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Inflation Is The Kryptonite That Will End Our Decades-Long Monetary Policy Ponzi Scheme

Inflation Is The Kryptonite That Will End Our Decades-Long Monetary Policy Ponzi Scheme

“It means buckle your seatbelt Dorothy, because Kansas is going bye-bye.”

The linchpin that allows the world’s nefarious central banking model to be so effective is that the commonfolk – the plumber, the electrician, the teacher, the bartender, bus driver or barber – don’t understand it.

Countless times, I have reminded my readers and listeners that the inflationary “machinery of night” blankets the most regressive tax possible upon the people who can least afford it, and does so in an extraordinarily convenient way for elites, politicians, central bankers and central planners whose titles and “jobs” hinge upon nobody questioning them and/or figuring out how the system works in the first place.

Today, the fabric of our modern banking world is held together by a logical fallacy of a system, wherein central banks are afforded the asinine luxury of being able to print infinite amounts of “money”, which is then disproportionately distributed toward the ruling class, billionaires, and elites, instead of the people who need it the most.

This shows up, literally, as a widening gap between the “haves” and the “have nots” that has widened consistently since the late 1970’s.

As a result of the most recent re-distribution of purchasing power disguised as “monetary stimulus” during the Covid-19 “crisis”, billionaires amassed an additional $4.1 trillion of wealth during a period of time in which the World Bank estimates that “some 100 million people have fallen into extreme poverty,” Bloomberg reported, in conjunction with the World Inequality Report, in December.

As I have asked many times, when the Fed considers stimulating by printing trillions: why not just divide up the money evenly amongst everybody in the country? Why must it be re-balanced and then deployed in a fashion that benefits those who already own financial assets?

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

 

The Problem With Ponzis…

The Problem With Ponzis…

Over the past few years, I’ve been highly critical of the Ponzi Sector. This is a whole grouping of companies that has no ability or desire to ever become profitable. Instead, these businesses have focused on rapid revenue growth because the stock market has rewarded them for this growth—especially if there are no profits. In reality, stock promotion is the core business of the Ponzi Sector—it allows the companies to raise capital and fund unprofitable growth, while insiders dump stock at insane valuations. Now, as the Ponzi Sector equities go into free-fall, a problem has emerged.

Let’s look at Peloton [PTON], the overpriced clothes rack with a built-in iPad. We just witnessed the best possible 6-quarter environment that the company will ever experience. The whole world was locked down, gyms were closed, and work was cancelled. People literally sat at home, bored out of their wits, armed with massive government stimulus checks, fixated on buying products. Despite every possible tailwind, Peloton lost $189 million in the year ended June 2021. As the stimmies wore off, losses exploded to $376 million in the most recent quarter. If this business cannot make money in this perfect environment, what is the operating environment where it earns money?

Investors will say that the goal at Peloton is to lose money on the hardware and make it back on the subscription product. Sure, I can see how investors may fixate on the growing subscription business, but this is a fad fitness business, churn will be high and accelerating now that gyms have re-opened. The expected monthly annuity will underperform, and marketing will always be necessary to bring in more customers.

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

Get in Crash Positions

Get in Crash Positions

When the market goes bidless, it’s too late to preserve capital, never mind all those life-changing gains.

Everyone with some gray in their ponytails knows the stock market has ticked every box for a bubble top, so everybody get in crash positions:

Let’s run through the requirements for a bubble top:

1. Retail investors (i.e. dumb money) are all in and buying the dip with absolute confidence. As the gray-ponytail traders know, there are many moving parts to the retail dumb money going all in:

— The pain of the last bubble bursting has finally faded and been replaced by greed as retail punters watch everyone else mint fortunes by buying the dip and gambling with abandon at the casino’s trendy tables: crypto, NFTs, Mega-Tech, EVs, uranium, etc.

— Prudence and caution (i.e. holding cash in low-risk accounts) are thrown to the wind as the more money you put into the bet, the bigger the rewards.

— Punters realize the key to the really big gains is maxing out margin and leverage, preferably by foregoing owning the underlying equity in favor of options and futures contracts.

— Confidence in the Federal Reserve’s god-like powers and determination to never let stocks decline more than a few percentage points over a few hours or days is off the charts.

— Confidence that this is a new era and so old rules no longer apply is in the stratosphere. Retail punters believe that cryptos, NFTs and blockchain are can’t-lose bets as these are A) unstoppable and B) revolutionizing finance and the economy. As for stocks, retail traders have discovered the power of the herd: if the herd all buys call options by the thousands, this forces market makers to buy the underlying stocks, pushing the price higher in a self-reinforcing feedback loop that is guaranteed to succeed.

