The U.S. national debt is at 34.7 trillion dollars. If you laid that many dollar bills end-to-end, it would wrap around the Earth 134,599 times. That’s enough to travel to the sun and back 17 times. Suffice it to say, we’re in a pickle.

America is slowly approaching the precipice of debt default. This is no minor dilemma. A default could cause approximately 8 million jobs to be lost. In other words, the bill would come due.

For many politicians, the debt crisis is not a pressing concern. At least not enough to take measures to fix it. The Biden administration passed a 1.2 trillion-dollar infrastructure bill in 2021, adding 256 billion dollars to the budget deficit over the next ten years. Biden has also forgiven 167 billion dollars in student loans during his tenure, which was financed through increased government spending. Despite already being one of the most indebted countries in the world, politicians continue to dig the U.S. into an even deeper hole. The problem is not simply a monetary one. There is an ideological battle underlying our descent into debt.

The ideas that have caused America’s current debt crisis were birthed during the Great Depression. In 1932, Franklin D. Roosevelt issued a series of spending measures that were intended to stimulate economic activity in what was called the “New Deal.” FDR spent over 950 billion (inflation-adjusted) dollars on the program while being touted as an economic “savior.” The deal was promoted as what released America from the bonds of the recession. In reality, it made the problem worse.

A study conducted by two UCLA economists found that the New Deal actually extended the Great Depression by seven years. By artificially increasing wages while unemployment remained rampant and below projected recovery rates, FDR’s program harmed economic health. Simply pumping money into the economy wasn’t the fix-all solution it was advertised to be.

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

Would Returning to the Gold Standard Resolve Our Most Pressing Monetary Problems?

May 28, 2024

Would Returning to the Gold Standard Resolve Our Most Pressing Monetary Problems?

We all know the problem with fiat currency: the temptation to print more currency is irresistible, but ultimately destructive.

Money in all its forms attracts quasi-religious beliefs and convictions. This makes it difficult to discuss with anything resembling objectivity. But given the centrality of money (and its sibling, greed) in human affairs, let’s press on and ask: would returning to the Gold Standard (i.e. gold as money / gold-backed currency) resolve our most pressing monetary problems?

The conviction that the answer is “yes” is widespread. In this view, President Nixon “closing the gold window,” in 1971, i.e. ending the convertibility of the US dollar to gold in international foreign exchange (FX) markets, is the Original Sin that doomed us to the inflationary Hell of fiat currency, i.e. currency unbacked by anything tangible such as gold or silver.

In this view, the only way to avoid the consequences of this Original Sin–the eventual reduction of fiat currency to zero value via hyper-inflation as the currency is “printed” without restraint–is to return to the gold standard.

So far, so good, but from here on in it gets tricky. We have a long history of precious metals being the only form of money in various economies, and an almost as long history of paper money augmenting precious-metal “real money” (in China, for example) and the issuance of copper coinage to grease small transactions.

Gold-backed currency rolls off the tongue rather easily, but what exactly does this mean? In theory, it means every unit of paper / digital currency in circulation can be converted on demand to a physical quantity of gold or silver at an exchange rate either set by the nation-state’s government or by the market.

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

Doug Casey on the Relentless Rise of Taxes, Regulations, and Inflation

May 18, 2024

Doug Casey on the Relentless Rise of Taxes, Regulations, and Inflation

International Man: Almost every government worldwide is moving to increase taxes and regulations on its citizens while at the same time engaging in ever-increasing currency debasement.

What do you think of this trend, and where is it going?

Doug Casey: Higher taxes, more money printing, and more regulations are long-standing trends. The cat first got out of the bag with the French Revolution and the triumph of the Jacobins, who wanted to collectivize French society. They almost succeeded. Not many years later, Karl Marx wrote The Communist Manifesto and Das Capital, letting another feral meme loose into society. The idea that the State was a good thing and should grow is now everywhere.

With the turn of the 20th century, roughly 120 years ago, governments all over the world created central banks and the income tax. They started small but have become behemoths, funding welfare and warfare. Both things are highly destructive. In the 19th century there was no welfare and very few wars, because wars are expensive. Governments were hard-pressed to extract adequate revenue from their populations for fighting.

Like all living creatures, the prime directive of the State is to survive and grow. But the State is unique. The State, as Mao said, comes out of the barrel of a gun. Since it’s based on coercion, it’s only natural that some form of socialism would be its preferred way to organize society. Currency inflation, income taxes, and debt have enabled governments to get completely out of control. The prognosis is not good.

