Best of the Week
Most Popular
1. Will Gold Price Breakout? 3 Things to Watch… - Jordan_Roy_Byrne
2.China Invades Saudi Oil Realm: PetroDollar Kill - Jim_Willie_CB
3.Bitcoin Price Trend Forecast, Paypal FUD Fake Cryptocurrency Warning - Nadeem_Walayat
4.The Stock Market Trend is Your Friend ’til the Very End - Rambus_Chartology
5.This Isn’t Your Grandfather’s (1960s) Inflation Scare - F_F_Wiley
6.GDX Gold Mining Stocks Fundamentals - Zeal_LLC
7.US Housing Real Estate Market and Banking Pressures Are Building - Chris_Vermeulen
8.Return of Stock Market Volatility Amidst Political Chaos and Uncertain Economy - Buildadv
9.Can Bitcoin Price Rally Continue After Paypal Fake FUD Attack? - Nadeem_Walayat
10.Warning Economic Implosion on the Horizon - Chris_Vermeulen
Last 7 days
Stock Market Predictive Modeling Is Calling For A Continued Rally - 22nd Apr 18
SWEATCOIN - Get PAID to WALK! Incentive to Burn Fat and Lose Weight - Review - 22nd Apr 18
Sheffield Local Elections 2018 Forecast Results - 22nd Apr 18
How Long Does it take for a 10%+ Stock Market Correction to Make New Highs - 21st Apr 18
Sheffield Ruling Labour Party Could Lose 10 Council Seats at May Local Elections - 21st Apr 18
Crude Oil Price Trend Forecast - Saudi Arabia $80 ARAMCO Stock IPO Target - 21st Apr 18
Gold Price Nearing Bull Market Breakout, Stocks to Follow - 20th Apr 18
What’s Bitcoin Really Worth? - 20th Apr 18
Stock Market May "Let Go" - 20th Apr 18
Overwhelming Evidence Against Near Stock Market Grand Supercycle Top - 20th Apr 18
Crude Oil Price Trend Forecast - Saudi's Want $100 for ARAMCO Stock IPO - 20th Apr 18
The Incredible Silver Trade – What You Need to Know - 20th Apr 18
Is War "Hell" for the Stock Market? - 19th Apr 18
Palladium Bullion Surges 17% In 9 Days On Russian Supply Concerns - 19th Apr 18
Breadth Study Suggests that Stock Market Bottom is Already In - 19th Apr 18
Allegory Regarding Investment Decisions Made On Basis Of Government’s Income Statement, Balance Sheet - 19th Apr 18
Gold – A Unique Repeat of the 2007 and How to Profit - 19th Apr 18
Abbeydale Park Rise Cherry Tree's in Blossom - Sheffield Street Tree Protests - 19th Apr 18
The Stock Market “Turn of the Month Effect” Exists in 11 of 11 Countries - 18th Apr 18
Winter is Coming - Coming Storms Will Bring Out the Best and Worst in Humanity - 18th Apr 18
What Does it Take to Create Living Wage Jobs? - 18th Apr 18
Gold and Silver Buy Signals - 18th Apr 18
WINTER IS COMING - The Ongoing Fourth Turning Crisis Part2 - 18th Apr 18
A Stock Market Rally on Low Volume is NOT Bearish - 17th Apr 18
Three Gold Charts, One Big Gold Stocks Opportunity - 17th Apr 18
Crude Oil Price As Bullish as it Seems? - 17th Apr 18
A Good Time to Buy Facebook? - 17th Apr 18
THE Financial Crisis Acronym of 2008 is Sounding Another Alarm - 16th Apr 18
Bombs, Missiles and War – What to Expect Next from the Stock Market - 16th Apr 18
Global Debt Bubble Hits New All Time High – One Quadrillion Reasons To Buy Gold - 16th Apr 18
Will Bitcoin Ever Recover? - 16th Apr 18
Stock Market Futures Bounce, But Stopped at Trendline - 16th Apr 18
How To Profit As Oil Prices Explode - 16th Apr 18
Junior Mining Stocks are Close to Breaking Downtrend - 16th Apr 18
Look Inside a Caravan at UK Holiday Park for Summer 2018 - Hoseasons Cayton Bay Sea Side - 16th Apr 18
Stock Market More Weakness? How Much? - 15th Apr 18
Time for the Gold Bulls to Show their Mettle - 15th Apr 18
Trading Markets Amid Sound of Wars - 15th Apr 18
Sugar Commodity Buying Levels Analysis - 14th Apr 18
The Oil Trade May Be Coming Alive - 14th Apr 18

