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Confronting the money-power elite

Confronting the money-power elite

Those who control the creation and allocation of money are able to control every other aspect of society. Shouldn’t that be us?

Credit: Flickr/Liz West. CC BY 2.0.

The world today is controlled by a small elite group that has been increasingly concentrating power and wealth in their own hands. There are many observable facets to this power structure, including the military security complex that President Eisenhower warned against, the fossil fuel interests, and the neoconservatives and others that are promoting US  hegemony around the world, but the most powerful and overarching force is the ‘money power’ that controls money, banking, and finance worldwide. It is clear that those who control the creation and allocation of money through the banking system are able to control virtually every other aspect of society.

What can be done to turn the tide? How can we empower ourselves to assert our desires for a more fair, humane and peaceful world order? I believe that the greatest possibility of bringing about the desired changes lies in economic and political innovation and restructuring.

The monopolization of credit.

I came to realize many years ago that the primary mechanism by which people are controlled is the system of money, banking, and finance. The power elite have long known this and have used it to enrich themselves and consolidate their grip. Though we take it for granted, money has become an utter necessity for surviving in the modern world. But unlike water, air, food, and energy, money is not a natural substance—it is a human contrivance, and it has been contrived in such a way as to centralize power and concentrate wealth.

Money today is essentially credit, and the control of our collective credit has been monopolized in the hands of a cartel comprised of huge private banks with the complicity of politicians who control central governments.

…click on the above link to read the rest of the article…

Italy and the Repricing of European Government Debt

  • The yield spread between 10yr BTPs and Bunds widened 114bp in May
  • Populist and anti-EU politics were the catalyst for this repricing of risk
  • Spain, Portugal and Greece all saw yields increase as Bund yields declined
  • The ECB policy of OMT should help to avoid a repeat of 2011/2012

I have never been a great advocate of long-term investment in fixed income securities, not in a world of artificially low official inflation indices and fiat currencies. Given the de minimis real rate of return I regard them as trading assets. I will freely admit that this has led me to make a number of investment mistakes, although these have generally been sins of omission rather than actual investment losses. The Italian political situation and the sharp rise in Italian bond yields it precipitated, last week, is, therefore, some justification for an investor like myself, one who has not held any fixed income securities since 2010.

An excellent overview of the Italian political situation is contained in the latest essay from John Mauldin of  Mauldin Economics – From the Front Line – The Italian Trigger:-

Italy had been without a government since its March 4 election, which yielded a hung parliament with no party or coalition holding a majority. The Five Star Movement and Lega Nord finally reached a deal, to most everyone’s surprise since those two parties, while both broadly populist, have some big differences. Nonetheless, they found enough common ground to propose a cabinet to President Sergio Mattarella.

Italian presidents are generally seen as rubberstamp figureheads. They really aren’t supposed to insert themselves into the process. Yet Mattarella unexpectedly rejected the coalition’s proposed finance minister, 81-year-old economist Paolo Savona, on the grounds Savona had previously opposed Italy’s eurozone membership. This enraged Five Star and Lega Nord, who then ended their plans to form a government and threatened to impeach Mattarella.

…click on the above link to read the rest of the article…

How To Best Prepare Yourself For The Coming Financial Crisis

How To Best Prepare Yourself For The Coming Financial Crisis

Many financial analysts believe the United States economy is in a dire situation.  Peter Schiff, who accurately predicted the 2008 recession has come out and declared we will all live through another Great Depression, only this time, it’ll be much worse than before.  But there are ways to prepare for such an event, and we’ve gathered some helpful tips and tricks to help make the process a little more smooth.

“The bad news is, we are going to live through another Great Depression and it’s going to be very different. This will be in many ways, much much worse, than what people had to endure during the Great Depression…This is going to be a dollar crisis.”

When you are talking about the magnitude of the debt we have, that extra money [raising interest rates] is big. That’s going to be a big drain on the economy to the extent that we have to pay higher interest to international creditors…a lot of this phony GDP is coming from consumption, while the average American who is consuming is deeply in debt and they are going to impacted dramatically in the increase in the cost of servicing that debt…given how much debt we have, and how much debt is going to be marketed the massive increase in supply will argue for interest rates that are higher.” -Peter Schiff

According to Financial Times, it is becoming clear that the global monetary policy is now caught in a debt trap of its own making. Continuing on the current monetary path is ineffective and increasingly dangerous. But any reversal also involves great risks. It stands to reason that the odds of another crisis blowing up continue to rise.

