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…

Today’s Contemplation: Collapse Cometh IV–Fiat Currency: Debasement and Infinite Growth

October 3, 2023

Today’s Contemplation: Collapse Cometh IV

Fiat Currency: Debasement and Infinite Growth

Sep 24, 2020

My comment on an article in The Tyee about our federal government’s latest throne speech by Prime Minister Justin Trudeau (https://thetyee.ca/Analysis/2020/09/24/Throne-Speech-Stew/).

_____

The idea that a sovereign nation can never run into trouble financially because it can create its own currency is certainly the dominant narrative amongst government and ‘mainstream’ economists/bankers. After all, who benefits the most from this storyline?

But is it in fact true?

Scratching below the surface of this ‘experiment’ suggests it is not.

If printing one’s own money were a panacea, then nations like Venezuela, Zimbabwe, or the German Weimar Republic (and countless other nations throughout history) would never have experienced the hyperinflation and/or currency debasement that they have. They would be the richest nations ever to have existed.

One could counter that this is because they had to use their debased currency to import goods. True, but if one is debauching one’s currency through exponential ‘printing’, then this may be true for any nation dependent upon imports, which almost every nation is in our globalised, industrial world.

The solution that nations have rested upon given this reality is that the central banks collude to all print at relatively the same rate, so currencies don’t fall/rise too drastically compared to their trading partners.

Fine, but what does endless money/credit creation due to the purchasing power of this fiat currency created from thin air?

Previous trials in this approach indicate that it totally debases/debauches the currency, significantly reducing the ‘wealth’ of the people holding/using it because of the inflation that it creates.
Here’s what John Maynard Keynes had to say about this: “By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.”

And while it’s interesting to note ‘official inflation’ is subdued, the manipulation that goes into creating this gauge of price inflation makes the official number meaningless to people’s real-world experience (look up hedonic adjustments to get a sense of how manipulated these numbers are; and then compare your experience in price increases to official numbers — my family’s utilities, food, health, housing, transportation, insurance, education, etc. expenses far, far outpace ‘official’ inflation; by several times).

Then there’s the whole issue of continuing to chase the infinite growth chalice and pulling substantial growth forward through debt/money creation. We live on a finite planet despite hopium narratives to the contrary and all this push for growth does is get us further and further into overshoot by quickening our exploitation of finite resources.

There is no consideration whatsoever of the limits imposed upon us. There is only more growth to try and address our dilemmas that are created by us pursuing growth in the first place.

Despite the story that these policies are being used to solve our problems and help people, the reality is that they are very much probably doing the exact opposite.

In fact, a good argument could be made that the ‘all in’ aspect of this is further evidence that the planet is reaching the endgame of overshooting our natural carrying capacity and the fallout is quickening towards its obvious conclusion: collapse of the complex systems we have come to depend upon.

To paraphrase Canadian economist Jeff Rubin in his book Why Your World is About to Get a Whole Lot Smaller: things are going local and simpler, whether we want them to or not.

Prepare accordingly.

Will This Fall Be the Fall of Falls?

August 29, 2023

WILL THIS FALL BE THE FALL OF FALLS?

MAMChat Egon von Greyerz & Matt Piepenburg

This 25 minute video with Matthew Piepenburg and myself is probably one of the most important discussions that we have had.

For years we have both warned investors about the consequences of a system based on unlimited money printing, debt creation and money debasement.

The world economy and the financial system is now on the cusp of a precipice.

No one can forecast when the coming violent turn will come.

It can take years or it can happen tomorrow.

Future historians will tell us when it happened.

In the meantime investors have one duty to themselves and their dependents which is to protect their wealth from total destruction.

Money printing and debt creation have taken markets to dizzy and unsustainable levels.

Since Nixon closed the gold window in 1971, both global and US debt is up over 80X!

And asset markets have been inflated by this fake money with the Nasdaq up 120X and the S&P up 44X since 1971.

But the bubbles are not just in stocks but also in bonds, property, art, other collectibles etc, etc.

In our view, the time to pay the Piper is here and now. The consequences will be costly, even very costly for the investors who ignore this major risk.

