Rob Cheng’s Blog

Rob Cheng’s Blog

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Last week I visited one of my banks in South Carolina and they informed me that my interest rate had been lowered to .05%. This is stark contrast to my bank accounts in Brazil where the interest rate has been raised to 10%. To be clear, interest rates in Brazil are 200 times that of the United States. This is not some bizarre Hollywood movie, this is our sad reality in the country that we love. Here are the top 17 reasons why cheap money is ruining the United States and large parts of the world.


You cannot base an economy on cheap money for a sustainable period of time. Furthermore, once a country / central bank goes down the cheap money road, and it is like a drug, and there is no simple way to reverse course without severe withdrawal symptoms.


By pumping too much money into the economy, it creates inflation where ever you look. It is most pronounced in food prices and other domestic items. The government intentionally excludes food, energy and health care costs from their monthly inflation calculation to further the lie that inflation is moderate.


A good economy is based on the work of its citizens that provide value to itself and that can be exported to the rest of the world. But now, our government wants us to believe that we don’t have to work. Just sit in your house, sign a mortgage and the price will rise, and you don’t have to work to make money. We are in the process of raising a whole generation of young people who don’t understand the value of work.


It is a virtue to save money. It teaches us discipline and forces us to prioritize and make choices that make us all better people. But this value has been lost in America. No longer is it important to save money, if we can go into debt. In today’s world, we encourage debt and consumption at the expense of savings.


By definition, setting interest rates at 0%, puts no value on the future. We are discounting the future of our children and grand children so that we can party like there is no tomorrow. We live under the false notion that if our future is more pleasant that somehow that translates to a brighter future for our young people. NOT.


Cheap money enables our humongous federal government that can mercilessly attack foreign countries without provocation, and create sophisticated spying technologies and progams, all while lower taxes to the richest Americans. The ugly part is that the less the bone headed 0% interest rate plans work, the larger the government becomes in safety nets and bizarre jobs programs like the Orwellian body scanners at your local airport.


When you sign a mortgage document, the bank almost like magic gives you money to buy a house. Behind the scenes, the bank takes title to your house. This is happening in business too. So the American dream is a clever ruse for the banks to own virtually all of the residential and commercial property in the country.


The stories are legendary of American entrepreneurs that became incredible successes building a business in a garage. This is no longer true. To start a business today,, the entrepreneur goes to a VC firm, bank or hedge fund, and does a Power Point presentation. They either get their seed money or not. If you are unsuccessful in getting seed money, and you persevere, be aware that your primary competition will be companies that have a healthy dose of cheap money.

When I was a boy, small business was genuinely the engine of the economy. The hardware store, the record store, restaurants and on and on were all small businesses, and now all these segments are owned by Wall Street on a national level.


To be clear, the banks by that I mean the entire financial system is risk averse. It was once the responsibility of the financial sector to analyze and value risk. They no longer do that.


When you have so much cheap money flying around, it is almost begging for open corruption. We need look no further than the ratings agency fiasco to understand how deep the corruption lies. And the federal government decides to regulate LESS. This means that the entire system is corrupt to its very core.


The problem in the United States is that we no longer have capitalism. We only need to look at health insurance, energy, banking, pharmaceuticals and on and on. The winners and losers in the market place are predetermined by the companies that funnel cheap money into lobbyists in Washington DC.


One by product of the cheap money and zero regulation is that we have created a new societal rung of wealth represented primarily by our financial sector. America has a rich history of creating wealth through innovation and the rewards fell to those companies that profoundly improved the productivity of the world. Think Henry Ford, Thomas Edison, Alexander Graham Bell and more recently Bill Gates, Andy Grove, Michael Dell and so on. The problem with the new banking elite is that they extract their riches from society rather than improving it.


There is a panic mentality in the world today. We have been programmed to religiously watch the news, as if the next tidbit will be the straw that breaks the camel’s back and throws the economy and potentially the world into a tail spin. There are two flaws. America is still strong but our banks are weak. Second, people normally make poor decisions in a panic. A good example is the monstrous bail out in 2008.