…click on the above link to read the rest of the article…

America’s Greatest Crisis Upon Us…Debt to GDP Makes It Clear

America’s Greatest Crisis Upon Us…Debt to GDP Makes It Clear

America in the midst of its greatest crisis in its 242 years of existence.  I say this based upon the US federal debt to GDP (gross domestic product) ratio.  In the history of the US, at the onset of every war or crisis, a period of federal deficit spending ensued (red bars in graph below) to overcome the challenge but at the “challenges” end, a period of federal austerity ensued.  Until now.  No doubt the current financial crisis ended by 2013 (based on employment, asset values, etc.) but federal spending continues to significantly outpace tax revenues…resulting in a continually rising debt to GDP ratio.  We are well past the point where we have typically began repairing the nation’s balance sheet and maintaining the credibility of the currency.  However, all indications from the CBO and current administration make it clear that debt to GDP will continue to rise.  If the American economy were as strong as claimed, this is the time that federal deficit spending would cease alongside the Fed’s interest rate hikes.  Instead, surging deficit spending is taking place alongside interest rate hikes, another first for America.
The chart below takes America from 1790 to present.  From 1776 to 2001, every period of deficit spending was followed by a period of “austerity” where-upon federal spending was constrained and economic activity flourished, repairing the damage done to the debt to GDP ratio and the credibility of the US currency.  But since 2001, according to debt to GDP, the US has been in the longest ongoing crisis in the nations history.

But what is this crisis?  The chart points out the debt to GDP surges in order to resolve the Revolutionary war, the Civil War, WWI, and WWII. But the debt to GDP surges since 1980 seem less clear cut.  But simply put, America (and the world) grew up and matured, but the central banks and federal government could not accept this change.

…click on the above link to read the rest of the article…

Do We Really Borrow From Only Ourselves? Does the Debt/GDP Ratio Means Anything?

QUESTION: Mr. Armstrong, the famous economist Paul Krugman says that debt is ok when we owe it to ourselves. He calls it “deficit scolding” as he wrote in the New York Times. Would you like to comment on this statement?

GH

ANSWER: Paul Krugman seems to lack any historical understanding of how nations rise and fall. Anyone who claims debt is OK and can be infinite because “we” owe it to ourselves is clueless. He wrote in the article you referred to that “we have a more or less stable ratio of debt to GDP, and no hint of a financing problem.” The debt to GDP ratio is interesting but totally irrelevant. China’s debt to GDP stands at 250%, the USA at 103%, and Greece buckled at 186%. Obviously, this ratio is rather meaningless as a forecasting tool. I have published this chart on call money rates previously. In my studies, I quickly discovered that you cannot reduce the cause of any effect to a single issue. We can see that the peak in call money rates took place during 1899 and it was the lowest in 1929 when the Great Depression hit. You can’t even claim that if interest rates hit some magical level the stock market would crash. The world is far more complicated than just this one-dimensional approach to everything.

Capital flows were fleeing the USA in 1899 so interest rates went higher with a shortage of money. In 1929, the capital was in the USA for it rushed here because of World War I. The inflow of capital created an excess so the peak in call money rates was lower than 1899 when capital was fleeing. We even have the world of President Grover Cleveland from the Panic of 1893 commenting on the net capital outflow because of the “unsound” financial policy of the Silver Democrats.

…click on the above link to read the rest of the article…

A Hard Rain’s a-Gonna Fall

A Hard Rain’s a-Gonna Fall

The prospects for the rest of the year are awful

Après moi, le déluge

~ King Louis XV of France

A hard rain’s a-gonna fall

~ Bob Dylan (the first)

As the Federal Reserve kicked off its second round of quantitative easing in the aftermath of the Great Financial Crisis, hedge fund manager David Tepper predicted that nearly all assets would rise tremendously in response.

“The Fed just announced: We want economic growth, and we don’t care if there’s inflation… have they ever said that before?”