International Man: There seems to be a coordinated effort to increase capital gains taxes.

For example, Canada just announced an increase in the capital gains tax from 50% to 67%. President Biden has proposed increasing the US capital gains tax to 44.6% and adding a tax on unrealized capital gains.

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

Mike Walden: Is it ‘greedflation’ or something more keeping prices high?

May 17, 2024

Mike Walden: Is it ‘greedflation’ or something more keeping prices high?

Photo by Adam Nir on Unsplash

Although the pace at which prices are rising has moderated, prices are still going up. In 2021, average consumer prices surged 7%; in 2022 they jumped 6.5%; in 2023 prices went up a more tolerable 3.4%, and the latest reading for 2024 shows consumer prices are up 3.5% from the same period in 2023. Cumulatively this puts prices up over 20% since 2021.

As long as consumers’ financial resources increase at the same or a higher rate than price inflation, then there’s no loss of purchasing power. But most people know this hasn’t happened. Indeed, from 2021 to now, the average consumer’s purchasing power is off by 5%.

I mention these statistics to show that inflation is still a problem, which is something most people know. The next question is, why is inflation still a continuing issue?

When inflation began its spurt in 2021 there was an easy-to-understand reason – consumers were trying to buy more than sellers had to offer. Consumers were flush with cash as a result of the COIVD-19 relief programs enacted in both 2020 and 2021. These programs culminated in $6.5 trillion being rapidly pushed into the economy. Initially there were few buying opportunities as large parts of the economy had not yet reopened.

When consumers were able to buy, they had what economists call “pent-up demand,” meaning they wanted to buy a lot! Typically this wouldn’t have been a problem, but there was another issue that had emerged – supply-chain problems. So, in short, consumers wanted to really buy, but many of the shelves were bare. In this situation, it was inevitable prices would rise substantially, which they did.

But today, consumers have spent most of the COVID money, and the supply-chain has mostly been fixed. Yet inflation is running hotter than the 1.8% in 2019, before the pandemic….

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

Money Is a Monopoly Government Will Never Surrender

May 5, 2024

Money Is a Monopoly Government Will Never Surrender

A major intellectual revelation from my youth came from reading Murray Rothbard’s “What Has Government Done to Our Money?” (1963). He includes a passing opinion that private markets are perfectly capable of producing money with no help from government. Under a sweeping monetary reform, private mints could compete in offering this good with full associated services. There is no need for any government intervention here.

It was the kind of claim that, at some point in one’s life, causes the jaw to hit the floor. Investigating this assertion more, I came to see that there was a large literature on the topic. Historically, money originated in the market economy itself, a naturally evolving institution that met the needs of trade. Whatever good was generally valued by everyone, and was as capable of being divided into consistent units with a stable value, could be deployed as money, with no need for government to do anything but watch.

But of course history has not panned out that way. Every government has a strong incentive to monopolize the good called money because this is how they can tax their citizens, reward the most compliant industries, cultivate close relationships with bankers, and inflate the currency at will through a variety of methods depending on the technology of the time.

We can of course imagine primitive tribes or pre-colonial native populations using rocks and shells, but is there a modern case where private coinage became normalized? In a major but often overlooked work of historical scholarship, economist George Selgin has written the most extensive treatment of the private coinage industry in the UK at the dawn of the Industrial Revolution.

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

How to Collapse: Hyperinflationary Depression

May 1, 2024

How to Collapse: Hyperinflationary Depression

How crop failure leading to a 20% caloric deficit might cause a financial crisis.

It’s Wednesday. You wake up, let the dog out for a piss, shower and drag yourself to work. Eight to ten hours of pointless grin-fucking pass by and you’re ready to collapse on your sofa with a mind-bending substance to stare at the idiot box for the rest of the night.

If you’re lucky, you have a companion with whom to share your misery.

The joy you once had for life has turned to drudgery and you wonder where you went wrong. The thing is, for most of us this is life now.

The weekly jaunts to a family restaurant: gone. Too expensive.

The desire to achieve greatness at work: that died with your youthful vigor.

Extended family: torn apart by tribalism.

A home to call your own: Only for the rich. 80% of Canadians believe ownership is now only for the wealth.

It wasn’t always like this. I can’t pinpoint when this all began, but it feels like everything started deteriorating at the turn of the century.