Market Oracle FREE Newsletter

Trading Lessons

Detroit and Social Credit, Stocks Contnuing Technical Strength

Stock-Markets / Financial Markets 2013 Aug 05, 2013 - 06:21 PM GMT

By: Christopher_Quigley

Stock-Markets

In 2009 I wrote an essay on Social Credit which for some reason has become one of the most popular articles I have ever penned. This, I reckon, is not because it is a particularly “exceptional” essay but due, in part, to timing. Interest in this “economic concept” has recently gone “viral”.


However, it is ironic that Detroit has recently filed for bankruptcy. Research for the piece I wrote on Social Credit helped me discover that it was in the environs of Detroit that the “American Dream” was made manifest by non-other than Henry Ford. Unfortunately it would appear that the lessons that should have been learned from the perspective of Social Credit have been ignored and accordingly the “American Dream” is dying. This is a tragedy. But it is never too late to start anew. As the saying goes: “when you lose, don’t lose the lesson”. To mark this seminal event in the social and economic history of Detroit I outline below the essential essence contained in that 2009 essay. Hopefully the economic truths contained therein, originally championed by Major Clifford Douglas in 1910, will continue to gain appeal and thereby motivate some future administration to take up the baton of reform and instigate credit policies that will help pass on the “American Dream” to new generations.

“What is the main objective of Social Credit? In essence it seeks to fairly compensate citizens with real purchasing power and thus end the current "trans-national/out-sourcing" industrial policy of American and European business leaders. It seeks to replace capital investment (i.e. investment in technology) with human investment.

Why is purchasing power so important? It is fundamental because without money no exchange can take place. In order to understand what I am talking about let us look at the historical example set by Henry Ford in Detroit in 1920. He completely redefined "classical" economics through the policies undertaken by the Ford Motor Company.

Under "normal" economic theory it was assumed that a corporation could only maximise profits by ideally becoming a monopoly which meant increasing price and limiting supply. Ford did the exact opposite. He had a more holistic view of the role of the corporation in society. He understood the synergetic relationship between money and goods. He DOUBLED the wages of his workers, DECREASED the price of the Model T and in the process remade the Ford Motor Corporation and remade America. (This policy was not inflationary because he knew he could at least double production through increased efficiencies when he doubled wages. This is the essence of the enlightened policy of Social Credit for communities rather than of monopoly credit for social elites alone).

The Ford Company boomed. How did this happen? It was axiomatic. He understood the importance of money and purchasing power in society. With "high" wages Ford's workers were able to make a good living and have excess funds to save or spend. Accordingly their financial anxiety ceased and staff turnover dropped by a multiple of five in one year. This dramatically decreased management expense and increased productivity. Workers finally had peace of mind. With the increased disposable income in the Detroit area the general economy boomed. All classes of economic sectors expanded. As a result more workers, new business owners, company managers, insurance brokers, real estate brokers, bankers, salesmen, craftsmen, delivery men, builders, farmers and retailers all could afford Ford cars. Demand for the model T exploded through the increased buying power WHICH HE HAD CREATED THROUGH MONEY DISTRIBUTION.

