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Inflation or Deflation: What is good for the economy and citizens?

Inflation

Inflation and deflation do occur with any monetary system even with currencies backed by 100% gold. What is inflation? At any given time, the unit of money, for example, a unit of gold, can buy a certain amount of a given product or service. This is the result of subtle perceived balance between the economic sides of supply and demand. At any given time, there is a total of (1) a certain amount of printed money, the right of accessing money (debt-credit), and financial and non-financial assets on the demand side of the balance and (2) the products and services available on the supply side.

Let's assume that a 100 percent gold back monetary system is in place in a small isolated island country, without any connection and trade with its neighboring countries. We also assume that the island produces gold but also all other products and services the Islanders need. Let's suppose now that by a miracle, the community of gold producers discovers an easy gold mine, which requires little labor and resources to produce the units of gold.

Under these circumstances, the gold miners would obviously can and want to produce a lot of gold in a record time. This would result in substantial increase in the amount of gold on the island. Consequently, the demand side grows. However, on the supply side of the equation, people who do not belong to the community of gold producers, would further have to invest the same amount of labor and resources to produce the unit of their products and services. With the increased amount of buying pressure due to the increased amount of gold, people who possess gold are now wealthier and compete among themselves for purchasing the same amount of goods and services. Furthermore, the producers of goods and services are forced to ask higher prices to sustain their customary lifestyle. This process automatically devalues the purchasing power of gold or, in other words, causes higher prices. The process of raising prices is commonly called inflation. Inflation is not the cause of higher prices but the effect of increased or inflated demand. The rising price of goods and services is the consequence of stronger demand. The root cause of inflation or raising prices is discovery of the easy gold mine, which makes it easier and cheaper to produce gold and, therefore, raises the level of demand.

Inflation is caused by either increased level of demand, decreased level of supply, or both.

In today's societies, the root cause of inflation is generally the central banker’s policy of supporting the demand side of economy by printing fiat currencies.

In conclusion, anytime the subtle balance between the demand and supply sides of economic equation shifts in favor of demand side, inflation is generated. Printing of fresh money by Central Bankers, political decisions to ease access to money by artificially lowering the interest rate, lowering the bank’s capital requirements, and increasing the volume of debt and credit cause inflation. Manipulation of financial markets by central bankers leads ultimately to artificially created asset bubbles that would have to pop up later on.

Inflation is Exogenous. This means that in order to generate inflation, external factors must artificially intervene and manipulate the established monetary and economic systems. Therefore, aggressive interventions and manipulations by central bankers are a prerequisite to (1) first compensate for the continuous endogenous rate of deflation and (2) artificially create a positive inflation. In contrast, deflation is endogenous. This means that if left alone, any economy would automatically be deflationary and with falling prices because technological innovations make it ever-increasingly easier to produce goods and services at lower costs.

Countries which suffer from destruction of war, the amount of available goods and services shrinks drastically in a record time. However, the amount of money in circulation remains the same or may even increase. The decreased level of supply side of equation hence also generates inflation or sometimes even hyperinflation.

Deflation

In contrast, now let's assume that in the same island country, a revolutionary technological innovation such as deployment of robots in the processes of production of goods and services makes it much cheaper and easier to produce the unit of goods and services. Let's also assume that the community of gold miners cannot use the same technology for various reasons and therefore, still need the same amount of labor and resources as before, to produce the unit of gold. In this example, now the supply side can produce much more than before and therefore, producers of good and services must compete against each other to attract the same amount of gold. They offer more of their products and services for the same amount of gold, or ask less gold for the same amount of goods and services. At the same time, the gold miners are forced to ask more for their unit of gold to sustain their customary lifestyle. Consequently, the price of goods and services falls.

The process of falling prices is called deflation. Again, falling prices are the effect, not the cause of deflation. The root cause of deflation is the deployment of robots, which makes it easier and cheaper to produce goods and services and therefore, increases the supply side of the economy. In conclusion, even in stable monetary systems where each issued certificate (bank note) is 100 percent backed by gold, inflation and deflation do occur. Each time the subtle balance between the demand and supply sides of economy shifts in favor of supply side, deflation occurs.

Deflation is endogenous. This means that if left alone, any economy would naturally be deflationary and with falling prices. The cause of this phenomenon is technological innovations which make it ever-increasingly easier to produce goods and services with less effort and fewer resources.

Technological innovation and their deployment in the systems of production of goods and services is one of leading causes of shifts in this subtle balance between supply and demand sides of economy.

Under normal circumstances with a monetary system backed by gold and without politicians and central banker's manipulation, technological innovations tend to affect both sides of this equation. Therefore, the rate of inflation and deflation would naturally remain contained and limited.

Likewise, a financial crash such as the one of 2008 led to substantial loss of wealth with falling prices of financial assets, commodities, and real estates. This was the result of reduced amount of available wealth on the demand side. The falling valuation of financial asset was deflationary. Deflation was the effect and symptom. The root cause was vanishing of some $60 trillion of wealth due to losses in the stock, derivative, real estate, and bond markets.

A monetary system of certificates (bank notes) backed by 100 percent deposits of physical gold remains relatively stable in terms of inflation and deflation. This is because the amount of produced gold is the only means that increases the demand side of the economy.