What is the dollar represent? Or any currency for that matter. The dollar represents the future productivity of all the people and companies that transact in it. In China, the RMB translates to the People’s Money. Imagine that. A Communist nation recognizing the fact that the currency is a reflection of the productivity of its people.

When Greenspan, Bernnake, and now Yellen, print enormous amount of money to “stimulate the economy”, they are not taking the money from us. They are moving the money from the future where it would have been used for future productivity. The problem is that many of the citizens of these future generations have not been born yet. Who if not us the citizens are responsible for preventing this type of theft? Each time they print more money, they make the future a little less bright.


The financial sector is pleased with the present state of affairs. The last thing they want is change. And we have a grid locked Congress, and an inept president. The media focuses on any other issue other than this one. We focus on abortion, gay marriage, et al, instead of the one issue that will impact us and the future of the country itself. The media owned by Wall Street and the federal government does everything in its power to focus the public on any issue other than this. Think about it. In the last two presidential elections, how much time was spent debating or discussing how cheap money is ruining the country?

The people must UNITE for America to work.


The truly scary part is that the people are not united but the banks are. The banks control the American Congress, but the American Central Bank called the Fed, is colluding with other banks throughout the world. Worse yet, there are three banks called the IMF, the World Bank, and the BIS that attempt to control other countries and other banks.

I am speculating here, but the power and money grab is not a problem isolated to the United States. It is happening on a world wide basis, and we the citizens of the world will have to find a solution or there will be an out right war of the magnitude we have not seen in the history of humanity.

Waiting for the Crash

I have read close to 25 books on the financial crisis and what I see happening in the United States truly makes me sad. The Fed is moving jobs from the future to the present at the expense of the young people and people who save money like myself.

I have also been playing old protest songs from the 60′s on my guitar. So this is my attempt at writing a modern protest song. Songs today have so little message.

Washington DC Vacation

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Although I grew up in the Washington DC area, I never spent a lot of time exploring all the tourist things in the area. We went to the National Air and Space Museum, Museum of National History, and one day it was quite cold but we wandered the mall and snapped a lot of photos.

Lagoa Bonita (3/4 Photo Sets)

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Our favorite trip from the hotel was to Lagoa Bonita. This tour was not as popular as Lagoa Azul and for that one reason, we were the only people at this site. There were seven of us in total. The four in my family, two men that drove their motorcycles from SŃo Paulo (10 days on the road), and the tour guide. The views were more stunning than Lagoa Azul, and the only downside is that Lagoa Bonita is a little further from the hotel. This is offset by the fact that we didn’t lose as much time collecting the other riders and waiting for them. The kids had an awesome time. I am really surprised at how few children we saw because it is a great place for kids.

Solange Lenšˇis Maranheses Shoot (2/4 Photo Sets)

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The setting for this photo shoot is Lagoa Bonita. Amazingly enough, the view here was even more stunning than Lagoa Azul and we were the only tourists there. We essentially had the entire area to ourselves to swim, jump on the dunes and of course take pictures.

It was an amazingly sunny day and I decided to do a photo set just of my beautiful wife. Read More »

Lagoa Azul (1/4 Photo Sets)

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This will be the first of four photo sets from a marvelous vacation that we took in Brazil. The place is called Lenšˇis Maranheses, and it is perhaps one of the most beautiful places I have ever visited. It is one of the candidates for the seven natural wonders of the world.

Lenšˇis Maranheses is far from the beaten of Rio de Janeiro and SŃo Paulo. From Rio, it is a 3.5 hour plane ride north to a small airport called SŃo Luis. From there, we rented a car and drove for 4 hours east to reach our hotel.

Our first trip was roughly a 45 minute dune buggy ride from the hotel, crossing the mighty Rio Preguiša. Lagoa Azul is the most popular trip and there were perhaps about 12 buggies that took the trip with us. The sites were stunning and perhaps because it is so far from the rest of the world, Teddy and Jesse were the only kids on these trips. They had a great time and we took a lot of photos.

Don’t Trust Anyone Over 30

Young people speaking their minds
Getting so much resistance from behind
It’s time we stop look what’s that sound
Everybody look what’s going down

Stephen Stills
For What It’s Worth

When I was young, there was a saying we said, “Don’t trust anyone over 30.” We grew up during a time of protest where the young people united against the draft for the Vietnam war. We also learned how to question authority, and to believe in ourselves and not what everyone was telling us to do.

