Home » Posts tagged 'debt'

Tag Archives: debt

Olduvai
Click on image to purchase

Olduvai III: Catacylsm
Click on image to purchase

Post categories

Post Archives by Category

Central Banks, Global Debt & COVID

Central Banks, Global Debt & COVID

Ed Dowd summarizes his career and insights as a successful stock picking “conspiracy theorist”.


I first met Ed Dowd during an early trip which a group of physicians from the International Alliance of Physicians and Medical Scientists (www.globalcovidsummit.com) made to the Hawaiian Islands of Maui and Oahu during the fall of 2021.  The primary purpose of the trip was to support our physician colleagues Dr. Kirk Milhoan (MD, PhD- Pediatric Cardiologist) and Lorrin Pang (MD, MPH- Maui County Public Health Officer), who were embroiled in an effort by local press and politicians to take their medical licenses for the perceived infraction of supporting early COVID treatment and (in the case of Lorrin) relying on his own evaluation and interpretation of the safety and effectiveness of the COVID-19 genetic vaccines.  The particular grievance concerning Lorrin seemed to have revolved around his reservations concerning the lack of data demonstrating safety of SARS-CoV-2 genetic vaccination during pregnancy.  After many long months subjected to the usual defamation and derision in local corporate-controlled media, both were eventually exonerated.  No final action was taken against them by the Hawaiian medical board, although both were deeply impacted by the experience, and I suspect will forever be more guarded and defensive in their medical practices.

It was during a local group dinner and fundraiser for the cause, held on the island of Maui, that Ed and his colleagues first introduced themselves to me. To my surprise, they indicated that they had authored a document which they named “The Malone Doctrine”.  Taken aback, as neither Jill nor I had contributed in any way, I asked why they were using this name.  Ed and his colleagues told me that “we have read and listened to everything you have said and written during COVID, and this is what is written in the white spaces between every line”…

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

#234. Britain on the brink

#234. Britain on the brink

THE PRICE OF EXTREMISM

Whether the country’s leaders know it or not, the United Kingdom is now at serious risk of economic collapse.

We must hope that this doesn’t happen. If it does, it will take the form of a sharp fall in the value of Sterling which, in these circumstances, is the indicator to watch.

A currency crash would cause sharp increases, not just in the prices of essential imports such as energy and food, but also in the cost of servicing debt. In defence of its currency, Britain could be forced into rate rises which would bring down its dangerously over-inflated property market.

This risk itself isn’t new. Rather, it results from a long period of folly, and can’t be blamed entirely on the current administration, inept though the Johnson government undoubtedly is. What we’re witnessing now seems to be a government on the edge of panic. The official opposition doesn’t offer a workable alternative programme, and mightn’t be electable if it did.

We need to be clear that the root cause of Britain’s problems is long-term adherence to an increasingly extreme ideology sometimes labelled ‘liberal’.

It’s one thing to recognize the merits of the market economy, but quite another to turn this into a fanaticism which judges everything on its capability of generating short-term private profit.

Extremism is divisive, and creates winners and losers to an extent that moderation does not. If solutions still exist for Britain’s worsening problems – and that’s a very big “if” – there are two reasons why such solutions mightn’t be adopted.

The first is that these solutions would anger a very vocal group of winners under the existing system.

The second is that those in charge would have to make a public admission of the failures of extremism.

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

The great unravelling

The great unravelling

Real life Bond villain Klaus Schwab has become the focus of ridicule following crude attempts to remove articles praising Sri Lanka’s “Vision 2025” economic plan from the World economic Forum (WEF) website – the world’s leading proponent of the hi-tech fourth industrial revolution apparently not realising that nothing ever disappears from the internet.

