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Oil and Debt: Why Our Financial System Is Unsustainable

Oil and Debt: Why Our Financial System Is Unsustainable

How much energy, water and food will the “money” created out of thin air in the future buy?

Finance is often cloaked in arcane terminology and math, but the one dynamic that governs the future is actually very simple.

Here it is: all debt is borrowed against future supplies of affordable hydrocarbons (oil, coal and natural gas). Since global economic activity is ultimately dependent on a continued abundance of affordable energy, it follows that all money borrowed against future income is actually being borrowed against future supplies of affordable energy.

Many people believe that alternative “green” energy will soon replace most or all hydrocarbon energy sources, but the chart below shows why this belief is not realistic: all the “renewable” energy sources are about 3% of all energy consumed, with hydropower providing another few percent.

There are unavoidable headwinds to this appealing fantasy:

1. All “renewable” energy is actually “replaceable” energy, per analyst Nate Hagens: every 15-25 years (or less) much or all of the alt-energy systems and structures have to be replaced, and little of the necessary mining, manufacturing and transport can be performed with the “renewable” electricity these sources generate. Virtually all the heavy lifting of these processes require hydrocarbons and especially oil.

2. Wind and solar “renewable” energy is intermittent and therefore requires changes in behavior (no clothes dryers or electric ovens used after dark, etc.) or battery storage on a scale that isn’t practical in terms of the materials required.

3. Batteries are also “replaceable” and don’t last very long. The percentage of lithium-ion batteries being recycled globally is near-zero, so all batteries end up as costly, toxic landfill.

4. Battery technologies are limited by the physics of energy storage and materials. Moving whiz-bang exotic technologies from the lab to global scales of production is non-trivial.

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

 

Heal the Planet for Profit – Redux


Giorgione The Tempest 1508
“Mankind’s only chance to not destroy its planet lies in diverging from all other species in that not all energy available to it, is used up as fast as possible. But that’s a big challenge. It would, speaking from a purely philosophical angle, truly separate us from nature for the first time ever, and we must wonder if that’s desirable.”

I wrote that 4 years and 2 months ago today, and I’m still thinking about it. It came to mind again, along with the article it comes from, see below, when I saw a few recent references to climate change, and to how any policy to halt it should be financed. It’s all painfully obvious.

Bill Gates, while on a virtual book tour, says governments should pay. In particular for the innovation needed. We’re going to solve it all with things we haven’t invented yet. That kind of thinking never fails to greatly boost my confidence in people and their ideas.

Overall, Gates’ words feel like a stale same old same old been there done that tone. But one thing is changing. Since Joe Biden became the most popular US president ever, according to his vote count, there is now a climate czar at the US Treasury, and a climate change team at the US Fed. Progress! At least for those seeking to use your money to solve their problems.

Bill Gates: Solving Covid Easy Compared With Climate

Mr Gates’s new book, How to Avoid a Climate Disaster, is a guide to tackling global warming. [..] Net zero is where we need to get to. This means cutting emissions to a level where any remaining greenhouse gas releases are balanced out by absorbing an equivalent amount from the atmosphere…

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

Federal Reserve & Fake Conspiracies

QUESTION: I found your history of the Federal Reserve very insightful which nobody else has put together. Can you explain your comment that the ECB could go bankrupt but not the Fed?

Thank you very much.

HB

ANSWER: Here is a full set of $1 bills with each issued by its respective branch. I would like to t5han Kohn C for having this framed and sent to me as a gift. The Federal Reserve is independent whereas it has its own authority to increase or decrease its power to create elastic money. I understand that many see this as evil, but it was absolutely essential. During an economic crash, people hoard their cash and do not spend it. Consequently, banks start to fail because they lent money out long-term as in mortgages but the demands by depositors are immediate. That is why a bank would fail in the midst of a run. Its assets are tied up in loans which they then recall and cannot sell the real estate to get liquid.

Right now we have had that problem where the velocity of money has been declining from 2007 until Trump was elected, but then it took a nose-dive in a waterfall event thanks to COVID lockdowns and rising unemployment. The Fed’s “elastic” money means they can create money in electronic form purchasing in debt which in theory injects cash into the system. However, because Congress has been so corrupt, the requirement to buy government debt has not directly helped the economy as it was originally intended to do in 1913 when it would only by corporate debt. That prevented companies from going bust and laying off people because they did not have the immediate cash.

