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2021 Year in Review: Crisis of Authority and the Age of Narratives

January 9, 2022

2021 Year in Review: Crisis of Authority and the Age of Narratives

Every year, friend-of-the-site David Collum writes a detailed “Year in Review” synopsis full of keen perspective and plenty of wit. This year is no exception. Poignant and delightfully acerbic when necessary, considering the troubling times. As with past years, he selected Peak Prosperity as the site where it is published in full. It is longer than our usual posts, but worth the time to read in full. This is Part 1.

Introduction

Dave: You do lack self control, but I learned and laughed making my way thru this.

~ Larry Summers (@LHSummers), former Secretary of the Treasury

I’ve been trying to reach you about your car’s extended warranty. What began more than a dozen years ago as a synopsis of the year’s events in markets and finance for a few friends morphed beyond my control into a Year in Review (YIR)—an attempt to chronicle human folly and world events for the entire year. It captures key moments before they slip into the brain fog. The process of trying to write a coherent narrative helps me better understand WTF just happened and seminal moments that catch my eye.

By far my favorite end-of-year recap for the last ten years. Finished it yesterday. Once again David hasn’t disappointed. He’s on my I want to go to dinner with list.

~ Jim Pallotta (@jimpallotta13), money manager and former owner of Boston Celtics

I’m game, Jim, even if it’s just a pretzel, nachos, and a brewski. The title, “Crisis of Authority,” is a double entendre. On the one hand, previously trusted authorities that we relied on to better understand the world are long gone. Edward R. Murrow, Walter Cronkite, and Tim Russert have been replaced with Chris Cuomo, Don Lemon, and Brian Stelter. Oops. Scratch Chris Cuomo..

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

The Coming Of Depression Economics

January 29, 2017

The Coming Of Depression Economics

Like it or not, this is where we have been all along and a great many people are just now catching up. No matter what Janet Yellen says about the economy, she is talking out the side of her mouth. Internally, the recovery is gone, and it is never coming back. Externally, we have sub-5% unemployment so we all should be so happy, especially with, in her view, stable prices.

To their credit, many prominent economists aren’t so enthusiastic about those prospects. Among them are Larry Summers, Paul Krugman, and Brad DeLong, all who recognize that “something” just isn’t right and therefore “something” else should be done about it. Thus, the real economic debate over the coming years (unfortunately) will take shape around those two facets. Having wasted nearly a decade on purely central bank solutions that were never going to work, the real discoveries can now possibly take place.

The problem is as I wrote yesterday, where in a rush to do anything and everything “different” the Trump administration might actually spoil the process. De-regulation and income tax cuts, as well as the repeal of Obamacare, are all very good things that sorely need to be addressed; but they didn’t cause this depression and thus won’t get us out of it. And you can bet that none of Summers, Krugman, or DeLong will be in favor of those options, so if they all fail to restore economic growth, as I believe they will if left in isolation, then that will severely diminish those ideas for perhaps a generation or more. That would be a fatal mistake, especially since for the first time in many generations people outside of Economics are receptive to “new” ideas (that are only new because they have been out of practice and actively discouraged for so long).

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

Central Banks Are Trapped – Are Higher Interest Rates the Only Answer?

April 20, 2016

Central Banks Are Trapped – Are Higher Interest Rates the Only Answer?

COMMENT: Marty, well it looks like you have done it. The central banks are going to start raising interest rates right in line with your model. It is interesting how your computer puts the entire world before you to see. Keep up the good work. They obviously are starting to follow you.

REPLY: I do not think that the central banks are simply beginning to follow us. Yes, they all probably read us, no doubt. But make no mistake about it, they are going to raise rates, not because of our model, but because they have no choice. Low interest rates have wiped out pension funds and destroyed the living standards of the elderly. These people are clueless and should never have followed Larry Summers down this path of absolute hell. The comments of Glenn Stevens, the meeting between Yellen and Obama, and the criticism starting to surface against Draghi at the ECB are the realization that interest rates must be “normalized” (raised). However, they have created a nightmare for governments are addicted to low interest rates and their budget will explode; we will see a sharp rise in taxes from 2017 onward.

We will be putting out a very important special report. Behind the curtain, state pensions are lobbying Congress to make it MANDATORY for everyone (not just government employees) to contribute to state pension systems. They want to takeover your 401K, manage everything, and rob your savings to pay for unfunded liabilities to state workers. This is how they are looking to bail themselves out — it will be the dark side post-2017. All of this is going on right now but it is still hush-hush.