Here in Brazil, the young people are uniting against the Brazilian government. It has been remarkable and inspiring to see. Millions of people have taken to the streets and it has been done without violence. The Brazilian protests are ironic, because the average life of a Brazilian in the last 10 years has vastly improved. On the other hand, the average life of an American is certainly worse than 10 years ago. That said, I hope that the protests make a difference in Brazil and creates a new government that is less corrupt and more responsive to the basic needs of the people.

When I look at the United States, I am fearful. Perhaps the scariest aspect of American life is the 0% interest rates and cheap money promoted by Alan Greenspan and Ben Bernanke. Zero percent interest rates gives the problems of today priority over the hope of the future. More simply put, our present is more important than the future of our young people. They are robbing our kid’s future to fund a luxurious life style for the ultra wealthy banking elites with the pathetic hope that somehow some of the money will trickle down to the rest of us.

The young people need to become a political movement. Same as in Brazil, they should demand change that will result in a brighter future for them even it places hardship on the older people. It is the truly the only hope for our democracy and the future of the United States.

Federal Reserve Football League

I was talking to a friend of mine about the key monetary problems facing our nation. He sighed and agreed with me but he remarked that the problems were quite complex, and in reality difficult for most people to understand. This is a problem since the US is a democracy, and perhaps the only solution is a better informed electorate.

To that end, I have invented the Federal Reserve Football League. Imagine that the United States is a football team. We compete against all of the other teams in the world and of course the perennial winners such as China, Japan, Europe as well as upcoming teams such as Brazil and Russia.

Different than a football game, the games are played real time and all the time. The scoreboard and the winning teams are determined by unemployment and GDP growth rates. The teams with the lowest unemployment and the highest GDP growth rates win and the others lose.

The problem for anyone that keeps track of these things is that in the last 5 years, the American team is losing. During the recession of 2008, the US team slowed to a grind while the teams of Brazil and China forged ahead.

Just like in football, the press plays a huge role and they applied huge pressure on our coach, Ben Bernanke, to improve the team’s performance NOW. So Ben Bernanke started trading draft picks for veterans. He traded the American team’s first round draft pick for the next 5 years, for a bunch of very high paid albeit older stars. Just like in football and perhaps Dan Snyder and the Washington Redskins, this type of strategy rarely works, and the American team still is not winning vis a vis the competition.

Bernanke is frustrated but he doubles down on his strategy, and he trades away the next 5 years of first round draft picks. Of course, because the draft picks are so far into the future, the stimulus to the team is marginal, and the team still cannot compete well against the new superstars in China and Brazil.

So this is where my analogy ends. Bernanke has forced interest rates to 0% for over 5 years now with marginal results. Just like in football, if you trade away all of your draft picks for players, you are sacrificing the future for the present. That is what Bernanke is doing today. He is discounting the future of our young people and that of the country. It is hard to imagine a football team that has traded away the next 10 years of draft picks but that in essence is what Bernanke has done to our country.

Waiting for the Crash

Every day, I read the morning news
to see if I'm OK
So many people and their views
but I'm waiting for the day

One number's up, the others down
which way will the markets go?
it'll happen in a blink of an eye
only Goldman Sachs will know

I'm waiting for the crash
it'll happen in a flash
my head is spinning
i truly fear
the day i lose my cash

Chairman Ben, Chairman Ben
What you're doing won't last
Cheap Money's a drug
and the  hangover's coming fast

And you Barack, a democrat
with your drones, spies and tanks
it was up to you and only you
to stand up to the banks

we're waiting for the crash
it'll happen in a flash
our heads are spinning
we truly fear
the day we lose our cash

i want to stop this crash
i know i'm not alone
how can we come together
to knock the king from his throne?

yea yea yea, the game is rigged
the smart money's in and we're left out
we got to stop pretending
take to the streets and shout

we're waiting for the crash
it'll happen in a flash
our heads are spinning
we truly fear
the day we lose our cash

Brazil Super Power

I just finished readings the Sunday newspaper here in Brazil and the press it up in arms. The last first four months of 2013, the Brazilian economy grew at .6%, and the American economy grew at 2.5%. On top of that, in the last month, the Brazilian real has lost 15% of its value against the American dollar. Everyone is calling for quick action due to the poor economic results. They are all dead wrong.

