Why from savers? Don’t ask a dumber question, this will do. And the answer is: beacause it is savers who have the money. Where else could it be transferred and stolen from? Naturally, the savers.

The speculators are all those people who use debt for wealth accummulation, more politely referred to as wealth creation. They create, and take on debt in the form of phoney money, worthless paper, and use that debt to purchase REAL assets.

The mechanism of wealth transfer from savers to speculators is called Inflation. By creating more and more debt, asset prices are pushed up in nominal terms, and the purchasing power of savings is diluted, as is the burden of the debt taken on by the speculators. Give it a decade or two, and voila, the savers will have lost half of the purchasing power of their savings to the speculators, who can now sell the real assets, pay back the loans, and keep the difference.

In most cases, this difference is simply the purchasing power lost by the savers. That is the mechanism, and that is the mechanism by which Moms and Pops over many decades have made their money. Those who tried to do it through savings in the bank lost out, and those who bought real assets, often through taking on debts in the form of mortgages, have ended up way in front. I am not saying that this is good, or right, but I am simply saying that this is the system, and it generates a certain trend. If you are serious about wealth accummulation, then this is the framework you need to understand and work within.

Of course, periodically, the trend reverses and you can be caught short if you overextend yourself with debt. This is a risk you cannot ignore, but you cannot afford to be paralysed by it either. There is risk in anything you do, so you have to manage your risk. Even so, sometimes the unthinkable can happen and you lose the lot. Nothing much you can do about that, but get up, dust yourself off, and start again. What is there to object to in what I am saying? I do not understand.

cb is saying speculation and too much debt is fine because the system is rigged for that, yet that whole system has crumbled since the GFC and now debtors have been given a stay of execution.

cb takes a very selective view of history – people who ‘Road the Dragon’ of speculative debt in 29 ended up jumping off buildings.

This time they are crying and asking for Government bail outs. And then cb has the hide to question the RBA deciding to raise rates. Has he heard the saying that “when you play with fire you get burnt”…its not some easy ride (being a debt-junkie) and dont think any bailouts will stop this pyramid scheme from falling over.

I think you were smart to not ride the dragon JC – time and the market will sort out these fools

http://www.youtube.com/watch?v=NOErZuzZpS8

CB, great stuff. I’ve thought about this a lot and it’s a dragon that I’ve been reluctant to jump on and ride.

It is the trend, stupid!
Even if that trend is generated through fraud and manipulation, either you get with it, or be crushed by it. That is the ugly reality and the choice I agree we should never be confronted with, but hey, in a world of crooks and thieves, these are the rules of the game. Right or wrong, you ignore them at your peril.