He then famously uttered the line “You gotta love a put”, referring to the Fed’s declared willingness to print $trillions to backstop the economy and financial makets.

Nine years later we see that Tepper was right, likely even more so than he realized at the time.

The other world central banks followed the Fed’s lead. Mario Draghi of the ECB declared a similar “whatever it takes” policy and has printed nearly $3.5 trillion in just the past three years alone. The Bank of Japan has intervened so much that it now owns over 40% of its country’s entire bond market. And no central bank has printed more than the People’s Bank of China.

It has been an unprecedented forcefeeding of stimulus into the global system. And, contrary to what most people realize, it hasn’t diminished over the years since the Great Recession. In fact, the most recent wave from 2015-2018 has seen the highest amount of injected ‘thin-air’ money ever:

Total Assets Of Majro Central Banks

In response, equities have long since rocketed past their pre-crisis highs, bonds continued rising as interest rates stayed at historic lows, and many real estate markets are now back in bubble territory. As Tepper predicted, financial and other risk assets have shot the moon.

And everyone learned to love the ‘Fed put’ and stop worrying.

…click on the above link to read the rest of the article…

The Volcano of Debt

The Volcano of Debt - Craig Hemke (11/06/2018)

Just as gravity propels the lava from Kilauea inexorably toward the sea, a mountain of public and private debt looms over today’s markets.

Earlier this week, the Boards of Trustees for both U.S. Social Security and Medicare released their latest updates on the “solvency” of the programs. The advisories can be read here:https://www.ssa.gov/oact/TRSUM/index.html

Though it’s common knowledge that these programs are vastly underfunded, the degree to which the pending crisis is accelerating should come as a shock to all Americans.

In their report, the Trustees state that the “Social Security Trust Fund” will be exhausted in 2034. Though this retirement income program is already running on fumes due to simple demographics— and the notion of a “trust fund” is really nothing more than an accounting trick

The report that it will be insolvent in just fifteen years should come as a cold slap to the face for anyone still clinging to the belief that the funding problems plaguing this income redistribution program can be put off indefinitely. From the report:

“Social Securitys total cost is projected to exceed its total income (including interest) in 2018 for the first time since 1982, and to remain higher throughout the projection period. Social Security s cost will be financed with a combination of non-interest income, interest income, and net redemptions of trust fund asset reserves from the General Fund of the Treasury until 2034 when the OASDI reserves will be depleted.”

Even worse was the report from the Trustees of the Medicare program. Sharply rising healthcare costs and the increase in program participation due to aging Baby Boomers led the Trustees to project insolvency as soon as 2026. That’s just eight years from now! Also from the report:

…click on the above link to read the rest of the article…

What’s Wrong with the Economy: 9 Toxic Dynamics

What’s Wrong with the Economy: 9 Toxic Dynamics

These nine dynamics are mutually reinforcing.

Beneath the surface signals of an eternally rising stock market and expanding GDP, we all sense something is deeply, systemically wrong with the U.S. economy. These nine structural dynamics generate secondary dynamics, all of which are toxic to social mobility, sustainable prosperity, accountability and democracy:

1. The financialization of the economy, which transformed services, credit, risk and labor into commodities that could be traded globally. Financialization generates enormously asymmetric returns: those with access to low-cost credit, global markets and expertise in finance collect the lion’s share of gains in income and wealth.

2. The technological transformation of the economy, which has placed a substantial scarcity premium on specific tech/managerial/communication skills and devalued ordinary labor and capital. As a result, the majority of gains in wealth and income flow to those with the scarce skills and forms of capital, leaving little for ordinary labor and capital.

3. The end of cheap fossil fuels. The fracking boom/bubble has obscured the long-term secular trend: the depletion of cheap-to-access and process oil. As many analysts have observed (Nate Hagens, Gail Tverberg, Richard Heinberg, Chris Martenson et al.), the global economy only grows if energy and credit are both cheap.

4. Globalization, which transformed the developing world into the environmental dumping ground of the wealthy nations and enabled the owners of capital to offshore waste and labor.

