Question I got on my Web site and my answer

John, I’m interested in your specific thoughts of the S&Ps rating downgrade for the US to negative. Also, I am having trouble finding a MMDA to put my IRA into. The investment advisors I speak to at USAA don’t understand what that means. I even looked it up on Wikapedia and it essential refers to MMDAs as money market funds. Not confident I am going to purchase what I, and the fiancial person on the other end, think I am purchasing.

My answer:

Since I have some of my money in an MMDA at USAA, that is not encouraging about the competence there.
Remember that I am married to a retired FDIC bank examiner who unretired to become a Federal Reserve bank examiner, so I don't say uninformed things about this subject. My wife and another bank examiner both proofread the damned book. They had no trouble with the phrase FDIC-insured MMDA. Indeed, I went back and forth with my wife over exactly what to call it to be sure it was correct.
Try telling the folks at the bank in question that you want a money market bank account and make sure it's FDIC-insured. USAA Savings Bank can do that. USAA other departments cannot. If the bank to whom you are speaking says yes, we have FDIC-insured money market accounts, you have found what my book calls an FDIC-insured MMDA. The fact that they may not call it an MMDA is their problem. The reason I use MMDA scrupulously in the book is that money market funds are not FDIC-insured and therefore are not to be touched with a ten-foot pole. Money market funds are UNINSURED securities offered by all sorts of brokerage firms. Money market deposit accounts are FDIC-insured and only offered by banks.
I will have to put someting about this at the errata page for that book. Warning: bank employees of banks that have FDIC-insured MMDAs do not know they have FDIC MMDAs. You have to use other words to help them understand the question.

Jack Reed

American convicted of terrorism for making barter coins for his North Carolina region

Read this article to see how a guy in North Carolina may get 25 years in prison for making coins to be used in his area of North Carolina instead of U.S. currency. The U.S. government really does not like anyone messing with their ability to inflate the dollar.

Page 131 capital gain error

It should be $88,000 gain and a $24,640 tax.

Changes in the Dow

On page 190 I noted that the Dow has changed since 1932 so comparing that year’s Dow to today’s overlooks the fact that a number of the 1932 companies went out of existence and would have taken your money with them had you bought at the bottom. Reader Patrick Johnson points out that some chaged names. In particular he said Woolworth is now Footlocker and Westngihouse Electric is now Viacom. That sort of detail is outside my area of expertise. My main point about the notion of buying at the bottom is that it took a long time for stocks bought in 1932 to make their buyers happy and that the analysis on how much profit was made requires more than just comparing the Dow of 1932 with the Dow of 1962 or whenever.

Depression farmer not allowed to grow wheat for his own consumption

In How to Protect Your Life Savings From Hyperinflation & Depression, I said monetary issues like hyperinflation and deflation depression do not affect subsistence farmers (eat all of what they grow themselves and sell none of it) like my father’s family during the Great Depression. I stand corrected.

Reading Thomas Sowell’s book Intellectuals and Society, I came across his discussion of “Intellectuals and the Law”. By “Intellectuals” he means educated liberals who are in favor of big government.

In 1942, the U.S. Supreme Court decided the case of Wickard v. Filburn, 317 U.S. 111. Basically, Filburn was an Ohio farmer who grew wheat solely for consumption by his family and livestock. Wickard was the Secretary of Agriculture at the time. The federal government said he violated the Agricultural Adjustment Act of 1938 which artificially held down the planting of certain crops to try to boost their market price. Filburn planted about 12 more acres of wheat than the Act permitted. He argued that planting wheat on his own land for his own consumption was none of the federal government’s business and was not covered by the Constitutions’ “interstate commerce” clause because he was not selling it even within the state let alone across state lines.

The U.S. Supreme Court outrageously decided that Filburn wheat grown for his own consumption was interstate commerce because eating his own wheat and feeding it to his own livestock would cause he himself to buy less wheat from interstate commerce and he might sell it across state lines even though he never did and had no intention of doing so!

So add prohibiting living off your own land to the list of government reactions to hyperinflation and deflation.

Fed low on ammo

Readers of my How to Protect Your Life Savings from Hyperinflation & Depression are familiar in detail with deflation and liquidity traps. So they will probably understand and appreciate Alan Blinder’s column in the 8/26/10 Wall Street Journal. The column, titled “The Fed is running low on ammo” is about the Federal Reserve’s limited options at present to prevent economic stagnation. He does not mention liquidity trap but that is what he is talking about.

I continue to maintain that no one can predict whether we will get hyperinflation or deflation (depression) from our current fiscal madness. Most people I talk to are quite certain they can predict we are going to have one or the other. Okay, then Read Binder’s column. It sort of predicts deflation. Read it even if you are a hyperinflation true believer. Basically, strong arguments can be made in both directions. My book says to protect yourself from both and that is still my position.

Phillipines part of U.S.

My dates of the Philippines becoming part of then becoming independent from the U.S. are incorrect on page 113. They were ceded to the U.S. by Spain in 1898 and became independent from the U.S. in 1946. Don’t know how I got that wrong. I sort of knew that off the top of my head.

‘Who are quite’ not ‘whore quit’

On page 69 in the second paragraph under “Stable Mafia currency” I said “whore quit.” It is supposed to be “who are quite…” And I used five proof readers for this book—more than on any of the previous 89 books.

I misspelled von Mises

I quoted Ludwig von Mises and gave the address of the Institute named after him in my book. Unfortunately, where I quoted him, I spelled his name as van Mises (Dutch spelling) rather than the correct von Mises (German spelling). The spelling in my bibliography is correct.

China lets yuan rise against dollar

In How to Protect Your Life Savings from Hyperinflation & Depression I said China has been holding their currency the yuan at a fixed rate against the dollar. The week the book came out, 6/25/10, China allowed the yuan to rise somewhat against the dollar.

Billion not trillion

On page 2, I said John Paulson made $14 trillion for his hedge fund by betting against subprime mortgages. It was $14 billion, not $14 trillion. $14 trillion is the gross domestic product of the U.S.

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