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Will it be an Inflationary or Deflationary Depression?

Will it be an Inflationary or Deflationary Depression?

depression

At some point, the economy is no longer controlled by individual citizens in the marketplace but by government “planners,” who find they have only one of two alternatives: stop “stimulating” and permit a full-scale credit collapse, or continue stimulating until the dollar loses all value and society breaks down.

Depending on which they choose, we will have a depression characterized by deflation or by hyperinflation.

Deflationary Depression

This is the 1929-style depression, where huge amounts of inflationary credit are wiped out through bank failures, bond defaults, and stock and real-estate crashes.

Before 1913 (the inception of both the Federal Reserve and the income tax), having the dollar pegged to gold (at $20 an ounce) inhibited the scale of monetization.

When depressions of this type occurred, depositors acted quickly to collect their money; they had no illusion that the government would bolster their banks; once the banks ran out of gold, their bank accounts were worthless.

Their quick response and the fact that the federal government could not monetize its deficit spending as freely as it now can forced the market to correct distortions rapidly.

Until the 1930s, depressions were sharp but brief.

They were short because unemployed workers and distressed business owners were forced to lower their prices and change their business methods to avoid starvation.

The 1929 Depression was deeper and more widespread than any before it since the Federal Reserve (by becoming the lender of last resort) allowed banks to maintain far smaller reserves than ever before.

By backing the dollar with Reserve Bank IOUs instead of gold, the money supply could be increased enormously, and large distortions could be built into the economy before a depression liquidated them.

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

Red Gold: China’s Stealth Plan to Use Gold for World Domination

Red Gold: China’s Stealth Plan to Use Gold for World Domination

China gold

Gold used to be important.

During and after World War II, every major developed country amassed as much physical gold as they could. It stabilized currencies and signaled independence.

But with the end of the gold standard in 1971, most countries began to sell off their reserves.

So much so that in 1999, an agreement was formed to limit the amount of gold that central banks could sell. Fast forward to today, and Canada’s central bank owns ZERO gold.

Despite the agreement, most countries continued to shed their gold reserves as fast as possible.

Central bank gold reserves

That is until a few years ago, when a handful of countries reversed course. Central Banks started buying gold with fury, and they haven’t let up since.

In the final quarter of 2018, central banks purchased more gold than in any other quarter on record.

By the end of the year, central banks collectively held around 1.064 billion ounces of gold (equivalent to 33,200 tons).

That’s about one-fifth of all the gold ever mined.

In the first half of 2019, central banks purchased 11.97 million ounces of gold (374 tons). Once again, that was far more than ever before. And it’s equivalent to one-sixth of total gold demand in that period.

And total central bank gold purchases for 2019 were the second highest they’ve been in the last 50 years (2018 being the first).

The Unusual Suspects in Central Bank Gold Purchases

And the Keyser Söze of gold is Vladimir Putin.

I’ve been very quiet about Russia and Putin the last few years as I’ve been swamped with media requests following the success of my NY Times Bestseller The Colder War.

Don’t underestimate what the Russians are doing, as others are starting to follow…

While the world focuses on China, Russia has positioned itself at the center of the global political chessboard.

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

Why the US Is Headed into Its Fourth Turning

Why the US Is Headed into Its Fourth Turning

US fourth turning

International Man: The economic, political, social, and cultural situation seems to have become increasingly volatile in the United States and more broadly in the West. Is this a unique situation or part of a recurring historical cycle?

Authors William Strauss and Neil Howe introduced a popular theory in their book, The Fourth Turning, outlining the recurring generational cycles that have occurred throughout American history.

What are your thoughts?

Doug Casey: I read Strauss and Howe’s first book, Generations, when it came out back in 1992. I thought it was brilliant.

Let me start off by recommending both Generations and The Fourth Turning to everybody. Both books offer quite a scholarly, readable, and prescient view of the cyclicality of history. And offer a very plausible forecast for the 2020s.

History’s best seen as cyclical, rather than a straight-line progress to some preordained end the way both the Marxists and the Abrahamic religions see it. But then, Ecclesiastes has its famous quote that there’s nothing new under the sun.

Plato in the Republic talks about how the younger generation—and we’re talking fourth century BC—can’t stand up to the moral values of their forefathers.

Older people have always thought that the younger generation wouldn’t quite measure up. In recent American history, you’ll recall, the younger generation were the beatniks in the ’50s, the hippies in the ’60s, and the yuppies in the ’80s—so it’s a passing parade. Older people have a tendency to think the world is going downhill. Nothing new there. But there’s always a rebirth.