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

Negative Interest Rates Destroying the World Economy

April 18, 2016

Negative Interest Rates Destroying the World Economy

QUESTION: Mr. Armstrong, I think I am starting to see the light you have been shining. Negative interest rates really are “completely insane”. I also now see that months after you wrote about central banks were trapped, others are now just starting to entertain the idea. Is this distinct difference in your views that eventually become adopted with time because you were a hedge fund manager?

Just curious;

Bob

Summers-Larry-Career ANSWER: I believe the answer is rather simple. How can anyone pretend to be analysts if they have never traded? It would be like a man writing a book explaining how it feels to give birth. You cannot analyze what you have never done. It is just impossible. Those who cannot teach and those who can just do. Negative interest rates are fueling deflation. People have less income to spend so how is this beneficial? The Fed always needed 2% inflation. The father of negative interest rates is Larry Summers. He teaches or has been in government. He is not a trader and is clueless about how markets function. I warned that this idea of negative interest rates was very dangerous.

Yes, I have warned that the central banks are trapped. Their QE policies have totally failed. There were numerous “analysts” without experience calling for hyperinflation, collapse of the dollar, yelling the Fed is increasing the money supply so buy gold. The inflation never appeared and gold declined. Their reasoning was so far off the mark exactly as people like Larry Summers. These people become trapped in their own logic it becomes irrational gibberish. They only see one side of the coin and ignore the rest.

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

Why All Central Planning Is Doomed to Fail

April 15, 2016

Why All Central Planning Is Doomed to Fail

Positivist Delusions

[ed. note: this article was originally published on March 5 2013 – Bill Bonner was on his way to his ranch in Argentina, so here is a classic from the archives]

We’re still thinking about how so many smart people came to believe things that aren’t true. Krugman, Stiglitz, Friedman, Summers, Bernanke, Yellen – all seem to have a simpleton’s view of how the world works.

Simpletons A bunch of famous people with a simpleton view of how the world works…who not only seriously think the economy can and should be “planned”, but arrogantly believe they are the ones who should do it. It’s a bit like the crazy guy who doesn’t know he’s crazy.

They believe they can manipulate the future and make it better. Not just for themselves… but also for everyone else. Where did such a silly idea come from?

After the Renaissance, Aristotelian logic came to dominate Western thought. It was essentially a forerunner of positivism – which is supposedly based on objective conditions and scientific reasoning.

“Give me the facts,” says the positivist, confidently.

“Let me apply my rational brain to them. I will come up with a solution!”

Beyond the Herald’s Cry

This is fine, if you are building the Eiffel Tower or organizing the next church supper. But positivism falls apart when it is applied to schemes that go beyond the reach of the “herald’s cry.”

That’s what Aristotle said: Only a small community would work. Because only in a small community would all the people share more or less the same information and interests.

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

Will The Fed Follow The BoJ Down The NIRP Rabbit Hole?

March 17, 2016

Will The Fed Follow The BoJ Down The NIRP Rabbit Hole?

On Monday, in “JPM Looks At Draghi’s ‘Package,’ Finds It ‘Solid’ But Underwhelming,” we noted that according to Mislav Matejka, investors would do well to fade the ECB’s latest attempt to jumpstart inflation, growth, and of course asset prices with Draghi’s version of a Keynesian kitchen sink.

“Overall, we believe the latest package is far from a game changer,” Matejka opined.

What was especially interesting about that particular note was the following graph and set of tables which show just how “effective” NIRP has been for the five central banks that have tried it so far.

As you can see, once you go NIRP, it’s pretty much all downhill from there whether you’re talking inflation, the economy, or even equities.

Given that, and given that the entire idea is absurd on its face for a whole laundry list of reasons, one wonders why any central banker would chase down this rabbit hole only to find themselves the protagonist in the latest retelling of “Krugman in Wonderland”.

In any event, for those wondering whether the Fed will join the ECB, the BoJ, the Riksbank, the SNB, and the NationalBank in this increasingly insane monetary experiment, below, courtesy of Bloomberg, find a chronological history of Fed and analyst commentary on NIRP in America.

FED COMMENTARY

March 16: Yellen said during post-FOMC press conference Fed isn’t actively considering negative rates, studying effects in other nations
March 2: San Francisco President Williams said “we’re not doing negative interest rates”; Williams Feb. 25 said negative rates are “potentially in the toolbox” but may have “unintended consequences”
March 1: Former Fed Chairman Alan Greenspan said on Bloomberg Radio and TV negative interest rates, if pursued for an extended period of time, will eventually distort saving and investment…click on the above link to read the rest of the article…

Sweden Minister Says Cashless Society “Not Possible”; Elderly, Disabled People Blamed

March 16, 2016

Sweden Minister Says Cashless Society “Not Possible”; Elderly, Disabled People Blamed

It was just a little over a week ago when we reported that Sweden had begun a 5-year countdown to becoming a cashless utopia.