Just as bubble assets can go up exponentially they can implode even faster.

RISK OF MARKETS FALLING 50-90%

Sustained corrections of 50% to 90% in stocks and bonds are very possible and when the bubble bursts it will go so fast that there won’t be time to get out or to buy insurance.

Whether the Everything Bubble turns to theEverything Collapse today or tomorrow, the time to protect your assets is before it happens which means NOW.

…click on the above link to read the rest…

When in Rome

June 29, 2023

When in Rome

Over its last one hundred years, the State steadily devalued the currency by 98%
The high cost of government—particularly, growing entitlements and perpetual warfare, coupled with a diminished number of taxpayers, led the government to massive debt, to the point that it could not be repaid.

Those citizens that were productive began to exit the country, finding new homes in countries that were not quite so sophisticated but offered better prospects for the future.

The decline in the value of the currency resulted in ever-increasing prices of goods, so much so that the purchase of them became a hardship to the people. By governmental edict, wage and price controls were established, forcing rises in wages whilst capping the amount that vendors could charge for goods.

The result was that vendors offered fewer and fewer goods for sale, as the profit had been eliminated.

If the reader is a citizen of the EU or US, the above history may seem quite familiar, with the one exception that strict wage and price controls have not (yet) been implemented. Still, the history is accurate; it is the history of Rome.

The Roman denarius pictured above features the profile of the emperor Diocletian, circa 301 AD, at the time when he issued the edict mentioned above. Like the US dollar that followed 1700 years later, the denarius was the most recognised and most respected currency of its day, as it was almost 100% silver. However, it was steadily devalued by successive emperors during the Era of Inflation from 193 to 293 AD. This was done by diminishing the amount of silver in the coin until it was made entirely of base metal, with a thin silver wash. Just as the US Federal Reserve devalued the US dollar 98% between 1913 and 2023, Rome devalued the denarius over a similar period of time.

…click on the above link to read the rest…

Modern Currency Policy: Nations Compete, Citizens Suffer

June 28, 2023

Modern Currency Policy: Nations Compete, Citizens Suffer

Below we consider how modern currency policy may not be so good for, well, the people…

This is why gold inevitably enters the conversation, for unlike policy makers, this old pet rock garners more trust.

Gold, of course, loves chaos, tanking currencies and cornered, debt-soaked nations, the numbers of which rise with each passing day.

We see currency debasement as mathematically and historically inevitable, though we have no clue (no one really does) as to the precise date, trigger or time the already teetering fiat money systems fall over the global debt cliff.

We only know that the $300+T cliff is here, and that nations are racing toward it at historical speed, with equally historical consequences.

Physical gold holders, however, enjoy a certain and calm advantage: They don’t need to be precise timers; simply patient owners.

As for more signs of the move toward weakening currencies in general, and a weakening USD in particular, let’s look at some more history and current facts.

Hot vs. Financial Wars: Today’s Evidence, Tomorrow’s Polices

As headlines change with daily Western biases regarding the military war in Ukraine, America’s financial war with the East (i.e., China) will continue into the next generation.

It’s no secret to me, or many others, moreover, that the war in the Ukraine is a US proxy war against Russia, in which Ukraine (and its citizens) are merely a convenient battering ram against Putin.

That’s just my opinion, but we’ve seen this “freedom” movie before. Many times, and in many countries, none of which ended with much “freedom” …

But as to financial wars, they too are just an extension of politics by another means, and with the growing waves of de-dollarization rising in speed and height following the predictable ripple of effects of the 2022 sanctions against Russia…

…click on the above link to read the rest…

Role Reversal: The Collapse of the Dollar-Enforced Empire

April 10, 2023

Role Reversal: The Collapse of the Dollar-Enforced Empire

The Soviet empire started to crumble around 1989. The time period between the forming of the North Atlantic Treaty Organization (NATO) in the late 1940s and the retreat of Russia from Eastern Europe with the eventual collapse of communism in Russia is known as the Cold War. There was a great power confrontation in Europe that did not result in war.