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

martin armstrong, armstrong economics, fed, us federal reserve, money printing, money, fiat currency, conspiracies

A World that Operates by Financial Cheating and Unsound Money Is Doomed

It’s all phony money but there’s no revolt yet.
Value for ValueMy friend Hugo Salinas Price wrote a short post that I agree with.

Please consider A World that Operates by Cheating Is Doomed

In ages past, gold and silver provided humanity with a system of economic co-operation among productive humans, which was fair to all participants.

With gold and silver, humans were trading value-for-value: what changed hands were amounts of physical gold or silver, or at least, Bills which were unquestioned claims upon gold or silver.

When the exchange had taken place, everyone was happy! The seller because he had gold or silver, in exchange for the goods or services he offered; and the buyer was pleased because he had the goods or services he wanted, and he got them by tendering gold or silver in exchange.

So, everyone was pleased: the buyer because he got the goods or services he wanted, in exchange for his gold or silver; and the seller was pleased because he traded the goods or services he had to offer, tor gold or silver.

Under the present monetary system, there can be no justice or “fair trading”, because all the World’s MONEY IS FAKE MONEY. No money in today’s world is gold or silver, nor does it represent an unquestioned claim upon a stated amount of gold or silver.

And a gigantic shooting war will mark the end of our times, as a result of the cheating involved – all because fake money was forced upon humanity.

No Consequences, Yet

Except in isolated hyperinflation cases, governments have learned there are no consequences to the ruling class (at least yet) for unsound money.

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

Opinion v Fact

COMMENT: Marty,

Each day I read reports from so called reputable people expressing what they think might happen given the backdrop today. It is laughable. Most do this based on superficial analysis or cursory comparisons with things that appear to line up, appear to rhythm, to paraphrase M Twain. What a joke.

I say this here because as I relearn what I once thought I knew, analyze my mistakes using real data…it brings me back to you and your marvelous study of history, your database, which is incomparable, and your willingness…let’s call it humility, to let Socrates make the call. Just remarkable.

What this has done for me is save countless hours reading nonsense and instead focusing on the data. Not trying to push my opinions on a trade and expect the market will follow, but respect what is there and not force things. Nothing is absolute, no one is always right. But today there are so many people who are flat out wrong, who claim to be right…just give them time, it explains why the government fails repeatedly…because these are the people who, like Keynsians or socialists claim…just give it more money…it will work. Right. History always seems to tell a different story.

MS

REPLY: Thank you. What I try to get across is what I have learned from my clients. Because I was perhaps the only international analyst in foreign exchange back in the 70s and 80s, we ended up with the largest client base that was so diverse that it compelled me to look at the world through everyone else’s eyes. I remember doing an institutional conference in Zurich probably around 1982-1983. People started flying in to attend from around the world. There were people from the USA and Canada as well as Germany who traveled to Zurich.

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

 

Transitioning Our Money to Invest Local

Transitioning Our Money to Invest Local

People often ask, “So what do Transition Town groups do?” One answer to that question would be, “We take good ideas, bring them home, and make them real.”

That’s what Pat Thompson and Sherm Eagles did when they attended Jay Tompt’s REconomy workshop at the Transition US National Gathering in St. Paul, Minnesota in 2017.

“Hearing that such a thing exists as the REconomy Centre, that was an eye opener. Wow! Someone is doing this thing and maybe we can do something like it,” said Pat. “I was also inspired by the people who attended the workshop. There was a woman from Brooklyn who owns a building that serves as a community center and helps percolate programs to start things the community needs. There were people doing online crowdsourcing to fund Transition-related things. There was local currency. All these different angles from different parts of the country.

“My first thought was that our Transition group – Transition Town–All St. Anthony Park (Transition ASAP) – could set up something like the Community of Dragons, community-supported entrepreneurship, that they have in Totnes. But we’re in a really big market here in the Twin Cities, and some things like that already exist. So instead, our group set up Transition Your Money (TYM).”