The levels of inflation and deflation are usually measured by price of commodities. The price of oil plummeted in 2008 as a consequence of market crash, depression, and deflation.

Fiat monetary systems permit the politicians and central bankers total freedom to manipulate the demand side of economic balance. Such manipulations are actually the root cause of subsequent aggravated financial bubbles and economic deflation and depressions.

                    Figure 13.0 Chart courtesy of the TC2000.com

Figure 13.0 shows a monthly chart of CRY0 (commodity) for the period from 1992 to October 4, 2017. It shows the deflationary period from 1996 to 1999, the deflationary period of 2001, the inflationary period from 2001 to mid-2008, the brutal deflationary period of 2008, the inflationary period from 2009 to 2011, and finally, the deflationary period from 2011 to October 2017.

The chart shows the price of a basket of commodities in US dollar. The price of commodities is closely linked to US dollar index and interest rate. Inflation usually fluctuates in line with price of commodities. Raising inflation rate and higher price of commodities are both the effects and symptom, but not the cause. When the US dollar is stronger against a basket of other currencies, prices of imported products tend to fall and vice versa. This is because when the US dollar is strong, other currencies are weak. Therefore, price of all commodities, fixed in other currencies, becomes cheaper, when bought in US dollar. This has the effect of importing deflation in to the US.

Here, it is worthwhile asking a question: Although the Fed has printed trillion of US dollar notes, lowered the interest rates to nearly 0 percent, and increased the debt-credit market to a new historical high, why the economy remains deflationary, in particular after 2011? There are several reasons for that.

The freshly printed money remained within the speculative financial assets. It has not found its way to the real economy. The cheap money has mainly been lent to major property speculators and public companies. The first group has been speculating with the borrowed money and bought real estates for speculative future profits and the second group, bought back their own stocks. Both of those markets have become major bubbles again. However, the inflation associated with those two markets has seemingly not contributed to any increase in price of commodities. Furthermore, it implies that the fresh money was not evenly lent across the board. Medium and small businesses, as well as individual consumers, have obtained relatively little access to loans. Consequently, the freshly printed money has mainly stayed within the financial markets and not actually made its way to the real economy. This is why the CRY0 has been deflationary since 2011.

Despite historical debasement of US dollar, it has remained quite firm against other currencies, in particular, china’s Renminbi (Yuan). Cheaply produced Chinese products have been massively imported. This contributes to falling prices of goods and therefore, is deflationary. Based on chart of figure 13.0, we have to assume that the fractional portion of inflation due to the Fed’s monetary stimulus has been largely offset by deflated prices of imported Chinese products.

In conclusion, the Fed’s easy money policy has well created huge inflation in the stock and housing markets. They both have become bubbles, subject to bursting soon. The other even larger bubble is the debt-credit (bond) market.

What is Good for the Economy And Citizens, Inflation or Deflation?

In a monetary system where money is 100 percent backed by gold, the free-market’s driving forces would naturally regulate the level of inflation or deflation. Such monetary system is deflationary in nature because deflation is endogenous. The amount of money in circulation would increase proportionally with increased productivity of gold. On the other side, the same technological innovations that contribute to increased productivity of gold, contributes to increased productivity of goods and services too. This way, the associated rate of inflation or deflation remains relatively stable. In any society, the level of inflation or deflation would then be commensurate with the deployment of technologies on the demand and supply sides of the equation, and on the established monetary system.

As already said, the driving forces of free markets adjust naturally the level of inflation and deflation in a monetary system that is 100 percent backed by gold. It would naturally be deflationary. However, the central bankers may intervene to provide more liquidity, meaning printing more gold certificates relative to actual amount of available physical gold, to temporarily support the economic expansion. The prerequisite for success of such policy is however, that central banks courageously remove from circulation the excess amount of certificates, in times of normal economic growth. Sadly, the history shows that central bankers and politicians tend to think first of their own interests before the ones of their citizens. Once the central bankers and politicians have printed excess certificates, spent the money, and artificially created inflation, they tend to resist the removal of excess certificates vigorously. Now the money is theirs! It looks like that once the politicians and central bankers are given a temporary and exceptional possibility of a certain right, for example, in times of crises or war, they tend to make it a permanent right in the future for their own benefits. Therefore, the best monetary system would be the one that is 100 percent backed by gold and prohibits in the constitution any right for central bankers and politicians to manipulate the amount of money in circulation. Again, President Hoover once said, “We have gold because we cannot trust governments.”

A sound economy requires a stable monetary system with a currency backed by gold. This limits the level of political manipulation of economy and finances drastically. The supply side of economy produces goods and services that are freely offered on the market. With gains of traded product and services, companies partly invest to improve the productivity, pay their employees, and cover their own costs of living, as well as paying taxes to the smallest possible governments for a restrictive list of services (not for the bureaucracy). The lift-over is then placed in a yield bringing bank account. The role of banks would then be to ensure the safety of savers' capital and pay interests for deposited funds. Furthermore, the banks would have to give loans against interests, for sound projects that again, would improve productivity of communities and countries. Banks would provide full transparency to their customers and be forbidden by law to take speculative positions and gambling with saver's money for the purpose of higher bonuses for the board of directors. The country would then be saving and making funds available to improve the society's productivity. Moreover, the level of debt-credit remains commensurate with the rate of economic growth. With endogenous deflation, saving becomes attractive with the advantage of ever-increasing funds available for sound projects. Due to build-up of inefficiencies, crises would still happen in such systems but with milder consequences only. The Kings are the citizens, and the governments would be there to serve their citizen, not to enslave or exploit them. One of main government duties would then consist of ensuring that the citizen's obsolete jobs, a s a result of ever-increasing technological innovation, are replaced by jobs of the future. The governments would spend the allocated money to offer training opportunity for unemployed citizens rather than paying unemployment benefits alone, or keeping unsustainable and inefficient jobs for the sake of political games of displaying lower unemployment rates.

