental and African Studies in London, who invented the term "virtual water."

The biggest net exporter of virtual water is the United States. It exports around a third of all the water it withdraws from the natural environment. Much of that is in grains, either directly or via meat. The United States is emptying critical underground water reserves, such as those beneath the High Plains, to grow grain for export. It also exports an amazing 80 million acre-feet of virtual water in beef. Other major exporters of virtual water include Canada (grain), Australia (cotton and sugar), Argentina (beef), and Thailand (rice).

Major importers of virtual water include Japan and the European Union. Few of these countries are short of water, so there are ethical questions about how much they should be doing this. But for other importers, virtual water is a vital lifeline. Iran, Egypt, and Algeria could starve without it; likewise water-stressed Jordan, which effectively imports between 80 and 90 percent of its water in the form of food. "The Middle East ran out of water some years ago. It is the first major region to do so in the history of the world," says Allan. He estimates that more water flows into the Middle East each year as a result of imports of virtual water than flows down the Nile.

While many nations relieve their water shortages by importing virtual water, some exacerbate their problems by exporting it. Israel and arid southern Spain both export water in tomatoes, Ethiopia in coffee. Mexico's virtual-water exports are emptying its largest water body, Lake Chapala, which is the main source of water for its second city, Guadalajara.

Many cotton-growing countries provide a vivid example of this perverse water trade. Cotton grows best in hot lands with year-round sun. Deserts, in other words. Old European colonies and protectorates such as Egypt, Sudan, and Pakistan still empty the Nile and the Indus for cotton-growing, as they did when Britain ruled and Lancashire cotton mills had to be supplied. When Russia transformed the deserts of Central Asia into a vast cotton plantation, it sowed the seeds of the destruction of the Aral Sea. Most of the missing water for the shriveling sea has in effect been exported over the past half-century in the form of virtual water that continues to clothe the Soviet Union.

Some analysts say that globally, the virtual-water trade significantly reduces water demand for growing crops. It enables farmers to grow crops where water requirements are less, they say. But this is mainly because the biggest trade in virtual water is the export of wheat and corn from temperate lands like the United States and Canada to hotter lands where the same crops would require more water. But for many other crops, such as cotton and sugar, the trade in virtual water looks like terribly bad business for the exporters.

Pakistan consumes more than 40 million acre-feet of water a year from the Indus River-almost a third of the river's total flow and enough to prevent any water from reaching the Arabian Sea-in order to grow cotton. How much sense does that make? And what logic is there in the United States pumping out the High Plains aquifer to add to a global grain glut? Whatever the virtues of the global trade in virtual water, the practice lies at the heart of some of the most intractable hydrological crises on the planet.

Chapter Two

North America: Crossing the Rio Grande

They serve a strong brew at the Alamo coffeehouse in Presidio, a small farming town near the U.S.-Mexican border. They need to. Times are tough, says Terry Bishop, looking up from his second mug. This land, next to the Rio Grande in Texas, has probably been continuously farmed for longer than anywhere in America, he says. Six hundred years, at least. It's been home to scalp-hunters and a penal colony; it's seen Comanche raids, Spanish missionaries, marauding Mexican revolutionaries, and a population boom during a recent amnesty for illegal aliens. All that time it has been farmed. But soon it will be back to sagebrush and salt cedar.

Climbing the levee by the river at the end of his last field, Bishop shows me the problem. The once mighty Rio Grande is now reduced to a sluggish brown trickle. In its middle stretches, the river often dries up entirely in the summer. All the water has been taken out by cities and farmers upstream. "The river's been disappearing since the fifties," says Bishop, who has farmed here since then. There hasn't been a flood worthy of the name since 1978. For 200 miles upstream of Presidio, there is no proper channel anymore, he says. They call it the forgotten river.

Bishop's land brings with it legal rights to 8000 acre-feet of water a year from the river-enough to flood his fields to a depth of more than three feet, enough to grow almost any crop he wants. But in recent years he has taken only a quarter of that. Even when he gets water, "it's too salty to grow anything much except alfalfa." But that's all academic now. Yields got so low, the farm went bust. Bishop leases some fields to tenants, but most of them are idle these days. The land is gradually returning to desert. And Bishop drinks a lot of coffee.

This is the way of things in Presidio. The town was once a major farming center. It used to ship in thousands of Mexican workers to harvest its crops. Bishop's farm alone once employed a thousand people. But that has all ended, and the unemployment rate among the town's permanent residents is almost 40 percent. About the only profitable business is desert tourism. An old silver mine a few miles up the road has been turned into a "ghost town," and a fort at Cibolo Creek is now an upmarket resort where Mick Jagger once stayed. Harvesting tourists, that's the game now, says Bishop.