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

Today’s Contemplation: Collapse Cometh XI

Today’s Contemplation: Collapse Cometh XI

Knossos, Crete (1993) Photo by author

Yet another in an increasing collection of comments I have posted to the online media site The Tyee. This time it is a commentary on an article that reviews a book arguing in favour of the implementation of Universal Basic Income.

“No stone is left unturned in their thorough and convincing argument…”

I’m not so sure this is true. My personal focus for the past decade+ has been on the unsustainability of our complex society, particularly as it is impacted by our propensity to chase growth — especially population and economic, for these both have a significant connection to our ever-increasing drawdown of finite resources and ecological destruction of our planet. If we are not correcting this tendency to ‘grow’ in any way, shape, or form, then we are just creating more ways to kick-the-can-down-the-road of our wasteful and ruinous path; and place the significant burden of our misinformed ways on future generations.

One of the key arguments of archaeologist Joseph Tainter’s thesis regarding societal collapse as presented in his text The Collapse of Complex Societies is that a society becomes increasingly susceptible to collapse once it encounters diminishing returns on its investments in complexity. It is not a stretch at all to argue that we have been on the path of such decline for decades, particularly once we began creating a purely fiat currency that has allowed an explosion in debt/credit. If one looks at the ‘growth’ of our world since the late 1960s when central banks/governments shifted the world to a monetary system that creates money from thin air with no connection to physical commodities that could constrain our growth somewhat, it is almost all predicated on debt/credit expansion; a conundrum since debt repayment necessitates the growth imperative to continue (yes, basically a gargantuan Ponzi scheme).

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

Ponzis Go Boom!!!

For the past few years, I have been critical of the Ponzi Sector. To me, these are businesses that sell a dollar for 80 cents and hope to make it up in volume. Just because Amazon (AMZN – USA) ran at a loss early on, doesn’t mean that all businesses will inflect at scale. In fact, many of the Ponzi Sector companies seem to have declining economics at scale—largely the result of intense competition with other Ponzi companies who also have negligible costs of capital.

I recently wrote about how interest rates are on the rise. If capital will have a cost to it, I suspect that the funding shuts off to the Ponzi Sector—buying unprofitable revenue growth becomes less attractive if you have other options. Besides, when you can no longer use presumed negative interest rates in your DCF, these businesses have no value. I believe the top is now finally in for the Ponzi Sector and a multi-year sector rotation is starting. However, interest rates are only a small piece of the puzzle.

Conventional wisdom says that the internet bubble blew up due to increasing interest rates. This may partly be true, but bubbles are irrational—rates shouldn’t matter—it is the psychology that matters. I believe two primary forces were at play that finally broke the internet bubble; equity supply and taxes. Look at a deal calendar from the second half of 1999. The number of speculative IPOs went exponential. Most IPOs unlock and allow restricted shareholders to sell roughly 180 days from the IPO. Is it any surprise that things got wobbly in March of 2020 and then collapsed in the months after that? Line up the un-lock window with the IPOs. It was a crescendo of supply—even excluding stock option exercises and secondary offerings…

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

adventures in capitalism, ponzi, interest rates, bubble, financial markets, psychology, speculation,

SHALE STOCK LOSES 99% OF ITS VALUE: Investor Warning For The Future Of The Industry?

SHALE STOCK LOSES 99% OF ITS VALUE: Investor Warning For The Future Of The Industry?

If you think the carnage taking place in the shale oil companies is nearly over, you couldn’t be more wrong.  I believe the bloodbath in the shale oil stocks has only just begun.  Once we see the majority of shale stocks trading on the pink sheets as penny stocks will we finally close the book on the Greatest Energy Ponzi Scheme in history.

I first wrote about the “Disconnect” between the major oil companies share prices versus the shale stocks in my article, THE BLOODBATH IN U.S. SHALE STOCKS CONTINUES: Worst Is Yet To Come.  In that article, I showed how several of the major oil companies’ stock prices had corrected back close to their highs set in October 2018.  However, the shale stocks never really recovered and are still considerably lower than their peaks set last year.

Here is the chart from that article linked above:

Even though many of the shale stocks shown in this chart have seen their prices move higher since I posted it in the middle of March, they are still well off their highs. For example, Whiting Petroleum peaked at $55 in October and is currently trading at $27.  Thus, it is still 50% off its peak last year.  Furthermore, Oasis trading at $6.60 is still 53% off its high of $14.