5. The destructive consequences of “growth at any cost” are piling up. “Growth” is the one constant of all existing political-economic systems, and none of the current Modes of Production (i.e. the structures that organize production, consumption, the economy and society) recognize that “growth” is not sustainable.

The first two dynamics drive three other dynamics that have hollowed out the productive economy:

…click on the above link to read the rest of the article…

Weekly Commentary: Q1 2018 Z.1 Flow of Funds

Weekly Commentary: Q1 2018 Z.1 Flow of Funds

The first-quarter 2018 Z.1 “flow of funds” report can be viewed in two ways. From one perspective, key conventional data are un-extraordinary. Household debt expanded at a 3.3% rate during the quarter, down from Q4’s 4.6%. Home Mortgage borrowings slowed from 3.4% to 2.9%. Total Business debt grew at a 4.4% pace, unchanged from Q4 and down from Q1 ’17’s 6.1%. Financial sector borrowings were little changed, after expanding 1.6% during Q4. Bank lending was, as well, unremarkable.
From another perspective, extraordinary Credit growth runs unabated. Total System (non-financial, financial and foreign) Credit expanded at a (record) seasonally-adjusted and annualized rate (SAAR) of $3.513 TN during 2018’s first quarter, compared to Q4’s SAAR $1.411 TN and Q1 ’17’s SAAR $860 billion. This booming Credit expansion was fueled by an SAAR $2.519 TN increase of federal borrowings. Granted, this was partially a makeup from Q4’s slight contraction in federal debt growth.

In nominal dollars, Total U.S. System Credit expanded a blazing $962 billion during Q1 to a record $69.717 TN (349% of GDP). Non-financial Debt (NFD) expanded a record (nominal) $874 billion, with one-year growth of $2.413 TN. One must return to booming 2007 for a larger ($2.508 TN) four quarter-period of Credit expansion. NFD ended Q1 at a record $49.831 TN, matching a record 250% of GDP. NFD expanded $4.086 TN over the past two years, the strongest expansion since ’07/’08.

Outstanding Treasury Securities ended Q1 at a record $17.046 TN, increasing a nominal $615 billion during the quarter. Treasury Securities jumped $1.172 TN during the past four quarters and $1.669 TN over two years. Outstanding Treasury Securities has increased $10.995 TN, or 182%, since the end of 2007. Treasury debt-to-GDP ended Q1 at 85%, more than double 2007’s 41%. It’s worth adding that total Treasury and Agency Securities ended Q1 at a record $25.920 TN, or 130% of GDP.

…click on the above link to read the rest of the article…

The Gently Rotting Debt-Ridden EU

The Gently Rotting Debt-Ridden EU

The EU as a political construction is in a state of terminal decay. We know this for one reason and one reason alone: its core principle is the state is superior to its people. A system of government can only work over the longer term if it recognises that it is the servant of the people, not its master. It matters not what electoral system is in place, so long as this principle is adhered to.

The EU executive in Brussels does not accept electoral primacy. It shares with Marxist communism a belief in statist primacy instead. The only difference between the two creeds is Marx planned to rule the world, while Brussels is on the way to ruling Europe.

The methods of satisfying their objectives differ. Marx advocated civil war on a global scale to destroy capitalism and the bourgeoisie, while Brussels has progressively taken on powers that marginalise national parliaments. Both creeds share a belief in an all-powerful executive. The comparison with Marxism does not flatter the EU, and suggests it has a limited life and that we may be on the verge of seeing the EU beginning to disintegrate. Despite economic evolution in the rest of the world, like Marxian communists Brussels is stuck with a failing economic and political creed.

It has no mechanism for compromise or adaptation. A rebellion from Greece was put down, the British voted for Brexit, which is proving impossible to negotiate, and now Italy thinks it can partially escape from this statist version of Hotel California. The Italians are making huge mistakes. The rebel parties forming a coalition government want to stay in the EU but are looking to exit from the euro. Putting aside the impossibility of change for a moment, they have it the wrong way around. If they are to achieve anything, they should be exiting the EU and staying in the euro. Let me explain, starting with the politics, before considering the economics.