On the map, the Rio Grande is the fifth longest river in North America and among the twenty longest in the world. Its main stem stretches almost 2000 miles, from the snowfields of the Colorado Rockies to the Gulf of Mexico via New Mexico and Texas. It drains a tenth of the continental United States and more than two fifths of Mexico. The hub of human exploitation of the Rio Grande is the Elephant Butte Reservoir, just upstream of El Paso, Texas. It was built in 1915 and changed the river forever. The wild, untamed flow, which obliterated villages and once rode right through downtown Albuquerque, was ended for good, and the river's waters were corralled for irrigation.

Today, Elephant Butte and its downstream sister, the Caballo, all but empty the river to supply El Paso and nearby farmers. Downstream the river is partly renewed with water from two tributaries, the Pecos, out of Texas, and the Rio Conchos, which comes in from Mexico and joins the main stem at Presidio, right by Bishop's farm. But this new water doesn't last long before being taken out to fill reservoirs supplying farms in the lower basin. More than 9 million people in the basin rely on the Rio Grande's waters. But it is the farmers who make most use of it. Four fifths of the water in the river is taken for irrigation -most of it to grow two of the thirstiest crops in the world, cotton and alfalfa (a grain that is fed to cattle). And the wastage is huge. Only about 40 percent of the water reaches the crops, and evaporation in the hot sun takes more than 6 feet of water a year from the reservoirs-a total of around 245,000 acre-feet from Elephant Butte alone.

Usually a trickle of water gets through to the sea. But since the mid-1990s, a decade during which drought gripped the basin, the flow has been at record lows. It should have come as no surprise when, on February 8, 2001, Cameron County Agent Tony Reisinger took a photograph of the mouth of the Rio Grande in the delta at Boca Chica and the flow had ceased. A sandbar 325 feet wide had completely blocked off the river from the Gulf of Mexico. The bar lasted for five months before summer flows washed it away. And for much of the next two years it returned. You could drive a car across the beach between the United States and Mexico. Though a couple of storms raised the flow in 2004, nobody doubts that the river is in serious trouble.

* * *

My exploration of the strange death of the Rio Grande started in El Paso at the Chamizal National Memorial, which commemorates a treaty that fixed the boundary between El Paso and its Mexican twin city, Juarez, by forcing the meandering river to pass down an unchanging concrete canal. This brutal carve-up may have underlined the river's geographical importance, but it hardly accorded it respect. Today the river is virtually invisible from the memorial behind a high chain-link fence designed to keep out illegal Mexican immigrants. Only up on the ugly, heavily guarded border bridge can you see it-a fetid trickle in an absurdly wide concrete canal flanked by a six-lane highway and a container dump. There is so little flow that as I watched, the wind ripping upstream was blowing the water back toward its source in distant Colorado.

El Paso is in hydrological trouble. With the river now trickling through the town virtually empty and upstream reservoirs scarcely any fuller, the El Paso Times regularly alerts readers to the days when they can use public water on lawns and the days they can't. Jittery suburbanites are repairing old wells in the hope of capturing some private water from beneath their land. And in the unplanned shantytown colonias where Mexicans usually end up after crossing the river, thousands of people live without access to piped water at all-and that is a shock to find in the United States, even in the desert.

Across the border in Juarez, things are worse, of course. People there are so short of water that sewage effluent and salty underground water have become major resources. I visited a gleaming new plant that treats half the city's sewage and sends the cleaned-up effluent 25 miles downstream to irrigate crops. And I went to Anapra, one of the city's more notorious colonias, where migrant Raphael Valarez told of his delight that he could now walk down the street to collect water from a new desalination plant. He had so much water his young daughter could paddle in a big washtub.

(Continues...)

 
 
 
 
 
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When the Dow/Gold Ratio is 1:1

D.R. U.S. versionThe Daily Reckoning U.S. Edition Home . Archives . Unsubscribe
More Sense In One Issue Than A Month of CNBC
The Daily Reckoning | Saturday, August 20, 2011

--------------------------------------------------

  • Another golden record...and another week in the red for stocks,
  • Readers weigh in on Ft. Knox, hanging politicians and an end to imperialism,
  • Plus, all the rest of this week's reckonings, neatly archived for your records...
--------------------------------------------------

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When the Dow/Gold Ratio is 1:1
Joel Bowman
Joel Bowman
En route to Buenos Aires, Argentina...

Did you see that, Fellow Reckoner? Gold hit another all-time high this week. Many of them, in fact. Yesterday, the price rocketed to within a couple of bucks shy of $1,880 an ounce. Stocks, meanwhile, had a tough time of it. The S&P 500 slipped 4.7% for the week. The Dow lost 450 points. Ouchie!

