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“Something Is Wrong Here”: U.S. Stocks Plunge Again And Are Having Their Worst Quarter In 7 Years

“Something Is Wrong Here”: U.S. Stocks Plunge Again And Are Having Their Worst Quarter In 7 Years

The Dow Jones Industrial Average plummeted another 496 points on Friday as panicked investors continue to pull billions of dollars out of the stock market.  With less than two weeks to go until Christmas, the markets are not supposed to be experiencing this kind of turmoil, but it is happening and there is no end in sight.  During the fourth quarter of 2018, we have already seen the S&P 500 fall 11 percent.  Even if it doesn’t go down any further, that will be the worst quarter in 7 years.  And of course the S&P 500 is not alone – at this point all of the major indexes are officially in correction territory.  Things are certainly getting quite frightening on Wall Street, and many believe that the worst is yet to come.

Despite widespread assurances from the mainstream media that the wise thing to do is to keep your money in the market, investors are pulling money out of equities at a near record pace

Jittery investors yanked a record $39 billion from global equities in the latest week, according to a Bank of America Merrill Lynch report released Friday. That included $28 billion that exited US stocks, the second-highest on record. And a record $8.4 billion was pulled from investment grade bonds.

The “race for the exits” that we have been witnessing really is turning into a bit of a stampede, and once panic starts to spread it can be very difficult to stop it.

So why is all of this happening?

Well, one market strategist told CNN that “something is wrong here” and that his firm cannot deny that we are in a “global slowdown”…

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

Democratizing Money

Democratizing Money

The Green New Deal has been in the air lately. In a recent piece on this website, Rob Urie writes that the Green New Deal is “the last, best hope for environmental and social resolution outside of rapid dissolution toward dystopian hell.”

Quite a claim. Let’s take a closer look.

The Green New Deal, first articulated by the Green Party but now supported by many progressive Democrats, calls for “real financial reform” to address the twin problems of climate change and economic insecurity.

Included are some of the standard proposals we regularly hear, such as restoring the Glass-Steagell Act (separating commercial and investment banking), breaking up the big banks, ending bank bailouts, reducing debt burdens, regulating derivatives, and taxing bank bonuses.

These are serious proposals, and would likely provide some relief, but they are partial measures subject to rollback and evasion–just the kind of incremental strategy that has failed for decades.

But the “real financial reform” the Green New Deal calls for goes a lot further. It promises genuine radical change with two new proposals: One is to “democratize monetary policy to bring about public control of the money supply and credit creation,” and the other is to “support the formation of federal, state, and municipal public owned banks that function as non-profit utilities.”

First, some background. Most people don’t realize that the government does not issue money; the private banking system does, by issuing loans at interest. The last time the government issued money in any quantity was during the Civil War, when so-called greenbacks were printed by the Treasury department to pay for the war. Greenbacks were not debt, but direct currency printed to give government contractors money for the goods and services provided, which they then spent into the general economy, stimulating commerce.

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

U.S. Debt Poised To Hit The $22 Trillion Mark As “Storm Clouds” Indicate “We Could Have Another Financial Crisis”

U.S. Debt Poised To Hit The $22 Trillion Mark As “Storm Clouds” Indicate “We Could Have Another Financial Crisis”

The rapidly exploding U.S. national debt is about to cross another critical threshold.  According to the U.S. Treasury, the debt of the federal government is currently sitting at $21,854,296,172,540.94, and at our current pace we will likely hit the $22 trillion mark next month.  This is a horrifying national crisis, and yet nothing is being done about it.  When Barack Obama entered the White House in January 2008, the U.S. was $10.6 trillion in debt, and so that means that we have added 11.2 trillion dollars of new debt to that total in less than 11 years.  Needless to say, it doesn’t take a math genius to figure out that we have been adding an average of more than a trillion dollars a year to the national debt for more than a decade.  But instead of getting our insatiable appetite for debt under control, Congress is actually accelerating our spending.  At this point, there is no possible scenario in which this story ends well.

Meanwhile, the global financial elite are really starting to talk up the possibility of a new financial crisis.

For example, the deputy head of the IMF just said that he sees “storm clouds building”

The storm clouds of the next global financial crisis are gathering despite the world financial system being unprepared for another downturn, the deputy head of the International Monetary Fund has warned.

David Lipton, the first deputy managing director of the IMF, said that “crisis prevention is incomplete” more than a decade on from the last meltdown in the global banking system.

