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Monopoly’s New Era

Monopoly’s New Era

NEW YORK – For 200 years, there have been two schools of thought about what determines the distribution of income – and how the economy functions. One, emanating from Adam Smith and nineteenth-century liberal economists, focuses on competitive markets. The other, cognizant of how Smith’s brand of liberalism leads to rapid concentration of wealth and income, takes as its starting point unfettered markets’ tendency toward monopoly. It is important to understand both, because our views about government policies and existing inequalities are shaped by which of the two schools of thought one believes provides a better description of reality.

For the nineteenth-century liberals and their latter-day acolytes, because markets are competitive, individuals’ returns are related to their social contributions – their “marginal product,” in the language of economists. Capitalists are rewarded for saving rather than consuming – for their abstinence, in the words of Nassau Senior, one of my predecessors in the Drummond Professorship of Political Economy at Oxford. Differences in income were then related to their ownership of “assets” – human and financial capital. Scholars of inequality thus focused on the determinants of the distribution of assets, including how they are passed on across generations.

minting money

The second school of thought takes as its starting point “power,” including the ability to exercise monopoly control or, in labor markets, to assert authority over workers. Scholars in this area have focused on what gives rise to power, how it is maintained and strengthened, and other features that may prevent markets from being competitive. Work on exploitation arising from asymmetries of information is an important example.

In the West in the post-World War II era, the liberal school of thought has dominated. Yet, as inequality has widened and concerns about it have grown, the competitive school, viewing individual returns in terms of marginal product, has become increasingly unable to explain how the economy works. So, today, the second school of thought is ascendant.

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

Making the Chicken Run

Making the Chicken Run

I’ve written many times about the importance of internationalizing your assets, your mode of living, and your way of thinking. I suspect most readers have treated those articles as they might a travelogue to some distant and exotic land: interesting fodder for cocktail party chatter, but basically academic and of little immediate personal relevance.

I’m directing these comments toward the U.S. mainly because that’s where the problem is most acute, but they’re applicable to most countries.

Now, in 2016, the U.S. is in real trouble. Not as bad as Rhodesia 40 years ago—and definitely a different kind of trouble—but plenty serious. For many years, it’s been obvious that the country was eventually going to hit the wall, and now the inevitable is rapidly becoming imminent.

What do I mean by that? There’s plenty of reason to be concerned about things financial and economic. But I personally believe we haven’t been bearish enough on the eventual social and political fallout from the Greater Depression. Nothing is certain, but the odds are high that the U.S. is going into a time of troubles at least as bad as any experienced in any advanced country in the last century.

I hate saying things like that, if only because it sounds outrageous and inflammatory and can create a credibility gap. It invites arguments with people, and although I enjoy discussion, I dislike arguing.

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

 

Helicopter Money “Not on the Table,” ECB Swears Furiously

Helicopter Money “Not on the Table,” ECB Swears Furiously

But it’s already here!

It has finally sunk in: what everyone really wants is helicopter money. Central banks, instead of transferring trillions of newly created dollars or euros or whatever to the banks should just hand them directly to the people, like dropping bank notes from a helicopter, so that these people can grab them and spend them all in one fell swoop, thereby creating sudden artificial demand, driving up inflation, and solving all economic problems of our times.

Instead of creating asset price inflation, as QE had done, it would create consumer price inflation. Wages would still remain stuck, and workers would soon not be able to buy the normal things at these inflated prices, but that wouldn’t matter because now they’re getting helicopter money, and companies could increase their sales, margins, and profits simply by raising prices without having to sell a single extra item.

Among economists, it’s the hottest idea of the century. But the ECB will have none of it. Or so it said today, on two different occasions, by two different officials, curiously using the same words.

“It’s not on the table,” ECB Executive Board member Peter Praet told a bunch of economists today who’d been pushing for an answer at a conference organized by the Center for Financial Studies in Frankfurt.