However, there are some outliers like Pioneer.  Pioneer hit $190 back in October 2018 and was only trading at $140 in mid-March.  So, it was still well off its October peak.  Although over the past month, Pioneer is now trading at $175, so it’s not too far from its previous high.   While Pioneer’s share price is behaving much better than Whiting, Continental, Oasis, and Callon, I believe there is a huge “PERMIAN PREMIUM” being paid by investors who have more money than sense.

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

Pushing Past the Breaking Point

Schemes and Shams

Man’s willful determination to resist the natural order are in vain.  Still, he pushes onward, always grasping for the big breakthrough. The allure of something for nothing is too enticing to pass up.

From the “displays of disbelief, revealing touching old-fashioned notions” file… [PT]

Systems of elaborate folly have been erected with the most impossible of promises.  That prosperity can be attained without labor.  That benefits can be paid without taxes.  That cheap credit can make everyone rich.

Central to these promises are the central government and central planning authorities.  They take your money and, in return, they make you a dependent.  They promise you a secure retirement, and free drugs, while running a scheme that’s well beyond anything Charles Ponzi ever dreamed of.

According to the government’s statistics, the economy has never been better.  By the official numbers, we’re living in a magical world of full employment, 2.3 percent price inflation, and the second-longest growth period in the post-World War II era.  Agreeable reports like these are broadcast each month without question.

Still, we have some reservations.  How come, with the nirvana of full employment, 62 percent of all U.S. jobs don’t pay enough to support a middle class life?  An economy with full employment should be an employee’s market; one where employees can name their price.

Surely, workers would select a middle class life if they could.  But they can’t… because full employment is a sham.

Left: Charles Ponzi back in his heyday. Right: the almost free lunch, a.k.a. the no free lunch theorem ATM [PT]

An $8 Trillion Purge

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

 

What Can Kill a Useless Currency, Report 28 Oct 2018

There is a popular notion, at least among American libertarians and gold bugs. The idea is that people will one day “get woke”, and suddenly realize that the dollar is bad / unbacked / fiat / unsound / Ponzi / other countries don’t like it / <insert favorite bugaboo here>. When they do, they will repudiate it. That is, sell all their dollars to buy consumer goods (i.e. hyperinflation), gold, and/or whatever other currency.

Redemptions Balanced With Deposits

No national currency is gold-backed today. In a gold backed currency, each currency unit begins life with someone who chooses to deposit his gold coin in exchange for the paper currency. And it ends life with someone redeeming the paper to get back the gold coin. A good analogy is bone in the human body. One process is constantly removing bone material. And another process is growing more. What seems to be a static bone, with fixed length and mass, is constantly being torn down and rebuilt. The seemingly stable bone is actually in equilibrium between two opposing forces.

So it is with the gold standard. Some people are redeeming paper to get the gold coin. Others are depositing gold coins to get paper. The seemingly stable gold standard is actually in equilibrium between two opposing processes.

We often hear that governments hate the gold standard because they cannot print gold. This is true, but there is another reason. When people don’t like the interest rate or the soundness of the banks, they withdraw their gold coin. What had seemed to be stable, is no longer. This has nothing to do with quantity of currency or gold. It has everything to do with honesty.

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

U.S. SHALE OIL INDUSTRY: Catastrophic Failure Ahead

U.S. SHALE OIL INDUSTRY: Catastrophic Failure Ahead

While the U.S. Shale Industry produces a record amount of oil, it continues to be plagued by massive oil decline rates and debt.  Moreover, even as the companies brag about lowering the break-even cost to produce shale oil, the industry still spends more than it makes.  When we add up all the negative factors weighing down the shale oil industry, it should be no surprise that a catastrophic failure lies dead ahead.

Of course, most Americans have no idea that the U.S. Shale Oil Industry is nothing more than a Ponzi Scheme because of the mainstream media’s inability to report FACT from FICTION.  However, they don’t deserve all of the blame as the shale energy industry has done an excellent job hiding the financial distress from the public and investors by the use of highly technical jargon and BS.

