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Central planners are pulling double shifts. Contriving plans and proposals to control what you consume, how you travel and cook, where your money is spent, and much, much more.

You know who we’re talking about. The Davos WEF crowd. The UN, IMF, World Bank, and central bankers. Washington lobbyists, NGOs, public/private partnerships, technical advisory committees, nonprofits, and everything in between. We’re also talking about your meddling neighbor, and many others.

What’s their deal? Do they think they’re making the world a better place? And, if so, a better place for who – them or you?

Could something more devious be guiding their advancements?

In Das Kapital, for example, Karl Marx bemoans capitalism for exploiting labor to produce surplus value. His main gripe was that 19th century laborers worked for mere wages while some factory owners got incredibly rich.

To eradicate this class struggle, as he perceived it, Marx proposed a socialist mode of production coordinated through conscious economic planning. He believed that distributing products “from each according to his ability, to each according to his needs” would bring about his vision of a workers’ paradise.

Many people took the bait hook, line, and sinker. They were all in. The promise of something for nothing administered by the state was too enticing to pass up.

Yet any country that has ever attempted to put these ridiculous ideas into practice has been left with an economy that fails to deliver the abundance for all which Marx advertised. Moreover, this comes at the expense of individual freedom and liberty.

Das Schnitzel

In this regard, what would Marx think of the political economy that’s currently pervading much of the western world?

Would he be in favor of the vast, elite political class that’s living off the surplus value produced by capitalism? Would he deduce that the political class is, therefore, exploiting labor?

…click on the above link to read the rest…

Are You the Collateral Damage of Central Planners?

January 29, 2023

Are You the Collateral Damage of Central Planners?

The Conference Board – a nonprofit think tank that delivers cutting edge research – recently published its latest Leading Economic Index (LEI) for the United States. The findings were a giant bummer. In December, the LEI dropped for the tenth consecutive month.

The LEI, if you’re unfamiliar with it, consolidates various measures of economic activity, including credit, interest rate spreads, consumer expectations, building permits, new orders of goods and materials, and several other items, to assess which way the economic winds are blowing. Over the past six months, the LEI has fallen by 4.2 percent. This is the fastest six-month decline since the great coronavirus panic.

This week, the Bureau of Economic Analysis provided its advance estimate of Q4 U.S. gross domestic product (GDP). For the final quarter of 2022, real GDP increased at an annual rate of 2.9 percent.

How could it be that GDP is expanding while the LEI is contracting?

The most probable answer we can think of is the massive expansion of consumer debt. For example, credit card balances hit a new record of $866 billion during Q3 2022. That marks a year-over-year increase of 19 percent.

Americans are borrowing from their future to make ends meet today. This may give GDP the appearance that it’s expanding. But, in reality, the GDP expansion is merely a measurement of the rate that consumers are going broke.

The fact is the U.S. economy is traversing headlong into a recession at the worst possible time. We expect things will get especially ugly, as consumers are operating in a world of chaos…

World of Chaos

In a centrally planned economy, decisions are not made between individuals through free market mechanisms. Instead, they’re made by politicians and bureaucrats through policies of mass market intervention.

…click on the above link to read the rest…

Countdown to U.S. Government Default

April 4, 2022

Countdown to U.S. Government Default

Central Bank Digital Currencies (CBDC) are coming. And they’re coming much faster than most people care to think about. Are you ready?

At the moment, roughly 90 central banks – including the European Central Banks and the Federal Reserve – are either experimenting with, or are in varying stages of CBDC implementation. Moreover, these CBDC friendly central banks include all G20 economies. And together, represent more than 90 percent of global GDP.

What’s important to understand is the adoption of a CBDC in your country of residence would accompany the abolition of cash. This would be for your own good, of course. To eliminate nefarious transactions and black markets.

If you value financial privacy and the liberty to spend your money as you please, then the rapidly approaching rollout of CBDCs is a major red flag. Compulsory use of a CBDC, like a digital dollar for example, would give central planners complete oversight and control over your finances.

You see, under a CBDC regime – free of cash – all of your transactions would be subject to government surveillance. All remnants of financial freedom, privacy, and anonymity would be destroyed. But that’s not all…

CBDCs would allow control freak, power mad central planners to do much more than spy and surveil your financial transactions. CBDCs would allow them to control how and when you spend your money.