He hadn’t come to discuss helicopter money. His speech was all about rationalizing monetary policy measures that have become absurd to everyone except to those who’ve been drinking the Kool-Aid.

He was explaining how these measures — the negative interest rates, the more-than-free money where lenders pay borrowers, the purchases of bonds, including securities backed by Italian non-performing corporate debt, the whole schmear — would “ward off the risk of a too prolonged period of low inflation,” although low inflation benefits every worker in the Eurozone.

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

Triffin’s Paradox Revisited: Crunch-Time for the U.S. Dollar and the Global Economy

Triffin’s Paradox Revisited: Crunch-Time for the U.S. Dollar and the Global Economy

The reality is that we’re one panic away from foreign-exchange markets ripping free of central bank manipulation.

While all eyes on fixated on global stock markets as the measure of “prosperity” and “growth” (or is it hubris?), the larger force at work beneath the dovish cooing of central bankers is foreign exchange: the relative value of nations’ currencies, which are influenced (like everything else) by supply and demand, which is in turn influenced by interest rates, perceived risk, asset purchases and sales by central banks and capital flows seeking the lowest possible risk and the highest possible return.

Which brings us to Triffin’s Paradox, a topic I’ve covered for many years:

Understanding the “Exorbitant Privilege” of the U.S. Dollar (November 19, 2012)

The Federal Reserve, Interest Rates and Triffin’s Paradox (November 19, 2015)

The core of Triffin’s Paradox is that the issuer of a reserve currency must serve two entirely different sets of users: the domestic economy, and the international economy.

The U.S. dollar (USD) is the global economy’s primary reserve currency. When the Federal Reserve lowered interest rates to zero (Zero Interest Rate Policy, ZIRP), it weakened the dollar relative to other currencies. In this ZIRP environment, it made sense to borrow dollars for next to nothing and use this free money to buy bonds and other assets in other currencies that paid higher yields. Many of these assets were in emerging market economies such as Brazil.

As a result of this enormous carry trade, an estimated $7 trillion was borrowed in USD and invested in other currencies/nations.

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

Intelligence Insider: How To Protect Your Assets From Critical Infrastructure Failure: “Power Grid, Banking System, Cyber Financial Warfare”

Intelligence Insider: How To Protect Your Assets From Critical Infrastructure Failure: “Power Grid, Banking System, Cyber Financial Warfare”

cyber-warfare

Intelligence insider Jim Rickards has previously warned of asymmetric attacks using cyber warfare, financial warfare and domestic disasters involving chemical, biological or radiologicial events. The threat is multi-faceted and the consequences of such an attack, whether it takes the the form of state-sponsored cyber financial warfare or a rogue terrorist group detonating a dirty bomb, could act as a destabilizing event that wipes out everything from our power grid to the wealth stored in your digital financial profiles.

Having worked directly with intelligence agencies simulating and war-gaming the potential fall-out that could result, in his latest interview with Crush The Street Rickards explains the distinct Doomsday scenarios that could instantly collapse life as we know it in America today… and how to prepare for them.

These things are actually happening and your digital wealth is vulnerable to a number of calamities… critical infrastructure failures… whether it’s power grid, banking system, cyber financial warfare, etc.


(Watch At Youtube)

Last month cyber thieves figured out a way to steal $100 million from the central bank account of Bangladesh via the U.S. Federal Reserve. They could have gotten away with $900 million more had it not been for a small typo. The point, as Rickards notes, is that there is a realistic possibility of a much larger-scale attack that targets not a central bank, but the direct holdings of every bank account in America.

The only tool you have at your disposal to protect from such an attack, says Rickards, is gold:

You never want to go all in… I am saying that 10% of your wealth… put it into physical gold… put it in a safe place and that will be immune from power grid outages, exchange closures, digital asset seizures and cyber financial warfare.