By week's end, the Dow/Gold ratio (which we last wrote about here) contracted to 5.8:1. We guessed it would fall to between 3 and 3.5:1 by this time next year, meaning it will take between thee and three and a half ounces of our favorite metal to purchase one share each of the 30 stocks on the Dow index. Bill reckons the two will eventually meet again, as they have done historically, at 1:1. That could mean gold at $10,000 per ounce or $10 per ounce. His guess is that they'll rendezvous somewhere around 3,000...though that's probably a ways off yet.

In the meantime, investors want to know where gold is headed over the short term. Is it due for a snapback? Are we going to get some buying opportunities over the coming months? Or is it headed from here to the moon? Here is our Reckoner-in-Chief on the subject. (This week's feature column originally appeared on Thursday, August 18, 2011.) Please enjoy...

Dots
Is Gold Still a Buy?
Bill Bonner
Bill Bonner
The price of gold jumped above $1,800 today. We can imagine $2,000 by the end of the year.

Meanwhile, Wells Fargo, among others, is warning of a 'bubble' in gold.

Is there a bubble in the gold market? An AP report explains why people are buying gold:

In October 2007, it sold for about $740 an ounce. A little over a year later, it rose above $1,000 for the first time. This past March, it began rocketing up. On Wednesday, it traded above $1,793 an ounce, just shy of last week's record of $1,801.

Meanwhile, stocks, despite rising sharply in the last two and a half years, are only slightly higher in price than they were a decade ago. Since hitting a record high in October 2007, the Standard & Poor's 500 index is down 23 percent.

Gold hits a sweet spot among the elements: It's rare, but not too rare. It's chemically stable; all the gold ever mined is still around. And it can be divided into small amounts without losing its properties.

Ultimately, though, gold is valuable because we all agree it is. It was used around the world as a currency for thousands of years, and then it gave value to paper currencies for a couple of hundred more.

Now, in a time of turmoil, from the credit downgrade and debate over raising the debt limit in the US to the growing financial crisis in Europe to worries of slow growth across the globe, gold is dazzling investors.
But wait....there's more to the AP story:

Sharlett Wilkinson Buckner, of Humble, Texas, recently took an old bracelet, ring and necklace to her local jeweler and walked out with $1,070.

"I couldn't wait for my husband to come home," she said. "I fanned my money in front of him and said, 'Look what I got for my gold.'"

The next day, he sold an old gold necklace for $650.
Do you see what we see? The average person is still 'out to lunch.' He has no idea what is happening. Desperate for cash, he sells gold in order to load up on – paper!

Of course, it may turn out to be a good move. At least, in the near term. The whole world is drowning in a tub of debt. As debt drains away – we are in a Great Correction, remember, a period of debt- reduction – 'money' goes down the drain too.

In an expansion, the banking system turns on the taps. It magnifies purchasing power...by making loans. In a contraction, purchasing power goes down...as loans are repaid or written off. A $100,000 loan that is repaid reduces the 'money' supply by $100,000 (unless it is lent out to someone else). In a fractional reserve banking system, a loan that can't be repaid...reduces the money supply by as much as $1 million. It wipes out the bank's lending capital, forcing it to reduce its loans outstanding.

This de-leveraging process should help support the value of the dollar and reduce the demand for gold as a refuge. But so far, gold is still going up. And in the long run...after the feds have intervened...it should soar.

Here's our old friend Doug Casey on the subject:

I hate encouraging people to buy gold at $1,800 an ounce, because that level is already more than 700% above the bottom in 2001, and I'm a bottom fisher. I like bargains, and I can't call gold a bargain today. But it's plain as day that gold is going to go higher. There's simply no other place for people to try to safeguard their wealth as the dollar, euro, and other currencies plummet toward their intrinsic values. What else could people buy as they get more and more afraid of paper currencies losing acceptance? What are corporations going to do with the billions of dollars in their treasuries when their management gets frightened? Where else can they go when they need to get rid of dollars, euro, yen, and yuan? Central banks, too – what will they do when they need to dump dollars in favor of something that will hold value?

This is why I see a bubble in gold still ahead. It has nothing to do with the supply and demand for gold in the jewelry trade, or whatever – it's going to be a result of there being no viable alternatives when the paper-money con game is over. Gold is the ultimate cash, and that's where people will go when there's a global, total, panic to cash.
Gold is fundamentally a bet that the financial authorities are losers...that the world's paper-based monetary system is headed for destruction, and they can't stop it. It is a good bet.

