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War on Cash: The Next Phase

April 14, 2021

War on Cash: The Next Phase

With so much news about an economic reopening, a border crisis, massive government spending and exploding deficits, it’s easy to overlook the ongoing war on cash.

That’s a mistake because it has serious implications not only for your money, but for your privacy and personal freedom, as you’ll see today.

Cash prevents central banks from imposing negative interest rates because if they did, people would withdraw their cash from the banking system.

If they stuff their cash in a mattress, they don’t earn anything on it; that’s true. But at least they’re not losing anything on it.

Once all money is digital, you won’t have the option of withdrawing your cash and avoiding negative rates. You will be trapped in a digital pen with no way out.

What about moving your money into cryptocurrencies like Bitcoin?

Governments Won’t Surrender Their Monopoly Over Money

Let’s first understand that governments enjoy a monopoly on money creation, and they’re not about to surrender that monopoly to digital currencies like Bitcoin.

Libertarian supporters of cryptos celebrate their decentralized nature and lack of government control. Yet, their belief in the sustainability of powerful systems outside government control is naïve.

Blockchain does not exist in the ether (despite the name of one cryptocurrency), and it does not reside on Mars.

Blockchain depends on critical infrastructure, including servers, telecommunications networks, the banking system, and the power grid, all of which are subject to government control.

But governments know they cannot stop the technology platforms on which cryptocurrencies are based. The technology has come too far to turn back now.

So central governments don’t want to kill the distributed ledger technology behind cryptos. They’ve been patiently watching the technology develop and grow — so they could ultimately control it.

Anyone who controls the money controls political power, the economy, and people’s lives.

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

Wrong… Again

March 25, 2021

Wrong… Again

The Federal Reserve met last week and voted to keep interest rates unchanged. What a shock!

The Fed also gave an upbeat forecast of economic growth, predicting that the U.S. economy will grow 6.5% this year, its highest rate in nearly 40 years. Its December 2020 forecast projected 4.2% growth.

The Fed also expects that the economy could return to full employment next year and that inflation could hit 2.4% this year before declining again.

In effect, the central bank said they were willing to let the economy run “hot” and risk higher inflation in order to capture the benefits of stronger growth.

Zero rates are essentially a given as far as the eye can see. What about that growth forecast?

The Fed has one of the worst forecasting records of any financial institution in the world. My expectation is that growth is slowing now and will get worse as the year progresses.

I believe this will be especially true as the Biden administration policies of higher taxes, more regulation, and open borders that import cheap labor take effect.

Biden has also shut down new oil and gas exploration and wants to push a Green New Deal that will guarantee higher energy prices. Higher energy prices are a burden on the economy.

Little Cause for Optimism

Where’s the evidence that growth is slower than the Fed expects?

Inflation measures remain weak. The annual core consumer price inflation rate moved down from 1.7% in September 2020 to 1.3% in February 2021.

The overall consumer price inflation rate (including food and energy) rose modestly from 1.4% in September 2020 to 1.7% in February 2021.

On a year-over-year basis, the core personal consumption expenditures rate of increase (the Fed’s preferred index) moved from 1.4% in October 2020 to 1.5% in January 2021.

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

daily reckoning, james rickards, fed, us federal reserve, inflation, price inflation, cpi, consumer price inflation,

Financial Warfare Is Real

December 30, 2020

Financial Warfare Is Real

In my 2011 book, Currency Wars, I gave a detailed description of the first-ever financial war game sponsored by the Department of Defense. This financial war game took place in 2009 at the top-secret Applied Physics Laboratory located about twenty miles north of Washington, D.C., in the Maryland countryside.

Unlike typical war games, the “rules of engagement” for this financial exercise did not permit the use of any kinetic weapons such as bombs, missiles or drones. The only weapons allowed were financial instruments including stocks, bonds, currencies, commodities and derivatives.

The game was played out over two days in the main War Room of the laboratory using six teams divided into the U.S., China, Russia, Europe, East Asia, and Banks & Hedge Funds. The contestants included about 40 players on the six teams and another 60 participants including: uniformed military, civilian defense officials, observers from the Treasury, Federal Reserve, CIA and other government agencies, think tanks, universities, and financial industry professionals.

In that original financial war game, a scenario involving Russia, China, gold and the destruction of the U.S. dollar was played out against a backdrop of geopolitical events, including the collapse of North Korea and a threatened Chinese invasion of Taiwan.

In May 2015, the Pentagon sponsored a new financial warfare session, which I was also invited to attend. This time the financial war took place inside a secure meeting facility at the Pentagon itself.

This new financial war game exercise was smaller and more focused than the one in 2009. We had about 20 participants. Our group included representatives from the diplomatic corps, military, think tanks, universities, CIA and the National Security Council. I was one of three individuals from the investment management community.

Our scenario this time was not global but was instead limited to a confrontation between China and the U.S. involving disputed jurisdiction in the South China Sea.

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

The Arctic Is Melting

December 28, 2020

The Arctic Is Melting

EARTH is down with a fever. Even the polar ice has vanished. Reports The Washington Post:

The Arctic seems to be warming up. Reports all point to a radical change in climatic conditions, and hitherto unheard-of high temperatures in that part of the earth’s surface. Expeditions have sailed as far as 81 degrees 29 minutes north in ice-free water. The eastern Arctic has steadily gotten warmer, and today the Arctic of that region is not recognizable as the same region of about 50 years ago. Many old landmarks have changed as to be unrecognizable. Where formerly great masses of ice were found, there are now often moraines, accumulations of earth and stones. At many points where glaciers formerly extended far into the sea they have entirely disappeared.

Thus the Arctic sweats:

Formerly the waters around Spitzbergen (Norway) held an even summer temperature of about 3 degrees Celsius; this year recorded temperatures up to 15 degrees, and last winter the ocean did not freeze over even on the north coast of Spitzbergen.

Spitzbergen sits far within the Arctic Circle, incidentally. Imagine an ice-free winter deep within the Arctic Circle — if you can.

As well imagine hell without its fires. But there you are.

To deny climate change is to deny the very nose upon your face — or gravity itself.

Wait… When?

But what is this? Could it be?

The article here cited bears the date of November 2… 1922.

That is correct — November 2, 1922.

The Arctic was iceless in 1922… if you accept the verdict of The WashingtonPost.

But the internal combustion engine was a mere adolescent in 1922, a junior menace, a future bugaboo.

Industry was up and going — but enough to melt the stubborn Arctic ice? We are filled with doubt.

We must therefore credit an alternate heat source. But what?

We do not know. We lack credentials within the climatic sciences.

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

The Fed Wrecked the World’s Most Important Market

December 19, 2020

The Fed Wrecked the World’s Most Important Market

Do you wish to know where the economy is heading? The bond market holds the answer, say the veterans.

The birds of the moment, the flighty birds, flock to the stock market. But the owls nest in the bond market.

The owls are the wiseacres.

The Federal Reserve’s hocus-pocus fails to trick them. They know the card is up the sleeve. And they enjoy exposing the fraud.

New York Times economics reporter Neil Irwin:

Savvy economic analysts have always known the bond market is the place to look for a real sense of where the economy is going, or at least where the smart money thinks it is going.

For example: Is inflation ahead? The bond market will tell you — Treasury bonds in particular.

Bonds and Inflation

Longer-dated Treasury notes will telegraph the signal. If they wire an inflationary message, their prices will fall. And their yields will rise.

(Bonds operate as seesaws operate. When prices go up, yields go down. When yields go up, prices go down).

Yields would rise because inflation would eat into the bond’s value… as the termite eats into wood. Under inflation a bond is a sawdust asset.

Bond purchasers would demand a higher yield to compensate them for inflation’s ravages.

That is, they would demand insurance against the termite’s evils.

The Message of the Bond Market

Does today’s bond market indicate inflation is ahead?

It does not. 10-year Treasury notes presently yield under 1% — 0.923%.

These are historic lows. 10-year yields average 4.40% across time.

In brief… the bond market indicates no inflationary menace. Inflation is as tame as a tabby.

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

The “COVID Coup”

November 20, 2020

The “COVID Coup”

What we are experiencing is a COVID coup.

While Joe Biden (apparently) won the election, the entire process was dominated by COVID precautions and distortions.

Nearly 80% of Joe Biden’s vote — according to the exit polls — named COVID as the key issue. A similar 80% of Trump’s vote saw the economy as the key issue.

In the name of COVID fears, election day was essentially cancelled and more than half the votes were cast by mail, many of them weeks before.

With the Democrats leading the push for early mail-in voting, people who feared to go to the polls (because of COVID) were overwhelmingly Biden voters.

Republicans across the country allowed the Democrats to intimidate voters with COVID myths and then use the myths as a pretext for voting by mail from home.

On the assumption that it was perilous to vote in person, mail-in ballots were authorized everywhere. More than 100 million votes were mailed-in.

Breaking the links between personal presence, IDs, signatures, ballots, and individual voters, the new procedures fostered a murky and error-prone system that should not be repeated.

The mail-in operations prolonged the voting period and changed the electoral dynamic. We can only hope that the American future was not “lost in the mail.

The Myth and Mantra of COVID

The ruling theme of the campaign was the myth and mantra of 220,000 “COVID deaths.” This claim the media inculcated and propagated relentlessly and even Trump disastrously seemed to condone. The electoral campaigns pivoted on the myth of the 220,000 or more deaths.

Actual COVID-caused deaths were less than 10% of this number and the average age of deaths was higher than the average age of all-cause deaths.

Measured by years of lost life, COVID was insignificant compared to ordinary flu, pneumonia, TB or other diseases.

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

The Bogus Case Against Gold

November 14, 2020

The Bogus Case Against Gold

Gold is in the early stages of its third great bull run that will take it to record heights.

The first two great bull markets were 1971-1980 (gold up 2,200%) and 1999-2011 (gold up 760%). After peaking in 2011, gold fell sharply from that peak to below $1,100 per ounce by 2015.

Now the third great bull market is underway. It began on December 16, 2015, when gold bottomed at $1,050 per ounce at the end of the 2011-2015 bear market. Since then, gold is up significantly, but it’s small change compared to 2,200% and 760% gains in the last two bull markets.

Still, most mainstream economists dismiss gold. They call it a barbarous relic and say it has no place in today’s monetary system.

But today, I want to remind you of the three main arguments mainstream economists make against gold and why they’re dead wrong.

There’s Just Not Enough Gold to Support the Money Supply!

The first one you may have heard many times. “Experts” say there’s not enough gold to support a global financial system. Gold can’t support all the world’s paper money, its assets and liabilities, its expanded balance sheets of all the banks and the financial institutions in the world. They say there’s not enough gold to support that money supply.

That argument is complete nonsense. It’s true that there’s a limited quantity of gold. But more importantly, there’s always enough gold to support the financial system. The key is to set its price correctly.

It is true that at today’s price of about $1,875 an ounce, pegging it to the existing money supply would be highly deflationary.

But to avoid that, all we have to do is increase the gold price. In other words, take the amount of existing gold, place it at, say, $14,000 an ounce, and there’s plenty of gold to support the money supply.

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

Civil War Two

October 1, 2020

Civil War Two

America has a new manufactured crisis, ElectionGate, as if all the other troubles piling up like tropical depressions marching across the September seas were not enough.

America needs a constitutional crisis like a hole in the head, and that’s exactly what’s being engineered for the holiday season by the clever folks in the Democratic Party’s Lawfare auxiliary.

Here’s how it works: the complicit newspapers and cable news channels publish polls showing Joe Biden leading in several swing states, even if it’s not true. Facebook and Twitter amplify expectations of a Biden victory. This sets the stage for a furor when it turns out that he loses on election night.

On cue, Antifa commences to riot all around the country. Meanwhile, a mighty harvest of mail-in votes pours into election districts utterly unequipped to validate them.