Such economic system would be in the opposite of many countries that currently promote the idea of creating debt for consumption.

The propaganda saying that low or high levels of inflation are good for the economy is a fallacy. The main reason for this aggressive propaganda lies in the truth that by the systematical creation of artificial inflation, the governments legally transfer the buying power of saving citizens towards central banks and governments.

Three fundamental laws of economy contradict this propaganda.
  1. Deflation is Endogenous and inflation, exogenous. Under normal conditions, the price of goods and services should consistently fall over time. Consequently, the citizens should be living in a world of continuous deflation, where the buying power of their savings continuously increases. Why doesn't happen? Because governments and Central banks artificially create inflation through (stealth) printing of paper money. The US government gave up unilaterally the gold backing of US dollar in 1971, so over four decades ago. Then, they established a fiat monetary system. Why did they do it? This is because under the fiat monetary system, central banks and governments are allowed to print an unlimited amount of money (bank notes) without constraints. With a gold backed system, they would have to deposit proportional amount of physical gold in the central bank’s reserves. Consequently, artificially created inflation is good only for governments and central banks because it let them transfer the buying power of saving citizens toward themselves. Inflation is not good for citizens and savers, nor for the economy.
  2. Another law of economics stipulates that lower prices of goods and services generate new demands. This is because people who could not afford to purchase goods and services at higher prices, could do it at lower prices. Based on this law, lower prices generate demand, not higher prices. Creation of inflation and future higher prices can neither create immediate demand nor prevent its postponement. This is because the huge majority of citizens spend already all money they earn to support their everyday lifestyle and pay their regular bills. Those expenses are compulsory for their daily life and therefore, cannot be postponed irrespective of inflation or deflation.
  3. Finally, the governments seem to ignore the time value of products and services, another law of economics. Wealthy people, who can afford, are simply willing to pay more for something they can enjoy sooner, rather than later. Just look at the Apple’s new gadgets. Their entire marketing policy is based on this simple economic law. People are willing to pay substantial amounts of money for such products. A few are even prepared to sleep several nights in front of the shops just to be among the first ones to get the product. Others are willing to buy it even in black markets and pay an additional premium. The Harry Potter books also witnessed a similar phenomenon. People know that the price of electronic gadgets decreases drastically over time. Why don't they wait to purchase the products cheaper in a few months or years? This is because this law of economics is in action. We see here that neither higher, nor lower future prices modify the level of demand significantly. The argument that inflation creates immediate demand could potentially apply only to those who have a certain level of available cash at hand. However, these people do not want to delay the joy of getting things earlier, if they can afford them right away.
Based on these analyzes, three fundamental laws of economy contradict the government’s arguments of pretending that inflation is beneficial for the demand, employment, and economy. If the government’s arguments are wrong, why they persist so aggressively in using it as propaganda? They have good reasons. Let's assume a yearly inflation of 2 percent as is the policy target of the Federal Reserve and the European Central Bank (ECB) in 2015. What do they gain from such level of artificially created inflation?
  1. This propaganda lets them print an amount of paper money to compensate not only for the real endogenous portion of deflation but also to artificially create an additional inflation of 2 percent.
  2. Taxation law is based on the nominal economic growth, not on real growth. Therefore, with a 2 percent nominal growth, they can tax their citizen at least 2 percent more, even when the citizen real buying power decreases.
  3. The governments have currently accumulated huge amounts of debts. By creating inflation, they make their debt less costly over time.
  4. Inflation also incites the credit-debt market to grow. It gives a sense of (false) GDP growth to the government, industry, and citizens. This helps politicians to report positive news to voters.
In contrast, governments and central bankers hate deflation. This is because the price of products and services falls over time. Falling prices generate new demand, and people tend to consume more. However, the overall nominal amount of government tax income decreases. Moreover, the real value of government’s debt increases over time.

What are the ultimate benefits for politicians and Central Bankers to enforce inflationary policies? There are two main reasons:
  1. They want to build ever bigger and ever stronger governments with ever-increasing power. They can do this by managing ever-increasing larger government’s budgets. The government budgets usually grow through a collection of taxes during expanding economic periods.
  2. During economic recessions, such as market crash of 2008, the government's tax income shrinks drastically. Governments could then increase taxes and reduce expenditure, including cutting certain social benefits. However, this would be a courageous policy, because unpopular with the voters. Printing of fiat money is therefore, a much easier way of taxing the citizens than taking sound and courageous decisions of increasing taxes or decreasing spending.
For citizens, however, what is important is not the amount of dollar they may own but rather the units of products and services they can buy with.
Become your own financial adviser and trade based on your own independent trend predictions and trading strategy - 
not on untrustworthy, unreliable, and costly external advice.
In Money Printing Strategy, we highly value and respect our customers' trust that we shall not betray in any way, and take pride in our honesty and integrity. We believe that these values form not only the foundation of trustworthy relationships but  are also essential prerequisites for long term successful business, especially in the sensitive fields of wealth management, trend prediction, finances, investing, and trading.
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Excerpt from: “Crystal Ball for Investing and Trading” Book.

