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Precious metals expert and financial writer Bill Holter says the recent underreported announcement by the UBS CEO Sergio Ermotti in Switzerland that his bank might need a “rescue” is yet another sign on the short road to the end of the global Ponzi scheme backed by the US dollar reserve currency. Holter points out, “You’ve got a sick bank (Credit Suisse) that is being bailed out by another bank (UBS) that may turn out to be sick. My question is who is going to bail out these central banks? You have got the Fed with a $9 trillion balance sheet. The last time, the Fed went from $900 billion to $9 trillion. Can the Fed now go from $9 trillion to $90 trillion? Who is going to bail out the Fed? Who is going to bail out the US Treasury? Who is going to bail out the Bank of England, the ECB or the Bank of Japan? These central banks have completely blown up their balance sheet and have no ability to save anything. My question is who is going to save them?”

Can’t they cut interest rates again like they did in 2009? Holter says, “If they cut interest rates from here, you would see the dollar absolutely crash. The only reason the dollar has not crashed is interest rates have basically gone from 0% to 5%. They have done that in a year and a half which is the fastest increase in interest rates in all of history.”

So, rate cuts will devalue the dollar. Can you pay trillions of dollars borrowed in Treasury Bond back in confetti dollars? Holter says, “Yes, you absolutely can pay back your debt in confetti. It’s been done many, many times before as currencies get lost…

…click on the above link to read the rest…

The Future for Fiat

November 4, 2023

The Future for Fiat

The day of reckoning for unproductive credit is in sight.

With G7 national finances spiraling out of control, debt traps are being sprung on all of them, with the sole exception of Germany.

Malinvestments of the last fifty years are being exposed by the rise in interest rates, increases which are driven by a combination of declining faith in the value of major currencies and contracting bank credit. The rise in interest rates is becoming unstoppable.

Do not be surprised to see a US Government deficit exceeding $3 trillion this fiscal year, half of which will be interest payments. And in the run-up to a presidential election, there’s every sign of deficit spending increasing even further.

We now face America and her allies being dragged into another expensive conflict in the Middle East, likely to drive oil and natural gas prices higher; far higher if Iran becomes a target. With the Muslim world united against Western imperialism more than ever before, do not discount the closure of Hormuz, and even Suez, with unimaginable consequences for energy prices.

The era of interest rate suppression is over. G7 central banks are all deeply in negative equity, in other words technically bankrupt, a situation which can only be addressed by issuing yet more unproductive credit. These are the institutions tasked with ensuring the integrity of the entire system of bank credit.

This is not a good background for a dollar-based global credit system that is staring into the black hole of its own extinction.

The end for the dollar is nigh

There are a number of events coming together that suggest we are about to undergo a major upheaval in world economic, financial, and monetary affairs…

…click on the above link to read the rest…

March 9, 2022

October 29, 2023

March 9, 2022

Where were you on March 9, 2022, when President Biden signed the death warrant on American freedom?

On that day, in a hushed ceremony at the White House without the approval of Congress, the states or the American people, Biden signed into law Executive Order 14067.

Buried in his order are a few paragraphs, titled Section 4. The language in Section 4 makes Order 14067 the most treacherous act by a sitting president in the history of our republic.

That’s because Section 4 sets the stage for legal government surveillance of all U.S. citizens, total control over your bank accounts and purchases and the ability to silence all dissenting voices for good.

In this new war on freedom, they aren’t coming for your guns. No, they’re thinking much bigger than that.

They’re coming for your money.

And it’s already started. These efforts are stepping up and taking on a nefarious tone that also involves surveillance and loss of our freedoms under the guise of central bank digital currencies (CBDCs), or Biden Bucks as I call them.

If you had asked me about this two years ago, I would have said the U.S. is taking a rather studious approach to it. It was too important to not be involved in, but the U.S. did not seem to be in any hurry to actually implement it.