Sri Lanka was supposed to be the poster child for the Great Green New Reset, scoring a 98 percent ESG (Environment, Social and Governance) ranking.  Sri Lankan President Gotabaya Rajapaksa winning considerable praise from globalist leaders and climate activists alike for his speech to the COP26 conference in Glasgow last November:

“Sri Lanka recently restricted imports of chemical fertilizers, pesticides, and weedicides due to public health concerns, water contamination, soil degradation, and biodiversity impacts.

“Although opposed by entrenched lobbies, this has created opportunities for innovation and investment into organic agriculture that will be healthier and more sustainable in future.”

Critics of climate action have understandably focussed on this policy as “the reason” for Sri Lanka’s economic collapse and descent into political chaos – Gotabaya Rajapaksa and Prime Minister Ranil Wickremesinghe having fled the country after the hungry masses invaded the presidential palace last week.  In spite of praise from organisations like the WEF and the world bank, however, the Sri Lankan economy was highly indebted and vulnerable to economic shocks long before the country’s leaders decided that a mass crash diet was in order.  The country’s main sources of foreign currency – without which it could not repay its debts – are tea exports and tourism.  Tourism was, of course, crushed in 2020 and 2021, as countries locked down and air travel ground to a halt.  In 2022, moreover, air travel is still disrupted, and far fewer consumers can afford international travel.

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

“Take The Tragedy In Sri Lanka And Multiply By Ten”: The Fed Just Lobbed A Financial Nuke That Will Obliterate The Global Economy

“Take The Tragedy In Sri Lanka And Multiply By Ten”: The Fed Just Lobbed A Financial Nuke That Will Obliterate The Global Economy

We are living in a period of mass “Jonestown” economic delusion. Just twenty months ago – central bankers were offering to buy nearly every junk bond known to mankind, dramatically distorting the “true cost of capital.” All the way from crypto to emerging markets – it was a moral hazard overdose. Everyone on earth was borrowing money at fantasy-land bond yields.

Nowthe Fed is promising endless rate hikes and $1T of balance sheet reduction onto a planet with emerging market and Euro-zone credit markets in flames.

Listen, all I have is an economics degree from the University of Massachusetts, but after having spent the last 20 years trading bonds professionally and embarking on a 20k feet deep autopsy on the largest bank failure of all time – from my seat the current Fed agenda is sheer madness and will be outed very soon.

The true cost of capital was distorted for so long, we now have hundreds of academics– clueless to the underlying serpent inside global markets. When the 6 foot seven, Paul Volcker walked the halls of the Marriner S. Eccles Building of the Federal Reserve Board in Washington, our planet embraced about $200T LESS debt than we are staring down the barrel at today. Please call out the risk management imbeciles that make any reference of “Powell to Volcker.”

In 2021, global debt reached a record $303T, according to the Institute of International Finance, a global financial industry association. This is a FURTHER jump from record global debt in 2019 of $226T, as reported by the IMF in its Global Debt Database. Volcker was jacking rates into a planet with about $200T LESS debt. Please call out the risk management imbeciles that make any reference of Powell to Volcker.

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

James Howard Kunstler: It’s All Going to Have to Get Smaller

James Howard Kunstler: It’s All Going to Have to Get Smaller

“I’m not a techno-narcissist. I don’t think there are technological rescue remedies that will allow us to keep doing what we’re doing…”

— James Howard Kunstler

There is a prevailing fallacy, despite warning signs to the contrary (looming peak oil, fragile markets, and climate weirdness, among others), that we can continue in perpetuity the lifestyle to which we’ve become accustomed. All we need to do is to pump into The System more debt or more political insanity, or hope that alternative energies or some new techno-solution will bail us out.

But, at best, all debt-fueled growth, shale oil “miracles” and green fuels can do by themselves is to make the Long Emergency just “a little bit longer.”

“The Long Emergency” is a phrase coined by James Howard Kunstler to describe the economic, political and social upheavals that will dominate the first decades of the 21st-century as the honeymoon of affordable energy comes to a close. It is also the name of Kunstler’s seminal book on the topic. (The Long Emergency is one of fifteen books on our “Essential Reading List for the Strong Towns Thinker.”)