This may sound crazy to a sane person, who operates with a modicum of modesty and integrity. But, in truth, this is one of the main intents of CBDCs. In fact, several years ago Bank for International Settlements General Manager Agustin Carstens outlined the extraordinary powers CBDCs would afford central planners. Here are the particulars from Carstens himself:

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

The Futility of Central Bank Policy

November 22, 2021

THE FUTILITY OF CENTRAL BANK POLICY

It is only now becoming clear to the investing public that the purchasing power of their currencies is declining at an accelerating rate. There is no doubt that yesterday’s announcement that the US CPI rose by 6.2%, compared with the longstanding 2% target, came as a wake-up call to markets.

Along with the other major central banks, the Fed’s reaction is likely to be to double down on interest rate suppression to keep bond yields low and stock valuations intact. The alternative will lead to a major financial, economic and currency shock sooner rather than later.

This article introduces the reader to some of the basic fallacies behind state currencies. It explains the misconceptions policy planners have over interest rates, and how central banks have become contracyclical lenders, replacing commercial banking’s credit creation for non-financial activities.

In effect, narrow money is being used by the major central banks in a vain attempt to shore up government finances and economic activity. The consequences for currency debasement are likely to be more immediate and profound than cyclical bank credit expansion.

Introduction

It is becoming clear that there has been an unofficial agreement between the US Fed, Bank of England, the ECB and probably the Bank of Japan not to raise interest rates. It is confirmed by remarkably similar statements from the former three in recent days. When, as the cliché has it, they are all singing off the same hymn sheet, those of us not party to agreements between our monetary policy planners are right to suspect they are doubling down on a market rigging exercise encompassing all financial markets.

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

There’s No ‘Supply-Chain Shortage,’ Or Inflation. There’s Just Central Planning

October 30, 2021

There’s No ‘Supply-Chain Shortage,’ Or Inflation. There’s Just Central Planning

It’s great that so many have copies of Adam Smith’s The Wealth of Nations, but very unfortunate that so few have read it. The alleged “supply chain” problems we’re enduring right now were explained by Smith in the book’s opening pages.

Smith wrote about a pin factory, and the then remarkable truth that one man in the factory working alone could maybe – maybe – produce one pin each day. But several men working together could produce tens of thousands.

Work divided is what enables the very work specialization that drives enormous productivity. If this was true in an 18^th century pin factory, imagine how vivid the truth is today. Figure that something as basic as the creation of a pencil is the consequence of global cooperation, so what kind of remarkable global symmetry leads to the creation of an airplane, car, or computer? The kind that can’t be planned is the short answer, but more realistically the only answer.

Please keep this in mind as you read media coverage of the so-called “supply-chain disruptions” resulting in “shortages” that are said to be causing “inflation.” If you want a bigger laugh, read about what President Biden wants to do in order to get “supply” back on the market with an eye on replenishing U.S. retail shelves that are increasingly bare. He’s decreed 24-hour port operations! Yes, thanks to the 46^th president we now know what held the Soviets back, and ultimately destroyed the Soviet Union: their ports weren’t open long enough; thus the shortages of everything…

All of the above would be funny if it weren’t so sad. Media members, “experts,” economists, and politicians don’t even disappoint anymore. To say they do would be to flatter them.

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

We Are Entering The Age Of “Full John Galt”

July 8, 2021

We Are Entering The Age Of “Full John Galt”

We are entering the age of “Full John Galt.” This is a time where society and politicians are rapidly dismantling the rights of ownership. This transfer of rights constitutes a transfer of wealth whether we wish to call it by that name or not. This is a time when people can just walk into a small privately-owned convenience store, then, without paying walk out with an arm full of merchandise with little or no ramifications. This is a time when government deficits have lost all meaning and people are being paid not to work. This is a time when saying what you feel can garner you massive negative attention and ruin your life.The idea the economy can be planned by a central force has yet to succeed anywhere. The failings and ills of such programs are rooted in the fact that central planning tends to produce enormous unintended malign effects owing to erroneous incentives and price signals. The new mechanisms of socialist control often created to guide the economy are generally not up to the task of maintaining control. In the old Soviet Union, for instance, nail factory managers got measured and rewarded by the tonnage produced. The story goes that one enterprising factory started massively exceeding its quota by producing only ten-ton nails.

Social Unrest May Be Unavoidable

A slew of news headlines give the impression we as a society are on the verge of becoming unhinged and totally dysfunctional. We, as a population have become polarized and poisoned by the decisive messages flowing from those with self-serving agendas. With governments and various agencies busy issuing mandates and ordering things like a halt on evictions while they lock down cities, it is difficult to argue this is business as usual…

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

Jerome von Havenstein: Inflation Or Bust

February 27, 2021

Jerome von Havenstein: Inflation Or Bust

This week brought forth new evidence that – to be perfectly frank – we’re all screwed.