Like Major Clifford Douglas, the mind behind Social Credit, Ford understood economics and he understood the issue of PURCHASING POWER. FOR HIM PURCHASING POWER WAS NOT CREDIT BUT CASH.  HE REASLIZED THAT WITHOUT THE MONEY TO PURCHASE HIS CARS POTENTIAL DEMAND WAS IRRELEVANT. THEREFORE HE INITIALLY REDISTRIBUTED DIVIDENDS FROM THE OWNERS TO THE WORKERS. THIS INCREASED GENERAL BUSINESS ACTIVITY AND TURNOVER EXPONENTIALLY. THESE INCREASED SALE BOOSTED PROFITS TO SUCH A DEGREE THAT THE SAME OWNERS EVENTUALLY RECEIVED INCREASED SUSTAINABLE DIVIDENDS. EVERYBODY WON. THIS BRILLIANT POLICY MADE THE COMPANY. It built up the economy of Detroit and it helped define America as a country where a factory worker was respected and well paid, not exploited, as had been the case throughout the English industrial revolution. The "American Dream" was Ford’s vision made manifest. It was a dream brought to fruition not through political fantasy but through the hard laws of economics, accounting, finance, production, distribution and marketing.”

To reiterate, in my view the “death” of Detroit is the unmistakable sign the “The American Dream” is dying on its feet. Unless the policies of off-shoring American jobs and the systematic lowering of American working wages cease we are going to see many more U.S. cities going bankrupt.

Social Credit as a policy may not have all the solutions to our contemporary economic crises but it has a part to play. Mainly it is helping people realise that fallacy of championing the use of technology without a concomitant policy in place to distribute money to consumers. Thus as a matter of expediency without the introduction of a National Dividend to stimulate American purchasing power contemporary modernity is going to continue to experience social disintegration. However, for some reason governments cannot seem to come to terms with the “radicalness” of this solution. Radical or not, the truth of the matter is you either “adapt or die” and unfortunately the tragedy of the Detroit bankruptcy saga proves that America is opting to die.

Technical Strength Continues For Now.
The market, though over-bought, continues to show exceptional technical strength.

The strategy of going long on pullbacks and selling into highs remains in place.

How long this approach continues to provide excellent returns is anyone’s guess but one should not “fight a gift horse in the mouth”.

Of the Transports and the Industrials, the Trannies is the strongest Index of the two, despite rising oil prices. Case in point, observe the powerful bullish engulfing candlestick price action on the Transport Index last Friday. It would appear that the Industrials are keen to follow, we shall wait and see. One would have thought that since we are coming to the end of this earnings season there would be a serious pullback, but no, not as we speak.

As reported previously this market strength is not based on fundamentals but on technicals. The FED is walking a tightrope with its QE strategy. How the FED finally gets itself out of the box it has constructed around its policy remains to be seen. Rationally one would assume that when Government debt stops being monetized interest rates will explode. The Gold bear is actually indicating that interest rates could go into double digits soon. Such an event would cripple any real estate “recovery”, seriously negatively alter valuations on dividend paying equities, and push debt crippled European sovereign budgets into fresh crises. However, currently the market is not interested in such “logical consequences”. Therefore traders and investors should “soldier on” and take advantage of the “party” while it lasts, for it cannot go on forever. Reversion to the historical price-earning-ratio-mean is inevitable. Technical analysis will indicate to keen observers when this setup is unfolding. For the moment mean reversion is off the technical radar but as is the nature of this profession we will only believe what we see not what we hear.

Dow Transports: Daily


USO: United States OIL Fund ETF: Daily

Charts: Courtesy of StockCharts.Com

Ref: “Robots Don’t Buy Cars: Henry Ford and Social Credit” 2009 Christopher M. Quigley

By Christopher M. Quigley

B.Sc., M.M.I.I. Grad., M.A.
http://www.wealthbuilder.ie

Mr. Quigley was born in 1958 in Dublin, Ireland. He holds a Bachelor Degree in Accounting and Management from Trinity College Dublin and is a graduate of the Marketing Institute of Ireland. He commenced investing in the stock market in 1989 in Belmont, California where he lived for 6 years. He has developed the Wealthbuilder investment and trading course over the last two decades as a result of research, study and experience. This system marries fundamental analysis with technical analysis and focuses on momentum, value and pension strategies.

Since 2007 Mr. Quigley has written over 80 articles which have been published on popular web   sites based in California, New York, London and Dublin.

Mr. Quigley is now lives in Dublin, Ireland and Tampa Bay, Florida.

© 2013 Copyright Christopher M. Quigley - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Christopher M. Quigley Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules