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A Pyrrhic End to 130 Years of Vicious Bad Money and Banking Crises

April 23, 2023

A Pyrrhic End to 130 Years of Vicious Bad Money and Banking Crises money printing The original vicious circle starts with inflationary interventions in an up-to-then well-anchored monetary regime. Consequent asset inflation spawns a banking crisis. That leads to the installation of anticrisis safety structures (one illustration is a novel or enhanced lender of last resort). Alongside a possible monetary regime shift, these damage the money’s anchoring system. A great asset inflation emerges and leads on to an eruption of another banking crisis, devastating in comparison with the first.

An array of additional safety structures is put in place which makes the now-bad money worse than before. After a long and variable lag, a long and violent monetary storm means the safety structures fail, a banking crisis again erupts but this time milder than the previous.

Then a further tinkering with the safety structures causes money to deteriorate even more in quality. Another shift in monetary regime coincidentally does much additional damage. Consequently, in time, a new crisis erupts much worse than the last one.

The safety engineers do more work, causing yet more damage to the mechanisms essential to sound money. But now the safety structures are so pervasive and strong across the banking industry that there is widespread belief that bank crisis eruptions will be smaller or, more likely, totally repressed.

Subsequent events demonstrate those beliefs to be hollow. There is a new round of safety structure elaboration leading to further monetary deterioration. Regime officials declare the end of bank crises.

The cumulative economic cost of this vaunted triumph over bank crisis is an advance of monopoly capitalism and monetary statism that throttles the essential dynamism of free market capitalism. Malinvestment becomes cumulatively larger. Living standards in general suffer. The severely ailing money which subsists is beyond any cure except the most radical.

…click on the above link to read the rest…

Role Reversal: The Collapse of the Dollar-Enforced Empire

April 10, 2023

Role Reversal: The Collapse of the Dollar-Enforced Empire

The Soviet empire started to crumble around 1989. The time period between the forming of the North Atlantic Treaty Organization (NATO) in the late 1940s and the retreat of Russia from Eastern Europe with the eventual collapse of communism in Russia is known as the Cold War. There was a great power confrontation in Europe that did not result in war.

Essentially, US-led NATO stood its ground to prevent further Soviet expansion from the territory it occupied at the end of World War II and waited for the inevitable collapse. Now, perhaps not everyone saw the collapse of the Soviet empire as inevitable. But all one had to do was view the Soviet empire for oneself, up close and personal, which is what I did in the early 1970s as a young Air Force officer.

The State of the Communist Economy

The Russian economy at that time is painful to describe. Moscow and Leningrad (Saint Petersburg), the so-called jewels of the Soviet Union, were depressing. Everything was shoddily built. There were very few cars on the streets. There were no retail shops deserving of the name. Lines formed in the middle of the night awaiting the opening of the few bakeries. I saw this for myself from my hotel window on the Nevsky Prospekt in Leningrad. GUM, the “world’s largest department store” near Moscow’s Red Square, sold nothing that was equal to what could be found in any garage sale in the West.

Actually, that should not be a surprise since at one time all those garage-sale goods were marketable. I did not visit Berlin, but those who did say that crossing the Brandenburg Gate from West Berlin to East Berlin was shocking…

…click on the above link to read the rest…

Are You Prepared for a Hard Landing?

January 6, 2023

Are You Prepared for a Hard Landing?

The New Year brings both optimism and hope. A chance to start fresh. To turn over a new leaf.

The sentiment is welcome. The outcome, however, can be a grave disappointment.

If you recall, 2022 was supposed to be a year of redemption and prosperity. After the ugly coronavirus fiasco, the economy was finally reopening. The general belief was that the resurgence of economic activity was going to bring a new boom and a new cycle of prosperity.

But then something unexpected happened. On the first day of market trading, January 3, 2022, the S&P 500 hit a closing peak of 4,796. Yesterday, just over a year later, the S&P 500 closed at 3,808. Down over 20 percent.

Over this duration, the yield on the 10-Year Treasury note spiked from 1.66 percent to 3.70 percent. In other words, Uncle Sam’s borrowing costs have more than doubled.

At the same time, transitory inflation proved to be enduring. And gross domestic product (GDP) went negative for the first two quarters of 2022.

What happened?

The calendar year may have started anew. But past actions remained. And there was plenty of wreckage from the past to be reconciled.