On Thursday, the yield on the 10 year Treasury note topped 1.55 percent. Subsequently, the Dow Jones Industrial Average, after hitting an all-time high on Wednesday, dropped 559 points. Wall Street must not be listening to Federal Reserve Chairman Jerome Powell.

Earlier in the week, Powell, in testimony to the Senate Banking Committee, confirmed that the central bank would keep the federal funds rate near zero until maximum employment is achieved. In addition, the Fed, in its recently released semiannual Monetary Policy Report, confirmed it would continue to create credit from thin air to buy $80 billion per month of Treasuries and $40 billion per month of mortgage backed securities (MBS).

What’s more, the Report specified the Fed’s purchases of Treasuries and MBS “…will continue at least at this pace until substantial further progress has been made toward its maximum employment and price stability goals.” The operative words being, “at least.”

What to make of it…

Central banking is a form of central planning. And central planning is a form of state control. And state control, as practiced in the United States, pertains not so much to the economics of producing income; but, rather, the methods for redistributing it.

State control, through inflationism, takes money saved and earned by individuals and covertly redistributes it to the central authority – i.e., Washington. There it is consumed by ever expanding government social programs and colossal pentagon budgets. What remains is wasted away by the endless array of bureaucracies and agencies.

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

Central Planners At Work

August 25, 2020

Central Planners At Work

Consumption without Production

“Every man is a consumer, and ought to be a producer”, observed 19th century philosopher Ralph Waldo Emerson. “He is by constitution expensive, and needs to be rich.”

Ralph Waldo Emerson (May 25, 1803 – April 27, 1882), who inter alia opined on consumers and the need to not only consume, but also produce. The latter activity has recently become even more severely hampered than it already was. And yet, government is spending like a drunken sailor. [PT]

These days Emerson’s critical insight is being taken to its extreme. Consumers, many whom lost their jobs due to government lockdown orders, no longer produce. Yet they still consume. They are expensive. Not rich.

What’s more, this consumption is not funded through personal savings. Nor is it funded through government transfer payments. Rather, it is funded via the printing press.

Emerson, no doubt, was lacking in the unique perspective we are presently granted. He did not have the special opportunity to watch his government destroy the economy in short order. Perhaps if he had, he would have penned a neat axiom to distill the essence of what happened.

The world today looks nothing like Emerson’s day. The 19^th century was an age of honest money. Central bankers did not roam the land.

Printing money to buy bonds and stocks, and to sprinkle on people, would have been quickly dismissed. The experience of the Continental Congress during the American Revolution, and their over-issuance of paper “continentals”, had shown that resorting to the printing press was an act of suicide.

Promises, promises… “not worth a continental” became a saying after this early experience with paper money. [PT]

Currently, printing press money is considered enlightened central banking policy. Inflation targets, zero interest rate policy (ZIRP), direct bond purchases, twisting the yield curve, unlimited credit. This is merely a partial list of the trouble central bankers are up to.

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

Why Central Planning by Medical Experts Will Lead to Disaster

April 9, 2020

Why Central Planning by Medical Experts Will Lead to Disaster

A great deal of the coverage of the COVID-19 crisis has been apocalyptic. That is partly because “if it bleeds, it leads.” But it is also because some of the medical experts with media megaphones have put forward potentially catastrophic scenarios and drastic plans to deal with them, reinforced by assertions that the rest of us should “listen to the experts,” because only they know enough to determine policy. Unfortunately, those experts don’t know enough to determine appropriate policies.

Doctors, infectious disease specialists, epidemiologists, etc. know more things about diseases, their courses, what increases or decreases their rate of spread, and so on than most. But the most crucial of that information has been browbeaten into the rest of us by now. Limited and imperfect testing also means that the available statistics may be very misleading (e.g., is an uptick in reported cases real or the result of an increasing rate of, or more accuracy in, testing, which is crucial to determining the likely future course COVID-19?). Further, to the extent that the virus’s characteristics are unique, no one knows exactly what will happen. All of that makes “shut up and listen” advice less compelling.

More important, however, may be that in making recommendations to address COVID-19, those with detailed knowledge of the disease (the experts we have been told to obey) do not have sufficient knowledge of the consequences of their “solutions” for the economy and society to know what the costs will be. That means that they don’t know enough to accurately compare the benefits to the costs. In particular, because of their relative unawareness of the many margins at which effects will be felt, the medical experts we are being told to follow will likely underestimate those costs. When combined with their natural desire to solve the medical problem, however severe it might get, this can lead to overly draconian proposals.

This issue has been brought to the fore by the increasing number of people who have begun questioning the likelihood of the apocalyptic scenarios driving the “OMG! We need to do everything that might help” tweetstorms, on the one hand, and those who are emphasizing that “shutting down the economy” is far more costly than planners recognized, on the other.