…click on the above link to read the rest of the article…

America Goes Full Imbecile

America Goes Full Imbecile

Credit has a wicked way

of magnifying a person’s defects.  Even the most cautious man, with unlimited credit, can make mistakes that in retrospect seem absurd.  But an average man, with unlimited credit, is preeminently disposed to going full imbecile.

 

Let us not forget about this important skill…  [PT]

Several weeks ago we came across a woeful tale of Mike Meru.  Somehow, this special fellow, while of apparent sound mine and worthy intent, racked up over $1 million dollars in student loan debt – all to become an orthodontist.

Surely, with several good text books, and a disciplined self-study program, Meru could have learned everything there was to possibly know about adjusting malpositioned teeth for roughly $200 bucks.  Instead, with the full backing of Uncle Sam’s loan program, he went full imbecile.

Yet Meru isn’t alone.  According to the Department of Education, there are 101 people in the U.S. who are a million dollars or more in federal student loan debt.  What’s more, there are 2.5 million people who owe at least $100,000.  What could they have possibly learned that could be so doggone valuable?

Did they discover how to turn nickels into dimes?  Did they solve the geometry of a four-sided triangle?  Did they learn the secrets of the universe?  Did they get an insider’s peek at something more than what happens under the sun?

Delusions of Grandeur

Only at rare moments are people capable of understanding the full implications of the catastrophes of their making.  These rare moments, often just before dawn, are the precise instants when they gain full clarity to the hopeless fact that they have gone full imbecile.  That every decision they have ever made has led them to this exact place – where they find themselves to be completely and utterly screwed.

…click on the above link to read the rest of the article…

Debt Doesn’t Matter, Because “We Owe It to Ourselves”? Why Krugman and Keynes Are Wrong about This

Debt Doesn’t Matter, Because “We Owe It to Ourselves”? Why Krugman and Keynes Are Wrong about This

It is an undeniable fact that debt, whether private or public, must, eventually, be repaid.

Creditors have better memories than debtors. This elegant line was coined by Benjamin Franklin—political philosopher, prolific writer, humorist and American ambassador to France. Mr. Franklin also was one of the Founding Fathers of the United States of America. A true polymath and a man of great common sense.

An entrepreneur assumes he is entitled to an inexhaustible supply of credit and nonchalantly racks up debt. Soon, he will discover that creditors have better memories than debtors. Credit will dry up. Workers will stop working. Suppliers will stop supplying. Debt, after all, needs to be paid back. Credit and debt are two sides of the same coin.

They will insist there is something subtle about debt we don’t understand.

The creditor is always a virtual partner of the debtor. He has linked his fate with that of the debtor. Every grant of credit is a speculative entrepreneurial venture, the success or failure of which is uncertain.” – Ludwig von Mises in Human Action (Chapter 20 – p539)

Mainstream economists will not deny this. After all, how could they? Yet, they will say we got it wrong. They will argue we don’t get the full picture. They will insist there is something subtle about debt we don’t understand.

We Owe it to Ourselves

The subtlety we fail to see—according to the mainstream—is that public debt and private debt are two different animals. When government owes money to other organizations or individuals, a different rule applies than when a private person or a private enterprise owes money. That rule is: we owe it to ourselves.

…click on the above link to read the rest of the article…

Total U.S. Public Debt & Interest Expense Hit A New Record High

Total U.S. Public Debt & Interest Expense Hit A New Record High

The total U.S. public debt hit a new record high of $21.145 trillion on the last day in May.  As the U.S. debt increased, so did the interest expense which jumped by more than $26 billion in the first seven months of the fiscal year.  That’s correct; the United States government forked out an additional $26 billion to service its debt (Oct.-Apr) versus the same period last year.

While the U.S. debt reached a new high on May 31st, it took nearly two months to do it.  Let me explain.  During tax season, the total U.S. public debt actually declined from a peak of $21.135 trillion on April 10th to a low of $21.033 trillion on May 3rd.  Since then, the U.S. debt has been steadily moving higher (including some daily fluctuations):

If you spend some time on the TreasuryDirect.gov site, you will see that the total public debt doesn’t go up in a straight line.  There are days or weeks where the total debt declines.  However, the overall trend is higher.