Niccolò Machiavelli, in his Florentine Histories, said:

Virtue gives birth to tranquility, tranquility to leisure, leisure to disorder, disorder to ruin… and similarly from ruin, order is born, from order virtue, from virtue, glory and good fortune.

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

Doug Casey on What the International Ruling Class Have Planned for You

Doug Casey on What the International Ruling Class Have Planned for You

International Ruling class

International Man: No matter the problem, the prescription of the Davos crowd is always more welfare, more warfare, more money printing, more taxes, and of course, more centralization of power into global institutions.

What’s your take?

Doug Casey: The people who attend Davos are all welfare statists. They’re not necessarily socialists, insofar as they don’t want to see government nationalize industries. Most understand how totally dysfunctional that is and that they don’t really benefit from it. Strict socialism, defined as State ownership of the means of production, is off the table. They prefer economic fascism, where a powerful State can funnel wealth to the corporations the elite own or control. They’re happy to throw some table scraps to the unwashed masses, of course. Modern Monetary Theory (MMT) is the best way to do that.

Again, they’re not socialists. They’re welfare statists. Completely opportunistic and absolutely unprincipled. Despicable people, actually. Few are entrepreneurial, independent thinkers or free-market oriented. Those types would be disruptive at Davos, and if they’re ever invited, it would be only once.

Other than celebrities, court intellectuals, and publicity-oriented multibillionaires, the attendees are almost all bureaucrats and politicians who thrive on stolen money. But it’s no longer easily visible briefcases full of cash. That’s quaint in today’s world. They steal indirectly, by making sure they benefit from state regulations, state favors, and the inflation of the currency.

Bribes are in the form of tax-deducible donations to charitable foundations and nongovernmental organizations (NGOs). That’s not only much safer, but the money is vastly bigger, and the way it’s rigged adds to their prestige. Both making and taking a bribe disguises the miscreants as philanthropists and do-gooders when they use an NGO as a funnel.

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

David Stockman on What Triggers the Next Financial Collapse

David Stockman on What Triggers the Next Financial Collapse

financial collapse

International Man: You have sounded the alarm on a coming financial crisis of historic proportions. How do Trump’s trade policies figure into your view that a crisis is coming?

David Stockman: Trump’s trade policies only create more risk and rot down below.

They’re just kicking the can down the road. With this latest move by the Fed, they have cut the interest rates three times and short-term rates are back at 1.55%. They’re pumping their balance sheet back up—it’s up $300 billion just since September.

The Fed has reverted to all of the things that have created the underlying rot—and that means when finally things break loose, it’s going to be far worse than it would have otherwise been.

Given that they’re kicking the can down the road, they’re building the pressure in the system to really explosive levels.

The trade chaos that Trump’s creating is probably the catalyst that will bring down the whole house of cards.

At end of the day, it’s about the Red Ponzi. The world economy would be not nearly as good as it looks had the Chinese not been borrowing like there’s no tomorrow and building regardless of whether its efficient or profitable.

This has kept the global economy inching forward on a totally artificial basis. You could track it; some people call it the “China credit impulse.” Every time they get into trouble, they turn on the printing press. That causes commodity prices to rise and industrial activity and trade to pick up. It shows up in the GDP numbers, and then everybody gets all excited.

The fear of recession that we had a while back has now abated. We’re back to another global reflation meme, but none of this is sustainable.

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

Doug Casey on the Destruction of the Dollar

Doug Casey on the Destruction of the Dollar

Dollar

“Inflation” occurs when the creation of currency outruns the creation of real wealth it can bid for… It isn’t caused by price increases; rather, it causes price increases.

Inflation is not caused by the butcher, the baker, or the auto maker, although they usually get blamed. On the contrary, by producing real wealth, they fight the effects of inflation. Inflation is the work of government alone, since government alone controls the creation of currency.

In a true free-market society, the only way a person or organization can legitimately obtain wealth is through production. “Making money” is no different from “creating wealth,” and money is nothing but a certificate of production. In our world, however, the government can create currency at trivial cost, and spend it at full value in the marketplace. If taxation is the expropriation of wealth by force, then inflation is its expropriation by fraud.

To inflate, a government needs complete control of a country’s legal money. This has the widest possible implications, since money is much more than just a medium of exchange. Money is the means by which all other material goods are valued. It represents, in an objective way, the hours of one’s life spent in acquiring it. And if enough money allows one to live life as one wishes, it represents freedom as well. It represents all the good things one hopes to have, do, and provide for others. Money is life concentrated.