Sherm and Pat now convene a monthly group that talks about ways people can get their money out of Wall Street and bring it back into the local economy.

“Our neighborhood is a pocket of fairly well off people – not all, but some – and also people with a strong social conscience,” Pat said. “They’re concerned about climate change and they want to do something about it.

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

Why We Need a Free Market in Money

What is fiat money and what does it do?

This is essential to understand since today’s worldwide unbacked paper, or “fiat,” money regime is an economically and socially destructive scheme—with far-reaching and seriously harmful consequences. There is an answer, though, and this lies in ending the money production monopoly of states.

The Problem of Fiat Money

The US dollar, the Chinese renminbi, the euro, the Japanese yen, the British pound, and the Swiss franc represent fiat money.

Fiat money has three characteristics:

  1. Fiat money is money monopolized by the state’s central bank. It is created by central banks and commercial banks licensed by the state.
  2. Fiat money is mostly produced through bank credit expansion; it is created out of thin air.
  3. Fiat money is dematerialized money, consisting of colorful paper tickets and bits and bytes on computer hard drives.

Fiat money is by no means “harmless.”

Fiat money is inflationary. Its buying power dwindles over time, and history has shown that this entropy is almost as irreversible as gravity. Fiat money makes a select few rich at the expense of many others. The first to get new money benefit to the detriment of those on the bottom rung.

What’s more, fiat money fosters speculative bubbles and capital misallocation, which culminate in crises. This is why economies go through boom and bust cycles. Fiat money lures states, banks, consumers, and firms into the trap of excessive debt. Sooner or later, borrowers find themselves in a deep hole with no way out.

Fiat money is easy to come by, so the government can finance its adventures and misadventures. Easy money; easy come, easy go. And the government keeps growing as it keeps spending…

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

“Monetizing Privacy”: The Fed Fans Out, Touting the “Digital Dollar.” This Time, How Consumers Would Benefit

“Monetizing Privacy”: The Fed Fans Out, Touting the “Digital Dollar.” This Time, How Consumers Would Benefit

But the problemita of pulling the rug out from under the entire banking system still needs to be addressed.

“As cash use continues to decline, the question naturally arises as to whether central banks should provide a digital alternative to cash that also provides some privacy features,” says the blog post, titled “Monetizing Privacy,” by the New York Fed. The post is based on a 26-page academic paper on digital payment methods that have been used broadly, the current market structure of digital payment methods, the data-gathering that occurs, versus cash payments that preserve privacy – and versus the “digital dollar” now being worked on.

Each time a digital payment takes place, the companies involved gather voluminous amounts of data and hang on to it because it gives them a competitive advantage in selling more goods or services to this particular consumer. This data has a lot of value for these companies – a key point we’ll get to in a moment with regards to the “digital dollar.”

While the share of cash in transactions has declined, US dollar bills are being hoarded like never before. “Currency in circulation,” which the Fed reports weekly on its balance sheet as a liability, has soared during the Pandemic, reaching another record last week of $2.06 trillion, having doubled since 2011:

The amount of currency in circulation is demand-based: Banks have to have enough currency on hand to satisfy their customers’ demand for currency, and during a crisis, people load up and hoard cash, much of it overseas, and to meet this demand, banks have to buy more currency from the Fed, usually paying with Treasury securities for this paper.

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

The global reset scam

The global reset scam

This article takes a tilt at increasing speculation about statist global resets, and why plans such as those promoted by the World Economic Forum will fail. Central bank digital currencies will simply run out of time.

Instead, the collapse of unbacked fiat currencies will end all supra-national government solutions to their policy failures. Already, there is mounting evidence of money beginning to flee bank accounts into stocks, commodities and even bitcoin. This is an early warning of a rapidly developing monetary collapse.

Moreover, nothing can now stop the collapse of fiat currencies, and with it schemes to control humanity for the convenience and ambitions of government planners. There can only be one statist solution and that is to mobilise gold reserves to back and save their currencies, which in order to succeed will have to be fully convertible into circulating gold coinage. It will also require the role of governments to be reset into a non-welfare, non-interventionist minimalist role, which can only be achieved after a complete collapse of the current fiat-financed system.