The key issue is that they are trying to compare Brazil to the United States. In my view, the United States, and in particular Ben Bernanke, has done everything wrong in order to manage a strong and prosperous economy. At this point, the United States economy is based on cheap money that creates a bonanza in the financial sector which creates a lot of faux milllionaires but does nothing to create jobs or improve the overall economy. On top of that this strategy creates a very unstable banking sector requiring massive government bail outs. So if Brazil is to be successful, they need to avoid doing what the United has done.

Up to this point, they have been very successful, because the Central Bank has decided to increases interest rates .5% from 7.5% o 8.0%. Imagine that, a country raised their interest rates and this is perhaps the #1 reason why Brazilian is on the right path. They are one of the few countries in the world which still have the ability or strength to raise interest rates. Compare that with the United States, the banks so control the country, that even if the Fed hinted at raising interest rates, the banks and Wall Street would batter the stock market. As we know, the US and Japan are both stuck at 0% interest rates for the foreseeable future. I will Brazil will resist falling in this economic trap and therefore will become more productive than both Japan and the US.

On top of that, Brazil measure inflation correctly The inflation index includes key costs such as health care costs, energy and food costs. That’s right. About 40 years ago, in America, we measured inflation to include all of the key things that people purchase, but in order to avoid “inflation”, our wonderful government decided to exclude key things that people need to survive such as energy and food costs. Again, America is NOT the benchmark and Brazilian can and will be successful if they avoid the tragic error of excluding key costs from the inflation index.

Brazil’s infrastructure severely lags that of Europe, China, Japan and the United States. This is in all senses a good thing. First and foremost, Brazil can and will upgrade their infrastructure and it will create a stimulus to the economy. The Brazilian government is doing the upgrade slowly so as not to overheat the economy and create inflation. It is a huge upside that no other country has at its disposal. China has gone about the infrastructure issue in the exact opposite way. In the short space of 10 years, their infrastructure is now world class.

There is another huge upside which Brazil has yet to explore. Brazil’s key exports are still agricultural in nature. Brazil can and wiil make the transition to move the agricultural work force to production jobs in factories much the same as China. It is another huge upside and they are just in the beginning now that there is a small iPad factory just north of SŃo Paulo.

I moved to Brazil 10 years ago, and believe it or not, interest rates were roughly 24% per year or roughly 2% per month. The dollar was also incredibly strong at 3 reais to the dollar. That’s when I bought my apartment it was the shrewdest investment I have made in my life. Since that time, interest rates have fallen from 24% to 8%, but by raising interest rates, Brazil has proven two things.

1. In the face of inflation, Brazilian did NOT change the way inflationn was measured.

2. Brazil has the ability to rasie interest rates which few nations in the world still have the capacity to do because the Brailian government still controls their banks as opposed to the other way around. If they can avoid the pundits, they can avoid the raise to zero and become of the strongest nations on earth.


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Books Read

The Unquiet
by John Connolly
Read in Apr 2014
Check it out at My Book List.
Flash Boys
by Michael Lewis
Read in Apr 2014
Check it out at My Book List.
Cycle of Lies
by Juliet Macur
Read in Mar 2014
Check it out at My Book List.
Wrath of Angels
by John Connolly
Read in Mar 2014
Check it out at My Book List.
Tower of Basel
by Adam LeBor
Read in Mar 2014
Check it out at My Book List.
Mystic River
by Dennis Lehane
Read in Feb 2014
Check it out at My Book List.
The Public Bank Solution
by Ellen Brown
Read in Feb 2014
Check it out at My Book List.
by Max Barry
Read in Jan 2014
Check it out at My Book List.
Gods of Guilt
by Michael Connelly
Read in Jan 2014
Check it out at My Book List.
Sycamore Row
by John Grisham
Read in Dec 2013
Check it out at My Book List.

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