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

The Fed’s Answer to the Ghastly Monster of its Creation

November 30, 2019

The Fed’s Answer to the Ghastly Monster of its Creation

The launch angle of the U.S. stock market over the past decade has been steep and relentless. The S&P 500, after bottoming out at 666 on March 6, 2009, has rocketed up over 370 percent. New highs continue to be reached practically every day.

Over this stretch, many investors have been conditioned to believe the stock market only goes up. That blindly pumping money into an S&P 500 ETF is the key to investment riches. In good time, this conditioning will be recalibrated with a rude awakening. You can count on it.

In the interim, the bull market may continue a bit longer…or it may not. But, to be clear, after a 370 percent run-up, buying the S&P 500 represents a speculation on price. A gamble that the launch angle furthers its steep trajectory. Here’s why…

Over the past decade, the U.S. economy, as measured by nominal gross domestic product (GDP), has increased about 50 percent. This plots a GDP launch angle that is underwhelming when compared to the S&P 500. Corporate earnings have fallen far short of share prices.

Hence, the bull market in stocks is not a function of a booming economy. Rather, it’s a function of Fed madness. And its existence becomes ever more perilous with each passing day.

Central planners at the Fed – like other major central banks – have taken monetary policy to a state of madness. Zero interest rate policy, negative interest rate policy, quantitative easing, operation twist, quantitative tightening, reserve management, repo market intervention, not-QE, mass-asset purchases, and more.

These schemes have fostered massive growth in public and private debt with nothing but lackluster economic growth to show. What’s more, these schemes have produced massive asset bubbles that have skyrocketed wealth inequality and inflamed countless variants of new populism.

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

The Final Act in a Terrible Play

January 11, 2019

The Final Act in a Terrible Play

If you don’t follow me on Twitter, you’ve been missing out on some good stuff. With the brith of our third child a couple of months ago, it’s been increasingly hard for me to find the time to sit down and write longer posts, so I’ve been putting more and more content on Twitter. Last Friday, Brent Johnson of Santiago Capital, asked me to provide additional thoughts on my recent turn to being far more bullish gold. Normally I would’ve written it in a piece, but being pressed for time I put together a Twitter thread

1/ Earlier, my friend @SantiagoAuFund asked me to expound on gold. I was a bit surprised by the interest the tweet generated, so I’ve decided to compose a thread on the topic and financial markets generally. There’s a lot coming, so apologies to those with no interest.

There are 32 posts in there and I suggest you read the whole thing. More important than the thread itself; however, was the unprecedented and totally surprising response I received. As I explain in the tweets, I intentionally avoided talking about markets for nearly half a decade for a variety of reasons, and so I was blindsided by the enthusiastic and exceptionally positive response. It led me to do quite a bit of soul-searching, and ultimately convinced me that the time is ripe for me to start commenting about financial markets again. Not only because I think we’re at or very close to a major inflection point, but because people want to hear it.

For the record, I didn’t think central planners would be able to put Humpty Dumpty back together again ten years ago for as long as they did.

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

Hitler’s Economics

October 30, 2018

Hitler’s Economics

For today’s generation, Hitler is the most hated man in history, and his regime the archetype of political evil. This view does not extend to his economic policies, however. Far from it. They are embraced by governments all around the world. The Glenview State Bank of Chicago, for example, recently praised Hitler’s economics in its monthly newsletter. In doing so, the bank discovered the hazards of praising Keynesian policies in the wrong context.

The issue of the newsletter (July 2003) is not online, but the content can be discerned via the letter of protest from the Anti-Defamation League. “Regardless of the economic arguments” the letter said, “Hitler’s economic policies cannot be divorced from his great policies of virulent anti-Semitism, racism and genocide.… Analyzing his actions through any other lens severely misses the point.”

The same could be said about all forms of central planning. It is wrong to attempt to examine the economic policies of any leviathan state apart from the political violence that characterizes all central planning, whether in Germany, the Soviet Union, or the United States. The controversy highlights the ways in which the connection between violence and central planning is still not understood, not even by the ADL. The tendency of economists to admire Hitler’s economic program is a case in point.

In the 1930s, Hitler was widely viewed as just another protectionist central planner who recognized the supposed failure of the free market and the need for nationally guided economic development. Proto-Keynesian socialist economist Joan Robinson wrote that “Hitler found a cure against unemployment before Keynes was finished explaining it.”

What were those economic policies?