Now, a rising debt level impacts the interest the U.S. Treasury must pay on this debt… especially when the average interest rate also increases.  According to the TreasuryDirect.gov, the interest expense rose from $257.3 billion (Oct-Apr) 2017 to $283.6 billion (Oct-Apr) this year:

As I mentioned, the U.S. government paid an additional $26 billion to service the debt than it did last year.  Now, $26 billion may not seem like a lot of money these days, but it could buy the total global Registered Silver inventory:

Thus, the extra $26 billion paid by the U.S. Treasury to service its debt would have purchased the 1+ billion ounces of silver held in the COMEX (270 million oz) and all the Global Silver ETFs. And, this would include the 138 million oz of silver supposedly stored at the JP Morgan vaults.

…click on the above link to read the rest of the article…

Ten Ways the Democratic Northern Hemisphere Nations Became the Orwellian West

Ten Ways the Democratic Northern Hemisphere Nations Became the Orwellian West

In his book, “1984”, George Orwell envisioned a future crushed by the iron grip of a collectivist oligarchy. The narrative told of the INGSOC Party which maintained power through a system of surveillance and brutality designed to monitor and control every aspect of society.  From the time of the book’s release in 1949, any ensuing vision of a dark dystopia depicting variations of jackboots stomping on human faces, forever, has been referenced as being “Orwellian”.  This is because Orwell’s narrative illustrated various disturbing and unjust conceptualizations of control, crime, and punishment.

For example, “Newspeak” represented the language of mind control, whereas “crimethink”, “thoughtcrime”, and “crimeface” manifested as transgressions against the state.  Guilty citizens were captured by the “Thought Police”, and the ultimate punishment consisted of “vaporization”; which eliminated every last vestige of a person’s existence.

In the horrifying world of 1984, the nation of Oceania was divided into three concentric groups:  The Inner Party, the Outer Party, and the Proles, or proletariat.  The Proles constituted 85% of the population and lived in extreme privation.  The Inner Party represented the elite powerbrokers who led lives of comprehensive luxury compared to the minions in the Outer Party.

But in the real world of today, it is the globalist billionaires who own multiple mansions, fly private jets and ride in eight-cylinder limousines to climate-change conferences where policies are decreed to lower the carbon footprint of the proletariat.  It is the wealthy elite of the westernized nations who have sacrificed individual freedom upon the altar of Collectivism as political correctness has stifled free speech and enslaved citizens drown under oceans of debt.

…click on the above link to read the rest of the article…

One Word: Contagion

One Word: Contagion

Terrible news, I’m afraid.

The trainwreck that is Italian politics has always been a hoot to watch. But this time around the implications to what happens in Rome are, as Trump would say, yuuuge.

You’ve probably seen the news-flow out of Europe.

Tasked with finding a suitable candidate to head a coalition between Luigi Di Maio’s Five Star Movement and the far-right League headed by Matteo Salvini, a coalition, which I might add has to be scaring the living isht out of Brussels, has not been an easy task.

Firstly, they went and chose someone nobody has ever heard about.

Why?

Well, Italy has many “colourful characters” in politics, and that is what scares Brussels more than anything else. Draghi’s worst nightmare must be sitting across the table from this guy discussing Italy’s bill to Germany.

In case you’re not up to speed on what these gents stand for here’s a sampling from Matteo Salvini.

Slaves of the European Union? No, thanks!

I can’t wait for Italy, with our government, to regain its sovereignty to defend the national interest in any way possible. Unacceptable intrusion from a European bureaucrat in Italy’s elections. The immigration policies and economic sacrifices imposed by the European Union have been a disaster and will be rejected by the free vote of Italians.

European bureaucrats calm down. League will always defend our fisheries and the agriculture of Italy. Enough with the European standards that slaughter our businesses and our territory!

No! What this coalition needed was someone entirely vanilla, very unlike their own leaders, a nobody, a perfectly useful idiot.

And so they picked Giuseppe Conte.

Who, I hear you say?

Precisely.

But poor Giuseppe didn’t last very long. Heck, he was tasked with what was one helluva job — sugarcoating this…

…click on the above link to read the rest of the article…

Olduvai II: Exodus
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Olduvai
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Olduvai II: Exodus
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Olduvai III: Cataclysm
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