Much of this wreckage was created by the central planners at the U.S. Treasury Department and the Federal Reserve. Decades of money printing are not without consequences. And, unfortunately, the consequences dramatically impact your life and your livelihood.

The wreckage doesn’t magically disappear when the calendar hits January 1. Rather, it piles up from one year to the next like rotting refuse at a municipal landfill.

How will the central planners manipulate your livelihood in 2023? How will Federal Reserve monetary policy influence your job, investments, and discretionary income?

Here we scratch for answers…

Foolish Ideas

…click on the above link to read the rest…

Inflation, recession, and declining US hegemony

December 24, 2022

Inflation, recession, and declining US hegemony

In the distant future, we might look back on 2022 and 2023 as pivotal years. So far, we have seen the conflict between America and the two Asian hegemons emerge into the open, leading to a self-inflicted energy crisis on the western alliance. The forty-year trend of declining interest rates has ended, replaced by a new rising trend the full consequences and duration of which are as yet unknown.

The western alliance enters the New Year with increasing fears of recession. Monetary policy makers face an acute dilemma: do they prioritise inflation of prices by raising interest rates, or do they lean towards yet more monetary stimulation to ensure that financial markets stabilise, their economies do not suffer recession, and government finances are not driven into crisis?

This is the conundrum that will play out in 2023 for the US, UK, EU, Japan, and others in the alliance camp. But economic conditions are starkly different in continental Asia. China is showing the early stages of making an economic comeback. Russia’s economy has not been badly damaged by sanctions, as the western media would have us believe. All members of Asian trade organisations are enjoying the benefits of cheap oil and gas while the western alliance turns its back on fossil fuels.

The message sent to Saudi Arabia, the Gulf Cooperation Council, and even to OPEC+ is that their future markets are with the Asian hegemons. Predictably, they are all gravitating into this camp. They are abandoning the American-led sphere of influence.

2023 will see the consequences of Saudi Arabia ending the petrodollar. Energy exporters are feeling their way towards new commercial arrangements in a bid to replace yesterday’s dollar. There’s talk of a new Asian trade settlement currency…

…click on the above link to read the rest…

Germany Unleashed Half-Trillion Dollar ‘Energy Bazooka’ To Keep Lights On

December 16, 2022

Germany Unleashed Half-Trillion Dollar ‘Energy Bazooka’ To Keep Lights On

Western sanctions on Moscow have backfired, failed to paralyze Russia’s economy, and ultimately sparked financial pain for ordinary Europeans and the largest economy in the block.

According to Reuters calculations, Germany has hemorrhaged cash to the tune of 440 billion euros ($465 billion) in energy bailouts and schemes, as well as keeping energy supplies flowing while it lost access to inexpensive natural gas from its leading supplier Russia in 2022.

“How severe this crisis will be and how long it will last greatly depends on how the energy crisis will develop,” said Michael Groemling at the German Economic Institute (IW). He added: “The national economy as a whole is facing a huge loss of wealth.”

Reuters said the “cumulative scale” of energy bailouts and other schemes employed by Berlin equates to 1.5 billion euros per day since Russia invaded Ukraine, or about 12% of national economic output, or 5,400 euros for each German.

Germany has shown Europe how backfiring sanctions ruin its country’s finances and send millions of its citizens crashing into energy poverty overnight. These anti-Russian measures have caused soaring electricity and NatGas prices and elevated risks of entering a recession in 2023.

“The German economy is now in a very critical phase because the future of energy supply is more uncertain than ever.

“Where does the German economy stand? If we look at price inflation, it has a high fever,” said Stefan Kooths, vice president and research director of business cycles and growth at the Kiel Institute for the World Economy.

Many other European countries find themselves at the mercy of the weather as NatGas injections into EU storage facilities have flipped to draws amid a wicked cold spell boosting heating demand.

“The country has turned to the pricier spot, or cash, energy market to replace some of the lost Russian supplies, helping drive inflation into double-digits,” Reuters noted.

…click on the above link to read the rest…

How Bernanke Broke The World

October 23, 2022

How Bernanke Broke The World

THE BIGGEST BUBBLE IN HISTORY DEFLATES
YOUR STANDARD OF LIVING IS GOING TO FALL IN HALF

Soon, you’ll wake up to hear reports on CNBC and Twitter about ATM machines not working across the country.

JPMorgan Chase CEO Jamie Dimon will appear on CNBC, to explain that for the good of the country, his bank and all the other banks in the country are buying long-dated Treasury bonds. And, to protect America, it’s important that we all take a pause and stop withdrawing cash from the system, which means a “temporary” shutdown of other banking operations for a week or two.

It will happen. It’s unavoidable.

A couple of interesting facts…

The price of U.S. Treasury bonds is collapsing. Since the end of July, the 10-year Treasury rate has risen sharply, from a yield of 2.65% to over 4.3% now. There haven’t been bigger losses in the U.S. Treasury bond market, EVER.

[ZH: The 1-year drawdown of US Equity and Treasury Market Cap is $14 Trillion, the largest draw that we have ever seen in absolute terms…]

Signs of inflation are fading, and the American economy is obviously heading into a severe recession.

But rather than stabilizing – which is what usually happens – the selloff in longer-dated U.S. Treasury securities is intensifying, and liquidity is at its lowest levels since March 2020.

That suggests that the market doesn’t trust the dollar anymore. And that means the entire system is at risk.

Payback’s A Witch

The sell-off in long-dated Treasuries isn’t because of last year’s inflation. It’s because the market knows that the U.S. Treasury cannot possibly afford a real rate of interest on its massive $31 trillion in debt.

…click on the above link to read the rest…

Europe Is Facing Energy Disaster And It’s Going To Bleed Over Into The US

September 11, 2022

Europe Is Facing Energy Disaster And It’s Going To Bleed Over Into The US

Though the situation is ever changing, currently the Russian government has announced an official shutdown of ALL natural gas exports to Europe through the Nord Stream 1 pipeline and plans to maintain the shutdown until the EU ends its economic sanctions over the war in Ukraine. This means that around 40% of Europe’s energy resources are now gone, with supply chain issues surrounding the other 60% and prices skyrocketing for households and businesses.

Back in March in an article titled ‘The Biggest Lies (So Far) Surrounding Russia And Ukraine’ I noted that:

“…There’s something else the media does not talk about much, which is Europe’s reliance on Russian oil and natural gas. If you want to see actual price inflation caused by Russia, let the EU ban Russian oil imports, or watch as Putin cuts off the supply. Europe is dependent on Russian oil and gas for about 40% of overall energy production. They cannot even survive a single year without it. If Russia retaliated and blocked energy exports to Europe, the the EU would have to siphon oil from many other countries, reducing global supply dramatically. This would cause gas prices to explode to double or even triple current levels.”

Back in April of this year in my article ‘The Media Is Ignoring These Two Events Which Could Cause Economic Collapse’ I predicted that:

“…The Russian economy is not about to fold anytime soon, and now the EU, which is reliant on Russian oil and gas exports for 40% of their energy needs, is about to face economic doom unless they submit to paying for energy in rubles (which they won’t) or find a replacement source for gas and oil (which is impossible)…

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

Fed Paper Admits the Central Bank Can’t Control Inflation; Finger-Points at Federal Government

September 1, 2022

Fed Paper Admits the Central Bank Can’t Control Inflation; Finger-Points at Federal Government

It appears somebody at the Federal Reserve has figured out that the central bank can’t tame inflation, so it’s setting up a scapegoat – Uncle Sam.

A paper co-authored by Leonardo Melosi of the Federal Reserve Bank of Chicago and John Hopkins University economist Francesco Bianchi and published by the Kansas City Federal Reserve argues that central bank monetary policy alone can’t control inflation.

The paper’s abstract asserts, “This increase in inflation could not have been averted by simply tightening monetary policy.”

In a nutshell, Melosi and Bianchi argue that the Fed can’t control inflation alone. US government fiscal policy contributes to inflationary pressure and makes it impossible for the Fed to do its job.

Trend inflation is fully controlled by the monetary authority only when public debt can be successfully stabilized by credible future fiscal plans. When the fiscal authority is not perceived as fully responsible for covering the existing fiscal imbalances, the private sector expects that inflation will rise to ensure sustainability of national debt. As a result, a large fiscal imbalance combined with a weakening fiscal credibility may lead trend inflation to drift away from the long-run target chosen by the monetary authority.”

There are a couple of startling admissions in this single paragraph.