Protectionism: Causes & Consequences

Meanwhile, the vicious circle of the currency war among countries to consistently devalue their currency against each other has found another vicious circle as a companion, the protectionism. Before defining it, let’s explain the notion of “trade balance.”

You have read earlier that technological innovations and their implementation in the systems of production of goods and services are one major cause of the increase in the rate of productivity. They also lead to specialization. The more companies or countries use technologies and become specialized, the more they become cost efficient and gain on competitive edge. As a result, they can produce goods and services with fewer resources, hence with ever-decreasing costs of production.

The countries’ trade balance measures the amount of imported and exported goods and services across the countries, generally in US dollars. A positive trade balance for a country, also called a surplus, means that the country exports more than it imports. In contrast, the opposite is called a trade deficit.

A country’s trade balance is influenced by the valuation of its national currency against other currencies, the country’s labor legislation, bureaucratic barriers such as imposed customs duties, and its rate of productivity. The more a country produces efficiently, the more it tends to export. Often the same products and services are produced in several competing countries at the same time. In the end, the countries with the lowest costs of production become the trade balance and the export champions. When this happens, inefficient companies of inefficient countries tend to close factories and dislocate jobs to produce in more competitive environment. As a result, inefficient national jobs of inefficient countries get progressively lost in favor of other nations.

As a rule, the free market system is most effective when there are no barriers to the free movement of (1) people (2) Products (3) services, and (4) capitals. This way, the competition can freely operate across the board, and most efficient countries become the trade balance champions. Therefore, this phenomenon exerts pressure on other nations to remove inefficiencies and become more competitive, too. The BRICS (Brazil, Russia, India, China, and South Africa) countries profited exactly from inefficiencies of the developed economies and became the world manufacturing factories after the 1980s. The emergence of new technological innovation since the 1980s led these countries to produce goods and services of the same quality at significantly lower costs, because of cheaper and flexible labor costs and conditions. This process is often referred to as “globalization.” Meanwhile, the intelligence and competence of qualified engineers of the developed countries have increasingly been emulated by robots. This process has led to a massive transfer of well-paid jobs from the developed countries toward the BRICS and other low-pay countries.

Under conditions of the free market, the volume of exchanged goods and services across borders grow because the increasingly lower price of goods and services attracts more consumers and generates more demand.

As a reader of this book, you may know by now that in times of economic prosperity and growth, major peace and trade treaties are signed. In contrast, you may also know that during economic depressions and crises, those treaties are frequently abandoned.

Coming back to the original topic of protectionism, it could be said that, starting in 2017, major trade partnerships and treaties are going to be torn off.

In short, protectionism is the result of populist governments’ policies to implement new trade barriers to protect the inefficient and non-competitive national companies and the associated inefficient jobs in the name of saving jobs.

Implementation of such measures is like keeping artificially a sick patient under permanent perfusion. At the same time, everyone knows that if the perfusion is stopped, the patient would die rapidly.

Protectionist measures are usually taken by powerful or less powerful rather inefficient conservative governments to give a false perception of job protection for their fragile national companies, jobs, and unemployed population. Such measures may have benefits temporarily, but in the long run, constitutes another vicious circle with major negative long-term impacts.

Implementation of protectionist measures by any country implies the implicit recognition of inefficiency and vulnerability of its national economy and financial system. Let’s analyze the issue in more details:

  1. Protectionist policies lead to ever-decreasing overall world trade volume. Decreased trade volume means a recession for production of goods and services in countries with a trade surplus. This may result in bankruptcy for many companies, and in job losses. The world economies nowadays are so connected that bankruptcy of any business in any country is immediately reflected in the financial indexes, worldwide.
  1. Such measures hurt the countries with a trade deficit too. Why? This is because, as an example, by imposing a 20% customs tax on imported goods, the price of associated goods increases proportionally for all citizens and consumers of the importing country. As a result, prices go up and generate artificial inflation. You may know by now that inflation is good for governments and central bankers, but not for citizens and consumers. The higher price of goods and services leads to lower levels of demand. Despite such taxes, companies continue to go bankrupt and lay off employees because the higher prices reduce the level of demand. The worse consequence of protectionism in countries with a trade deficit consists of the fact that, with the perceived new protections, inefficient companies become even more relaxed to address the inefficiencies built-up in the systems of production. Tax increases hurt the consumers’ wallet because it leads to a transfer of part of citizens wealth toward the governments. This effect, however, will be short-lived. Because the overall volume of purchased goods and services decreases drastically over time, the amount of collected taxes decreases proportionally as well.
  1. The exertion of any pressure generates a counter pressure of proportionally same level, more and less. This rule also applies to economics. The vicious circle of protectionism gets nourished with retaliation from other countries because affected nations will be forced to protect their national interests too. Levying an importation tax of e.g. 20 percent by the US government for the goods imported from Mexico could result in a retaliation levy of a 20 percent tax by the Mexican government for the imported goods from the US.
  2. Protectionism addresses only the symptoms and effects, not the cause. As a result, such measures will reveal inefficient in the long run. The cause is the presence of inefficiencies in the national system of production of goods and services, and the cure, removal of the built-in inefficiencies and improvement of economic competitiveness against other countries. To better explain, let’s take the example of a few metaphors. Protectionism is like wanting to measure the temperature with a thermometer and not liking the reading. However, instead of investigating why the temperature is not at the desired level, breaking or replacing the thermometer would not help. Other metaphors could be like having a hole in the house roof with the consequence of flooded floor each time it rains. Now, imagine someone telling you that the cure is to use a bucket on the floor to prevent the flooding (curing the symptom), instead of getting a carpenter to repair the roof (curing the cause). Another metaphor could be when saying, “a fish in an aquarium is sick because the aquarium water is toxic.” Now you go to a doctor who says, no problem. Just give these medicines to the fish, and it should recover. Likewise, this approach addresses the symptom, not the cause. The real cure would be a change of the toxic water (the cause), and potentially, prescription of some temporary medicine to support the fish for a more rapid recovery.

