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Fed Chairman Paul Volcker’s Thoughts On Goverance

Fed Chairman Paul Volcker’s Thoughts On Goverance

For many people, former Fed Chairman Paul Volcker’s relevance today is rooted in how he broke the back of surging inflation in 1980. He is widely credited with employing the harsh policies that ended the high levels of inflation seen in the United States during the 1970s and early 1980s. back then few people realized his brave and bold move would shape the economic system for decades.
Paul Volcker served two terms as the 12th Chair of the Federal Reserve from 1979 to 1987. He was nominated to the position by President Jimmy Carter and renominated by President Ronald Reagan. Paul Volcker died on December 8, 2019. Before his death, Volcker participated in an interview with Ray Dalio. I recently stumbled upon this video from February 2019 on YouTube. (https://www.youtube.com/watch?v=mMN17uBzCw4)

Paul Volcker was a firm believer in good governance and felt it is a key factor in keeping the nation healthy. Even back in early 2019, Volcker was unhappy with the efficiency of government management. Since then it could be argued the government has performed even more poorly. He voiced concern over how it seems today that working in government has become a revolving door where people go into a job just long enough to make contacts they can exploit when they return to the private sector.

If Volcker were alive today, it is likely he would be appalled at the current state of affairs considering the role he felt government should play in our lives. One similarity the late 70s and early 80s have in common with today is that many special situations exist that scream huge risk ahead. When we look closely at current trends, it is difficult to ignore the numbers simply do not work going forward.…click on the above link to read the rest of the article…

Fourth Turning 2022–Bad Moon Rising (Part 2)

FOURTH TURNING 2022 – BAD MOON RISING (PART 2)

In Part 1 of this article I laid out how the global elite have used this covid flu to manipulate the weak minded into a fear induced mass psychosis as a key element in their Great Reset plan to control the world and keep you technologically enslaved under lock and key. Now I will try to decipher how this mass hysteria might play out over the course of 2022 and beyond.

“Americans today fear that linearism (alias the American Dream) has run its course. Many would welcome some enlightenment about history’s patterns and rhythms, but today’s intellectual elites offer little that’s useful. Caught between the entropy of the chaoticists and the hubris of the linearists, the American people have lost their moorings.” – Strauss & Howe – The Fourth Turning

Federal Reserve Just Declared the American Dream is Dead for Most Americans

“The most effective way to destroy people is to deny and obliterate their own understanding of their history.” ― George Orwell

The American Dream, where all Americans, no matter the circumstances of their birth, had a legitimate opportunity to live a better life than their parents, based upon their own intelligence, work ethic, and good fortune, is an illusion in today’s world. The ruling elite have stolen the wealth of the nation and its citizens. This was not an accident, but a plan implemented over many decades, accelerating after Nixon closed the gold window and opened the door to unlimited amounts of debt being created out of thin air and backed by nothing.

 

One of the Fed’s only mandates was to maintain a stable currency. Since its inception in 1913 to 2020, the USD had lost 96% of its purchasing power. The USD has lost 7.5% of its purchasing power since 2020, as Powell and his cronies have lost control of inflation.

Visualizing the Purchasing Power of the U.S. Dollar Over Time

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

Big Banks Win, You Lose (Volume 32,836)

Big Banks Win, You Lose (Volume 32,836)

bank risk

Part of the 2010 Dodd-Frank Act, the “Volcker Rule” was intended to prevent big banks from taking irresponsible risks.

It’s named after a former Fed Chair, the late Paul Volcker, who used this concept to curb out-of-control inflation in the 1980s.

But in spite of an already-uncertain economy, regulators are now proposing to ease these rules. According to CNBC:

The Volcker Rule was designed to prevent banks from acting like hedge funds. The general principle is that they are allowed to facilitate trades for clients, but not allowed to strap on risk for big proprietary bets.

The amount of risk a big bank can take on is about to change, thanks to the easing of these regulations.