Anything less will fail.

The Deep State and The Blob fuel conspiracy theories

Increasingly, people are beginning to realise that their world is undergoing a period of rapid change, with the future of fiat money now uncertain. For most, it is too difficult to even contemplate. But growing uncertainties are driving wild speculation about what those in authority now have in store for the human race in the form of a global reset. It is a time for conspiracy theorists, aided and abetted by our politicians and central bankers who are being increasingly evasive, because events are spiralling out of their control.

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

Do Not Trust Governments With the Control of Money

If there one thing that is fairly certain in this life – besides the seeming inescapability of death and taxes – is that once someone is appointed to almost any position in the political and bureaucratic structures of a government they soon discover how important and essential is the organization of which they are a part for the well-being of the nation. The country could not exist without it, along with its increasing budget and expanded authority. This applies to the Federal Reserve, America’s central bank, no less than other parts of government.

The news media has reported that the apparently unlikely appointment of Dr. Judy Shelton to the Federal Reserve Board of Governors probably will be successfully maneuvered through the full Senate confirmation process. Shelton would then sit on the Federal Reserve Board for a 14-year term. Hers has been one of the more controversial nominations to the Fed in recent years, with critics fervently expressing their negative views of her.

For instance, Tony Fratto, a former Treasury official and deputy press secretary under George W. Bush, was recently quoted as saying that Shelton’s appointment would be “a discredit to the Senate and the Fed. It screams. Nothing at all is serious. Not us. Not you. Not them.”

Mainstream Economists Against Anyone for Gold

Back in August of this year, over one hundred academic and business economists issued an open letter to members of the U.S. Senate calling for rejection of her nomination to the Fed. Among those who signed were some economics Nobel Laureates, including Robert Lucas and Joseph Stiglitz. They insisted on her unfitness for such an appointment. Why? They said: “She has advocated a return to the gold standard; she has questioned the need for federal deposit insurance; she has even questioned the need for a central bank at all.”

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

Getting Out of Dodge

GETTING OUT OF DODGE

Recently I received an email from a reader who asked for some feedback regarding a decision he was about to make. He’s in his early 50’s, single with an adult child and is considering resigning from his well paid and secure job in order to gain access to his substantial pension fund, which represents at least two thirds of his total wealth.

Why would he do such a crazy thing? Well, when he considers the growing financial, political, social, environmental and resource disruptions, he feels it may make sense to retrieve his pension now before the dollar devaluation accelerates and his pension fund loses significant purchasing power or is substantially lost to government decree and Wall Street greed.

He has talked to friends and acquaintances about what’s going on in the world these days and his thoughts about getting out and moving on with his life in a more prudent and thoughtful manner. All believe he’s nuts. Gone round the bend in fact.

So, he turned to me for some feedback (an “informed perspective” he said, though I’m not too sure about the informed part) carefully explaining he understands this is his decision alone and he’s responsible for any and all consequences of any action he may pursue.

Wow! Someone who is actually considering a radical life change and is already burning his get-out-of-jail-free victim card. What a refreshingly rare and responsible point of view. He actually led with that in his email and I couldn’t help but sit up and take notice.

Clearly this person warranted a detailed and in-depth response from me, if for no other reason than to show respect for his maturity and forthrightness. What follows below is a much expanded and edited version of my thoughts, which I promptly emailed back to him.

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

What Are You Going To Do As Our Money Dies?

What Are You Going To Do As Our Money Dies?

Central banks are killing our currency to protect the already-rich

In our recent article It’s Time To Position For The Endgame, Chris Martenson explained how the US Federal Reserve and its sister central banks around the world have been engaged in the largest and most egregious wealth transfer in all of history — one that has been drastically exacerbated by the covid-19 pandemic.

The official response, tremendous monetary stimulus by the central banks paired with massive fiscal stimulus from national legislatures, has been pitched as “saving the system”.

Yet, in reality, it has merely served to accelerate the transfer of capital from the public into the pockets of the already-rich.