For example, Pioneer published this in the recent Q2 2018 Press Release:

Pioneer placed 38 Version 3.0 wells on production during the second quarter of 2018. The Company also placed 29 wells on production during the second quarter of 2018 that utilized higher intensity completions compared to Version 3.0 wells. These are referred to as Version 3.0+ completions. Results from the 65 Version 3.0+ wells completed in 2017 and the first half of 2018 are outperforming production from nearby offset wells with less intense completions. Based on the success of the higher intensity completions to date, the Company is adding approximately 60 Version 3.0+ completions in the second half of 2018.

Now, the information Pioneer published above wasn’t all that technical, but it was full of BS.  Anytime the industry uses terms like “Version 3.0+ completions” to describe shale wells, this normally means the use of  “more technology” equals “more money.”  As the shale industry goes from 30 to 60 to 70 stage frack wells, this takes one hell of a lot more pipe, water, sand, fracking chemicals and of course, money.

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

THE SHALE OIL PONZI SCHEME EXPLAINED: How Lousy Shale Economics Will Pull Down The U.S. Economy

THE SHALE OIL PONZI SCHEME EXPLAINED: How Lousy Shale Economics Will Pull Down The U.S. Economy

Few Americans realize that the U.S. economy is being propped up by the Shale Oil Industry.  However, the shale oil industry is nothing more than a Ponzi Scheme, so when it collapses, it will take down the U.S. economy with it.  Unfortunately, the reason few Americans understand how lousy the economics are in producing shale oil and gas is due to the misinformation and propaganda being put out by the industry and energy analysts.

I am quite surprised how bank analysts and brokerage firms can continue to fund the shale oil and gas or advise clients to purchase stock when the industry is behaving just like the Bernie Madoff Ponzi Scheme.  The only big difference is that the U.S. Shale Industry is a Ponzi at least four times greater than Madoff’s $65 billion fiasco.

I decided to discuss in detail why the U.S. Shale Oil Industry was a Ponzi Scheme in my newest video.  I provide some interesting charts that explain how the huge decline rates and massive debt are going to bring down the industry, much quicker than the market realizes.

In the video, I show just how quickly two of the largest U.S. shale oil fields decline.  The chart below was developed by Enno Peters at the ShaleProfile.com websiteThe Permian, the largest shale basin in the United States, decline rate was a stunning 60% in just two years.  Thus, the companies producing oil in the Permian are forced to spend boatloads of Captial Expenditures (CAPEX) to grow or just maintain production:

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

India Enters the Sovereign Debt Crisis

I have warned continually that the Sovereign Debt Crisis will unfold not so much by people selling government debt, but by the lack of people buying new debt. The greatest peril is when there is NO BID for the new issues because all governments are operating a PONZI scheme. The sell new debt to pay off maturing debt. Currently, holders of Indian government debt have been dumping 4.7 billion rupees ($73 million) of government bonds on average every day this year, according to data from the Clearing Corp. of India. Last year, their net daily sales totaled 368 million rupees.

The Sovereign Debt Crisis emerges when the government is unable to raise enough cash to pay off the maturing debt. India has crossed that threshold so as we have warned, the Sovereign Debt Crisiswill begin from outside the USA and spread to the core. This is how all Empires, nations, and city-states collapse.

Is Cryptocurrency a Ponzi Scheme?

Is Cryptocurrency a Ponzi Scheme?

Just three weeks ago Bitconnect announced it was shutting down after being accused of running a Ponzi scheme.  Techcrunch chronicles Bitconnect’s decline noting how the term “pyramid scheme” was not an unfair assessment as to what was going on:

“Bitconnect was an anonymously-run site where users could loan their cryptocurrency to the company in exchange for outsized returns depending on how long the loan was for. For example, a $10,000 loan for 180 days would purportedly give you ~40% returns each month, with a .20% daily bonus. Bitconnect also had a thriving multi-level referral feature, which also made it somewhat akin to a pyramid scheme with thousands of social media users trying to drive signups using their referral code.”

Typically a Ponzi scheme is characterized by first by promising large, unrealistic returns such as the ~40% monthly return. The promise of these sorts of returns largely regarded as both suspicious and impossible, even under even the most aggressive market conditions.

Another point of critique aimed at Bitconnect was the fact that those who sign up for its service are encouraged to share its affiliate marketing and affiliate links. If you look online for any discussion of BitConnect you will find the comments riddled with affiliate links. The reason for this is that those who spread the affiliate links were allegedly to be rewarded with higher returns on their original deposit if the link they posted is later used to sign up a new customer.  Best Bitcoin Exchange chronicles how one user is reported to have lost over $400,000 in the demise of Bitconnect.  And many others have made a legal challenge in a class-action lawsuit about their losses in this market.