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

BREAKING: US government releases its 2015 financial statements

BREAKING: US government releases its 2015 financial statements

Hot off the presses, the US government just published its audited financial statements this morning, signed and sealed by Treasury Secretary Jack Lew.

These reports are intended provide an accurate accounting of government finances, just like any big corporation would do.

And once again, the US government’s financial condition has declined significantly from the previous year.

For 2015, the government reports $3.2 trillion in total assets.

This includes everything from financial assets like bank balances to physical assets like tanks, bullets, aircraft carriers, and the federal highway system.

Curiously, the single biggest line item amongst these listed assets is the $1.2 trillion in student loans that are owed to the government by the young people of America.

This is pretty extraordinary when you think about it.

37% of the government’s total reported assets are student loans, which is now considered one of the most precarious bubbles in finance.

$1.2 trillion is similar to the size of the subprime mortgage market back in 2008. And delinquency rates are rising, now at 11.5% according to Federal Reserve data.

Plus, it’s simply astonishing that so much of the federal government’s asset base is tantamount to indentured servitude as young people pay off expensive university degrees that barely land them jobs making coffee at Starbucks.

On the other side of the equation are a reported $21.5 trillion in liabilities, giving the government an official net worth of negative $18.2 trillion.

This is down from last year’s negative $17.7 trillion and $16.9 trillion the year prior. It just keeps getting worse.

But there’s one thing that’s even more incredible about all of this.

You see, each year these financial statements are audited by the government’s in-house agency known as the Government Accountability Office (GAO).

All big companies do this. They publish financial statements, which are then reviewed by an independent audit firm.

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

Is Any Asset Safe?

SilverCoins

QUESTION: Hi Marty, I have been following your blog for several years and attended your “Cycles of War” presentation in Philadelphia. It has been rewarding and very educational. My question, is there any one investment that is a safe haven in the chaos that approaches? I recently sold my company and placed the proceeds into “Certificates of Deposits” at several large FDIC banks laddering over several years. Are these safe or will it all be for naught? Meanwhile, I look forward to utilizing Socrates “traders” software when it comes available.

Thanks,

RZ

ANSWER: Certificates of deposits are ok for now.  Keep in mind this will change probably in 2017, but by 2018 for sure. The risk is government paper where they can by decree convert short-term to long-term. The USA is probably less likely to do that compared to Europe. But with people like Larry Summers shooting off his mouth, all bets on that are a 50/50 game.

There is no investment that survives. If you look at the Great Depression, absolutely EVERY asset class was hit. Nothing survived intact. This means we will have to stay on top of this more closely than ever before because liquidity is also declining and that means volatility will increase, which is often what hurts people. The vast majority assume whatever trend in motion will stay in motion. They are incapable of seeing the turns.

We still show that equities will probably be the safest place moving forward insofar as they are recognizable and liquid. Cash is still king, but the war on cash itself is disturbing. Silver coins will be useful, perhaps even more so than gold, since they are tracking gold but not old, common date, silver coins. This may replace cash, which they are desperately trying to destroy.

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

Gold price over $1,200 has bullion buyers sure rally will continue

Gold price over $1,200 has bullion buyers sure rally will continue

Price of bullion is rising fast, especially when converted into Canadian currency

Gold has outperformed almost every single other asset class as an investment this year. Many backers of the precious metal say the rally is just getting started.

Gold has outperformed almost every single other asset class as an investment this year. Many backers of the precious metal say the rally is just getting started. (Frantzesco Kangaris/Bloomberg)

Bad news for stock markets is often a good time for one of the world’s oldest commodities, and this year is no exception as gold has rallied almost 20 per cent since the start of 2016.

The price of an ounce of gold bullion has risen from a little over $1,000 US an ounce in late December to above $1,200 US Thursday, through a period when every single major stock index has fallen.

That’s part of a widespread flight to safety that has seen investors dump anything perceived as risky — stocks, oil and currencies like the Canadian dollar — and put their money into investments that are perceived to be safer.