The US trade balance measures the level of its economic competitiveness and efficiency. On February 1, 2017, its trade deficit amounted to over $737 billion, with a deficit of $344 billion to China alone. Any protectionist measure to reduce the deficit e.g. against China would substantially hurt both, the Chinese and the US economies directly.

Above being said, the US economy has meanwhile become quite inefficient. The main reasons are (1) the US controlling of the world global finances (the World Bank and IMF, the SWIFT system, and the US dollar), (2) the US dollar is the world reserve currency (3) undoing of dollar backing by gold, and finally (4) the petrodollar. These are very efficient and powerful tools that have consistently been used by the US successive governments to preserve, protect, and expand its national interests quite easily.

Other countries must produce efficiently and export goods and services to the US to obtain the needed dollars to purchase e.g. the crude oil from Saudi Arabia. The US, however, has no need to be efficient and export goods and services to other countries to get the needed US dollars. It easily and simply prints them. Meanwhile, the European Union and Japan central banks are replicating the money printing policy too.

Why does the US tend to move in 2017 toward protectionism? Since WWII, the US has taken advantage and profited from its status as the world economic, financial, and military power. After 2009, it has completed three rounds of QE programs and tapering, with an interest rate of virtually 0% for over six years until the end of 2015. The purpose of the QE programs was to manipulate and weaken the valuation of the US dollar against other currencies artificially, to support the US exporting industries and to improve its trade balance.

Meanwhile, the European Central Bank (ECB) started its QE program in January 2015 too and decided to introduce negative interest rates to support its trade balance. These actions led to a euro depreciation of over 25% against the US dollar.

Japan has also decided a negative interest rate policy. Meanwhile, one solution for the US to propel its trade balance consists of depreciating its currency through new rounds of QE program. However, any depreciation of US dollars potentially could support the US trade balance with the European Union and Japan. What concerns its trade deficit with China, a resumption of QE programs would have marginal effects because the Chinese yuan is pegged to the US dollar.

Furthermore, the effects of the world previous and ongoing QE programs have generated a relatively significant level of inflation in the world economies. Consequently, the rate of interest should rather go higher.

Finally, the decision of two rate hikes of 25 basis point each in December of 2015 and 2016, and the anticipation of the ones to come in 2017, have already led to substantial appreciations of the US dollar. The rate hikes cause the interest rate to rise. As you may know, rising interest rates are damaging for the bond market, which had already suffered substantial losses. So, the only alternative would be a return to the Zero Interest Rate Policy (ZIRP) with its own consequences.

In brief, the world and the US policies of previous decades have meanwhile led its own and the world economy close to a cliff. On the one hand, it can no longer raise the interest rates without risking the collapse of the bond market, increase the burden of servicing the government debt of some 20 trillion, increase the risk of defaulting on its debt, import further deflation with the additional danger of losing jobs, and deteriorate the trade balance. On the other hand, it can lower the interest rate by resuming a QE program.

This may partially improve its trade balance with the European Union and Japan but not with China. It could also raise the risk of being unable to attract enough external loans for its bond at practically zero interest rate while, in addition, the government budget deficit may easily grow to over a trillion dollars per year starting in 2018.

Who would wish to lend money at 0% to any government with an inflation rate of around 1.5%? Only the Fed could do. However, each newly printed $100 note would then diminish a fraction of trust in the US dollar and generates inflation. Such decision would have adverse consequences for the Treasury Bonds.

The foreign governments could be forced to dump their reserves in dollars, hence exacerbating losses in the bond market which in turn, could lead to higher rates of interest. Regardless, the process of QE programs will finally result in the collapse of the fiat monetary system, loss of trust in the US dollar, and generation of hyperinflation. The history has taught us that all paper currencies will eventually end where they should end, at the intrinsic value of the printed paper.

To justify the protectionism, the leaders become creative and often use allegations of unfair trade agreements, border protection against immigrants, wasting of social benefits by minorities and so on. Such arguments are an easy way of distracting the citizens’ opinion from the real cause of trade deficits, which is the built-up of inefficiencies in the world economic, financial, political, and social systems since 1789.