Essentially, US-led NATO stood its ground to prevent further Soviet expansion from the territory it occupied at the end of World War II and waited for the inevitable collapse. Now, perhaps not everyone saw the collapse of the Soviet empire as inevitable. But all one had to do was view the Soviet empire for oneself, up close and personal, which is what I did in the early 1970s as a young Air Force officer.

The State of the Communist Economy

The Russian economy at that time is painful to describe. Moscow and Leningrad (Saint Petersburg), the so-called jewels of the Soviet Union, were depressing. Everything was shoddily built. There were very few cars on the streets. There were no retail shops deserving of the name. Lines formed in the middle of the night awaiting the opening of the few bakeries. I saw this for myself from my hotel window on the Nevsky Prospekt in Leningrad. GUM, the “world’s largest department store” near Moscow’s Red Square, sold nothing that was equal to what could be found in any garage sale in the West.

Actually, that should not be a surprise since at one time all those garage-sale goods were marketable. I did not visit Berlin, but those who did say that crossing the Brandenburg Gate from West Berlin to East Berlin was shocking…

…click on the above link to read the rest…

It’s Wholesale Robbery!

December 23, 2022

It’s Wholesale Robbery!

The latest inflation news was glorious, they said. The whole media told us so!

It’s easing, improving, better than it has been and headed in the right direction. So stop your kvetching and get out there and make (and spend) money. For that matter, throw around the credit card a bit and stop trying to save money.

Inflation is all but done! It’s pretty interesting because they have been saying this for the better part of 18 months.

In reality, the consumer price index rose 7.1% from a year ago. That’s terrible. Yes, not as terrible as last month, but look at the breakdown in detail.

Food at home is up 10% while food at restaurants is up 12%. Fuel oil is up 65.7 % and transportation services are up 14.2%!

So on it goes, and each month we get a report, and the intensity shifts from one sector to another. The perception that this is cooling is based mostly on the weighting scheme that yields the final number. This is no world in which we are watching the problem gradually disappear.

Wholesale Robbery of the American People

You can see the scale of the problem by looking at the so-called sticky rate of price increases over 14 years. This reveals which part of the overall index is truly embedded and less subject to exigencies of temporary market change.

This is wholesale robbery of the American people. That the thief stole a full place setting of silver last month but this month left the dessert spoon is hardly an improvement and a case for leaving the doors unlocked.

They’ve told us for 18 months that it’s not so bad and we should all stop kvetching about it. But it keeps being bad. The inflation is embedded and clearly has a long way to go before the momentum runs out of steam.

…click on the above link to read the rest…

Gold’s Climb Amidst Wisdom’s Decline

November 25, 2022

Gold’s Climb Amidst Wisdom’s Decline

As the latest headlines from the FTX implosion remind us yet again of a politicized and rigged market riddled with deception, gold’s climb becomes easier to foresee.

But first, a little philosophical musing…

Modern Policy: High Office, Low Wisdom

I have often referred to La Rochefoucauld’s maxim asserting the highest offices are rarely, if ever, held by the highest minds.

Nowhere has this been more apparent than among the halls of the physically impressive yet intellectually vacant Eccles Building on Constitution Ave in Washington DC, where a long string of Fed Chairs have been un-constitutionally distorting free market price discovery for over a century.

The media-ignored levels of open fraud and inflationary currency debasement which passes daily for monetary policy (namely monetizing trillions of sovereign debt with trillions of mouse-clicked Dollars) within the FOMC would be comical if not otherwise so tragic in its crippling ripple effect to the Main Street citizen.

From Greenspan to Powell, we have witnessed example after example of error after error and gaffe after gaffeon everything from mis-defining inflation narratives as “transitory” to re-defining a “recession” as non-recessionary.

And all this while the Fed (and its creative writing team at the BLS) simultaneously and deliberately fudges the math on everything from misreported CPI data to artificial U6 employment statistics.

Pondering the Philosophically Nobel Amidst the Administratively Dishonest

To any who have pondered the philosophical pathways (as well as elusive definition) of wisdom (from the ancient Greeks to the pre- and post-modern Europeans, romantic Emersonians, tortured Russians or enlightened Confucians), one common trait of wisdom through time, culture and language is the ability to admit, and then learn from, error–as any man’s journey is one riddled with countless opportunities for teachable error.