That’s leading them right to gold, which is gaining ground after a multi-year slide.

“Investors are suddenly waking up to the risks in the market, pretty much like what happened in 2008,” said Robert Cohen, a portfolio manager at Scotiabank’s Dynamic Funds.

Mini-rally underway

“This time it’s more of a slower motion train wreck out there, so people are slowly digesting that information and systematically moving to safe havens like gold.”

Part of gold`s rally is due to a relative dearth of better options. That’s because central banks have cut interest rates so low that non-risky assets now can`t outperform inflation.

Bloomberg recently reported that almost a third of all the sovereign debt held by developed economies is negative yielding. That`s more than $7 trillion worth of assets guaranteed to lose money if held to maturity. Against a backdrop like that, it’s not hard to see gold’s appeal.

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

The West Is Reduced To Looting Itself

The West Is Reduced To Looting Itself

Myself, Michael Hudson, John Perkins, and a few others have reported the multi-pronged looting of peoples by Western economic institutions, principally the big New York Banks with the aid of the International Monetary Fund (IMF).

Third World countries were and are looted by being inticed into development plans for electrification or some such purpose. The gullible and trusting governments are told that they can make their countries rich by taking out foreign loans to implement a Western-presented development plan, with the result being sufficient tax revenues from economic development to service the foreign loan.

Seldom, if ever, does this happen. What happens is that the plan results in the country becoming indebted to the limit and beyond of its foreign currency earnings. When the country is unable to service the development loan, the creditors send the IMF to tell the indebted government that the IMF will protect the government’s credit rating by lending it the money to pay its bank creditors. However, the conditions are that the government take necessary austerity measures so that the government can repay the IMF. These measures are to curtail public services and the government sector, reduce public pensions, and sell national resources to foreigners. The money saved by reduced social benefits and raised by selling off the country’s assets to foreigners serves to repay the IMF.

This is the way the West has historically looted Third World countries. If a country’s president is reluctant to enter into such a deal, he is simply paid bribes, as the Greek governments were, to go along with the looting of the country the president pretends to represent.

When this method of looting became exhausted, the West bought up agricultural lands and pushed a policy on Third World countries of abandoning food self-sufficiency and producing one or two crops for export earnings.

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

Davos, Dalio, and a Depression?!

Davos, Dalio, and a Depression?!

When Ray Dalio, founder of the world’s largest hedge fund, Bridgewater Associates, referred to a possible economic depression as he was being interviewed at the World Economic Forum at Davos, it does not mean what most people think it means.

Most of us think about recessions and depressions in a linear way. That is, a depression is a really, really bad recession featuring even higher levels of unemployment and lower overall levels of economic activity.

But for Mr. Dalio, recessions are kind of normal, business-cycle related economic events that regularly occur every 5-10 years or so. The economy begins to overheat, the Fed raises rates in response (the removal of the “punch bowl”), business activity slows perhaps a bit too much in response, and voila! A recession results.

Depressions on the other hand are secular or long term, occurring much less frequently. That’s because according to Mr. Dalio, it takes a long time (perhaps decades) to accumulate the excess levels of corporate and government debt that end up triggering this type of economic event. A depression is a condition where more debt cannot be added to the system and instead it must be reduced, or as we say, deleveraging must occur. A depression always threatens systemic solvency.

There are several hallmarks of a systemic deleveraging or depression if you will:

  1. Various asset classes begin to be sold (like oil and gas wells today for example)
  2. As a result of these widespread asset sales, prices decline
  3. Equity levels decline as a result
  4. This triggers more selling of assets
  5. Since there is less worthwhile collateral available credit levels contract
  6. Overall economic activity declines. In short, there isn’t enough cash flow being generated to service all the accumulated debt. As a result assets have to be sold, bankruptcies become more common.