James Howard Kunstler is our very special guest on today’s episode of the Strong Towns podcast. He is the author of more than 20 books, including The Geography of Nowhere, Too Much Magic, and the World Made By Hand novel series.

In this episode, Strong Towns president Charles Marohn talks with Kunstler about what has changed—or perhaps what hasn’t changed—since The Long Emergency was first published in 2005. Kunstler explains why the “psychology of previous investment” (4:45) makes it so hard for most people to imagine living differently. Marohn and Kunstler also discuss (17:00) what’s wrong with the Green Revolution narrative that we can keep doing everything we’re doing now, if just “do it green”:

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

This Implosion Will Be Fast–Hold Onto Your Seats

THIS IMPLOSION WILL BE FAST – HOLD ONTO YOUR SEATS

The massive money creation in the 2000s has led to a debt and asset bubble, which is about to burst. Investors will be shocked by the speed of the decline and won’t react before it is too late.

The massive money creation by central and commercial banks in this century has resulted in a growth of global assets from $450 trillion in 2000 to $1,540 trillion in 2020.

DEBT TO GDP GROWTH

As the chart below shows US debt to GDP held well below 25% from 1790 to the 1930s, a period of almost 150 years. The depression with the New Deal followed by WWII pushed debt to GDP up to 125%. Then after the war, the debt  came down to around 30% in the early 1970s.

The closing of the gold window in 1971 ended all fiscal and monetary discipline. Since then, the US and much of the Western world has seen debt to GDP surge to well over 100%. In the US, Public Debt to GDP is now 125%. Back in 2000 it was only 54% but since then we have seen a vote buying system with a money printing bonanza and an exponential increase in debt to 125%.

A major part of the debt increase has gone to finance the rapid growth in property values.

The table below shows that property has grown on average by 250% between 2000 and 2020. So individuals are creating wealth by swapping properties with each other. Hardly a sustainable form of wealth creation.

The exponential growth in property prices has been global although countries like China, Canada, Australia and Sweden stand out with over 200% gains since 2000. Most of the properties bought in the last 20+ years involve massive leverage. When the property bubble soon bursts, many property owners will have negative equity and could easily lose their homes.

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

Food Riots Continue In Sri Lanka As The Military Begins Shooting

The starving and hungry people of collapsing Sri Lanks have been rioting over the cost of food and lack of energy. As if things couldn’t get worse, the ruling class has taken to gunning down those who stand against being ruled.

People are starving and are without gas or electricity, and now they are rioting as a society completely collapses. To make matters worse, the military is gunning people down. This is a glimpse into the future here if the rulers of Western countries continue. Once they collapse it around us, we will be the ones starving while the government makes sure it can remain intact and functional. That means we’ll still get stolen from and be forced at the barrel of the fun to comply with whatever they say.

According to a report by StrangeSounds, troops fired in Visuvamadu, 365 kilometers (228 miles) north of Colombo, on Saturday night as their guard point was pelted with stones, army spokesman Nilantha Premaratne said. “A group of 20 to 30 people pelted stones and damaged an army truck,” Premaratne told the Associated FreePress.

Police said four civilians and three soldiers were wounded when the army opened fire for the first time to quell unrest linked to the worsening economic crisis.

As the pump ran out of petrol, motorists began to protest and the situation escalated into a clash with troops, police said. -Strange Sounds

Sri Lanka is suffering its worst economic crisis since “independence”, with the country unable to find dollars to import essentials, including food, fuel, and medicines. (Anyone who actually believes anyone other than the rulers are “independent” in Sri Lanka has a lot of cognitive dissonances to evaluate).