As the state becomes more powerful and is expected to provide more resources to selected groups, its demand for funds escalates. Government naturally prefers to avoid imposing more taxes as people become less able (or willing) to pay them. It runs greater budget deficits, choosing to borrow what it needs. As the market becomes less able (or willing) to lend it money, it turns to inflation, selling ever greater amounts of its debt to its central bank, which pays for the debt by printing more money.

Democracy Is the Ideal Distraction

Democracy Is the Ideal Distraction

democracy

In the days of yore, there were kings. Everybody could agree to hate the king because he was rich and well-fed, when most of his minions were not.

Then, a more effective system was invented: democracy. Its originators had in mind a system whereby the populace could choose their leader from amongst themselves – thereby gaining a leader who understood them and represented them.

In short order, those amongst the populace who wished to rule found a way to game the new system in a way that would allow them to, in effect, be kings, but to do so from behind the scenes, whilst retaining the illusion of democracy.

The formula is to create two opposing political parties. Each is led by someone who’s presented as being a “representative of the people.”

You then present the two parties as having opposing views on governance. It matters little what the differences are. In fact, you can have the differences be as obscure and arbitrary as, say, gay rights or abortion, and they will work as well as any other differences. What matters is that your two parties object to each other strenuously on the declared issues, working the electorate into a lather.

Once you have each group hating the other group “on principle,” you’re home free. At that point, you’ve successfully completed the distraction. The electorate now believe that, whatever the trumped-up issues are, they’re critical to the ethical governance of the country.

Most importantly, the electorate actually believe that their future well-being depends on the outcome of the next election – that it will decide whether their own view on the issues will prevail.

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

The Greatest Swindle in American History… And How They’ll Try It Again Soon

The Greatest Swindle in American History… And How They’ll Try It Again Soon

property taxes

International Man: Before 1913 there was no income tax, and the United States was a much freer country. Initially, the government sold the federal income tax to the American people as something only the rich would have to pay.

Jeff Thomas: Yes, exactly. It always begins this way. The average person is always happy to see the rich taken down a peg, so this makes the introduction of the concept of theft by the government more palatable. Once people have gotten used to the concept and accept it as being perfectly reasonable, then it’s time to begin to drop the bar as to who “the rich” are. Ultimately, the middle class are always the real target.

International Man: The top bracket in 1913 kicked in at $500,000 (equivalent to around $12 million today), and the tax rate for it was only 7%. The government taxed those making up to $20,000 (equivalent to around $475,000 today) at only 1% – that’s one percent.

Jeff Thomas: Any good politician understands that you begin with the thin end of the wedge, then expand upon that as soon as you feel you can get away with it. The speed at which the tax rises is commensurate with the level of tolerance of the people. And in different eras, the same nation may have a different mindset. The more domination a people have come to accept from their government, the faster the pillaging can be expanded.

As an example, the Stamp Tax that King George III placed upon the American colonies in the eighteenth century was very small indeed – less than two percent – but the colonists were very independent people, asking little from the king in the way of assistance, and instead, relying upon themselves for their well-being. Such self-reliant people tend to be very touchy as regards confiscations by governments, and even two percent was more than they would tolerate.

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

All It Takes Is a Slipup or a Nudge

All It Takes Is a Slipup or a Nudge

US warfare

Just prior to a war, the majority of people in the nations that are about to become involved tend to assume that another nation is threatening theirs, whist their own leaders are doing all they can to avoid conflict. This is almost never the case.

The “etiquette” of starting wars is for leaders to claim to their people that the last thing they want is war, but the enemy is goading them into armed conflict and, at some point, retaliation becomes “unavoidable.”

The reason for this etiquette is that, almost invariably, the people of a nation have no desire to go to war.

But if that’s the case, why is world history filled with warfare taking place on a regular basis?

Well, truth be told, there are two groups of people who tend to relish war – the military and the political leaders.

I’ve often quoted Randolph Bourne as saying, “War is the health of the state.” He was quite correct. The larger the nation, the greater the need political leaders have for warfare. After all, there’s no situation in which a people feel more greatly that they need their leaders to take charge, than in a time of war.

Political leaders, after all, thrive on taxation and the oppression of basic rights. And they can get away with taxing a people more heavily during a war. They can also remove basic freedoms “temporarily” in order to keep the people “safe.”

Then, when the war is over, taxes never seem to return to their previous low and freedoms never fully return. With each conflict, the state ratchets up its power over the people.