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

Central Banks Are Out of Tricks

Central Banks Are Out of Tricks

Once the power to manage expectations has been lost, the central bank bag of tricks is empty.

No one knows precisely how and when the global unraveling will impact their corner of the planet, but we do know one thing with absolute certainty: central banks are out of tricks. 

Like all good conjurers, the major central banks will claim that their magical powers to inflate asset valuations and inspire the animal spirits of risk, borrowing and spending are unimpaired, but this time the audience knows the truth: their magic is threadbare and their trick-bag is empty.

Obfuscation and doublespeak are primary components of central bank magic.The magic is largely semantic: if the Federal Reserve claims it can restore the economy and the stock market with reverse repos and other financial legerdemain, the corporate media is always ready to repeat this dubious claim until it is accepted as self-evident.

The central bank magic is fundamentally a mind-trick of managing expectations. If the Fed (or other central bank) announces a quantitative easing or market-goosing program, punters buy assets anticipating the success of the bank’s program, effectively creating the very push higher the bank intended.

This rise draws in other traders, and the program is declared a success as the market generates a self-reinforcing logic: the market’s response is evidence the central bank’s program is a success, which then inspires more risk-on buying and further market gains.

Once a central bank program fails to generate a self-reinforcing rally, the mind-trick’s power is broken. Once expectations of a sustained rally are crushed by the failure of the rally to achieve virtuous-cycle lift-off, the magic no longer works: once traders take a wait and see stance rather than rush to place panic-buy orders, the initial rally soon fizzles, and the expectations of effortless gain are replaced by gnawing fear of more losses.

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

The Chart That Explains Everything

The Chart That Explains Everything

It’s the policy, stupid. And here’s the chart that explains exactly what the policy is.

Screen Shot 2016-01-14 at 12.06.21 PM

(Richard Koo: The ‘struggle between markets and central banks has only just begun’, Business Insider)

What the chart shows is that the vast increase in the monetary base didn’t impact lending or trigger the credit expansion the Fed had predicted. In other words, the Fed’s madcap pump-priming experiment (aka– QE) failed to stimulate growth or put the economy back on the path to recovery. For all practical purposes, the policy was a flop.

QE did, however, touch off an unprecedented 6-year bull market rally that pushed stocks into the stratosphere while the real economy continued to languish in a long-term slump. And the numbers are pretty impressive too. For example, the Dow Jones Industrial Average, which bottomed at 6,507 on March 9, 2009, soared to an eye-popping 18,312 points by May 19, 2015, an 11,805 point-surge in just five years. And the S&P did even better. From its March 9, 2009 bottom of 676 points, the index skyrocketed to a record-high 2,130 points on May 21, 2015, tripling its value at the fastest pace in history.

What the chart shows is that the Fed knew from 2010-on that stuffing the banks with excess reserves was neither lowering unemployment or revving up the economy. The liquidity was merely driving stocks higher.

It’s worth noting, that the Fed knows that credit does not flow into the economy without a transmission mechanism, that is, unless creditworthy borrowers are willing to to take out loans. Absent additional lending, the liquidity remains stuck in the financial system where it eventually creates asset bubbles.

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

Discovery

Discovery

It looks like 2016 will be the year that humanfolk learn that the stuff they value was not worth as much as they thought it was. It will be a harrowing process because a great many humans are abandoning ownership of things that are rapidly losing value — e.g. stocks on the Shanghai exchange — and stuffing whatever “money” they can recover into the US dollar, the assets and usufructs of which are also going through a very painful reality value adjustment.

Of course this calls into question foremost exactly what money is, and the answer is: basically a narrative construct. In other words, a story explaining why we behave the way we do around certain things. Some parts of the story have a closer relationship with reality than other parts. The part about the US dollar has a rather weak connection.