There were studies, and I would have said my estimate at the time would have been, “OK, China has it. Europe, maybe another year. The U.S. might be three or four years down the road because the dollar’s too important. They don’t want to race into it. They want to get it right. There are a lot of ways to mess it up.”

But that’s changed under Joe Biden.

…click on the above link to read the rest…

Debt, Currency Debasement & War—The Timeless Pillars of Failure

October 24, 2023

Debt, Currency Debasement & War—The Timeless Pillars of Failure

Below, we follow the breadcrumbs of simple math and bond market signals toward an oft-repeated pattern of how once-great nations become, well…not so great any more.

Debt Destroys Nations

Debt, once it passes the Rubicon from extreme to just plain madness, destroys nations.

Just ask the former Spanish, British or Dutch empires. Or ask the inter-war Germans. Ask the Yugoslavians of the 1990’s or ask a historian of Ancient Rome or a merchant in modern Argentina.

It’s all pretty much the same story, just different a different stage or curtain call.

Like Hemingway’s description of poverty, the process begins slowly at first, and then all at once.

Part of this process involves currency debasement needed to pay down more desperate issuance of IOUs, a process evidenced by rising rather than “transitory” inflation.

Thereafter, comes increased social unrest, and hence increased centralization from the political left or right in the name of “what’s best for us.”

Sound familiar?

Centralization—The Last, Failed Act

Centralization never works in the long run, but that has never stopped opportunists from trying.

Just look at our central bankers.

In a centralized rather than free market, the very name “central bank” should be a dead give-away as to their real role and profile.

As private central banks have been slowly increasing their hidden power and control over national markets and hence national welfare, the very notion of free price discovery in bonds, and indirectly in stocks, is now all but an extinct financial creature in the neo-feudalism which long ago replaced genuine capitalism.

How the Central Game is Played—From Temporary Prosperity to Permanent Ruin

When central banks like the Fed repress rates and print gobs and gobs of money, bonds are artificially supported, which means their prices go up and their yields are compressed.

…click on the above link to read the rest…

Unwinding the Financial System

October 6, 2023

Unwinding the Financial System

This article looks at the collateral side of financial transactions and some significant problems that are already emerging.

At a time when there is a veritable tsunami of dollar credit in foreign hands overhanging markets, it is obvious that continually falling bond prices will ensure bear markets in all financial asset values leading to dollar liquidation. This unwinding corrects an accumulation of foreign-owned dollars and dollar-denominated assets since the Second World War both in and outside the US financial system.

Furthermore, collapsing collateral values, which are increasingly required backing for changing values in over $400 trillion nominal in interest rate swaps are a new driver for the crisis, forcing bond liquidation, driving prices down and yields higher: we are in a doom-loop.

What action can the authorities take to ensure that counterparty risk from widespread failures won’t take out inadequately capitalised regulated exchanges?

It seems that they acted some time ago by giving central security depositories (The Depository Trust and Clearing Corporation, Euroclear, and Clearstream) the right to pool securities on their registers and lend them out as collateral. Your investments, which you think you may own can be absorbed into the failing financial system without your knowledge.

This seems particularly relevant, given the appointment of JPMorgan Chase as custodian of the large gold ETF, SPDR Trust (ticker GLD). In a test case in the New York courts concerning Lehman’s failure, JPMC was given legal protection should it seize its customer’s assets.

This important erosion of property rights is poorly understood. But as the financial distortions are unwound, leading to unintended consequences such as bank failures and ultimately the collapse of the dollar-based fiat currency regime, the implication is that holders of physical gold ETFs will be left owning an empty shell at a time when they might have expected some protection from the collapse of the value of credit.

…click on the above link to read the rest…

The Coming Collapse of the Global Ponzi Scheme

September 19, 2023

The Coming Collapse of the Global Ponzi Scheme

It won’t be long before governments around the world, including the one in Washington, self-destruct.

Strong words, but anything less would be naïve.