Political leaders who do not take responsibility for their national miseries and accuse others to justify protectionism are simply refusing to recognize the real deficiencies in their homes. How can someone lead other countries when at the same time refuses to do his own homework first? This is particularly true for some of the European Union and Eurozone countries in 2017.

The impending crash is the human fate and destiny regardless of who are the head of states and central banks. The crash cannot indefinitely be delayed either. It is inevitable and needed to prepare the solid foundation on top of which the next wave of growth and prosperity can safely develop.

Book: Example of Customers' review on amazon.com:

Best knowledgable book ever, June 27, 2016, By Amazon Customer -Verified Purchase(What's this?)
 Best knowledgable book ever: A Very comprehensive and analytic view and tools For today and future trading with understanding of worlds political and enviormental effect On the economy. For beginers and specialists. great book. thank you mr.kabir.
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Become your own financial adviser and trade based on your own independent trend predictions and trading strategy - 
not on untrustworthy, unreliable, and costly external advice.
In Money Printing Strategy, we highly value and respect our customers' trust that we shall not betray in any way, and take pride in our honesty and integrity. We believe that these values form not only the foundation of trustworthy relationships but  are also essential prerequisites for long term successful business, especially in the sensitive fields of wealth management, trend prediction, finances, investing, and trading.
Money Printing Strategy supports actively the Afghan children and women in need of education and health. When purchasing product or services, $1 of the price will be donated to a Charity foundation which spends over 90% of the funds directly in helping the Afghan children and women in Afghanistan.

They deserve your help! Your donations will be transferred to the charity foundation directly.

Terms And Conditions of Products & Services (ToS)

Excerpt from: “Crystal Ball for Investing and Trading” Book.

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In Money Printing Strategy (the website), we highly value and respect our customer’s trust and take pride in our honesty and integrity. They form the foundation of interactions with our clients, especially in the sensitive fields of wealth management, finances, investing, and trading. Integrity, Ethic, Honesty, Confidentiality, Transparency and Mutual Trust are the main values that drive our actions. Within this context, our missions are to:

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Become your own financial adviser and trade based on your own independent trend predictions and trading strategy - 
not on untrustworthy, unreliable, and costly external advice.
In Money Printing Strategy, we highly value and respect our customers' trust that we shall not betray in any way, and take pride in our honesty and integrity. We believe that these values form not only the foundation of trustworthy relationships but  are also essential prerequisites for long term successful business, especially in the sensitive fields of wealth management, trend prediction, finances, investing, and trading.
Money Printing Strategy supports actively the Afghan children and women in need of education and health. When purchasing product or services, $1 of the price will be donated to a Charity foundation which spends over 90% of the funds directly in helping the Afghan children and women in Afghanistan.

They deserve your help! Your donations will be transferred to the charity foundation directly.
Download the Money Printing Strategy book in PDF Now!
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Subscribe to TradeAlert newsletter Now!
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Reward-Risk Ratio

Reward-Risk Ratio (RRR) is an essential and fundamental component of  Order-Management Strategy. The purpose of RRR is to pinpoint and validate the financial instrument prices for the most profitable trading opportunities. For ease of understanding, Money Printing Strategy uses "Reward-Risk" Ratio and not "Risk-Reward" Ratio: It is easier to compare positive numbers than fractions. The higher the value of RRR, the more fruitful the trade would be. The RRR main contribution to Trading-Checklist is provision of a "go" or "no-go" signal before placing any order. It verifies that potential gains relative to potential losses is high enough to justify placing of orders. Furthermore, it forces usage of support and resistance trend lines for opening and closing of positions. Finally, it minimizes the costly risk of over-trading by signaling "no-go" for risky trades. Before determining the Reward-Risk Ratio, it is necessary to accurately predict the market ongoing trends. It is done by applying the Trend-Prediction Strategy (TPS). Application of TPS is a prerequisite for calculation of RRR.

For the sake of good understanding of the RRR concept, let us take a theoretical example. We assume that the market is within a horizontal channel with support at 100 and resistance, at 120. This results in a channel range of 20 points. Here we empirically assume that if the wave goes 2 points below the support level of 100 or 2 points above the resistance level of 120, the market contradicts the originally predicted trends.

The process to calculate the value of RRR for a Long position would be as follows:
  1. The trade Open price would be $100.
  2. The trade Close price would be $120.
  3. Total potential gains would be $20 per share or 20 percent of invested capital.
  4. The Stop-Loss would be at 98 (100 - 2). The total potential loss per share would be 2 points or 2 percent of invested capital.
  5. With this example, the RRR value is calculated by dividing the trade potential gains (20) by potential losses (2), hence resulting in a RRR value of 10.
It is essential to understand that while prices fluctuate within the channel between 100 and 120, the RRR value varies significantly. For example, when the price is at 105, the RRR would shrink drstically and becomes 2.5 ((120 - 105 = 15) / (105 - 98 = 7)) and therefore, the Trading-Check list would signal a no-go for the trade. This is because while the amount of potential gains decreases to 15 (120 - 105 = 15), the amount of risks rises simultaneously from 2 to 7 (105 - 98 = 7). If we were to open a Long position at $115, the Reward-Risk Ratio would become less than 0.3 ((120 - 115 = 5) / (115 - 198 = 17)). This signifies a more than three times potential risks than potential gains. Therefore, the RRR would signal a clear "no-go" for the trade. Money Printing Strategy is a gaining strategy because it considers opening and closing positions at the support or resistance levels where the RRR value is maximal. The so-called "Random Walk" theory that recommends opening of Long positions at any time is a losing strategy because the position can be opened at times, mostly when indeed the level of potential risk may outweigh several times the level of potential gains. This theory is usually not recommended by  professional financial advisors who have in mind the interests of their clients. However, it is aggressively promoted by an overwhelming number of financial advisors and brokers out there who live from the income generated from the commission of business with their clients, rather than from the gains in trading portfolios. Such professionals do usually lose also their own investing money too. One of the main reason why the investing crowd loses money is because they blindly follow the wrong recommendations based on the "Random Walk" theory, which is like trying to watch the sunset but facing towards the east.