“As we have put it, ‘fix the roof while the sun shines’. But, like many of you, I see storm clouds building and fear the work on crisis prevention is incomplete.”

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

Money: the silent killer

Money: the silent killer

In Sweden, which is famously on the way to becoming cash-free, you can find signs in shop windows that say ‘we don’t take cash because electronic payments are better for the environment’.

Since cash does require a certain amount of resource use for its production process and transportation, and since in general we’re encouraged to go paperless as much as we can, this idea may seem – at first, anyway – to make sense.

And if electronic money truly required only the modest amount of energy that goes into creating bank cards or whichever payment device is being employed, along with a bit more energy for moving the data around in cyberspace, then it would very likely be true.

Swedish business sign saying “a big thank you for your card payments! From 1 February 2017 we will be cash-free. Better for the environment, secure, quick and easy.”

Indeed, a recent study by the Dutch central bank seemed to back up the Swedish store owners’ assumptions. It investigated the ecological footprint generated by cash and compared it to that of electronic payments, and found that cash was the loser.

However, there’s a very important missing variable in the Dutch study: how the money comes into existence in the first place.

With cash, that’s pretty straightforward. The central bank creates cash and it then gets distributed to private banks. (Corresponding deductions are made to their ‘reserve accounts’ at the central bank. Then it’s put into ATMs.) Apart from the up-front ecological costs mentioned above there is nothing else to worry about.

Electronic money, in its current form anyway, is a very different beast. And since it makes up about 97% of money in circulation, it deserves serious attention.

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

A Global Dearth of Liquidity

A Global Dearth of Liquidity

Worldwide Liquidity Drought – Money Supply Growth Slows Everywhere

This is a brief update on money supply growth trends in the most important currency areas outside the US (namely the euro area, Japan and China)  as announced in in our recent update on US money supply growth (see “Federal Punch Bowl Removal Agency” for the details).

Nobody likes a drought. This collage illustrates why.

The liquidity drought is not confined to the US – it is fair to say that it is a global phenomenon, even though money supply growth rates in the euro area and Japan superficially still look fairly brisk. However, they are in the process of slowing down quite rapidly from much higher levels – and this trend seems set to continue.

Euro Area – Money Supply Growth Still High, But Slowing Fast

The chart below shows the euro area’s narrow money supply aggregate M1 (stock) and its year-on-year growth rate. M1 in the euro area is almost equivalent to US TMS-2, which makes it a good enough stand-in (it includes savings deposits that are in practice payable on demand; however, it lacks euro deposits belonging to foreign residents and central government deposits).

It is worth noting that a slowdown to a 0% growth rate triggered crisis conditions in 2008. After a sharp, but short term spike in money supply growth after the ECB made emergency liquidity facilities available to European banks to mitigate the fallout from the US housing bubble implosion, crisis conditions promptly returned when these facilities expired and money supply growth fell to around 1% in 2011.

Euro area, M1 (~TMS-2): Total in millions of EUR (blue line) and y/y rate of change (orange line). We have highlighted the three most recent slowdowns in money supply growth associated with economic crises and declining asset prices.

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

Charles Hugh Smith: Preventing The Final Fall Of Our Democratic Republic

Charles Hugh Smith: Preventing The Final Fall Of Our Democratic Republic

Fighting against the obscene concentration of wealth & power

There’s mounting evidence that the Age of American Exceptionalism is grinding to an end.

Demographically, in the U.S. (as well as many other developed nations), the prospects of the younger generations are substantially less than those of the Baby Boomers. The same is true socioeconomically as well; the wealth gap between the 1% and everyone else continues to accelerate.

What’s been the root cause of this slide towards greater and greater inequity? And can anything be done to reverse it?

Economist analyst and author Charles Hugh Smith addresses these core questions in his new book Pathfinding Our Destiny: Preventing The Final Fall Of Our Democratic Republic. Charles concludes that we are the terminal end of a multi-century process of centralization that is no longer working for society’s benefit:

We have a political system which is becoming increasingly tied into money. Now, people have always said, like from 100 years ago, “money is the mother’s milk of politics”. Money and power have always coalesced around political power. But in the last, say, 70 years, post-World War II, the central governments and central banks of the world have grown immensely in their centralized power.

And one of the theses I’m proposing in my book is that centralization itself in now the problem. We’ve been told for 400 years that it’s been the solution. Just centralize power and wealth into tighter and tighter control and then that will somehow solve whatever problems we have.