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

The Engineered Stagflationary Collapse Has Arrived – Here’s What Happens Next

The Engineered Stagflationary Collapse Has Arrived – Here’s What Happens Next

In my 16 years as an alternative economist and political writer I have spent around half that time warning that the ultimate outcome of the Federal Reserve’s stimulus model would be a stagflationary collapse. Not a deflationary collapse, or an inflationary collapse, but a stagflationary collapse. The reasons for this were very specific – Mass debt creation was being countered with MORE debt creation while many central banks have been simultaneously devaluing their currencies through QE measures. On top of that, the US is in the unique position of relying on the world reserve status of the dollar and that status is diminishing.

It was only a matter of time before the to forces of deflation and inflation met in the middle to create stagflation. In my article ‘Infrastructure Bills Do Not Lead To Recovery, Only Increased Federal Control’, published in April of 2021, I stated that:

Production of fiat money is not the same as real production within the economy… Trillions of dollars in public works programs might create more jobs, but it will also inflate prices as the dollar goes into decline. So, unless wages are adjusted constantly according to price increases, people will have jobs, but still won’t be able to afford a comfortable standard of living. This leads to stagflation, in which prices continue to rise while wages and consumption stagnate.

Another Catch-22 to consider is that if inflation becomes rampant, the Federal Reserve may be compelled (or claim they are compelled) to raise interest rates significantly in a short span of time. This means an immediate slowdown in the flow of overnight loans to major banks, an immediate slowdown in loans to large and small businesses, an immediate crash in credit options for consumers, and an overall crash in consumer spending…

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

Kim Dotcom Breaks Down the True Scale of US Government Debt

New Zealand tech CEO, Kim Dotcom did the math on the United States’ sovereign debt and he tweeted a thread about it, saying it may the most important thread that he may ever make.

Kim explains that US spending and debt have spiraled out of control and the Government can only raise the money it needs by printing more of it, which means that hyperinflation is guaranteed.

He says this has been going on for decades and there’s no way to fix it and that the US got away with this for so long, because US dollar is the world’s reserve currency. When the US Government prints trillions, it is thereby robbing Americans and the entire world in what he calls the biggest theft in history.

He says the total US debt is at $90 trillion, which together with $169 trillion in US unfunded liabilities totals $259 trillion, which is $778,000 per US citizen or $2,067,000 per US Taxpayer.

Now, the value of all US assets combined: every piece of land, real estate, all savings, all companies, everything that all citizens, businesses, entities and the state own is worth $193 trillion.

Our total debt, $259 trillion minus our total net worth, $193 trillion equals negative $66 trillion of debt and liabilities after every asset in the US has been sold off.

So even if the US could sell all assets at the current value, which is impossible, it would still be broke.

This is where the ‘Great Reset’ comes in and he asks, “Is it a controlled demolition of the global markets, economies and the world as we know it? A shift into a new dystopian future where the elites are the masters of the slaves without the cosmetics of democracy?”

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

Will the Global South break free from dollarized debt?

Will the Global South break free from dollarized debt?

In his latest book, economist Michael Hudson pits socialism against finance capitalism and tears apart the ‘dream civilization’ imposed by the 1 percent.
https://media.thecradle.co/wp-content/uploads/2022/06/IMG-20220609-WA0000.jpg

Michael Hudson’s new book on the world’s urgent global economic re-set is sure to ruffle some Atlanticist feathers.

Photo Credit: The Cradle

With The Destiny of Civilization: Finance Capitalism, Industrial Capitalism or Socialism, Michael Hudson, one of the world’s leading independent economists, has given us arguably the ultimate handbook on where we’re at, who’s in charge, and whether we can bypass them.

Let’s jump straight into the fray. Hudson begins with an analysis of the “take the money and run” ethos, complete with de-industrialization, as 90 percent of US corporate revenue is “used to share buybacks and dividend payouts to support company stock prices.”

That represents the apex of “Finance Capitalism’s” political strategy: to “capture the public sector and shift monetary and banking power” to Wall Street, the City of London and other western financial centers.

The whole Global South will easily recognize the imperial modus operandi: “The strategy of US military and financial imperialism is to install client oligarchies and dictatorships, and arm-twist allies to join the fight against designated adversaries by subsidizing not only the empire’s costs of war-making (“defense”) but even the imperial nation’s domestic spending programs.” This is the antithesis of the multipolar world advocated by Russia and China.

In short, our current Cold War 2.0 “is basically being waged by US-centered finance capitalism backing rentier oligarchies against nations seeking to build up more widespread self-reliance and domestic prosperity.”

Hudson presciently reminds us of Aristotle, who would say that it is in the interest of financiers to wield their power against society at large: “The financial class historically has been the major beneficiary of empires by acting as collection agents.”

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

The Handbook for Debt-Soaked Nations: Lie, Print, Inflate & Finger-Point

The Handbook for Debt-Soaked Nations: Lie, Print, Inflate & Finger-Point

Below we consider the classic (and oh-so predictable) tactics of debt-soaked nations facing a showdown (corner) between tanking markets and ripping inflation.

Ultimately, I see a stagflationary end-game in which both occur, but for the near-term, prepare for more inflation, as it’s the option all debt-soaked sovereigns are eternally forced to take.

The Cruelest Month

T.S. Elliot famously described April as the cruelest month, but the recent (and ever-unfolding) events of May seem far crueler.

As we have warned from the very onset of this otherwise avoidable war in Ukraine, the backfiring of Western sanctions against Putin (de-dollarization, inflationary tailwinds and increasingly discredited central banks) were not only plain to foresee, but placed the West in an almost comical (yet tragic) scenario in which nations like Germany find themselves sending weapons to the Ukraine while simultaneously sending Rubles to Putin.

How did the world become so hypocritical, dishonest, cornered and silly?

(Cold) Economic Realism vs. (Empty) Moral Posturing

As George Washington observed in a 1770’s moment of Realpolitik candor: “Nations have no permanent friends nor permanent enemies, just permanent interests.”

Turning to 2022, the self-interested reality of Western reliance on Russian energy has made their front-page virtue signaling a bit less virtuous…

Such cold realism explains why Italian Prime Minster Draghi realistically confessed as early as May 11 that EU companies could pay for Russian gas in Rubles in the very same week German Chancellor Olaf Scholz realistically opposed any immediate halting of oil imports from Russia.

Meanwhile, by May 12, the headlines revealed that Russian oil revenues had increased YoY by 50% despite the Western “boycott.”

An equally realistic Japan, like Germany, will take its time to phase-out its dependence on Russian energy, as it, like Germany, recognizes that an immediate G-7 boycott of Russian oil and gas amounts to little more than an energy suicide pact.

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

China, U.S. lead rise in global debt to record high $305 trillion – IIF

China, U.S. lead rise in global debt to record high $305 trillion – IIF

View of the city skyline in Shanghai

A view of the city skyline in Shanghai, China February 24, 2022. Picture taken February 24, 2022. REUTERS/Aly Song

NEW YORK, May 18 (Reuters) – The world’s two largest economies borrowed the most in the first quarter as global debt rose to a record above $305 trillion, while the overall debt-to-output ratio declined, data from the Institute of International Finance showed on Wednesday.

China’s debt increased by $2.5 trillion over the first quarter and the United States added $1.5 trillion, the data showed, while total debt in the euro zone declined for a third consecutive quarter.

The analysis showed many countries, both emerging and developed, are entering a monetary tightening cycle -led by the U.S. Federal Reserve- with high levels of dollar denominated debt.

Global debt totals
Global debt totals

“As central banks move ahead with policy tightening to curb inflationary pressures, higher borrowing costs will exacerbate debt vulnerabilities,” the IIF report said.

“The impact could be more severe for those emerging market borrowers that have a less diversified investor base.”

The yield on the benchmark 10-year Treasury note has risen some 150 basis points so far this year and earlier this month hit its highest since 2018.