First, the authors acknowledge that the federal government uses inflation as a tool to handle its debt. In other words, it acknowledges that we’re all paying an inflation tax.

Peter Schiff talked about this inflation tax in an interview on Rob Schmitt Tonight.

Inflation is a tax. It’s the way government finances deficit spending. Government spends money. It doesn’t collect enough taxes, so it has to run deficits. The Federal Reserve monetizes those deficits – prints money. They call it quantitative easing, but that’s inflation…

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

Greyerz – The US Economy Is Crashing But The Global Collapse Will Be Even More Terrifying

August 31, 2022

Greyerz – The US Economy Is Crashing But The Global Collapse Will Be Even More Terrifying

Today the man who has become legendary for his predictions on QE and historic moves in currencies and metals warned King World News that the US economy is crashing but the global collapse will be even more terrifying.

_____

“Everyone wants to live
at the expense of the
state. They forget
that the state wants
to live at the expense
of everyone.”
Frederic Bastiat

August 28 (King World News) – Egon von Greyerz, Founder of Matterhorn Asset Management (based in Switzerland): Contrary to what the wisest men and women in the land have told us, the world has been hit by the most vicious bout of inflation.

The “transitory” heads of the Fed and ECB clearly couldn’t recognise inflation until there was a scapegoat like Putin to blame it all on.

The fact that Powell, Lagarde and their predecessors had laid the perfect foundation not just for a small spell of price increases but for an unstoppable avalanche of global inflation, they were totally oblivious of.

NEITHER COVID NOR PUTIN IS THE CAUSE OF INFLATION
Let’s be very clear.

Covid didn’t create inflation.

Putin didn’t create inflation.

No, inflation is the result of governments’ and central banks’ irresponsible and totally irrational policy of believing that prosperity can be created out of thin air.

They don’t understand or at least choose not to understand that reckless creation of fake money that has zero value CREATES ZERO WEALTH.

Money in itself has ZERO value. Money is just a derivative that derives its value as a medium of exchange through the production of goods and services.

In simple terms, money that has derived value from anything but goods and services has ZERO value.

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

It’s Game Over for the Fed—Expect a Monetary “Rug Pull” Soon…

August 13, 2022

It’s Game Over for the Fed—Expect a Monetary “Rug Pull” Soon…

You often hear the media, politicians, and financial analysts casually toss around the word “trillion” without appreciating what it means.

A trillion is a massive, almost unfathomable number.

The human brain has trouble understanding something so huge. So let me try to put it into perspective.

If you earned $1 per second, it would take 11 days to make a million dollars.

If you earned $1 per second, it would take 31 and a half years to make a billion dollars.

And if you earned $1 per second, it would take 31,688 years to make a trillion dollars.

So that’s how enormous a trillion is.

When politicians carelessly spend and print money measured in the trillions, you are in dangerous territory.

And that is precisely what the Federal Reserve and the central banking system have enabled the US government to do.

From the start of the Covid hysteria until today, the Federal Reserve has printed more money than it has for the entire existence of the US.

For example, from the founding of the US, it took over 227 years to print its first $6 trillion. But in just a matter of months recently, the US government printed more than $6 trillion.

During that period, the US money supply increased by a whopping 41%.

In short, the Fed’s actions amounted to the biggest monetary explosion that has ever occurred in the US.

Initially, the Fed and its apologists in the media assured the American people its actions wouldn’t cause severe price increases. But unfortunately, it didn’t take long to prove that absurd assertion false.

As soon as rising prices became apparent, the mainstream media and Fed claimed that the inflation was only “transitory” and that there was nothing to be worried about. Then, when the inflation was obviously not “transitory,” they told us “inflation was actually a good thing.”

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

UN Secretary-General Blames Global Economic Crisis On Ukraine War

August 4, 2022

UN Secretary-General Blames Global Economic Crisis On Ukraine War

NATO governments and globalist institutions have put on a good show acting as if they hate Putin and the Russian advance in Ukraine, but the reality is that the war acts as an all encompassing distraction from the greater agenda at hand. It offers globalist organizations, western politicians and central banks a perfect scapegoat for the ongoing economic instability caused by THEIR policies.