Based on this example, it would be understandable that with an RRR of 10, even if 90 percent of trades are losing (9 out of 10) and only 10 percent gaining (1 out of 10), the portfolio would not lose a penny, except the broker commissions.

By applying the Money Printing Strategy in a very basic way, an average of 75 percent gaining, and 25 percent losing trades should conservatively be achievable. This is possible thanks to the highly sophisticated and reliable Trend-Prediction Strategy and Order-Management Strategy. This rate should rise to over 90 percent if applied correctly and using real-time market charts.

By achieving an average ratio of 75 percent gaining (3 out of 4) and a 25 percent losing trades (1 out of 4), and by assuming an RRR of 10, the trading results after ten trades should yield the following results:
  1. Each gaining trade yields a 20 percent gain or, with 1,000 shares per trade, a $20,000 Gain. This example assumes a trading capital of $100,000.
  2. Each losing trade would represent a loss of $2,000 or 2 percent.
  3. Assuming an average of 75 percent gaining (3 out of 4) and 25 percent losing trades, the profit-loss figures would be as follows:
  4. Each of the 7.5 gaining trades, gains $20,000, resulting in a total gain of US$ 150,000. The 2.5 losing trades, lose each $2,000 or a total loss of $5,000. The balance would be 150,000 – 5,000 = $145,000.
  5. Consequently, each of the ten trades, gains in average $14,500 whether gaining or losing.
  6. Even if only 10 percent of trades would be gaining and 90 percent losing, we would still be even.
The assumptions of 75 percent gaining trades and the RRR of 10 are rather conservative expectations. The second round of demo-trading yielded a ratio of 97% gaining and only 3% losing trades while trading using real-time charts. Out of 66 trades, 64 were gaining and only 2, losing.

You may recall that Money Printing Strategy uses the specifically designed Loss-Parking Strategy to minimize losses, and seldom the customary stop-loss strategy.
The TradeAlert Newsletter Performances have meanwhile demonstrated a ratio of over 80% gaining and less than 20% losing trades despite the heavy constraints of using end-of day charts. If you are not interested in learning the Money Printing Strategy but still want to make money by trading or investing, you may consider subscribing to this service.
Book: Example of Customers' review on amazon.com:

*******************************************************************************
5.0 out of 5 stars Best knowledgable book ever, June 27, 2016, By Amazon Customer -Verified Purchase(What's this?)
Best knowledgable book ever: A Very comprehensive and analytic view and tools For today and future trading with understanding of worlds political and enviormental effect On the economy. For beginers and specialists. great book. thank you mr.kabir.
******************************************************************************
READ MORE..
Become your own financial adviser and trade based on your own independent trend predictions and trading strategy - 
not on untrustworthy, unreliable, and costly external advice.
In Money Printing Strategy, we highly value and respect our customers' trust that we shall not betray in any way, and take pride in our honesty and integrity. We believe that these values form not only the foundation of trustworthy relationships but  are also essential prerequisites for long term successful business, especially in the sensitive fields of wealth management, trend prediction, finances, investing, and trading.
Download the Money Printing Strategy book in PDF Now!
Order the Money Printing Strategy book Now!
Subscribe to TradeAlert newsletter Now!
Money Printing Strategy supports actively the Afghan children and women in need of education and health. When purchasing product or services, $1 of the price will be donated to a Charity foundation which spends over 90% of the funds directly in helping the Afghan children and women in Afghanistan.

They deserve your help! Your donations will be transferred to the charity foundation directly.
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US Dollar is a Fiat Currency

The US dollar is a fiat currency. Fiat money derives its value from the government regulations and laws. The purchasing power of dollar notes depends on the state of the United States’ Laws and Regulations alone and depends on what it can purchase on the free markets.

Although the US dollar is a fiat currency and backed by nothing, many countries still consider it today as an important reserve currency. This means that other countries with own national currencies, must produce goods and services and sell them in US Dollar to get their needed US dollar notes. Only then, they can purchase the products and services sold in dollar. However, the US doesn't need to produce or sell anything to foreign countries to get US dollars. It has the exclusive legal right to print dollar notes at its discretion and buy the needed foreign products from foreign countries.

Petrodollar is an artificially created mechanism to propel the value of Dollar. For example when France would need to buy petrol from Saudi Arabia, it cannot do it by paying in Euro or Riyal, the local currency of those countries. It must convert Euros against US dollars through a banking system controlled by the US government before being able to pay the Saudis in US dollars. Various commodities are currently traded in US dollar.