When various authorities — the BLS, the Federal Reserve, The New York Times — state that the US economy is “strong,” we can translate that to mean giant companies listed on the stock exchanges are able to put up a Potemkin façade of soundness. For instance, Amazon.com. The company continues to seem like a good idea. And it reinforces that idea in the collective imagination by sending a lot of low-priced goods to your door, (all bought on credit cards), which rings your (nearly) instant gratification bell. This has prompted investors to gobble up Amazon stock.

It’s well-established by now that the “brick-and-mortar” retail operations are majorly sucking wind. Meaning, fewer people are driving to the Target store and venues like it to buy stuff. Supposedly, they are buying stuff at Amazon instead. What interests me in that story is the idea that every single object purchased these days has a UPS journey attached to it. Of course, people also drive to the Target store, though I doubt they leave the place with just one thing.

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

2016 – the BIG SHIFT

2016 – the BIG SHIFT

As we close 2015 and begin a new year, the markets generally closed flat to neutral with a warning that as we approach the political year from hell being 2017, this is by no means going to be a walk through the park. We are more likely than not going to see some trends conclude in 2016 and others perform a false move the scare the hell out of everyone. Nevertheless, the stars may not be aligning, but the markets appear to be setting the stage to align for the BIG SHIFT.

Money-Assets

What does the BIG SHIFT mean? It means that as we face a meltdown in Socialism which has taken hold of Western Governments destroying our underlying democratic foundations, ALL assets must prepare for the HEDGE against government.

Big Shift 1975-1982

 

Relationships are NEVER constant, yet the TV analysis touts fixed concepts that people then believe. At first, many will buy or sell based upon such unfounded beliefs and assumptions. When we examine them in detail, they fall to the ground into dust.

Troika-Unelected

Europe is operating under a dictatorship and has lost any possible right to exercise a democratic process to remove the three members of the Troika since not a single one stands for any election. Lagarde is of the IMF and is not even appointed the head of the IMF exclusively by Europeans. She was a personal friend of Obama. Draghi is ex-Goldman Sachs. Once a member of Goldman, you never leave. The EU Parliament has no validity since the Commission is not bound by their vote. The people of European nations have absolutely no means to reclaim their sovereignty by any method other than force. And to prevent that, the EU Commission wants to create its own army.

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

The Catastrophic Threat of Bail-Ins

The Catastrophic Threat of Bail-Ins - Jeff Nielson

It has now been more than two and a half years since the Cyprus Steal , the first “bail-in” perpetrated in the Western world, occurred. Before reviewing the history of this newest financial atrocity, it is necessary to define the terms.

The term “bail-in” describes a scenario in which a bank confiscates private property to indemnify itself for losses it has suffered. A bail-in is a totally lawless theft of assets, as there is no principle of law (of any kind) that could authorize such a seizure of private property. And in fact, there are many principles of law that demonstrate the lawlessness at work here. As with much of the financial crime jargon, “bail-in” is simply another gibberish euphemism like “quantitative easing” or “derivatives.”

As custodians of the financial assets of their clients, banks represent a form of trustee. The purpose of any trust relationship is to provide absolute security to the beneficiary of the trust (i.e., the legal owner of the property). Thus, one of the most fundamental principles of our legal system is non-encroachment regarding the property held in the custody of a trustee.

From a legal standpoint, it is like there is an invisible and impenetrable wall that surrounds the trust property. The only exceptions to this wall (ever) occur when the trust beneficiary makes a legal request for some disbursement or related transaction, when the trust itself directs some form of action (in the interests of the trust beneficiary), or when the trust allows the trustee to manage the trust assets on behalf of the beneficiary.

The idea of trustees using assets for their own benefit or (worse) claiming ownership of any trust assets represents one of the most serious forms of financial crime in Western civilization. Given this context, how did the government of Cyprus respond when its own Big Banks whined and claimed that they “needed” to confiscate deposits in order to pay off their own gambling debts? It meekly rubber-stamped the lawless theft.

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

Olduvai IV: Courage
In progress...

Olduvai II: Exodus
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