As economist Herbert Stein once said, “If something cannot go on forever, it has a tendency to stop.” Case in point: fiat money political regimes. Interventionist economies of the West are in a fatal downward spiral, comparable to that of the Roman Empire in the second century, burdened with unsustainable debt and the antiprosperity policies of governments, especially the Green New Deal.

In the global Ponzi scheme, thin air and deceit substitute for sound money. As hedge-fund manager Mitch Feierstein wrote in Planet Ponzi, “You don’t solve a Ponzi scheme; you end it.” Charles Ponzi and Bernie Madoff

made some of their investors a whole lot poorer, but the world didn’t come crashing down as a result.

For that‌—‌for a Ponzi scheme that would threaten to bankrupt capitalism across the entire Western world‌—‌you need people much smarter than Ponzi or Madoff. You need time, you need energy, you need motivation. In a word, you need Wall Street.

But Wall Street alone doesn’t have the strength to deliver a truly cataclysmic outcome. If your ambition is to create havoc on the largest possible scale, you need access to a balance sheet running into the tens of trillions. You need power. You need prestige. You need a remarkable willingness to deceive. In a word, you need Washington.

As Gary North wrote in a brief review of Feierstein’s book, “The central banks have colluded with the national governments in order to fund huge increases of national debt, beyond what can ever be paid off. In other words, [Feierstein] has described government promises as part of a gigantic international Ponzi scheme.”

…click on the above link to read the rest…

The West Is Losing Control Over the Gold Price

August 29, 2023

The West Is Losing Control Over the Gold Price

TABLE OF CONTENTS:

Introduction The West is Losing its Gold Pricing Power The East on a Gold Buying Spree Conclusion

An important change has unfolded in the global gold market. The East has been driving up the gold price, predominantly in late 2022 and the first months of 2023, breaking the West’s long standing pricing power.

Gold bazaar in Turkey. Pricing power in the gold market has recently shifted to the East.

Until recently, Western institutional money was driving the price of gold in wholesale markets such as London, mainly based on real interest rates. Gold was bought when real rates fell and vice versa. However, from late 2022 until June 2023 gold was up 17% while real rates were more or less flat, and Western institutions were net sellers. Most likely, Eastern central banks, and Turkish and Chinese private demand, lifted the price of gold.

Introduction

For about ninety years, up until 2022, there was a pattern of above-ground gold moving from West to East and back, in sync with the gold price falling and rising. Western institutions set the price of gold and bought from the East in bull markets. In bear markets the West sold to the East. For more information read my article: The West–East Ebb and Flood of Gold Revisited.

If we zoom in on the period from 2006 through 2021 the main reason for Western institutions to buy or sell gold was the 10-year TIPS rate, which reflects the 10-year expected real interest rate (“real rate,” in short) of US government bonds.

The physical gold price was predominantly set in the London Bullion Market and to a lesser extent Switzerland. Gold trade in London can be divided in three categories:

…click on the above link to read the rest…

“No Way Out” for Global Markets Trapped in a Doom Loop of Debt

April 23, 2023

“No Way Out” for Global Markets Trapped in a Doom Loop of Debt

In this compelling conversation with Wealthion founder, Adam Taggart, Matterhorn Asset Management principal, Matthew Piepenburg, addresses the current and vast range of headline market topics, signals and risks. Inflation, deflation, risk assets, bond stress, cryptos, war, bank failures, CBDC’s rise, trapped policy makers and, of course, the topic of precious metals are all carefully and plainly discussed.

Piepenburg’s broader views on current and future financial conditions are bluntly yet realistically presented as a “no way out” scenario for global economies distorted by cornered central bankers. The bottom line is as simple as it is incontrovertible: The global economy is stuck in a doom loop of debt.

Either central banks raise rates to allegedly “kill inflation” by killing the economy and markets, or they resort to more mouse-click money and kill the currency in your wallet.