There are many causes and symptoms, but two deeply scarring events helped tip the West into decline. September 11th, 2001 cracked the veneer of trust within America. Enabled by new technologies, governments salivated at the ability to wrest control in the name of security. The surveillance state reached maturity.

The global financial crisis also gave us a peak behind the curtain of capitalism. It demonstrated how the winners and losers of capitalism were demarcated, with captains of industry bailed out while individuals were held to account. Wealth and power became inseparable, forging an impenetrable barrier beyond which most will never reach. The wealthy – still unhealthily revered by most – gained more control and extended the moat between them and the unwashed masses.

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

Central Banks Are Wrong about Rate Cuts

April 27, 2024

Central Banks Are Wrong about Rate Cuts

When we talk about monetary policy, people do not understand the importance of interest rates reflecting the reality of inflation and risk. Interest rates are the price of risk and manipulating them down leads to bubbles that end in financial crises, while imposing too high rates can penalize the economy. Ideally, interest rates would flow freely and there would be no central bank to fix them.

A price signal as important as interest rates or the amount of money would prevent the creation of bubbles and, above all, the disproportionate accumulation of risk. The risk of fixing rates too high does not exist when central banks impose reference rates, as they will always make it easier for state borrowing—artificial currency creation—in the most convenient—what they call “no distortions”—and cheap way.

Many analysts say that central banks do not impose interest rates; they only reflect what the market demands. Surprisingly, if that were the case, we wouldn’t have financial traders stuck to screens on a Thursday waiting to decipher what the rate decision is going to be. Moreover, if the central bank only responds to market demand, it is a good reason to let interest rates float freely.

Citizens perceive that raising interest rates with high inflation is harmful; however, they do not seem to understand that what was really destructive was having negative real and nominal interest rates. That’s what encourages economic agents to take far more risks than we can take and to disguise excess debt with a false sense of security. At the same time, it is surprising that citizens praise low rates but then complain that home prices and risky assets rise too fast.

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

Kick Back, Watch It Crumble

April 22, 2024

Kick Back, Watch It Crumble

Monetarily and fiscally there seems to be no other way to describe our government’s actions other than willingly and excitedly driving the country full speed ahead toward the death of the dollar.

The title to this post comes from one of my favorite NOFX songs, Dinosaurs Will Die.

While I’m sure the band in absolutely no way agrees with most, if not all, of my political leanings, the critiques they raise about the music industry in the song could serve just as well as many of the questions I want to ask of legacy mainstream media and politicians from both sides of the aisle in our government.

Leading those questions, for me, is this one: Doesn’t it elicit a hopeless feeling sometimes that we always have to learn the hard way in this country?

Few things are surer than taxes and death, but one of them is that our powers that be will make up any excuses necessary, scapegoat anything possible, and generally exercise every single possible wrong decision before reluctantly realizing that a consequential, uncomfortable yet important, proactive adult decision needs to be made and/or communicated to the American public.

Nobody ever wants to fess up to doing something wrong and nobody has a tolerance for even an ounce of discomfort, even when it accompanies an obvious decision that is in the best interest of our nation.

There have been too many examples in recent memory to name, but one of the latest bouts of us acting like a scared 6 year old with an aversion to reality was the farce of the Fed and Biden administration constantly telling the nation that inflation was transitory, when that has turned out to be the polar opposite of the truth.

Janet Yellen, unable to ascertain a clue in the real world, looking for one in the virtual world.

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

Today’s Contemplation: Collapse Cometh XCVIII–‘Inevitable’ Growth: Helping To Keep the Profiteer Gravy Train Pumping

April 13, 2024

Today’s Contemplation: Collapse Cometh XCVIII

February 7, 2023 (original posting date)

Monte Alban, Mexico. (1988) Photo by author.

‘Inevitable’ Growth: Helping To Keep the Profiteer Gravy Train Pumping

The following are two brief comments (followed by a couple of shorter responses to others) I put out on one of my town’s FB pages regarding the ongoing conversation/debate around a proposed 18-story apartment complex along our main street. This is a very controversial plan given the fact that buildings have been limited to 6 floors for decades and brings to the surface the insane speed with which development has been occurring in our once small town with the moniker ‘Country close to the city’ — which most laugh at now given the ongoing loss of ‘ruralness’ once felt/observed. This community on the edge of the Greater Toronto Area has grown from around 13,000 in 1995 (when my wife, newborn, and I moved to a spot overlooking a kettle lake 10 minutes north of the built-up centre) to close to 50,000 presently with plans to continue expanding at a 5–10% per annum clip for as long as possible. For anyone who has ever seen the television series Schitt’s Creek, several of the buildings seen in the show exist along our main street (e.g., the veterinary clinic) and the main buildings are located in the town of Goodwood ten minutes east of us.