Meanwhile China, Russia and the European Union are trying to establish new rules that enable them to exchange commodities in their local currencies, no more in US dollar.

Once alternative agreements are in place between producer and consumer countries, the need for currency conversion into US Dollar becomes obsolete. Furthermore, US Dollar is anticipated to lose its world reserve currency at the end of Grand Super Cycle degree subwave E around October 21, 2021. As a consequence, the US dollar valuation against other currencies should significantly drop due to excessive amount of US dollars in circulation.
Become your own financial adviser and trade based on your own independent trend predictions and trading strategy - 
not on untrustworthy, unreliable, and costly external advice.
In Money Printing Strategy, we highly value and respect our customers' trust that we shall not betray in any way, and take pride in our honesty and integrity. We believe that these values form not only the foundation of trustworthy relationships but  are also essential prerequisites for long term successful business, especially in the sensitive fields of wealth management, trend prediction, finances, investing, and trading.
Download the Money Printing Strategy book in PDF Now!
Order the Money Printing Strategy book Now!
Subscribe to TradeAlert newsletter Now!
Money Printing Strategy supports actively the Afghan children and women in need of education and health. When purchasing product or services, $1 of the price will be donated to a Charity foundation which spends over 90% of the funds directly in helping the Afghan children and women in Afghanistan.

They deserve your help! Your donations will be transferred to the charity foundation directly.
Terms And Conditions of Products & Services (ToS) 

FREE REGISTRATION 

Register now to get the daily TradeAlert newsletter and other high-value posts in a timely manner in your inbox for free.

You can cancel your risk-free registration at anytime.
Trading-Checklist

The purpose of trading-checklist is to ensure that traders have taken all elements of the MPS into account before placing orders and without any omission. Furthermore, it forces traders to do their homework and make conscious, intelligent, and objective decisions. This way, it let them reduce, contain, or eliminate the influence of trading based on feelings and guesswork.

During the process of going through Trading-Checklist, we must check and validate each criterion correctly and objectively. The MPS is powerful because it uses measurable and objective facts, not subjective feelings. Therefore, the rule is simple: if you are unable to check, evaluate, and validate any elements of Trading-Checklist objectively, the Money Printing Strategy is not for you.

Furthermore, you are required to keep a written record of your answers for each criterion. Once you have closed a position, this would help to know your good and less good behaviors. More importantly, it would help analyze what went wrong with losing trades to improve your trading skills in the future.

You must validate accurately and objectively each of the following twenty elements of Trading-Checklist before placing any order.
  1. What is timescale for the trade?
  2. Which wave number is developing at this time?
  3. What is the anticipated wave amplitude?
  4. Is the wave in motive or corrective mode? If in corrective mode, what is the wave pattern?
  5. What are the support and resistance levels?
  6. Is the wave at a Fibonacci retracement level?
  7. What is the VIX current trend?
  8. Is the wave within the channel?
  9. Has the wave broken a trend line?
  10. Is a trend-reversal at hand?
  11. Does the TSV confirm the current trend as signaled by the trend lines? Does it show any trend divergence?
  12. Does the MS confirm the current trend as signaled by trend lines and the TSV? Does it show any divergence?
  13. Based on above, what is the chart trend, upward or downward?
  14. Based on above, do you want to open a Long or a Short position?
  15. What are the Open, Close, and Stop-Loss prices?
  16. What is the Reward-Risk Ratio? Is it 5 or more?
  17. What is a comfortable amount of money you wish to allocate for this trade?
  18. What does the market timing suggest at this time? This criterion is currently not applicable.
  19. Are you compliant with the Management of Capital, Safety Net, and Stop-Loss?
  20. Have you validated all criteria of Trading-Checklist objectively?
Once you have validated all criteria positively, you may wish to place orders to open or close positions.
Book: Example of Customers' review on amazon.com:

*******************************************************************************5.0 out of 5 stars Best knowledgable book ever, June 27, 2016, By Amazon Customer -Verified Purchase(What's this?)
Best knowledgable book ever: A Very comprehensive and analytic view and tools For today and future trading with understanding of worlds political and enviormental effect On the economy. For beginers and specialists. great book. thank you mr.kabir.
******************************************************************************
READ MORE..
Become your own financial adviser and trade based on your own independent trend predictions and trading strategy - 
not on untrustworthy, unreliable, and costly external advice.
In Money Printing Strategy, we highly value and respect our customers' trust that we shall not betray in any way, and take pride in our honesty and integrity. We believe that these values form not only the foundation of trustworthy relationships but  are also essential prerequisites for long term successful business, especially in the sensitive fields of wealth management, trend prediction, finances, investing, and trading.
Download the Money Printing Strategy book in PDF now!
Order the Money Printing Strategy book now!
Subscribe to TradeAlert newsletter now!
Money Printing Strategy supports actively the Afghan children and women in need of education and health. When purchasing product or services, $1 of the price will be donated to a Charity foundation which spends over 90% of the funds directly in helping the Afghan children and women in Afghanistan.

They deserve your help! Your donations will be transferred to the charity foundation directly.
Terms And Conditions of Products & Services