The same CNBC article points out: “The change, which was floated earlier this year, will allow banks to invest more of their own capital in venture capital funds that invest in start-ups and small businesses alongside clients.”

So basically, the money you deposit into your bank account can be used by your bank for riskier investments that have greater potential of backfiring.

According to a ThinkAdvisor article, one of the reasons these changes were proposed in the first place was the difficulty in deciding which investments did or did not pass the Volcker Rule:

FDIC Chairwoman Jelena McWilliams argued when the final changes passed that simplifying the post-crisis Volcker Rule, ushered in by the Dodd-Frank Act in 2010, was needed, as Volcker has been “the most challenging to implement” for regulators and the industry. “Distinguishing between what qualifies as proprietary trading and what does not has proven to be extremely difficult,” she said.

Now that the changes are finalized, an estimated $40 billion could be freed up. It gives the impression of a “backdoor bank bailout” being given to banks, which were feeling financial pressure thanks to COVID-19 lockdowns.

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

Peter Schiff: Jerome Powell Is Resurrecting the Inflation Monster Paul Volcker Slayed

Peter Schiff: Jerome Powell Is Resurrecting the Inflation Monster Paul Volcker Slayed

Former Federal Reserve Chairman Paul Volcker passed away last week. Volker was appointed by President Jimmy Carter, but served most of his term under President Ronald Reagan. Volker was best-known for fighting inflation with interest rate hikes. At the peak, Volker pushed rates all the way to 20%.

Peter talked about Volcker in a recent podcast, noting that he was credited with slaying the inflation monster that today’s Fed seems happy to resurrect.

Volcker took a lot of heat from officials in government for allowing rates to rise so high. Peter said that notably, Reagan was not critical of Volcker’s strategy.

Unlike Donald Trump, Ronald Reagan stood by Paul Volcker. He was his ally and he never criticized Volcker for high interest rates where everybody else was criticizing him, from Main Street, to Wall Street, to the Capitol, but Reagan stood by his Fed chairman.”

In hindsight, Volcker has a lot of respect. Peter said he was the last decent Fed chairman.

I wish he had been a little more critical of his predecessors, but there’s some kind of unwritten rule among Fed chairmen that you never speak ill about anybody who has the job after you. But I wish he had, because I’m sure he had some ill-will, he had some feelings that we were making mistakes, and he could have been more vocal in his criticism.”

Jerome Powell opened up his press conference at the conclusion of last week’s FOMC meeting with a tribute to Volcker. Powell talked about how the former Fed chair slew inflation. Peter called the tribute “ironic.”

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

How a Fragile Euro May Not Survive the Next Crisis

How a Fragile Euro May Not Survive the Next Crisis

euros2_0.PNG

A big US monetary inflation bang brought the euro into existence. Here’s a prediction: It’s death will occur in response to a different type of US monetary bang — the sudden emergence of a “deflationary interlude.” And this could come sooner than many expect.

The explanation of this sphynx-like puzzle starts with Paul Volcker’s abandonment of the road to sound money in 1985/6. The defining moment came when the then Fed Chief joined with President Reagan’s new Treasury Secretary, James Baker, in a campaign to devalue the dollar. The so-called “Plaza Accord”  of 1985 launched the offensive.

Volcker, the once notorious devaluation warrior of the Nixon Administration (as its Treasury under-secretary), never changed his spots, seeing large US trade deficits as dangerous. The alternative diagnosis — that in the early mid-1980s these were a transitory counterpart to increased US economic dynamism and a resurgent global demand for a now apparently hard dollar — just did not register with this top official.

Hence the opportunity to restore sound money. But this comes very rarely in history — only in fact, where high inflation has induced general political revulsion (as for example after the Civil War) — was inflation snuffed out. In the European context this meant the end of the brief hard-Deutsche-mark (DM) era and the birth of the soft euro.

The run-up of the DM in 1985-7 against other European currencies, as provoked by the US re-launch of monetary inflation, tipped the balance of political power inside Germany in favor of the European Monetary Union (EMU) project. The big exporting companies, the backbone of the ruling Christian Democrat Union (CDU) under Chancellor Kohl, won the day. The hard DM, an evident threat to their profits, had to go. The monetarist regime in Germany tottered towards a final collapse.