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

Falling From Grace

Falling From Grace

Years ago, Doug Casey mentioned in a correspondence to me, “Empires fall from grace with alarming speed.”

Every now and then, you receive a comment that, although it may have been stated casually, has a lasting effect, as it offers uncommon insight. For me, this was one of those and it’s one that I’ve kept handy at my desk since that time, as a reminder.

I’m from a British family, one that left the UK just as the British Empire was about to begin its decline. They expatriated to the “New World” to seek promise for the future.

As I’ve spent most of my life centred in a British colony – the Cayman Islands – I’ve had the opportunity to observe many British contract professionals who left the UK seeking advancement, which they almost invariably find in Cayman. Curiously, though, most returned to the UK after a contract or two, in the belief that the UK would bounce back from its decline, and they wanted to be on board when Britain “came back.”

This, of course, never happened. The US replaced the UK as the world’s foremost empire, and although the UK has had its ups and downs over the ensuing decades, it hasn’t returned to its former glory.

And it never will.

If we observe the empires of the world that have existed over the millennia, we see a consistent history of collapse without renewal. Whether we’re looking at the Roman Empire, the Ottoman Empire, the Spanish Empire, or any other that’s existed at one time, history is remarkably consistent: The decline and fall of any empire never reverses itself; nor does the empire return, once it’s fallen.

But of what importance is this to us today?

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

The Economic Bubble Bath

The Economic Bubble Bath

economic bubble stocks bonds

At the end of a long, tiring day, we may choose to treat ourselves to a soothing bubble bath. Surrounded by steaming water and a froth of sweet-smelling bubbles, it’s easy to forget the cares of everyday life.

This fact is equally true of economic bubbles. When the markets are up, we’re inclined to feel as though life is rosy. Unfortunately, it does seem to be the norm that investors fail to recognize when a healthy up-market transforms into a dangerous bubble. We tend to be soothed into overlooking the fact that we’re in hot water, and economically, that’s not an advantageous situation to be in.

Periodically, any economy will experience bubbles. It’s bound to happen. Human nature dictates that, if the value of an asset is on the rise, the more success it experiences, the more we want to get in on the success.

Sadly, the great majority of investors have a tendency to fail to educate themselves on how markets work. It’s easier to just trust their broker. Unfortunately, our broker doesn’t make his living through our success; he makes it through brokering transactions. The more buys he can encourage us to make, the more commissions he enjoys.

It’s been said that a broker is “someone who invests your money until it’s gone,” and there’s a great deal of truth in that assessment.

And so, we can expect to continue to witness periodic bubbles in the markets. They’ll occur roughly as often as it takes for us to forget the devastation of the last one and we once again dive in, only to be sheared once again.

But we’re presently seeing an economic anomaly – a host of bubbles, inflating dramatically at the same time.

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

Doug Casey Debunks Four Myths About Trump, Taxes, and the Economy

Doug Casey Debunks Four Myths About Trump, Taxes, and the Economy

Trump taxes debunked

International Man: For many years, President Trump has made no apologies for trying to pay the least amount of taxes possible. He’s clearly stated this in many interviews.

His desire to minimize his taxes has brought scorn from many in the mainstream media, and politicians from both sides of the aisle. These people are of the opinion that paying taxes is an honorable and necessary responsibility. It brings to mind the wrongheaded saying “taxes are the price we pay for a civilized society”, which came from US Supreme Court Justice Oliver Wendell Holmes. Many people believe this.

But if that’s true, how come low tax locales like Singapore, the Cayman Islands, Monaco aren’t backward hell holes, but rather sophisticated and civilized?

Doug Casey: Almost any lie can be accepted as truth if it’s said often enough and with enough certainty. That absolutely applies to what Holmes said. It’s shameful how people don’t think about its meaning, but slavishly repeat it.

Taxes aren’t the price we pay for civilized society. They’re a sign of the fact that society is becoming uncivilized. A civilized society is based on voluntarism. Taxes are all about coercion.

People don’t seem to recognize or remember that before 1913 there was no income tax in the US. There was no reporting of any kind to the US government. It was a much more civilized and far freer country then.

As far as Trump minimizing his taxes, congratulations to him. The object should be to cut the size of the US government in half, and cut it in half again, and again. And along with it, cut the tax burden that it imposes on the average American.

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

Doug Casey: “This is Going to be One for the Record Books”

Doug Casey: “This is Going to be One for the Record Books”

Just because society experiences turmoil doesn’t mean your personal life has to. And a depression doesn’t have to be depressing. Most of the real wealth in the world will still exist—it will just change ownership.