Historically, all debt-cornered nations spur collapsing markets followed by collapsing currencies and inflation-driven social unrest. Leaders of all eras and stripes (left or right) then address this unrest with tighter, more centralized controls over our economies and lives. CBDC is a classic and modern symptom of this timeless pattern. So is war. The current era will be no exception, as history (from ancient Rome to Chairman Mao, or Napoleon to the rise of fascist leaders of the 1930’s) offers no exception.

Piepenburg tracks the current evolution of this trend in a Federal Reserve that has tightened too fast and too high, breaking everything in its path in one dis-inflationary debt or banking crisis after the next, which are inevitably “solved” via more inflationary and mouse-clicked dollars. End result? Currency debasement, for which gold is one obvious and historical solution rather than “gold bug” apology.

…click on the above link to read the rest…

Project Icebreaker: The Beginning Of A One World Digital Currency System?

April 12, 2023

Project Icebreaker: The Beginning Of A One World Digital Currency System?

There has been extensive discussion in the past couple of years within alternative media circles about the dangers of Central Bank Digital Currencies (CBDCs); a currency framework very similar to blockchain based products like Bitcoin but directly controlled by central bankers. It’s a threat that some analysts including myself have been writing about for more than a decade, so it’s good to finally see the issue being addressed more in the mainstream.

The Orwellian nature of CBDCs cannot be overstated. In a cashless society most people would be dependent on digital products for exchanging goods and labor, and this would of course mean the end of all privacy in trade. Everything you buy or sell or work for in your life would be recorded, and this lack of anonymity could be used to stifle your freedoms in the future.

For example, say you like to eat steak regularly, but the increasingly authoritarian government decides to list red meat as a health risk and a “climate change risk” due to carbon emissions from cows. They determine by your purchase history (which they have full access to) that you have contributed more carbon pollution than most people by eating red meat often. They declare that you must pay a retroactive carbon tax on your past purchases of red meat. Not only that, but your insurance company sends you a letter indicating that you are a medical risk and they cut off your health coverage.

Products you consume and services you use can be tracked to create a psychological profile on you, which could then become a factor in determining your social credit score, just as CCP authorities do in China today…

…click on the above link to read the rest…

The Fed Cannot Fix Today’s Energy Inflation Problem

April 10, 2023

The Fed Cannot Fix Today’s Energy Inflation Problem

There is a reason for raising interest rates to try to fight inflation. This approach tends to squeeze out the most marginal players in the economy. Such businesses and governments tend to collapse, as interest rates rise, leaving less “demand” for oil and other energy products. The institutions that are squeezed out range from small businesses to financial institutions to governmental organizations. The lower demand tends to reduce inflationary pressure.

The amount of goods and services that the world’s economy can produce is largely determined by fossil fuel supplies, plus our ability to use “complexity” in many forms to produce the items that the world’s growing population requires. Adding debt helps add complexity of various types, such as more international trade, more advanced education, and more specialized tools. For a while, the combination of growing energy supplies and growing complexity have helped pull economies along.

Unfortunately, the world’s oil supply is no longer growing. Without an adequate oil supply, it becomes difficult to maintain complexity because complex solutions, such as international trade, require adequate oil supplies. Inasmuch as we seem to be reaching energy and complexity limits, nothing the regulators try to do to change the debt and money supplies–even reeling them back in–can fix the underlying oil (and total energy) problem.

I expect that the rich parts of the world, including the US, Europe, and Japan, are in line to be adversely affected by high interest rates this time. With their high levels of complexity, they are among the most vulnerable to disruption when there is not enough oil to go around.

Figure 1. World oil consumption divided into consuming areas, based on data of BP’s *2022 Statistical Review of World Energy*. Europe excludes Estonia, Latvia, Lithuania, and Ukraine.

…click on the above link to read the rest…

The schizophrenic understanding of money in economics

April 3, 2023

The schizophrenic understanding of money in economics

One of the great ironies of economics is that, while the public regards economists as experts on money, the issue of how money is created is still not settled within economics.