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

Steen Jakobsen: The Four Horsemen Portend A Painful Reckoning

Steen Jakobsen: The Four Horsemen Portend A Painful Reckoning

Even the US is now ‘swimming naked’

Steen Jacobsen, Chief Economist and Chief Investment Officer of Saxo Bank sees economic slowdown ahead.

Specifically, his “Four Horseman” indicators: the drivers of economic growth, are all flashing red.

Jacobsen believes that the central banks will continue their liquidity tightening efforts for as long as they can get away with (i.e., until the financial markets start toppling over). In his opinion, they eased way too much for way too long; and the malinvestment and zombification that resulted needs to clear the system — and it will likely do so more violently and painful than the central banks will like:

I like to make things simple. Right now we have the Four Horsemen: the four drivers of the global economy. They are the quantity of money, which is falling; the price of money, which is rising; the price of energy,which is a tax on consumers and is rising; and globalization/productivity, which is falling.

So, if you look at the economy as a black box, I really don’t know what happens inside of it. But I can observe what goes into the black box: it’s these four things.

Globalization / productivity, we know that’s all about Trump, trade war and the likes. It’s not exactly improving; it’s actually worsening.

As for the quantity of money, a lot of people argue with me that the Central Banks are still expanding their balance sheets, but the fact of the matter is that the QT in terms of the U.S has been reducing the Federal Reserve balance sheet. And we have a stealth reduction of the balance sheet in terms of the Bank of Japan. The EBC would love to cut and is publicly committed to doing so. The Bank of England is doing its first hike. So the quantity of money is falling.

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

Volcker Rebukes Bernanke and Yellen

Volcker Rebukes Bernanke and Yellen

In his new book, “Keeping At It: The Quest for Sound Money and Good Government,” by Paul Volcker (1979-1987) with Christine Harper, the former Fed Chairman delivers a sound rebuke to Chairmen Ben Bernanke (2006-2014) and Janet Yellen (2014-2018), and other Fed governors and economists, for fretting overmuch about deflation.  He argues that the true danger is that loose monetary policy leads to inflation and market contagion caused by the manipulation of risk preferences.

Volcker specifically chides Bernanke and Yellen for their fixation on a two percent inflation target, one of the main ornaments on the data dependent Fed Christmas Tree.  “How did central bankers fall into the trap of assigning such weight to tiny changes in a single statistic, with all of its inherent weakness?” he asks.  Good question. Volcker writes in Bloomberg:

“Deflation is a threat posed by a critical breakdown of the financial system. Slow growth and recurrent recessions without systemic financial disturbances, even the big recessions of 1975 and 1982, have not posed such a risk.  The real danger comes from encouraging or inadvertently tolerating rising inflation and its close cousin of extreme speculation and risk taking, in effect standing by while bubbles and excesses threaten financial markets. Ironically, the ‘easy money,’ striving for a ‘little inflation’ as a means of forestalling deflation, could, in the end, be what brings it about.  That is the basic lesson for monetary policy. It demands emphasis on price stability and prudent oversight of the financial system. Both of those requirements inexorably lead to the responsibilities of a central bank.”

Of course, Volcker is cut from different cloth than his successors.  Janet Yellen was only chairman of the Federal Reserve Board for four years and with good reason.

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

Paul Volcker’s Fed Criticism Hints at Potential Recession

Paul Volcker’s Fed Criticism Hints at Potential Recession

paul volcker federal reserve

From Birch Gold Group

In the 1980’s, amidst out-of-control inflation, former Fed chairman Paul Volcker employed a controversial economic strategy of high interest rates to combat the issue.

In that case, the economic band-aid, dubbed “The Volcker Rule”, worked.