What is a depression?

We’re now at the tail end of a very long, but in many ways a very weak and artificial, economic expansion. At the same time we’ve had one of the strongest securities bull markets in history. Both are the result of trillions of new dollars created over the last decade. Right now very few people are willing to consider the possibility of tough times—let alone The Greater Depression.

But, perverse though it may seem, this is the very best time to think about it. The U.S. economy is a house of cards, built on quicksand, with a tsunami on the way. I urge everyone to read up on the topic. For now, I’ll only briefly touch on the nature of depressions. There are at least three good definitions of the term:

  1. A period of time when most people’s standard of living drops significantly.
  2. A period of time when distortions and misallocations of capital are liquidated.
  3. A period of time when the business cycle climaxes.

Using the first definition, any natural disaster can cause a depression. So can living above your means for long enough. But the worst kind of depression has not just economic effects, but economic causes. That’s where definitions 2 and 3 come in.

What can cause distortions in the way the market operates, causing people to do things they’d otherwise consider unreasonable or uneconomic? Only government action, i.e., coercion. This takes the form of regulation, taxes, and currency inflation.

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

The Frontlines in the War on Cash

The Frontlines in the War on Cash

Let’s face it, many forces are pushing for the abolition of – or at least serious restrictions on – cash.

Many businesses hate cash, because cash transactions take longer to process, and large quantities of cash pose a security risk. If you travel by air, you’ve experienced this first-hand. “Cashless cabins” are the rule for most airlines. You must purchase every glass of wine, cheese dip, or package of mixed nuts with a credit or debit card.

In Atlanta, you can’t even buy a hot dog at a pro football or soccer game with cash. In March, the operators of Mercedes-Benz Stadium, home of the Atlanta Falcons and Atlanta United, announced it would no longer accept cash at food and beverage concession stands.

Credit card companies hate cash too. And for obvious reasons – they get a cut of every purchase through the fees they charge businesses. So it’s no surprise that in 2017, Visa announced its “Cashless Challenge” and gave $10,000 to 50 small businesses that stopped accepting cash payments.

Big brother hates cash, too. For decades, governments around the globe have engaged in a War on Cash. The original justification for this war was to fight racketeering. The War on Cash then morphed into the War on Drugs, the War on Money Laundering, and subsequently, the War on Terror.

Numerous countries have placed severe limits on how much cash you can spend at one time.

Spain and France have banned cash transactions over €1,000. If you want to spend more than that, you must use a debit card, credit card, a non-transferrable check, or pay by bank transfer. In Italy, where the cash limit is €3,000, violations are punished by confiscation of up to 40% of the amount paid. In Spain, you lose “only” 25% of your cash if you violate the rules. Similar restrictions are in place in most EU countries. Later this year, Australia will ban cash transactions larger than AU$10,000 (about US$7,500).

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

Brace Yourself: The Next Epic Collapse Could Be Weeks Away

Brace Yourself: The Next Epic Collapse Could Be Weeks Away

There wasn’t a group of people more wrong about the 2008 financial crisis than those at the Federal Reserve.

Mere months before the disaster hit in earnest, the nation’s highest economic and financial officials were vocal that there was nothing to worry about.

Most memorable of these are perhaps two comments from former Fed Chairman Ben Bernanke…

In January 2008, he said, “The Federal Reserve is not currently forecasting a recession.”

And later that year, in July, he said Fannie Mae and Freddie Mac – the two government-sponsored enterprises that kicked off the credit crisis a few months later – were “in no danger of failing.”

And it wasn’t just Bernanke. The same delusional sentiment was echoed by almost all the top Fed and Treasury officials… as well as those in the mainstream financial media and academia.

Of course, we all know how things played out…

When the housing bubble burst in 2008, the effects rippled throughout the economy, kicking off the largest financial and economic crisis since the Great Depression.

And the S&P 500 – a good proxy for the U.S. stock market – went on to fall by over 56%.

The reason I’m telling you this today is to remind you that people exhibit laughable sentiments near the peak of bull markets.

And today, we’re hearing much of the same sentiment that was displayed before the 2008 crisis.

But as you’ll see below, it’s not the only sign I’m seeing of a coming crisis…

A Contrarian Indicator

I’ve written before about why I believe we’re near the peak of the largest bubble in human history.

And as I’m about to show you, there are clear indicators of a coming crisis… in the auto sector… the housing sector… and in the economy as a whole.

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

Olduvai IV: Courage
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Olduvai II: Exodus
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