SOVEREIGNS BEWARE

Corporate debt outside banks and government borrowing were the largest sources of the increase in borrowing, with debt outside the financial sector rising above $236 trillion, some $40 trillion higher than two years ago when the COVID-19 pandemic hit.

Government debt has risen more slowly in the same period, but as borrowing costs rise sovereign balance sheets remain under pressure.

Government financing needs
Government financing needs

“With government financing needs still running well above the pre-pandemic levels, higher and more volatile commodity prices could force some countries to increase public spending even further to ward off social unrest,” said the IIF.

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

A Global Monetary & Commodity Inferno of Nuclear Proportions

A GLOBAL MONETARY & COMMODITY INFERNO OF NUCLEAR PROPORTIONS

When the sh-t hits the global fan, it often does it at the optimal time for the maximum amount of damage and with the worst kind of sh-t to soil the world.

For years I have been clear that the world is reaching the end of an economic, financial and monetary era which will affect mankind catastrophically for decades.

The world will obviously blame Putin for the catastrophe which will hit every corner of our planet. But we must remember that neither Putin nor Covid is the reason for the economic cataclysm that we are now approaching.

These events are catalysts which will have a major effect because they are hitting a gigantic debt bubble of a magnitude that has never been seen before in history. And it obviously takes very little to prick this epic bubble.

What is unequivocal is that all currencies will finish the 100+ year fall to ZERO in the next few yearsIt is also crystal clear that all the asset bubbles – stocks, bonds and property – will implode at the same time leading to a long and deep depression.

We had the warning in 2006-9 but central banks ignored it and just added new worthless debt to existing worthless debt to create worthless debt squared – an obvious recipe for disaster.

So as is often typical for the end of an economic era, the catalyst is totally unexpected and worse than anyone could have forecast.

WAR CYCLES

Yes, I and a few others have pointed out that we are in a war cycle currently, and recent events have clearly confirmed this and hit the world with a vengeance.

Just as nobody paid any serious attention to the warning that the Great Financial Crisis in 2006-9 gave the world, few people have taken Putin’s warnings seriously since the 2014 Maidan revolution in Ukraine.

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

Welcome to the age of cuts

Welcome to the age of cuts

Voiced by Amazon Polly

The UK government faced a barrage of criticism over its National Insurance hike this week.  The tax – which theoretically pays for public services, pensions, and benefits – was in creased last autumn, before the political class became aware of the massive increase in gas and electricity prices coming later this year.  However, with cost-push inflation rising across the economy, and with rises in local taxes due to be announced, millions of British households are facing a massive squeeze on their standard of living.  This has given more weight to the idea that government should extend its pandemic borrowing until the economy has recovered, rather than raising new taxes at this point.

It goes without saying that nobody welcomes tax increases.  Nevertheless, as a consequence of the way this currency-creation system works, the government is rapidly running out of room to manoeuvre.  In the UK, around £500bn worth of government bonds are index-linked, so that as the inflation rate rises, so the cost of servicing the debt increases.  As James Sillars at Sky News reported this week:

“Interest payments on government debt hit a record £8.1bn for the month of December because of surging inflation…  The Office for National Statistics (ONS) said the cost of servicing the country’s £2trn+ debt pile was almost 200% or £5.4bn up on December 2020.

“It is because half a trillion pounds worth of government bonds are linked to the Retail Prices Index (RPI) measure of inflation which stood at 8.4% in December – its highest level since 1991.”

The problem will worsen in the spring as the new energy price cap comes into force, and as prices continue to rise across the economy.  This sets up one of contemporary democracy’s greatest flaws.  It is precisely during inflationary periods that the people begin to demand more government spending and less taxation…

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

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…

Olduvai IV: Courage
In progress...

Olduvai II: Exodus
Click on image to purchase

Click on image to purchase @ FriesenPress