Volcker is 91 now, and as reported in the New York Times, his respect for the Fed is “all gone.” In a recent interview about his memoir, not only did Volcker take the opportunity to travel down memory lane, he also lambasted the Fed’s “2 percent rate target”:

“I puzzle at the rationale,” he wrote. “A 2 percent target, or limit, was not in my textbook years ago. I know of no theoretical justification.”

With a laugh, he told me that he believed the policy was driven by fears of deflation. “And we haven’t had any deflation in this country for 90 years!”

During the interview, he also made an eerie blanket statement summarizing his thoughts about the U.S., the Fed, and the economy.

He stated clearly, “We’re in a hell of a mess in every direction”. Talking about the stability of banks later in the interview, Volcker revealed an unsettling thought (emphasis ours):

They’re in a stronger position than they were, but the honest answer is I don’t know how much they’re manipulating.

He finished the interview saying, “We need stronger supervisory powers”. It’s tough to disagree with that.

Especially after the Dow dropped 1,400 points two weeks ago, and a slight recovery dropped dramatically again this week, the worry in the markets is clear.

On October 3, the Dow sat at 26,828. Market optimists were singing the praises of a market on the way to the top. But things have turned around dramatically.

Today, the Dow closed at 24,984, for an overall drop of 1,844 points in only 22 days. It has lost almost everything it gained in 2018.

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

Volcker Recalls Another Time the Fed Was in the President’s Crosshairs

Volcker Recalls Another Time the Fed Was in the President’s Crosshairs

The central banker’s memoir recounts an awkward encounter with Ronald Reagan.

Reagan and Volcker in the Oval Office in 1981.

PHOTOGRAPHER: J. SCOTT APPLEWHITE/AP PHOTO

Donald Trump’s repeated public criticism of the Federal Reserve’s monetary policy seems extraordinary, but he isn’t the first president to oppose raising rates. Paul Volcker, 91, has had firsthand experience with this, both in Lyndon Johnson’s Treasury Department and as Fed chairman during the Reagan administration, as he recalls in Keeping at It: The Quest for Sound Money and Good Government (Oct. 30, PublicAffairs), written with Bloomberg Markets Editor Christine Harper. Volcker, who was Fed chairman from 1979 to 1987, is credited with ending an era of double-digit inflation by pushing short-term rates as high as 20 percent.

Later in the fall of 1965, Treasury Secretary Henry Fowler became deeply concerned about a warning he had received from Fed Chairman William McChesney Martin. The Fed planned to raise its discount rate, the rate the Fed charges banks for short-term loans, with the presumed effect of raising all market rates. Martin’s clear aim was to forestall inflationary pressures as Vietnam War spending rose in an already fully employed economy. A spirited internal debate developed. The Council of Economic Advisers and the Bureau of the Budget lined up with Fowler in pleading for delay. Privately, I was sympathetic to Martin’s argument and hoped to persuade the secretary into a compromise: perhaps a quarter-percentage-point increase instead of the planned half-point.

The unfortunate result for me was the creation of a four-man ad hoc committee to examine the issue. The composition was odd. Although I was the Treasury’s representative, I was eager to compromise. Dan Brill, the Fed’s research chief, was strongly opposed to any rate hike despite his boss’s view. So were, in varying degrees, representatives from the CEA and the Bureau of the Budget (now the Office of Management and Budget). Predictably, we concluded that the decision could wait until January so it could be coordinated with the new budget.

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

Paul Volcker Trashes Fed, Washington Plutocrats: World’s In “A Hell Of A Mess In Every Direction”

While we have grown used to Alan Greenspan’s flexible world views appearing regularly among US media channels, when former Fed Chair Paul Volcker speaks, it’s low frequency nature tends to make on pay attention, and he is not optimistic about the state of the world… at all.

As ‘Tall Paul’ prepares to publish his memoir (ironically titled – given the current state of the world – “The Quest For Sound Money & Good Government”), he sat down with NYTimes’ Dealbook’s Andrew Ross Sorkin and was not shy about how he sees the world and where it’s going:

When he looks around now, he sees “a hell of a mess in every direction,” including a lack of basic respect for government institutions..