Lawfare cadres agitate in the contested states’ legislatures to send rogue elector slates to the electoral college. The dispute ends up in congress, which awaits a seating of newly-elected representatives on January 4, hopefully for Lawfare, mostly Democrats. Whoops…!

Turns out, the Dems lost their majority there too. Fighting in the streets ramps up and overwhelms hamstrung police forces in Democratic-run cities. January 20 — Inauguration Day — rolls around, and the Dems ask the military to drag Trump out of the White House “with great dispatch!” as Mr. Biden himself put it so nicely back in the summer.

The U.S. military breaks into two factions. Voilà: Civil War Two.

You didn’t read that here first, of course. It’s been all over the web for weeks, since the Democratic Party-sponsored Transition Integrity Project (cough cough) ran their summer “war game,” intending to demonstrate that any Trump election victory would be evidence of treason and require correction by any means necessary, including sedition, which they’d already tried a few times in an organized way since 2016 (and botched).

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

Negative Interest Rates Have Arrived

September 13, 2020

Negative Interest Rates Have Arrived

We are often warned that negative interest rates are an approaching menace — not an immediate menace.

Yet are negative rates already reality in the United States? Has the unholy day already arrived?

Today we don the sleuth’s cap, step into our gumshoes… and unearth evidence that negative interest rates are not the future menace… but the present menace.

What is the evidence? Answer anon.

Under negative interest rates…

Your bank does not compensate you for stabling your money with it. You instead compensate the bank for stabling your money.

A man sinks a dollar into his bank. Under standard rules he hauls out a dollar and change on some distant date — perhaps $1.05.

These days he is of course fortunate to bring out $1.01.

Yet under negative interest rates he endures a rooking of sorts. He pulls out not a dollar and change — but change alone. The bill itself has vanished.

His dollar may be worth 97 cents for example. Thus his dollar — rotting down in his bank — is a sawdust asset, a wasting asset, a minus asset.

Would you willingly hand a bank a dollar today to take back 97 cents next year? You are a strange specimen if you would.

Yet that is precisely as the Federal Reserve would have it…

The Federal Reserve wants your money eternally up and doing, searching, hunting, grasping… adventuring…

It must be forever acquiring, forever chasing rainbows, forever upon the jump.

That is, the Federal Reserve would not allow your money one contemplative moment to sit idle upon its hands… and doze.

For a dollar in motion is a dollar in service — in service to the economy.

The dollar in motion runs down goods and services. It invests in worthwhile and productive enterprises.

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

We’re All Serfs of Big Tech

August 25, 2020

We’re All Serfs of Big Tech

What do you call an economy of monopolies without competition or any regulatory restraints?

An economy of monopolies that controls both the buying and selling in the markets they control?

Monopolies with the power to commit legalized fraud and the profits to buy political influence?

Monopolies whose black box algorithms are all-powerful but completely opaque to public scrutiny?

Call it whatever you want, but it certainly isn’t Capitalism, which requires competition and market transparency to price capital, labor, risk, credit, goods, services, etc.

Black Box Monopoly is the death of Capitalism as it eliminates competition and market transparency.

Legalized Fraud

The American economy is now dominated by Big Tech Black Box Monopolies, and thus what we have isn’t a “free market” system (a.k.a. capitalism), it’s the pretense of capitalism, a slick PR cover for the most rapacious form of exploitation.

The SillyCon Valley model is simple: achieve monopoly power by scaling the network effect and buying up hundreds of potential competitors with stock “printed” out of thin air.

Once monopoly is achieved, buyers and sellers are both captive to the Big Tech monopoly: both buyers and sellers of apps, for example, must submit to the profiteering and control of the Big Tech monopoly.

Once the profits flowing from monopoly pile up, buy back the shares you “printed” to eliminate competition, boosting the wealth of insiders to the moon. Since share buybacks were once illegal, this is nothing but legalized fraud.

Despite the immense destruction these Big Tech monopolies wreak on society, the political power they purchase protects them from any limits. of “free markets.”That their platforms now control the flow of data, including political content and adverts, is brushed aside with the usual paradoxical claims

Ironic, isn’t it?