…click on the above link to read the rest…

Response: Money and Payments: The US Dollar in the Age of Digital Transformation

January 31, 2022

Response: Money and Payments: The US Dollar in the Age of Digital Transformation

Implications from the Federal Reserve’s Paper

Our first comment is that every monetary change from the Founding of America through present has been to move away from free markets, and to adulterate our currency. An analogy could be made to the Ship of Theseus, with each good plank replaced with an unsound board. A Zombie Ship of Theseus, decaying, but still afloat.

Let’s walk through the Fed’s paper. The very firstparagraphon page 1 says, “The Federal Reserve, as the nation’s central bank, works to maintain the public’s confidence by fostering monetary stability, financial stability…”

Monetary stabilityis defined as2% debasement per annum, an Orwellian twist. Andfinancial stabilityin the Fed’s regime is a myth.Interest rates shot the moon between 1947 and 1981, and since then have been falling—with volatility—into the black hole of zero.Meanwhile debt grows exponentially, and the marginal productivity of debt—how much GDP is added for each new dollar of debt—falls decade after decade. It is not only unstable, but unsustainable, heading towards an ultimate heat death of the economic universe.

“CBDC is defined as a digital liability of a central bank that is widely available to the general public.” In other words, it’s like holding a paper dollar bill except it’s digital. Which implies several things:

The Fed could muscle out the banks from the demand deposits business
The Fed could buy all the assets, which the banks now finance with demand deposits
Thus, money and payment services could become more socialized
The government could declare paper is no longer legal tender, thus forcing everyone into CBDC
The government could track who spends their CBDC, and what they buy
This spending data could be used in a social credit score system

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

The Criminalization of Preppers in Turkey: Will Our Country Be Next?

December 23, 2021

The Criminalization of Preppers in Turkey: Will Our Country Be Next?

History has shown us that collectivism detests the individual. The man who can exist independent of the system, who thinks for himself, who is not easily swayed, and who has values rooted in absolute truth which he refuses to give up – this is the enemy of collectivism.

But if we take a closer look at one aspect of the individual – his ability to exist independent of the system – is it not clear this is an end goal of prepping?

Is that not what a prepper strives for – the ability to exist independent of the world around them so that disaster does not affect them in the way that it affects others?

It is, and this is why collectivism criminalizes preppers over and over again.

We’ve seen it before and we’re seeing it right now, most notably in Turkey.

Turkey is cooked, and we all know it.

For those who keep a fairly accurate pulse of world events, you know that the fiat currency of Turkey – the lira – is collapsing.

As of this year the lira has lost approximately 40% of its value, and from all appearances, it shows no signs of stopping its downward spiral anytime soon.

Inflation is rapidly leading to hyperinflation within Turkey and the Turkish citizens have recognized this. People began attempting to step away from the lira and delving into cryptocurrency in an attempt to protect themselves.

And then the Turkish government made crypto illegal as a form of payment on April 30, 2021. This was done to prevent “irreparable damage.” What’s ironic about this is that the Turks said this was because cryptocurrencies were “neither subject to any regulation and supervision mechanisms nor a central regulatory authority.” [source]

That’s a fun train of logic from the people that are in the process of destroying their own currency.

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

Printing and Borrowing Always Ends Badly

December 8, 2021

Printing and Borrowing Always Ends Badly

As more countries copy the Federal Reserve’s monetary policy without the global demand of the US dollar, financing trade and fiscal deficits printing a weakening currency, nations become more dependent on the US dollar.

Neither domestic nor international citizens demand local currency, and governments continue to build large fiscal and trade imbalances believing the magic money tree will solve everything. However, as confidence in their domestic currency collapses, global US dollar-denominated debt soars because very few investors want local currency risk and central banks need to build US dollar reserves to cushion the monetary debasement blow.

Implementing aggressive so-called expansionary policies almost always backfires because the impact on growth of large spending plans is minimal, and the destruction of purchasing power of the currency rises.