“Respect for government, respect for the Supreme Court, respect for the president, it’s all gone,” he said.

“Even respect for the Federal Reserve.”

“And it’s really bad. At least the military still has all the respect. But I don’t know, how can you run a democracy when nobody believes in the leadership of the country?

…a current Fed that seems to be following a completely arbitrary benchmark…

“I puzzle at the rationale,” he wrote.

“A 2 percent target, or limit, was not in my textbook years ago. I know of no theoretical justification.”

…and a “swamp” in Washington run by plutocrats.

“There is no force on earth that can stand up effectively, year after year, against the thousands of individuals and hundreds of millions of dollars in the Washington swamp aimed at influencing the legislative and electoral process,”

Finally, Volcker dispels with the myth that presidents historically haven’t tried to influence interest rates. Recounting a 1984 meeting he had with former President Ronald Reagan, then-chief of staff James Baker flatly told Volcker:

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

Beware of the Real Debt Crisis on the Horizon – not the BS on TV

We have to come to the reality that from 2019 onward, we are headed into a Pension Crisis that will be serious. Many are starting to yell about the debt crisis. They lump on private debt and yell its a bubble. What they miss entirely is the fact that we face more than a decade of crises that would have been avoidable, had governments been actually managers and central bank had not tried to keep using Keynesian Demand Side Economics that even Paul Volcker warned back in 1978 had failed.

This is by no means prophecies of doom and gloom. Unfortunately, they are prophecies not even of a pessimist, but only facts that are comprehensible simply using a pocket calculator and not even a computer. The Pension Crisis is the end of Socialism. Promises that were made which were never sustainable but were a scheme to win votes. Then the money needed to pay the pension required 8% interest annually. Then the central banks enter the game and mess everything up even more. Instead of DIRECTLY aiding the economy, they lower rates and HOPE that the banks will pass it along. They never did. The banks parked the money at the Excess Reserve Window that the Fed has still not closed.

The cost of pensions is currently stifling Western society beyond belief. Europe itself is ahead of the curve and will crack before the United States. Europe already has between  30% to 40% of the population who have already retired or are about to leave the labor market. They have used the old Roman pension system of the army which was earning an average of 20 years service to qualify for a pension. It was the pensions which contributed to the Decline and Fall of the Roman Empire.

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

For God’s Sake, Stop!

“Most economists, it seems, believe strongly in their own superior intelligence and take themselves far too seriously. In his open letter of 22 July 2001 to Joseph Stiglitz, Kenneth Rogoff identified this problem. ‘One of my favourite stories from that era is a lunch with you and our former colleague, Carl Shapiro, at which the two of you started discussing whether Paul Volcker merited your vote for a tenured appointment at Princeton. At one point, you turned to me and said, “Ken, you used to work for Volcker at the Fed. Tell me, is he really smart ?” I responded something to the effect of, “Well, he was arguably the greatest Federal Reserve chairman of the twentieth century.” To which you replied, “But is he smart like us ?”

  • Satyajit Das.

“..Every time a report lands on their desks, central bankers must stop to think about the economic, social and political havoc their policies have caused over the past 10 years.

“The desperate attempt to avoid deflation via quantitative easing and record-low interest rates has had horrible side effects, and this observation is hardly controversial. The rich have become much richer; corporate wealth has become more concentrated; soaring house prices have created intergenerational strife; low yields have made all but the super-rich paranoid that they will be entirely unable to finance their futures. Most markets have ended up overvalued (this will really matter one day), while pension fund deficits and a constant sense of crisis have discouraged capital investment — and have possibly held down wages in the UK.

“Set a target, get a distortion. This is standard stuff. But the fact that extreme monetary policy has been going on for so long means that central bankers do not just have macro problems to feel bad about.

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

Is There a Way Out of This Financial Mess?