In 2014, the Bank of England published a landmark paper explicitly rejecting the textbook model of money creation, stating that:

Money creation in practice differs from some popular misconceptions—banks do not act simply as intermediaries, lending out deposits that savers place with them, and nor do they ‘multiply up’ central bank money to create new loans and deposits…

The reality of how money is created today differs from the description found in some economics textbooks: Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits. In normal times, the central bank does not fix the amount of money in circulation, nor is central bank ‘multiplied up’ into more loans and deposits. (McLeay, Radia, and Thomas 2014, p. 14)

Several other Central Banks published related papers, notably the Bundesbank in 2017, which stated that:

It suffices to look at the creation of (book) money as a set of straightforward accounting entries to grasp that money and credit are created as the result of complex interactions between banks, non- banks and the central bank. And a bank’s ability to grant loans and create money has nothing to do with whether it already has excess reserves or deposits at its disposal (Deutsche Bundesbank 2017, p. 17)

And yet, just five years later, the Nobel Prize in Economics was awarded to Bernanke, Diamond and Dybvig for work which, as the “Scientific Background” to the Prize noted, claimed that banks function as “financial intermediaries” which “channel funds from savers to investors, receiving funds from some customers and using the funds to finance others”….

…click on the above link to read the rest…

“Dr. Doom” Nouriel Roubini Warns Of Stagflationary Megathreat

April 3, 2023

“Dr. Doom” Nouriel Roubini Warns Of Stagflationary Megathreat

Though the threat of an exponential liquidity crisis is a conversation that Bloomberg should have been seriously addressing two years ago, it’s good to see that reality is finally hitting the mainstream media. Nouriel Roubini, also known as “Dr. Doom” because he’s one of the few mainstream economists that’s not constantly touting the soft landing narrative, has been rather consistent in terms of covering the clash between credit liquidity, rising inflation and rising interest rates. Now, he’s talking about an incoming stagflationary “megathreat” that will crush credit while prices continue to rise, compelling central bankers to continue raising rates.

The Catch-22 scenario that central banks have triggered should have been obvious to every economist as soon as they began tightening into the financial weakness and instability created by the covid lockdowns. Instead, the narrative has been an ever escalating waiting game – Everyone was simply biding their time until the central bank pivot they assumed was coming. Except, it didn’t happen. As long as interest rates remain higher or continue to climb existing debt and new debt will continue to grow more expensive and less desirable. The lifeblood of markets for the past 14 years has been near-zero interest rates and easy fiat money circulating through banking conduits. Now, the dream is dead.

Roubini addresses the deeper problem in part when he notes the exposure of banks like SVB to bonds with declining value caused by rising rates. What he misses, and it’s surely something Bloomberg does not want to talk about, is the issue of ESG related programs and lending that made up a sizable portion of SVB’s portfolio…

…click on the above link to read the rest…

World Bank Warns Of ‘Lost Economic Decade’ As Turmoil Spreads

March 29, 2023

World Bank Warns Of ‘Lost Economic Decade’ As Turmoil Spreads

The world is in a precarious situation, with the potential for nuclear conflict. Central banks are taking aggressive measures to address decades-high inflation by raising interest rates, which in turn is causing a banking crisis in the Western world. As recession risks surge worldwide and international trade fractures, the future of the global economy appears to be heading down a dark path.

“A lost decade could be in the making for the global economy,” Indermit Gill, the World Bank’s Chief Economist and Senior Vice President for Development Economics, warned in a new report.

The report “Falling Long-Term Growth Prospects: Trends, Expectations, and Policies” reveals new forecasts that show global long-term potential output in growth rates are expected to slide:

Nearly all the economic forces that powered progress and prosperity over the last three decades are fading. As a result, between 2022 and 2030, average global potential GDP growth is expected to decline by roughly a third from the rate that prevailed in the first decade of this century—to 2.2% a year.