Governments always want to believe that they will be able to disguise their imbalances with monetary debasement, but the effect is the opposite.

It is, therefore, no surprise that most global currencies have depreciated against the US dollar even in a year of high Federal reserve injections and commodity price rises. When a commodity exporting country sees its currency collapse despite rising exports, you know that -again- the myth of modern monetary theory has evaporated.

As the domestic economy and currency in countries like Brazil, Argentina or Turkey get worse, governments turn the blame to the International Monetary Fund.

The relationship of countries with the International Monetary Fund (IMF) always makes the headlines when governments have already spent the money they borrowed and do not want to return it. Interestingly, few seem to criticize the IMF when it rescues governments from their fiscal imbalances, and harsh comments only surface when the money must be paid back.

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

Venezuelans Turn to Gold Nuggets as the Local Currency Implodes

October 31, 2021

Venezuelans Turn to Gold Nuggets as the Local Currency Implodes

The Venezuelan government recently lopped off six zeros from its hyperinflating currency, the bolivar. The highest denomination currency note of 1 million bolivars, worth less than $0.25, was replaced by a one-bolivar note. At the same time, a 100-bolivar note, worth about $25.00, was introduced as the new highest denomination of the bolivar. The currency conversion was designed to spare the government the embarrassment of having to issue a 100-million bolivar note to enable people to purchases everyday items without having to carry around bundles of notes, given that the price of a loaf of bread had risen to 7 million old bolivars. Of course, the arbitrary scaling down of the denomination of the currency will not slow inflation, because the new currency notes can be printed just as cheaply as the old. The bolivar has already lost 73 percent of its value in 2021 alone and the IMF estimates the annual inflation rate will reach 5,500 percent by the end of 2021.

It is not surprising, then. that all but the poorest Venezuelans have abandoned the bolivar as a medium of exchange, let alone a store of value or unit of account. US dollars are the exchange medium of choice in Caracas and other large cities, while the Colombian peso dominates along the Colombian border, particularly in the regional city of San Cristobal. The Brazilian real is current along the southern border with Brazil and the euro and cryptocurrencies have also found niche uses.

What is wonderfully surprising is the spontaneous emergence of a pure gold currency in a remote region of southeastern Venezuela around the towns of Tumeremo and El Callao. The region abounds with precious metal ores and has a long history of luring prospectors and miners seeking their fortunes…

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

Shortages & Hyperinflation Lead to Total Misery

October 23, 2021

SHORTAGES & HYPERINFLATION LEAD TO TOTAL MISERY

At the end of major economic cycles, shortages develop in all areas of the economy. And this is what the world is experiencing today on a global basis. There is a general lack of labour, whether it is restaurant staff, truck drivers or medical personnel.

There are also shortages of raw materials, lithium (electric car batteries), semi-conductors, food, a great deal of consumer products, cardboard boxes, energy and etc, etc. The list is endless.

SHORTAGES EVERYWHERE

Everything is of course blamed on Covid but most of these shortages are due to structural problems. We have today a global system which cannot cope with the tiniest imbalances in the supply chain.

Just one small component missing could change history as the nursery rhyme below explains:

For want of a nail, the shoe was lost.
For want of a shoe, the horse was lost.
For want of a horse, the rider was lost.
For want of a rider, the battle was lost.
For want of a battle, the kingdom was lost.
And all for the want of a horseshoe nail.

Cavalry battles are lost if there is a shortage of horseshoe nails.

The world is not just vulnerable to shortages of goods and services.

BOMBSHELLS

Bombshells could appear from anywhere. Let’s just list a few like:

Dollar collapse (and other currencies)
Stock market crash
Debt defaults, bond collapse (e.g. Evergrande)
Liquidity crisis (if money printing stops or has no effect)
Inflation leading to hyperinflation

There is a high likelihood that not just one of the above will happen in the next few years but all of them.

Because this is how empires and economic bubbles end.

The Roman Empire needed 500,000 troops to control its vast empire.

Emperor Septimius Severus (200 AD) advised his sons to “Enrich the troops with gold but no one else”.

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

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