We need to open the door to the future but that is only possible by understanding the past. Paul Volcker back in 1979 in his Rediscovery of the Business Cycle “Not much more than a decade ago, in what now seems a more innocent age, the ‘New Economics’ had become orthodoxy. Its basic tenet, repeated in similar words in speech after speech, in article after article, was described by one of its leaders as ‘the conviction that business cycles were not inevitable, that government policy could and should keep the economy close to a path of steady real growth at a constant target rate of unemployment. … But it was not until the events of 1974 and 1975, when a recession sprung on an unsuspecting world with an intensity unmatched in the post-World War II period, that the lessons of the ‘New Economics’ were seriously challenged.”

It gives me no please to point out all out problems. My objective is straight forward. If we understand what is unfolding and why, then we can apply the correct solutions rather than turn toward more government authoritarian control. Make no mistake about this, we are in a battle for our freedom. This era of “New Economics” was set in motion by Karl Marx who advocated that government could control the economy and thus create Utopia. While Russia embraced the Communism of Marx, the West adopted his position trying to be just a little bit pregnant. We rejected everything that Adam Smith discovered and the Invisible Hand, rushing into Socialism for it empowered government rather than the private sector and Laissezfaire.

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

Alan “Bubbles” Greenspan Returns to Gold

Under a gold standard, the amount of credit that an economy can support is determined by the economy’s tangible assets, since every credit instrument is ultimately a claim on some tangible asset. […] The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit.

— Alan Greenspan, 1966 

BALTIMORE – That old rascal!

Before joining the feds, former Fed chief Alan “Bubbles” Greenspan was a strong proponent of gold and the gold standard.

He wrote clearly and forcefully about how it was necessary to restrain the Deep State and protect individual freedom.

Then he went to Washington and faced a fork in the tongue.

In one direction, lay honesty and integrity. In the other, lay power and glory.

Faking It

Under the Bretton Woods monetary system, the U.S. promised foreign central banks that it would convert their dollars to gold at a fixed price of $35 an ounce.

This constrained the amount of dollars the U.S. could print to the amount of gold it had in its reserves.

A smart man, Greenspan quickly realized he could not advocate for this old, tried-and-true gold standard and run the Deep State’s new credit money system.

In 1987, he made his choice. He took over the top job at the Fed and faked it for the next 19 years.

Since 1978, we have had four different Fed chiefs. Some were smart. Some were honest. Only Paul Volcker was smart and honest.

Bernanke was honest… we believe. As near as we can tell, so is Janet Yellen. Both may mean well, but both are careful not to think out of the Deep State box.

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

Former Fed Advisor Asks “Has The Fed Bankrupted The Nation”

Former Fed Advisor Asks “Has The Fed Bankrupted The Nation”

Volcker, Greenspan, Bernanke and Yellen.

Which one does not belong? Logic dictates that Volcker should have been odd man out. After all, there is no legendary “Volcker Put.”

The towering monetarist made no bones about never being bound by the financial markets. The same can certainly not be said of his three successors. And yet, history contrarily suggests it is to Volcker above all others that the financial markets will forever be beholden.

Many of you will be familiar with Michael Lewis’ memoir, Liar’s Poker. Yours truly first read the book in a Wall Street training program much like the one Lewis survived to describe in his autobiographical work. The take-away then, in late 1996, was that Gordon Gekko was right — greed was good.

Recently, a second reading of Liar’s Poker, following nearly a decade inside the Federal Reserve, delivered a much different message than did that first youthful reading and was nothing short of an epiphany: Paul Volcker, albeit certainly inadvertently, created the bond market.

On Saturday, October 6, 1979. Volcker held a press conference and announced that interest rates would no longer be fixed and that further the Fed would begin to target the money supply in order to curb inflation and “speculative excesses in financial, foreign exchange and commodity markets.”

Alas, this new regime was not meant to be. In trying to introduce an alternative to interest rate targeting, the Fed replaced one guessing game with another. Predicting the demand for reserves and then buying or selling securities based on that demand proved to be just as dicey as a similar exercise to target a given level of interest rates had been.

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

Olduvai IV: Courage
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Olduvai II: Exodus
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