As The Local reported, “cash transactions today represent no more than two percent of the value of all payments made in Sweden, [and that estimate] will drop to below 0.5 percent within the next five years.”

According to Visa, Swedes use debit cards three times more than other Europeans. Even the homeless accept electronic payments. “The spread of debit cards has had a profound effect even on the street level with fruit and veg traders and even buskers and retailers of homeless magazines accepting cards or electronic payments using the popular Swedish smartphone app Swish,” The Local goes on to note.

As 65-year-old Stefan Wikberg told The New York Times in December, using SMS and mobile card readers effectively helped him climb out of homelessness after losing his IT job. He sells magazines for Situation Stockholm, a charitable organization and his sales rose 30% once he went digital. “Now people can’t get away,” he said. “When they say, ‘I don’t have change,’ I tell them they can pay with card or even by SMS.”

As The Times goes on to write, churches and museums now prefer cashless payments and “at more than half of the branches of the country’s biggest banks, including SEB, Swedbank, Nordea Bank and others, no cash is kept on hand, nor are cash deposits accepted.”

This may all sound rather surreal to some, but for Swedes it’s not only normal, but desirable. “No one uses cash,” said Hannah Ek, a 23-year-old student at the University of Gothenburg. “I think our generation can live without it.”

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

Mr. MORE!

March 10, 2016

Mr. MORE!

The Man with the Inflation Plan

Proving beyond a shadow of doubt that Keynesian absurdity knows no bounds, Larry Summers has graced the FT – one of the West’s premier establishment propaganda mouthpieces advocating central economic planning as practiced by modern-day regulatory democracies – with yet another cringe-worthy editorial.

a danger to society Larry Summers – it is probably no exaggeration to call the man a danger to civilization Photo credit: Hyungwon Kang / Reuters / Corbis

The editorial is entitled “A world stumped by stubbornly low inflation” with a subheader reading “There is no evidence that policymakers are acting strongly to restore their credibility”.

The title and subheader alone deserve comment. First of all, absolutely no-one outside the inhabitants of the incestuous ivory tower of Keynesian and monetarist mainstream economists and the central planning bureaucrats infesting central banks is in any way “stumped” by “low inflation”.

We suspect that there are billions of consumers in the world who would prefer prices to stop rising altogether. In fact, we believe they not only want them to stop rising, they actually want them to decline. But what do they know? Mr. Summers and his central planning comrades have decreed that it is “bad” for them if they are able to buy more rather than less with their income!

As to the perceived lack of policymaker “credibility”: They don’t deserve any. The world’s economic malaise is to 100% their fault. If only it were true that they are “not acting”! The truth is unfortunately that they continue to heap folly upon folly.

Need we remind Mr. Summers of the Bank of Japan’s decision to implement the perversion of negative deposit rates, or the decision of the Riksbank to lower its negative rates to minus 50 basis points in the middle of a raging housing and consumer credit bubble, even though Sweden’s GDP is forecast to grow by 3%?

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

Sweden Begins 5 Year Countdown Until It Eliminates Cash

March 6, 2016

Sweden Begins 5 Year Countdown Until It Eliminates Cash

How much louder can the “ban cash” calls get?

Recall it was just last year when we catalogued the growing cacophony of crazies for whom banning physical currency is the only way to ensure that depositors can’t simply reassert their economic autonomy under a low or zero rate regime..

Put simply, if interest rates get too low, depositors will simply take their money out the bank and put it in the mattress or the safe where, to quote WSJ from last week, “interest rates are always low no matter what central bankers do.

Most recently, Larry Summers called for the abolition of the $100 bill in the US and in Europe the €500 note is to go the way of the dinosaurs.

Perhaps the most telling sign that citizens are starting to panic is that in Japan, they’re selling out of safes. Literally.

“It shows a vague sense of unease,” one Japanese lawmaker who brought up the soaring safe sales in parliament on Monday remarked.

Now, the excuse given for banning big bills is that it combats crime. And maybe it does. But in the end the rationale is simple: if there are no more physical banknotes, people have no economic autonomy. Let’s say consumer spending is stagnating. No problem, take rates to -20%. We bet they’ll start spending then – either that or see their deposits haircut by 20%.

In short, no cash means no effective lower bound and with no lower bound, the economy can be completely centrally planned – for all intents and purposes.