All this, however, begs the question that many of us have been asking for some time: are cryptocurrencies an elaborate Ponzi scheme?

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

The Pension Ponzi Scheme is Coming to an End

 

Inevitably, all things must come to an end.  Our entire problem with government is we have ZERO accountability and ZEROqualification standards to even run for office. The Democrats have put forth blacks and women, not because of their abilities, but simply because they want to score votes. The latest proposal was to put Oprah Winfrey up for president. She is black and a woman. This is the qualification requirement? This is like going to Jay Leno for brain surgery. This is why we are in such a crisis. Oprah may be a nice person, but that does not qualify her to make a decision in international relations no less economics.

We impose no qualifications to be a politician. Anyone can run for office. We are in serious trouble because we elect people who have no idea what is going on and just assume everything has been working so why change it? I have warned that the Central Banks in quantitative Easing set the stage for the next crisis. The excessive low-interest rates for nearly 10 years has undermined the pension system while all governments have borrowed like crazy never considering what happens if rates rise?

In Britain, two out of three pension funds are in the deficit. In total, some 3,710 pension schemes are in deficit according to the Pension Protection Fund watchdog. The entire Ponzi Scheme of pension is falling apart. We need crisis management right NOW and there isn’t a hope in hell of moving to such a position of a Crisis Manager. Millions of workers around the world who believed in government are going to see their futures wiped out.

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

10 Years Automatic Earth


Winslow Homer Mending the nets 1881
 

Yes, it’s 10 years ago today, on January 22 2008, that Nicole Foss and I published our first article on the Automatic Earth (the first few years on Blogger). And, well, obviously, a lot has happened in those 10 years.

For ourselves, we went from living in Ottawa, Canada to doing a lot of touring starting in 2009, to support Nicole’s DVDs and video downloads. We visited Sweden, Slovakia, Czech Republic, Germany, Switzerland, Italy, Spain, Austria, Denmark, US of course, with prolonged stays in France, Britain, New Zealand, Australia, times that I miss a lot here and there, to now with Nicole settled in New Zealand and my time divided between Athens, Greece and the Netherlands.

We met so many people both online and in the flesh in all these countries it’s impossible to remember everyone of them, and every town we found ourselves in. Overall, it was a humbling experience to have so many people share their views and secrets, especially since we never stayed at hotels (or very rarely), we were always invited to stay with our readers. Thank you so much for that.

Since we started publishing 8 months before the fall of Bear Stearns, and we very much predicted the crisis that followed (we had been doing that before as well, since 2005 at the Oil Drum), we were the first warning sign for many people that things were going off the rails.

There are still to this day people expressing their gratitude for that. Others, though, not so much. And that has to do with the fact that governments, media and central banks came together to create the illusion of an economic recovery, something many if not most people still believe in. Just read the headlines and the numbers, on housing markets, stocks, GDP, jobs. Unfortunately, it was an illusion then and it still is now.

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

The Darkest Hours


The Tax “Reform” bill working its way painfully out the digestive system of congress like a sigmoid fistula, ought be re-named the US Asset-stripping Assistance Act of 2017, because that’s what is about to splatter the faces of the waiting public, most of whom won’t have a personal lobbyist / tax lawyer by their sides holding a protective tarpulin during the climactic colonic burst of legislation.

Sssshhhh…. The media has not groked this, but the economy is actually collapsing, and the nova-like expansion of the stock markets is exactly the sort of action you might expect in a system getting ready to blow. Meanwhile, the more visible rise of the laughable scam known as crypto-currency, is like the plume of smoke coming out of Vesuvius around 79 AD — an amusing curiosity to the citizens of Pompeii below, going about their normal activities, eating pizza, buying slaves, making love — before hellfire rained down on them.

Whatever the corporate tax rate might be, it won’t be enough to rescue the Ponzi scheme that governing has become, with its implacable costs of empire. So the real aim here is to keep up appearances at all costs just a little while longer while the table scraps of a four-hundred-year-long New World banquet get tossed to the hogs of Wall Street and their accomplices. The catch is that even hogs busy fattening up don’t have a clue about their imminent slaughter.

The centerpiece of the swindle, as usual, is control fraud on the grand scale. Control fraud is the mis-use of authority in applying Three-Card-Monte principles to financial accounting practice, so that a credulous, trustful public will be too bamboozled to see the money drain from their bank accounts and the ground shift under their feet until the moment of freefall.

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

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