The intense concentration of power is becoming blatantly visible these days. Six media companies control most of the media in the U.S. It used to be six banks, but now I think it’s down to only three or four, who control most of the financial system.
…click on the above link to read the rest of the article…

2019 Outlook: The State of Sound Money in the United States

2019 Outlook: The State of Sound Money in the United States

The Great Recession, coupled with the “Ron Paul Revolution,” prompted a renaissance of the sound money movement in the United States.

As Germany, Russia, and China — to name a few — continue to increase their gold holdings, the hegemonic power of Federal Reserve Notes (referred to today as the dollar) is slowly slipping away.

Simultaneously, whispers—once relegated to fringe corners—of restoring sound money have become passionate, concerned, and loud.

The destruction of sound money over the past century stems from actions at the federal level, but there are steps which states can take —and even have already taken —to move toward real, sound, constitutional money.

As state legislatures reconvene in the next few weeks, let’s take a look at the current state of play…

Since 2016, sound money has made a splash on the state level. According to the 2018 Sound Money Index, a new ranking of all 50 states on the extent to which they have implemented the pro-sound money policies, there are currently 38 states with an exemption of sales and use tax on the purchase of gold and silver.

Since 2016, legislators in 10 different states have introduced bills, seven of which were signed into law, to restore sound money by eliminating taxes on gold and silver within their borders.

In 2017, a quarter of all states without a sales tax exemption on gold and silver introduced new measures to eliminate the tax against the monetary metals. As states continue to make inroads on the sales tax issue, Tennessee and West Virginia are expected to introduce bills to remove sales and use taxes on sound money in 2019.

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

Thoughts From The Precipice

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Thoughts From The Precipice

Things are worsening. But we’re not over the edge quite yet.

As you already know, things are unraveling. The narratives of the past are being revealed as false and fraudulent — even harmful.

For example, the fallacy of pursuing “ever more” growth. Growth up to a point is beneficial, but it turns self-destructive when it exceeds what available resources can sustain.

As it is practiced, economic growth as pursued around the world today is now destructive. If we continue on our current trajectory, it will become fatal.

It already has for an increasing scope of the natural world. Beauty is being ruined. The complex web of life is being shredded. Species loss is accelerating.

This kind of damage is essentially permanent.

Pollinator Collapse

Right now insect ecologists the world over are utterly horrified by the declines in insect populations. “Crashing” is not too strong of a term.

It’s almost as if the Rapture happened; but instead of humans, it’s the insects who were taken.

A healthy, prudent response by a healthy, prudent culture would be to immediately ban any insecticides suspected of contirbuting to the problem. And to swiftly deploy a serious scientific resources into studying the issue.

Nothing of the sort is happening in the US yet. Few other countries are, either; with the exception of France.  This is really positive news:.

France Is The First Country To Ban All Five Bee-Killing Pesticides

Nov 21, 2018

With bees on the endangered list and the terrible consequences that will come to pass if they become extinct, France has taken a drastic step in an attempt to save the population of pollinating insects.

As reported by Organic Consumers, the European nation has decided to ban all five pesticides that scientists believe are responsible for killing bees.

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

Holiday Doings and Undoings


Somehow I doubt that this Christmas will win the Bing Crosby star of approval. Rather, we see the financial markets breaking under the strain of sustained institutionalized fraud, and the social fabric tearing from persistent systemic political dishonesty. It adds up to a nation that can’t navigate through reality, a nation too dependent on sure things, safe spaces, and happy outcomes. Every few decades a message comes from the Universe that faking it is not good enough.

The main message from the financials is that the global debt barge has run aground, and with it, the global economy. That mighty engine has been chugging along on promises-to-pay and now the faith that sustained those promises is dissolving. China, Euroland, and the USA can’t possibly meet their tangled obligations, and are running out of tricks for rigging, gaming, and jacking the bond markets, where all those promises are vested. It boils down to a whole lot of people not getting paid, one way or the other — and it’s really bad for business.

Our President has taken full credit for the bubblicious markets, of course, and will be Hooverized as they gurgle around the drain. Given his chimerical personality, he may try to put on an FDR mask — perhaps even sit in a wheelchair — and try a few grand-scale policy tricks to escape the vortex. But the net effect will surely be to make matters worse — for instance, if he can hector the Federal Reserve to buy every bond that isn’t nailed to some deadly derivative booby-trap. But then he’ll only succeed in crashing the dollar. Remember, there are two main ways you can go broke: You can run out of money; or you can have plenty of worthless money.