Everybody keeps going on and on about how we need to increase significantly the supply of housing to keep prices affordable but this is not at the root of this issue. That rather facile explanation is the one being leveraged and marketed by the profiteers (especially developers and banks, and facilitated by politicians eager to look like they’re doing something ‘positive’) to expand their cash cow of ever-expanding ‘development’ — regardless of environmental impacts and finiteness of resources.

These unaffordable prices are primarily the result of gargantuan money creation (i.e., credit/debt) by financial institutions (banking and shadow banking) to support (at least for a bit longer) the Ponzi nature of our monetary/financial/economic systems.

Much of this newly created ‘money’ is sloshing around in the system looking for assets with the best returns and what better avenue than parking it in housing — much of which is being bought up by the rentier class (especially the ‘investment’ industry who suck up most of the supply).

Take a look some time at the enormous exponential increase in debt/credit instruments over the past few decades — all of which are potential claims on future resources (particularly energy) that have encountered significant diminishing returns.

This will not end well…

The ‘growth is inevitable’ narrative that some are repeating here must be challenged. Pursuing growth is a conscious choice and one being made and repeatedly propagated by those who stand to profit the most from it: the ruling caste of society who market it as purely beneficial and ignore or rationalise away the negative aspects. This creates an Overton Window that limits our thinking and thereby beliefs.

Limits to growth and the significant negative consequences of such growth (e.g., ecological overshoot) are real. While such repercussions can be ignored/denied/bargained with, the very real biophysical impacts continue on and compound regardless of our beliefs or wishes.

The speed with which growth overwhelms systems is not something to wave away via denial or bargaining through magical thinking (i.e., some as-yet-to-be-hatched technology will ‘solve’ our resource woes and toxic legacies). While growth can be perceived to have some good intentions, as the saying goes “The road to hell is paved with good intentions.”

We are putting at risk not just the overburdened planetary sinks that help to absorb and cleanse the pollutants created by our expanding industrial processes, but also the finite resource stocks — especially energy — that we depend upon for everything. Perhaps more importantly to sustaining a livable environment is the destruction of ecological systems in the wake of our growth. Biodiversity loss (mostly due to land system changes) over the past century or more has been off the charts and puts all species, including homo sapiens, in jeopardy.

And ‘building up’ to densify areas and prevent expansion onto farmland or environmentally-sensitive lands does absolutely nothing to eliminate the above issues. The sinks and stocks continue to be affected at almost the exact same rate. It is the continued growth that is the problem, not how we accommodate such growth.

For any that continue to believe growth in inevitable and can go on indefinitely (or, at least, for a lot longer before we must confront it), you need to watch the following presentation by the late Dr. Albert Bartlett, a physics professor from Colorado University, on the reality of exponential growth: https://www.youtube.com/watch?v=sI1C9DyIi_8.

You have fallen prey to the mythical narrative the governments, banks, and developers have created around supply and demand impacting house prices. This is not the primary reason. The fundamental reason is all the credit/debt ‘money’ created by the financial institutions and government (mostly financial institutions). This newly created money seeks return and gets funnelled into popular assets, sometimes good ones but oftentimes not (think Non-fungible Tokens, cryptocurrency, or many stocks). Housing is one of the very popular targets for all this ‘money’, most of it in the hands of the ruling elite/caste that buy up the housing stock and then rent it out. When well-off individuals/families and/or investment firms (what some have referred to as the rentier class) have millions/billions of dollars at hand to soak up assets, they sink much in real estate and land thereby driving up the price of these assets. The developers, banks, and other profiteers, however, leverage the rising prices to argue for more of their cash cow: development. They need more land, hence opening up the Greenbelt. They need to build more houses, thus the push to build ‘millions’ of residences. Despite the building binge that has been going on for decades around Toronto, prices have shot through the roof. It’s not about supply and demand.

Disagree completely. Growth is happening to keep our Ponzi economic system going for as long as possible…a bit of a misguided strategy on a planet with finite resources, especially energy. We need to be pushing degrowth, not growth.