Anyone with eyes can see how the central banks have abandoned all pretense of monetary fiduciary responsibility and have simply cranked their printing presses up to “maximum”:

In concert with this surge of liquidity, national legislatures have added their own emergency measures. In the US alone, the CARES Act pushed nearly $3 trillion in fiscal stimulus into the system, and will highly likely soon be followed by another $1-3 trillion depending on which party’s bill gets passed.

Despite these staggering sums, the amount of money trickling into the average US household has been meager and is drying up.

Instead, these $trillions are mostly finding their way into the coffers and share prices of corporations. We have seen the fastest and most extreme V-shaped recovery in the history of the financial markets since the March swoon. The major indices are now back to record all-time-highs, despite the major carnage covid-19 has wreaked on the global economy.

So who benefits from that? Oh yeah, the people who own those companies. The already-rich.

Remember: 84% of all stocks are owned by the top 10% of households.

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

Central Planners At Work

Consumption without Production

“Every man is a consumer, and ought to be a producer”, observed 19th century philosopher Ralph Waldo Emerson.  “He is by constitution expensive, and needs to be rich.”

Ralph Waldo Emerson (May 25, 1803 – April 27, 1882), who inter alia opined on consumers and the need to not only consume, but also produce. The latter activity has recently become even more severely hampered than it already was. And yet, government is spending like a drunken sailor. [PT]

These days Emerson’s critical insight is being taken to its extreme.  Consumers, many whom lost their jobs due to government lockdown orders, no longer produce.  Yet they still consume.  They are expensive.  Not rich.

What’s more, this consumption is not funded through personal savings.  Nor is it funded through government transfer payments.  Rather, it is funded via the printing press.

Emerson, no doubt, was lacking in the unique perspective we are presently granted.  He did not have the special opportunity to watch his government destroy the economy in short order.  Perhaps if he had, he would have penned a neat axiom to distill the essence of what happened.

The world today looks nothing like Emerson’s day.  The 19th  century was an age of honest money.  Central bankers did not roam the land.

Printing money to buy bonds and stocks, and to sprinkle on people, would have been quickly dismissed.  The experience of the Continental Congress during the American Revolution, and their over-issuance of paper “continentals”, had shown that resorting to the printing press was an act of suicide.

 

Promises, promises… “not worth a continental” became a saying after this early experience with paper money. [PT]

 

Currently, printing press money is considered enlightened central banking policy.  Inflation targets, zero interest rate policy (ZIRP), direct bond purchases, twisting the yield curve, unlimited credit.  This is merely a partial list of the trouble central bankers are up to.

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

 

On Inflation (& How It’s Not What Happens Next)

Everyone is convinced the dollar is going to inflate because more dollars are entering the system.

But are they really?

That is the question that sparked a succinct Twitter thread by Travis K (@ColoradoTravis) explaining why inflation is not what happens next (emphasis ours):

Let’s take a look at how dollars are born and how they die.

A dollar is ‘born’ when a loan is made against collateral on a bank’s balance sheet. Banks can issue multiples of dollars for every dollar of collateral they have.

It’s this multiplication effect that expands the amount of total dollars.

Generally, banks are limited in how much they can lend – let’s say it’s 10x their collateral. So for every dollar of collateral they have, they can lend 10 dollars.

By so lending, they ‘birth’ new dollars into the system.

As banks lend more, more dollars are created and the money supply increases. This multiplicative lending is the chief driver of total dollars in the system.

Banks lending a lot → more total dollars and inflation.

When do dollars die?

Dollars ‘die’ when debts are paid back. This reverses the multiplication effect of lending, leading to less total dollars in the system and a contraction of total dollars in circulation.

So what is the Fed ‘printer’ doing – creating dollars, right? Actually no, not really.

The printer only increases the collateral banks have to lend against. It does not directly ‘birth’ dollars, only *potential* dollars.

Banks are still the midwives, and the only ones who birth dollars into the system by lending.

The Fed can increase collateral by 1000x but unless the banks lend against that collateral, dollars will not enter circulation for you and I to interact with.

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

Why Martians Are Wrong About Gold

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

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

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

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

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

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

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

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

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

The Gold Standard of Money

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

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

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

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

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

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

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

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

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

Olduvai IV: Courage
In progress...

Olduvai II: Exodus
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