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

Stock Market Crash: The Dow Has Fallen Nearly 2,500 Points And FAANG Stocks Have Lost A TRILLION Dollars In Value

Stock Market Crash: The Dow Has Fallen Nearly 2,500 Points And FAANG Stocks Have Lost A TRILLION Dollars In Value

Thanksgiving week was not supposed to be like this.  Normally things are slow in the days leading up to Thanksgiving as investors prepare to gorge themselves with turkey and stuffing as they gather with family and friends.  But this year the stock market is crashing, and Wall Street is in panic mode.  On Tuesday, the Dow Jones Industrial Average closed at 24,465.64, which is nearly 2,500 points lower than the all-time high of 26,951.81 that was set in early October.  But as I noted yesterday, what has been happening to tech stocks is even more dramatic.  Each one of the FAANG stocks is now down by more than 20 percent, and they have combined to lose more than a trillion dollars in value.  We haven’t seen anything like this since the financial crisis of 2008, and at this point all of Wall Street’s gains for 2018 have been completely wiped out.

Fear is a very powerful motivator, and right now a lot of investors are feverishly getting out of the market because they are afraid of losing their paper profits.

One analyst is describing what is going on as a rush for the exits

“The highways will be crowded this evening as the Thanksgiving rush will begin in earnest, but this morning investors are rushing for the exits,” Paul Hickey, co-founder of Bespoke Investment Group, wrote to clients on Tuesday.

But for many tech investors, the truth is that the cattle have already left the barn.

Just check out how much market capitalization the “big five” have already lost.  The following numbers come from CNBC

  • Facebook: $253 billion
  • Amazon: $280 billion
  • Apple: $253 billion
  • Netflix: $67 billion
  • Alphabet: $164 billion

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

Does China Have Enough Gold to Move Toward Hard Currency?

Does China Have Enough Gold to Move Toward Hard Currency?

yuangold1.PNG

Are the Chinese Keynesian?

We can be reasonably certain that Chinese government officials approaching middle age have been heavily westernised through their education. Nowhere is this likely to matter more than in the fields of finance and economics. In these disciplines there is perhaps a division between them and the old guard, exemplified and fronted by President Xi. The grey-beards who guide the National Peoples Congress are aging, and the brightest and best of their successors understand economic analysis differently, having been tutored in Western universities.

It has not yet been a noticeable problem in the current, relatively stable economic and financial environment. Quiet evolution is rarely disruptive of the status quo, and so long as it reflects the changes in society generally, the machinery of government will chug on. But when (it is never “if”) the next global credit crisis develops, China’s ability to handle it could be badly compromised.

This article thinks through the next credit crisis from China’s point of view. Given early signals from the state of the credit cycle in America and from growing instability in global financial markets, the timing could be suddenly relevant. China must embrace sound money as her escape route from a disintegrating global fiat-money system, but to do so she will have to discard the neo-Keynesian economics of the West, which she has adopted as the mainspring of her own economic advancement.

With Western-educated economists imbedded in China’s administration, has China retained the collective nous to understand the flaws, limitations and dangers of the West’s fiat money system? Can she build on the benefits of the sound-money approach which led her to accumulate gold, and to encourage her citizens to do so as well?

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

“The Outlook For The Global Economy Has Deteriorated”: Oil, Copper And Lumber Are All Telling Us The Next Economic Downturn Is Here

“The Outlook For The Global Economy Has Deteriorated”: Oil, Copper And Lumber Are All Telling Us The Next Economic Downturn Is Here

Oil, copper and lumber are all telling us the exact same thing, and it isn’t good news for the global economy.  When economic activity is booming, demand for commodities such as oil, copper and lumber goes up and that generally causes prices to rise.  But when economic activity is slowing down, demand for such commodities falls and that generally causes prices to decline.  In recent weeks, we have witnessed a decline in commodity prices unlike anything that we have witnessed in years, and many are concerned that this is a very clear indication that hard times are ahead for the global economy.

Let’s talk about oil first.  The price of oil peaked in early October, but since that time it has fallen more than 25 percent, and the IEA is warning of “relatively weak” demand out of Asia and Europe

The International Energy Agency said on Wednesday that while US demand for oil has been “very robust,” demand in Europe and developed Asian countries “continues to be relatively weak.” The IEA also warned of a “slowdown” in demand in developing nations such as India, Brazil and Argentina caused by high oil prices, weak currencies and deteriorating economic activity.

“The outlook for the global economy has deteriorated,” the IEA wrote.