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

Why Martians Are Wrong About Gold

August 22, 2020

Why Martians Are Wrong About Gold

A martian — Warren Buffett once razzed — would marvel that earthlings dig gold from the ground… only to rebury it in vaults.

That is, the business is idiotic… pointless… and wasteful.

At first blush, our space man is justly puzzled. Why would humans shovel up hunks of metal — only to lock them away, idle?

Yet the martian — and the Nebraskan — jump past a fundamental truth of human nature.

As one insightful fellow (whose identity we cannot recall) has noted…

Men act with purpose. They do not squander their time or resources on pointless, juiceless pursuits.

Why would they expend vast resources to haul up gold… and risk their lives deep in dangerous mines to grab it… if they lacked compelling reasons?

We note that Mr. Buffett has recently purchased 21 million shares of Barrick Gold. Has this man forgotten his martian?

And so we arrive at this question: Why do men still toil extravagantly to wrest gold metal from stingy earth?

The Gold Standard of Money

Perhaps men continue digging up gold because thousands of years of history demonstrate that gold is worth digging up.

Gold is perhaps the ideal money, money par excellence — if you will forgive the expression, the gold standard of money.

Money must be rare. Rocks cannot be money — for example. Nor can dirt.

Yet there must be enough money to “go around.”

Gold is rare. But there is enough to go around. Hence it meets money’s strict conditions.

Gold is also durable. Gold mined thousands of years ago lives yet, fresh as a sprig, no wrinkles, no sags.

And unlike gems or diamonds, gold is divisible. It can be fashioned into bars or coins as needed.

Meantime, money must be a store of value. And gold maintains its value across centuries, across millenia.

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

They’ve Done It Again

August 21, 2020

The stars are back in their courses. The angels are back in the heavens. And the Perfections are back within sight…

For merely 148 trading days after bottoming… the S&P returned to record heights today.

The index closed the day at 3,389 — eclipsing its February 19 height of 3,386.

Thus Jerome Powell’s maniacal persistence has yielded a reward truly fantastic. He has successfully reflated the bubble.

The Federal Reserve has itself become the market.

Shannon Saccocia, Boston Private’s chief investment officer:

Equity markets are reflecting the massive monetary and fiscal stimulus that has been injected over the past four months… the rationale to diversify away from risk assets is hard to pinpoint.

For many the rationale to diversify away from risk assets is indeed hard to pinpoint…

No Longer Considered a Bear Market Rally

Bank of America has concluded its August Global Fund Manager survey. This survey revealed that:

The majority of professional investors no longer believe this market spree represents a bear market rally.

It is as genuine as gold itself, they believe.

What is more, 31% of those surveyed believe it is “early cycle” — the highest percentage since the financial crisis.

Meantime, Deutsche Bank reports, “companies have already restarted buybacks or are considering doing so.”

Buybacks were of course a primary source of helium for the bubble presently reflating.

And the Federal Reserve’s artificially depressed rates opened the taps…

Corporations Take on More Debt Than Ever

These exorbitantly low rates enabled corporations to pile on cheap debt.

With this debt they often purchased their own stock… which reduced shares outstanding… and raised the price per share.

That is, corporations often took on debt to conduct financial sorcery.

And now — as Deutsche Bank reports — the sorcerers are at their tricks again.

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

Inflation

July 21, 2020

Inflation

Remember all those “green shoots?”

That was the ubiquitous phrase used by White House officials and TV talking heads in 2009 to describe how the U.S. economy was coming back to life after the 2008 global financial crisis.

The problem was we did not get green shoots, we got more like brown weeds.

The economy did recover, yes, but it was the slowest recovery in U.S. history.

After the green shoots theory had been discredited, Treasury Secretary Tim Geithner promised a “recovery summer” in 2010.

That didn’t happen either.

The recovery did continue, but it took years for the stock market to return to its previous highs and even longer for unemployment to come down to levels that could be regarded as close to full employment.