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

Central Planning Failed in the USSR, but Central Banks Have Revived It

September 20, 2018

Central Planning Failed in the USSR, but Central Banks Have Revived It

The Federal Reserve’s changing of the guard — the end of Janet Yellen’s tenure and the beginning of the Jerome Powell era — has me remembering what it was like to grow up in the former Soviet Union.

Back then, our local grocery store had two types of sugar: The cheap one was priced at 96 kopecks (Russian cents) a kilo and the expensive one at 104 kopecks. I vividly remember these prices because they didn’t change for a decade. The prices were not set by sugar supply and demand but were determined by a well-meaning bureaucrat (who may even have been an economist) a thousand miles away.

If all Russian housewives (and house-husbands) had decided to go on an apple-pie diet and started baking pies for breakfast, lunch, and dinner, sugar demand would have increased but the prices still would have been 96 and 104 kopecks. As a result, we would have had a shortage of sugar — a common occurrence in the Soviet era.

In a capitalist economy, the invisible hand serves a very important but underappreciated role: It is a signaling mechanism that helps balance supply and demand. High demand leads to higher prices, telegraphing suppliers that they’ll make more money if they produce extra goods. Additional supply lowers prices, bringing them to a new equilibrium. This is how prices are set for millions of goods globally on a daily basis in free-market economies.

In the command-and-control economy of the Soviet Union, the prices of goods often had little to do with supply and demand but were instead typically used as a political tool. This in part is why the Soviet economy failed — to make good decisions you need good data, and if price carries no data, it is hard to make good business decisions.

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

Chasing the Wind

June 17, 2018

Chasing the Wind

Futility with Purpose

Plebeians generally ignore the tact of their economic central planners. They care more that their meatloaf is hot and their suds are cold, than about any plans being hatched in the capital city. Nonetheless, the central planners know an angry mob, with torches and pitchforks, are only a few empty bellies away. Hence, they must always stay on point.

Watch for those pitchfork bearers – they can get real nasty and then heads often roll quite literally. [PT]

One of the central aims of central planners is to achieve effective public exhortation. While they pursue futility, in practice. They must do so with focus and purpose.

For example, economic reports with impressive tables and charts, including pie graphs, are important to maintaining the requisite public perception. Central planners know that financial scientism must always be employed as early and often as possible.

Statistics, with per annum projections, particularly those that show increasing exports and decreasing imports, are critical to maintaining the proper narrative. The USA’s embarrassing deficit in the balance of international payments will certainly diminish if it is sketched accordingly in an “official” report… right?

Yet the planners always disregard the simple observation that an economy is composed of countless, and variable, inputs. How is a new discovery or technology, and its effect on investment and labor, to be anticipated and forecast? How are the actions of 7 billion individuals to be modeled and displayed on a tidy diagram?

Good old Friedrich A. Hayek – depicted above – once coined the term “scientism” to describe the futile attempts of assorted social engineers and their academic advisors to express human action in the form of barren mathematical equations and statistics. Lettuce look at something one of his followers, the late Professor Austin L. Hughes, wrote in an article published in the autumn 2012 issue of “The New Atlantis” journal:

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

$21 Trillion And Rising: How Central Banks Are LBOing The World In One Stunning Chart

March 10, 2018

$21 Trillion And Rising: How Central Banks Are LBOing The World In One Stunning Chart

Back in late 2016, we showed the unprecedented domination of capital markets by central banks using a chart from Citi, which had put together a fascinating slideshow asking simply “Where is the utility in marginal QE” and specifically pointing out that the longer unconventional monetary policy such as QE continues, the bigger its marginal cost, until eventually QE becomes a detriment.

A broad criticism of monetary policy, the presentation carried an amusing footnote: “This presentation does not change any of Citi’s existing, published views on the actual future path of monetary policy. It is merely intended as a contribution to the ongoing debate about the efficacy of available policy tools” – after all, the last thing the market wanted is the realization that even banks no longer have faith in the central planners.

Incidentally, Citi’s broad critique of global QE took place when central banks owned just over $18 trillion in assets.

Fast forward to today when in its latest update of central bank holdings, Citi shows that as of this moment not only has the total increased by another $3 trillion to a grand total of $21 trillion and rising, but that the big six central banks now own over 40% of global GDP, more than double the 17% they held before the financial crisis less than a decade ago.

Which is remarkable in a world where there is still some confusion about what is behind the “global coordinated recovery”, and where there are deluded people who claim that central banks are now out of the picture.

It is also remarkable because now that central banks are gradually phasing out QE, it is the central bankers themselves who are terrified of what happens when the market starts selling; terrified that they have lost control. Recall that following stunning admission from Citi’s Hans Lorenzen last November:

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

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