Shaving it off at zero would be best. The idea that ‘growth’ is inevitable is another of those notions that needs to be challenged. ‘Growth’ is a choice and one being made by our ‘leaders’ (mostly because the ruling caste profits immensely from it). It is neither inevitable nor beneficial past a particular tipping point when it begins to encounter diminishing returns — to say little about the negative impact any and all growth has on ecological systems.

While ‘printing’ money is a tad inaccurate (the vast majority of new money is loaned into existence by banks and shadow-banking institutions), the primary reason housing costs have ballooned is certainty related to this as you suggest: newly created money is flowing into certain hard assets such as housing. If one includes the derivatives nightmare and other debt-liabilities, the world is drowning in quadrillions of dollars of interesting-bearing obligations. The issue around housing costs is multifaceted and supply/demand is but a very small aspect…but one leveraged as THE one by those who stand to profit from ever-expanding development; mostly the banks and developers. I am reminded of what industrialist Henry Ford stated (paraphrasing US Congressman Charles Binderup):”It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”

This Double Whammy Will Unleash Unprecedented Money Printing… or Break the U.S. Economy

April 11, 2024

This Double Whammy Will Unleash Unprecedented Money Printing… or Break the U.S. Economy

Deficits, Deficits, and More Deficits, Unravelling Social Security, Money Printer Going Brrr

“A government big enough to give you everything you want is a government big enough to take from you everything you have.”

~ Gerald Ford

The Federal Reserve is gearing up to cut rates and fire up the money printer this year. And you can see why…

You have Joe Biden, who’s in dire need of a push to turn the tide in the upcoming election. Then you have U.S. banks sitting on a hefty $480 billion in unrealized losses on government securities. The Fed is poised to lend a helping hand to both.

But then there’s another reason that tells me that the Fed won’t likely stop soon once it starts up the proverbial money printer.

Let me elaborate.

Numbers Straight Out of a Horror Flick

Every six months, the Congressional Budget Office (CBO) releases a rolling 10-year “Budget and Economic Outlook.” Most people ignore reading material of this sort, but I’m always eager for it because it showcases just how utterly incompetent governments can be.

If you open the most recent report, and scroll to Page 10, you’ll find Table 1-1: CBO’s Baseline Budget Projections. Look for the line labeled “Total Deficit.” These are government deficits, and I’ve marked them in the next image.

The first thing that should catch your eye from the table above is that the deficits will consistently worsen, starting at $1.5 trillion in 2024 and reaching about $2.6 trillion by 2024. That’s an increase of 71% in just a decade.

Alarmingly, this also means that the total cumulative deficit between 2024 and 2034 would hit an astounding $21.6 trillion.

If this isn’t a damning indication that the U.S. is rapidly heading towards complete fiscal ruin, I don’t know what is. But it gets even worse.

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

Record Global Debt: A Ticking Time Bomb for the World Economy

February 29, 2024

Record Global Debt: A Ticking Time Bomb for the World Economy

The relentless increase in global debt is an enormous problem for the economy. Public deficits are neither reserves for the private sector nor a tool for growth. Bloated public debt is a burden on the economy, making productivity stall, raising taxes, and crowding out financing for the private sector. With each passing year, the global debt figure climbs higher, the burdens grow heavier, and the risks loom larger. The world’s financial markets ignored the record-breaking increase in global debt levels to a staggering $313 trillion in 2023, which marked yet another worrying milestone.

In the Congressional Budget Office (CBO) projections, the United States deficit will fluctuate over the next four years, averaging an insane 5.8 percent of GDP without even considering a recession. By 2033, they still expect a 6.9 percent GDP budget hole. Unsurprisingly, the economy, even using optimistic scenarios, stalls and will show a level of real GDP growth of 1.8% between 2028 and 2033, 33% less than the 2026–2027 period, which is already 25% lower than the historical average.

Some analysts say that this whole mess can be solved by raising taxes, but reality shows that there is no revenue measure that will fill an annual financial hole of $2 trillion with additional yearly receipts. This, of course, comes with an optimistic scenario of no recession or economic impact from a higher tax burden. Deficits are always a spending problem.

Citizens are led to believe that lower growth, declining real wages, and persistent inflation are external factors that have nothing to do with governments, but this is incorrect. Deficit spending is printing money, and it erodes the purchasing power of the currency while destroying the opportunities for the private sector to invest. The entire burden of higher taxes and inflation falls on the middle class and small businesses.

…click on the above link to read the rest…

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Today’s Contemplation: Collapse Cometh XCVIII

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