Now, in the aftermath of the 2020 pandemic and market crash, we’re getting the same happy talk.

Green Shoots, or Brown Weeds?

The White House is talking about “pent-up demand” as the economy reopens and consumers flock to stores and restaurants to make up for the lost spending during the March to July pandemic lockdown.

But, the data shows that the “pent-up demand” theory is just as much of a mirage as the green shoots we heard about a decade ago..

Many of the businesses that closed have failed in the meantime. They will never reopen and those lost jobs are never coming back. Even people who kept their jobs are not spending like it’s 2019, they’re saving at record levels.

Meanwhile, the “reopening” of the economy is now in doubt.

In some cities, the reopening was derailed by riots that left shopping districts in ruins. In other cities, the reopening was stopped in its tracks by new outbreaks of the virus that led to new lockdowns and strict application of rules on wearing masks and social distancing.

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

The Last Gasps of “Late Degeneracy Capitalism”

July 19, 2020

The Last Gasps of “Late Degeneracy Capitalism”

It was a mid-afternoon in 2006 in Cannes, where I joined Dr. Kurt Richebächer at his apartment to collaborate on a book project that, unfortunately, failed to come together before his death a year later.

The old man grabbed his cane and moved to a comfy chair and clicked on a widescreen TV.

Bloomberg. In German.

It was bad news from what I remember. But as far as the economic commentariat was concerned, it was good news. It meant the Fed would simply pump more money into the market.

Traders loved the report; stock futures back in New York had already begun to rally.

Kurt, on the other hand, was flabbergasted. He started talking to me and to the television in German. Neither I nor the TV understood German…

Dr. Richebächer was kind of a crank. He was a special kind of crank, though.

He used to say something like: “the sins of the boom, will be laid bare in the bust.”

A Market Prophet

Kurt wrote a newsletter for more than 40 years. And back in the late 90s and early 2000s we published The Richebächer Letter.

Kurt accurately forecast the tech wreck. And for having done so, he became a semi-celebrity among the geeks — present company included — who like to read and think about an obscure outpost in the field of economics — the Austrian school.

Kurt never claimed to adhere to the Austrian school, but that hardly seemed to matter. His insights apply just as much today as they did 14 years ago — probably more.

It all started after World War II when Kurt had made a name for himself as the best-known financial journalist in Germany — a razor-sharp critic of what he saw as the stupid economic and fiscal policies of the post-war German government.

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

The Fed Isn’t a Magic Money Tree

June 28, 2020

The Fed Isn’t a Magic Money Tree

There seems to be no end to the Federal Reserve’s arrogance. Fed officials believe that through their wise actions, they can eliminate the business cycle, lower unemployment and make society prosperous.

But it’s actually much more limited in what it can do.

All the Fed can reliably do is stop bank runs and limit liquidity panics. It can also fund (or “monetize”) the U.S. federal deficit, as it has done in recent months.

By buying essentially the same amount of U.S. Treasury securities the government has issued, the Fed has taken pressure to fund mammoth federal deficits off of the private sector.

But such actions are not cost-free.

They store up trouble for the future. These actions swell the Fed’s balance sheet, which will limit the Fed’s flexibility and its willingness to tighten policy during the next inflation spike.

The more the Fed intervenes, the harder it is for it to reverse course without causing damage.

By promising the public that it can do anything more than offer dollar liquidity, the Fed is setting up both investors and workers for disappointment.

Yet it’s going to try anyway. And it’ll only undermine its limited reputational capital in the process.

“Yield Curve Control”

The Wall Street Journal recently reported that the Fed is considering implementing “yield curve control” in the Treasury market. This policy hasn’t been used since WWII and the early postwar period.

It essentially funded the war effort. If unleashed today, it wouldn’t be done to support a civilization-saving war effort but to maintain the debt-saturated economy to which we’ve become accustomed.

Here’s how it would work in practice:

The Fed would set a target range, or cap, on yields for Treasury bonds of a specific maturity — say, 3-, 5- or 7-year Treasuries.

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

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