For developing economies, the decline will be equally steep: from 6% a year between 2000 and 2010 to 4% a year over the remainder of this decade. These declines would be much steeper in the event of a global financial crisis or a recession.

World Bank’s chief economist continued:

“The ongoing decline in potential growth has serious implications for the world’s ability to tackle the expanding array of challenges unique to our times—stubborn poverty, diverging incomes, and climate change.”

However, he said:

“But this decline is reversible. The global economy’s speed limit can be raised—through policies that incentivize work, increase productivity, and accelerate investment.”

Ayhan Kose, director of the World Bank’s forecasting group, said the fracturing of the global economy implies “the golden era of development appears to be coming to an end.”

…click on the above link to read the rest…

Fed, Central Banks Created the Current Crisis and Are on Course to Making Matters Worse

March 22, 2023

Fed, Central Banks Created the Current Crisis and Are on Course to Making Matters Worse

The incompetence of our financial regulators, most of all the Fed, is breathtaking. The great unwashed public and even wrongly-positioned members of the capitalist classes are suffering the consequences of Fed and other central banks being too fast out of the gate in unwinding years of asset-price goosing policies, namely QE and super low interest rates. The dislocations are proving to be worse than investors anticipated, apparently due to some banks having long-standing risk management and other weaknesses further stressed, and other banks that should have been able to navigate interest rate increases revealing themselves to be managed by monkeys.

What is happening now is the worst sort of policy meets supervisory failure, of not anticipating that the rapid rate increases would break some banks.¹ Here we are, in less than two weeks, at close to the same level of bank failures as in the 2007-2008 financial crisis. From CNN:

And even mainstream media outlets are fingering the Fed:

As we’ll explain in due course, the regulators’ habitual “bailout now, think about what if anything to do about taxpayer/systemic protection later” is the worst imaginable response to this mess. For instance, US authorities have put in place what is very close to a full backstop of uninsured deposits (with ironically a first failer, First Republic, with its deviant muni-bond-heavy balance sheet falling between the cracks). But they are not willing to say that. So many uninsured depositors remained in freakout mode, not understanding how the facilities work. Yet the close-to-complete backstop of uninsured deposits amounted to another massive extension of the bank safety net.²

The ultimate reason the Fed did something so dopey as to put through aggressive rate hikes despite obvious bank and financial system exposure was central bank mission creep, of taking up the mantle of economy-minder-in-chief.

…click on the above link to read the rest…

Unsound Banking: Why Most of the World’s Banks Are Headed for Collapse

March 16, 2023

Unsound Banking: Why Most of the World’s Banks Are Headed for Collapse

You’re likely thinking that a discussion of “sound banking” will be a bit boring. Well, banking should be boring. And we’re sure officials at central banks all over the world today—many of whom have trouble sleeping—wish it were.

This brief article will explain why the world’s banking system is unsound, and what differentiates a sound from an unsound bank. I suspect not one person in 1,000 actually understands the difference. As a result, the world’s economy is now based upon unsound banks dealing in unsound currencies. Both have degenerated considerably from their origins.

Modern banking emerged from the goldsmithing trade of the Middle Ages. Being a goldsmith required a working inventory of precious metal, and managing that inventory profitably required expertise in buying and selling metal and storing it securely. Those capacities segued easily into the business of lending and borrowing gold, which is to say the business of lending and borrowing money.

Most people today are only dimly aware that until the early 1930s, gold coins were used in everyday commerce by the general public. In addition, gold backed most national currencies at a fixed rate of convertibility. Banks were just another business—nothing special. They were distinguished from other enterprises only by the fact they stored, lent, and borrowed gold coins, not as a sideline but as a primary business. Bankers had become goldsmiths without the hammers.

Bank deposits, until quite recently, fell strictly into two classes, depending on the preference of the depositor and the terms offered by banks: time deposits, and demand deposits. Although the distinction between them has been lost in recent years, respecting the difference is a critical element of sound banking practice.

…click on the above link to read the rest…

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