Regards,

Bill Bonner
for The Daily Reckoning

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ALSO THIS WEEK in The Daily Reckoning...
Heirs to A.W. Jones
By Chris Mayer
Gaithersburg, Maryland


Last week, in The Daily Reckoning column entitled, Hedge Yourself!, I shared a few highlights from the investment philosophy of Alfred Winslow Jones, the "father of hedged funds." Today, I'll share some insights about some very smart guys who manage money in the style of A.W. Jones.


The "Other" Precious Metal
By Byron King
Pittsburgh, Pennsylvania


When you hear the term "precious metals," you likely think of gold and silver. That's what the Spanish conquistadors had in mind, of course, when in the 15th and 16th centuries they trekked inland from their beachheads on the sands of the New World. But there are other metals of great value besides gold and silver.


Bernanke to Savers: Save This!
By Dan Amoss
Jacobus, Pennsylvania


Last week, Fed Chairman Ben Bernanke shocked the world – or at least that portion of the world that tries to save money and earn interest – by announcing he would suppress short-term interest rates to near- zero until 2013.


Armageddon Can Wait
By Bill Bonner
Poitou, France


Until August 15, 1971, wealth was tallied in units of a real and natural thing – gold. It measured out the world's other real things – its resources and its output. Its main advantage was that it couldn't be diddled. That turned the authorities against it; they couldn't make more of it.


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Dots
The Weekly Endnote...
And now, it's over to a few readers for some thoughts, ideas and rumors...

First up, this one from Reckoner Glen B:

My favorite story about Nixon and gold is this: (I have embellished the rumors somewhat.)

The main reason that Richard Nixon made it so paper dollars could no longer be exchanged for gold in this country, was that there was hardly any gold left in Fort Knox and that would have been earth- shattering for the US economy if the truth were known.

What happened to the gold? Good old Lyndon Johnson sent it off to England to be used there to control the price of gold and keep it from rising above 35 dollars an ounce. England was still selling this gold in the late 1990s and early 2000s when gold was languishing around 275 dollars for several years. Now it is gone out of the US and England's control.

Can you say that the gold is still in Fort Knox. How long has it been since it was assayed and audited? Not since Lyndon was president. There may be bars that look like gold and weigh like gold there but drill a hole through them and see if the center of the bars is really gold.

I bet that gold would double in price if it turned out Ft Knox is really a repository for tungsten and or lead!!!!!!!

Respectfully submitted for your enjoyment.

And this, from Reckoner Dave J:

I like your plan to save the economy by presidential decree. It makes more sense than anything coming out of Washington and would stand a good chance of working. Why is it that those who propose spending cuts focus almost exclusively on programs here at home that actually help people?

If we brought all our troops home from all over the world, we would probably find that we had few enemies remaining once they realized we had abandoned our Imperial policies. But the budget-cutters are all professional paranoids. They make Richard Nixon seem like the life of the party. We're still screwed.

And finally, one from Reckoner Monte B:

Bill Bonner is the best! I particularly liked his thoughts on hanging...much more precise and conservative than mine...but the only way to let the political class know the seriousness of the situation.

In the inimitable words of George Washington Hayduke, "When the situation is hopeless...there is nothing to worry about."

---

As always, we welcome your thoughts. Email them to the address below and...

..enjoy your weekend.

Cheers,

Joel Bowman
Managing Editor
The Daily Reckoning

-------------------------------------------------------

Here at The Daily Reckoning, we value your questions and comments. If you would like to send us a few thoughts of your own, please address them to your managing editor at joel@dailyreckoning.com
Dots
The Bonner Diaries The Mogambo Guru The D.R. Extras!

Stocks and Gold Point to a Hellish Outcome
We keep an eye on stocks and gold. Stocks measure the value of America's businesses. Gold measures the value of America's – and the world's – money. What are these measures telling us? That we're on the road to Hell! Of the two measures, gold is harder to figure out.

Armageddon Can Wait

Zombies Born of Government Spending

China: Where Money Is Treated Best
I am sure that Mr. Pento is right because every country on the Face Of The Planet (FOTP) is desperately creating more and more money, and the money will eventually find its way to the place where it is treated best and/or has the best prospects, which is, in this case, Bob. Oops! I meant "China."

Buying Gold on the Price Inflation Guarantee

Awaiting the "Zero Hour" of Available Credit

Gold Sets Record Highs With Every Tick Higher
Well, folks... Today it's all about gold... Gold this, gold that, and hey you should know that gold right now is trading at $1,866! Future expectations of slower global growth, which means interest rates won't be rising, thus keeping gold at the top of investor's lists, and... Future expectations for inflation... Hmmm...

Gold Rallies to $1,800 Again!

BOE Unanimously Leaves Rates Unchanged

Dots

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