Consumers not spending? No problem. Just tax their excess account balance. Economy overheating? Again, no problem. Raise the interest paid on account holdings to encourage people to stop spending.

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

An Escalating War on Cash

February 25, 2016

An Escalating War on Cash

In early 2015, it was reported that Spain had already limited private cash transactions to 2,500 euros. Italy and France set limits of 1,000 euros. In France, all cash withdrawals in excess of 10,000 euros in a single month must be reported to government agencies. In the U.S., such limits are $10,000 per withdrawal. China, India and Sweden are among those with plans under way to eradicate cash.

On April 20, 2015, the Mises Institute reported that Chase, a subsidiary of JPMorgan Chase and a bailout recipient of some $25 billion (ProPublica, 2/22/16), had announced restrictions on its customers’ ability to use cash in the payment of credit cards, mortgages, equity lines and auto loans. Before that, on April 1, 2015, Chase, in concert with JPMorgan, updated its safe deposit box lease agreement to provide, “You agree not to store any cash or coins [including gold and silver] other than those found to have a collectible value.”

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

The First Steps to Ending Currency

February 20, 2016

The First Steps to Ending Currency

While I don’t want to sound like a broken record, it is becoming increasingly clear that the Federal Reserve, other central banks and governments around the world are laying the foundation for a negative interest rate environment that will more than likely be imposed during the next recession. Governments are involved because they play a very key role in any movement toward negative interest rates since it is obvious that if consumers are paying for the “privilege” of holding funds in a bank, many will simply convert at least some of their savings to cash, an issue that could prove to be problematic since the whole point of negative interest rates is to get consumers to spend more. Obviously, the only way to beat consumers at this game is to put an end to cash, one way or another.

A recent item by former Treasury Secretary under Bill Clinton, former Chief Economist for the World Bank and current Harvard University Professor, Lawrence Summers, in the Washington Post acts as a bit of a trial balloon for the impending “cashless society” by noting that “It’s time to kill the $100 bill”. In the item, Lawrence Summers cites his reasons for the abolishment of the 500 euro note, including the oft-cited “fact” that the criminal and terrorist spheres operate using high denomination currency. He points out that the 500 euro note is known as the “Bin Laden” and that the fact that $1 million in $100 notes weighs only 22 pounds compared to 110 pounds (filling four briefcases) if a $20 bill was the highest denomination note as shown on this figure:

Here is the closing paragraph of his item:

“Even better than unilateral measures in Europe would be a global agreement to stop issuing notes worth more than say $50 or $100.

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

Why The Keynesian Market Wreckers Are Now Coming For Even Your Ben Franklins

February 18, 2016

Why The Keynesian Market Wreckers Are Now Coming For Even Your Ben Franklins

Larry Summers is a pretentious Keynesian fool, but I refer to him as the Great Thinker’s Vicar on Earth for a reason. To wit, every time the latest experiment in Keynesian intervention fails——as 84 months of ZIRP and massive QE clearly have—–he can be counted on to trot out a new angle on why still another interventionist experiment or state sponsored financial fraud is just the ticket.

Right now he is leading the charge for the greatest stroke of foolishness yet conceived. Namely, negative interest rates based on the rubbish theory that the “natural” money market rate of interest is at an extraordinarily low point. Accordingly, the central bank should drive the “policy rate” to sub-zero levels in order to achieve the appropriate level of “accommodation” in an economy that refuses to attain “escape velocity”.

ENLARGE

As can’t be pointed out often enough, however, there is no such economic ether as “accommodation”. It’s just a blanket cover story for what Keynesian central bankers believe they are accomplishing by pegging interest rates below market clearing levels and by bending and mangling the yield curve to cause more investment.

But after 86 months it is evident that all of this putative monetary “accommodation” has failed. Falsifying the cost of money and capital can only work if it causes households and businesses to borrow more than they would otherwise; and to then lay credit based spending for consumption and investment goods on top of what can be funded out of current production and income. Another name for that is leveraging private balance sheets and thereby stealing production and income from the future.

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

As War on Cash Escalates, Cash Lovers Fight Back

February 18, 2016

As War on Cash Escalates, Cash Lovers Fight Back

“It would be fatal if citizens got the impression that cash is gradually taken away from them”: Bundesbank President Weidman.

Over the last couple of days, bureaucrats at the European Commission and European Central Bank have expressed a keen interest in withdrawing the €500-note from circulation – barely a week after former Standard Chartered CEO Peter Sands published a report calling for the exact same measure. Allegedly the currency of choice for organized crime outfits around the world, the so-called “Bin Laden bill,” accounts for close to a third of the total amount of cash in existence in the Eurozone.