As anyone that follows alternative economic knows, the stagflationary crisis that is escalating today was triggered well before the Russian invasion of Ukraine. Price inflation was hitting 40 year highs in December of 2021, months before the war started. Gas prices were skyrocketing long before sanctions on Russia were ever implemented, climbing from an average of $2.20 per gallon in November of 2020 to $5 per gallon in June of 2022. That’s more than a 100% increase in less than two years and most of it occurred before Ukraine was an issue.

What really caused stagflation? It’s a process initiated by central bank stimulus that the alternative media has been warning about for many years. The real culprits are central bankers and the politicians that align with them. The world has been awash in fiat money as a means to prolong economic corrections that should have been allowed to run their course a long time ago. Instead, bankers sought to artificially prop up the system and funnel money into “too big to fail” corporations along with the too big to fail stock markets. Now, of course, things are changing.

The inevitable Catch-22 dynamic has come into play – Central banks can continue to print and keep interest rates near zero, but inflation will rapidly expand, making all their efforts pointless as rising costs lead to plummeting demand…

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

#234. Britain on the brink

July 22, 2022

#234. Britain on the brink

THE PRICE OF EXTREMISM

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

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

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

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

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

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

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

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

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

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

This Implosion Will Be Fast–Hold Onto Your Seats

July 4, 2022

THIS IMPLOSION WILL BE FAST – HOLD ONTO YOUR SEATS

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

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

DEBT TO GDP GROWTH

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

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

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

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

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

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

Pulling Back The Curtain On The ‘Real’ US Economy

July 1, 2022

Pulling Back The Curtain On The ‘Real’ US Economy

Revised numbers on US GDP from the Bureau Of Economic Analysis indicate that the economy faces a deeper contraction than originally reported. GDP shrank in the first quarter of 2022 by 1.6%; this is an impressive and sharp reversal from the fourth quarter of last year, which saw GDP grow by 6.9% due primarily to the continued circulation of covid stimulus dollars and consumer credit spending.

It’s important to keep in mind that this plunge in GDP occurred BEFORE the Federal Reserve started raising interest rates. Meaning, the Fed did in fact raise rates into economic weakness, much like they did during the onset of the Great Depression, causing even more damage to the economy in the process and prolonging the effects of the crisis. The difference this time is that we do not face a standard deflationary threat, but a stagflationary one. It’s a completely different ballgame.

Calls for recession are ample from the mainstream financial media and many alternative analysts, though the assumption among many is that price inflation will track down as the recession pressures grow. This may not be the case.

Loss of buying power in the dollar due to central bank stimulus and numerous supply chain issues indicate an extended period of price inflation well into next year. Furthermore, with foreign central banks now incrementally dropping the dollar as the world reserve currency, there will be even more dollars flooding into the US from overseas. That’s too many dollars chasing too few goods and services.

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

The Inflation Crisis Is Worse Than Admitted – Will Interest Rates Go To Record Highs?

June 11, 2022

The Inflation Crisis Is Worse Than Admitted – Will Interest Rates Go To Record Highs?

Inflation is not a new problem in the US; there has been a steady expansion of price inflation and a devaluation of the dollar ever since the Federal Reserve was officially made operational in 1916. This inflation is easily observed by comparing the prices of commodities and necessities from a few decades ago to today.

The median cost of a home in 1960 was around $11,900, which is the equivalent of $98,000 today. In the year 2000, the median home price rose to $170,000. Today, the average sale price for a home is over $400,000 dollars. Inflation apologists will argue that wages are keeping up with prices; this is simply not true and has not been true for a long time.

In today’s terms, a certain measure of home price increases involve artificial demand created by massive conglomerates like Blackstone buying up distressed properties. We can also place some blame on the huge migration of Americans out of blue states like New York and California during the pandemic lockdowns. However, prices were rising exponentially in many markets well before covid.

Americans have been dealing with higher prices and stagnant wages for some time now. This is often hidden or obscured by creative government accounting and the way inflation is communicated to the public through CPI numbers. This is especially true after the inflationary crisis of the late 1970s and early 1980s under the Carter Administration and Fed Chairman Paul Volcker.

It’s important to understand that CPI today is NOT an accurate reflection of true inflation overall, and this is because the methods used by the Fed and other institutions to calculate inflation changed after the 1970s event. Not surprisingly, CPI was adjusted to show a diminished inflation threat. If you can’t hide the price increases, you can at least lie about the gravity of those increases.

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

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