Meanwhile, the price of copper has been declining for quite some time now.  The price of copper also fell substantially just before the last recession, and many analysts are pointing out that “Dr. Copper” is now waving a red flag once again

The message of weakening demand on the oil front was reinforced by the falling price of copper.

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

Can We Escape Control of The Wire?

Can We Escape Control of The Wire?

“He’ll See Everything!  He’ll See the Big Board!
— Dr. Strangelove

What is The Wire?  

Why is it so important?

Who controls it?

Answer those three questions and you can answer a number of problems plaguing our world today.

The Wire is simply a metaphor for the transmission of information.  The Wire takes many forms.  And if you aren’t sure whether something is The Wire just ask if you have control over it or not.

The Internet?  The Wire.

Electricity?  The Wire

Roads?  The Wire.

Media?  The Wire.

Money?  The Wire.

In short, The Wire is the main conduit through which we communicate with each other.  Money?  Really?  Yes, really.  What are prices if not information about what we are willing to part with our money in exchange for?

Without The Wire modern society fails.  So, government can’t shut it down but neither can it allow unconstrained access to it.

Electricity, commerce, communications, everything, goes over The Wire.  

This isn’t a radical concept but like all important ideas, once it is presented to you you can’t unsee it.

But, identifying The Wire isn’t the important thing.  What’s important is knowing who controls The Wire and what they are willing to do to maintain that control.

If you look at all of the things listed above you will see massive government intervention into these markets.  They need control of them to maintain the illusion they have control over you.

They sell you on the idea that speech, speed, education, commerce, defense, information, etc.  all need to have sensible limits placed on them.  But do they really or is this just yet another example of some jackass talking his book?

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

What is the Relation Between Supply and Demand for Money?

For most economists there is the need to keep the so-called economy along the path of a stable economic growth and a stable price inflation. One of the reasons for the possible deviation of the economy from the stable growth path is a change in the demand for money. If the authorities failing to make sure that an increase in the demand for money is accommodated by the corresponding increase in the supply of money this could result in the economy deviating from the path of stable economic growth and stable inflation. Hence, it is imperative for the central bank to make sure that the growth in the supply of money is in tandem with the growth rate of the demand for money in order to maintain economic stability.

Note that on this way of thinking, a growing economy requires a growing money stock, because economic growth gives rise to a greater demand for money. Failing to accommodate a strengthening in the demand for money could lead to a decline in the prices of goods and services, which in turn will destabilize the economy and lead to an economic recession.

Since growth in money supply is of such importance, it is not surprising that economists are continuously searching for the right, or the optimum, growth rate of the money supply.

Some economists who are the followers of Milton Friedman – also known as monetarists – want the central bank to target the money supply growth rate to a fixed percentage. They hold that if this percentage maintained over a prolonged period it will usher in an era of economic stability.

The idea that money must grow in order to sustain economic growth gives the impression that money somehow sustains economic activity.

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

This Wasn’t Supposed To Happen…

This Wasn’t Supposed To Happen…

We have definitely deviated from the script.  According to virtually all of the “experts”, the stock market was not supposed to keep plummeting in November.  This was supposed to be the month when the market calmed down and things returned to normal.  But instead, November is starting to look a whole lot like October, and many investors are really starting to freak out.  U.S. stocks declined for a third day in a row on Monday, and all post-election gains have now been completely wiped out.  The Dow Jones Industrial Average lost another 602 points, and all of these large daily losses are really starting to add up.  It may still be a bit too early to call this a “major financial crisis”, but if stock prices keep plunging like this it won’t be too long before all hell starts breaking loose on Wall Street.

Goldman Sachs, GE and California utility stocks were some of the biggest losers on Monday, but it was Apple that made the biggest news

Investors grew concerned after Wells Fargo analysts identified Apple as the unnamed customer that optical communications company Lumentum Holdings said was significantly reducing orders. The news sent Apple’s stock down 5 percent for the day. Lumentum shares plunged almost 33 percent.

Shares in other major tech stocks fell. Advanced Micro Devices gave up 9.51 percent, while Nvidia fell 7.84 percent. Micron Technology lost 4.27 percent. Banks and consumer-focused companies, and media and communications stocks also took heavy losses.

All along, tech stocks had been leading the bull market on the way up, but now things have completely shifted.

In recent weeks tech stocks have been absolutely cratering, and several of the biggest names are now officially in bear market territory.  The following summary comes from Wolf Richter

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

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