Then on Tuesday, Larry Summers, in an effort to keep his name in the media by hook or crook, called for the death of the $100 bill, though he lamented that removing existing notes was probably “a step too far”:

But a moratorium on printing new high denomination notes would make the world a better place. In terms of unilateral steps, the most important actor by far is the European Union. The €500 is almost six times as valuable as the $100. Some actors in Europe, notably the European Commission, have shown sympathy for the idea and European Central Bank chief Mario Draghi has shown interest as well.

We have warned for over two years (here, here, here and here) that a loose, albeit powerful, coalition of governments, central banks, big banks, credit card companies, fintech firms, NGOs, and large corporations seeks to pull the plug on cash, for their own disparate motives.

Those motives include sustaining and even intensifying the central banks’ nightmarish experiment with negative interest rates, increasing public dependence on big banks, destroying the last vestiges of personal financial freedom and anonymity, expanding government surveillance of and control over the economy, and in the case of credit card companies and fintech firms, doing away with their biggest competitor, physical currency.

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

When Cash Is Outlawed… Only Outlaws Will Have Cash

February 18, 2016

When Cash Is Outlawed… Only Outlaws Will Have Cash

Control, Tax, Confiscate

BALTIMORE – Harvard economist Larry Summers is a reliable source of claptrap. And a frequent spokesman for the Deep State.

To bring new readers up to speed, voters don’t get a say in who runs the country. Instead, a “shadow government” of elites, cronies, lobbyists, bureaucrats, politicians, and zombies – aka the Deep State – is permanently in power.

22_summers_560x375 Larry Summers – the man with a plan for everyone. An economist whose economic theorizing is truly abominable crap (more on this in an upcoming post), a reliable, crypto-fascist, bought and paid for evil intellectual in the service of the Deep State. His “policy proposals” all have one thing in common: they are apodictically certain to restrict economic progress and individual liberty. Photo credit: Fabrice Coffrini / AFP / Getty Images

Put simply, it doesn’t matter which party is in power; the Deep State rules. Want to know what the Deep State is up to now? Read Larry Summers.

“It’s time to kill the $100 bill,” he wrote in the Washington Post (another reliable source of claptrap).

The Deep State wants you to use money it can easily control, tax, and confiscate. And paper currency is getting in its way.

France has already banned residents from making cash transactions of €1,000 ($1,114) or more. Norway and Sweden’s biggest banks urge the outright abolition of cash. And there are plans at the highest levels of government in Israel, India, and China to remove cash from circulation.

Deutsche Bank CEO John Cryan predicts that cash “probably won’t exist” 10 years from now. And here is Mr. Summers in the Washington Post:

“Illicit activities are facilitated when a million dollars weighs 2.2 pounds as with the 500 euro note rather than more than 50 pounds, as would be the case if the $20 bill was the high denomination note.”

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

This Is The Real Reason For The War On Cash

February 18, 2016

This Is The Real Reason For The War On Cash

Originally posted Op-Ed via The Wall Street Journal,

These are strange monetary times, with negative interest rates and central bankers deemed to be masters of the universe. So maybe we shouldn’t be surprised that politicians and central bankers are now waging a war on cash. That’s right, policy makers in Europe and the U.S. want to make it harder for the hoi polloi to hold actual currency.

Mario Draghi fired the latest salvo on Monday when he said the European Central Bank would like to ban €500 notes. A day later Harvard economist and Democratic Party favorite Larry Summers declared that it’s time to kill the $100 bill, which would mean goodbye to Ben Franklin. Alexander Hamilton may soon—and shamefully—be replaced on the $10 bill, but at least the 10-spots would exist for a while longer. Ol’ Ben would be banished from the currency the way dead white males like him are banned from the history books.

Limits on cash transactions have been spreading in Europe since the 2008 financial panic, ostensibly to crack down on crime and tax avoidance. Italy has made it illegal to pay cash for anything worth more than €1,000 ($1,116), while France cut its limit to €1,000 from €3,000 last year. British merchants accepting more than €15,000 in cash per transaction must first register with the tax authorities. Fines for violators can run into the thousands of euros. Germany’s Deputy Finance Minister Michael Meister recently proposed a €5,000 cap on cash transactions. Deutsche Bank CEO John Cryan predicted last month that cash won’t survive another decade.

The enemies of cash claim that only crooks and cranks need large-denomination bills. They want large transactions to be made electronically so government can follow them. Yet these are some of the same European politicians who blew a gasket when they learned that U.S. counterterrorist officials were monitoring money through the Swift global system. Criminals will find a way, large bills or not.

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

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