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History Tells Us to Own Gold When Central Banks Run Out of Control

HISTORY TELLS US TO OWN GOLD WHEN CENTRAL BANKS RUN OUT OF CONTROL

“Extraordinary Popular Delusions and the Madness of Crowds” happen with regular intervals as Charles Mackay wrote about. It seems that the world experiences more delusions and madness than truth and sanity. 

The pattern is always the same. The economy is never in equilibrium but moves in cycles of boom and bust. If these cycles were allowed to take their natural course, they would move up and down in a steady rhythm without reaching extremes at the top or bottom. 

GOVERNMENTS’ PRIME OBJECTIVE IS TO BE REELECTED BY BUYING VOTES

But human psychology and hunger for power prevent these natural cycles from taking place. Most leaders, whether they are kings or presidents, all have fear of failure combined with illusions of grandeur. As the economy peaks and the good times come to an end, they know that the best chance of not being ejected is for the good times to continue. Today’s leaders’ primary objective is to hang on to power by buying votes. 

And how can they buy votes when the economy is turning down and the coffers are empty? Easy! You just print money out of thin air, as I discussed in my article a couple of weeks ago. The Romans did it, and so did the French, the Brits, Germans, Argentinians, and everyone else. 

PRICES DON’T GO UP – VALUE OF MONEY GOES DOWN

Initially, when a country prints money to extend the prosperity, nobody notices that it is fake. After all, they are still called dollars or pounds. But gradually things become more expensive. The popular interpretation of increasing prices is calling it inflation. Nobody actually notices or understands that it is not prices going up but the value of the money going down as more and more which has zero value is issued.

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

Forced Liquidation

Forced Liquidation


Historians of the future, pan-roasting fresh-caught June bugs over their campfires, may wonder when, exactly, was the moment when the financial world broke with reality. Was it when Nixon slammed the “gold window” shut? When “maestro” Alan Greenspan first bamboozled a Senate finance committee? When Pets.com face-planted 268 days after its IPO? When Ben Bernanke declared the housing bubble “contained?”

If our reality is a world of human activity, then finance is now completely divorced from it for the obvious reason that, for now, there is no human activity. Everyone, except the doctors and nurses, and some government officials, is locked down. So, the only other thing actually still out there spinning its wheels is finance and, to those of us watching from solitary confinement, it is looking more and more like an IMAX-scale hallucination with Dolby sound.

How many mortals can even pretend to understand the transactions now taking place among treasury and banking officials? On their own terms – TALFs, Special Purpose Vehicles, Commercial Paper Funding Facilities, Repo Rescue Operations, “Helicopter Money” – stand as increasingly empty jargon phrases that signify increasingly futile efforts to paper over the essence of the situation: the world is bankrupt. It’s that simple.

The world is locked down and in hock up to its eyeballs. It faces what the bankers euphemistically call, ahem, a “work-out,” which is to say, a restructuring. The folks in charge are resisting that work-out with all their might, because it will change many of the conditions of everyday life (especially theirs), but it is coming anyway. When debt can’t be paid back, money vanishes. Money isn’t capital, but it represents capital when it is functioning. When it isn’t functioning, it stops being money. Now the whole world realizes that the debt can’t be paid back, will never be paid back… and that’s the jig that’s up.

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

Every Bubble Eventually Finds its Pin

Every Bubble Eventually Finds its Pin

The transfer of wealth from workers and savers to governments and big banks continued this week with Swiss-like precision.  The process is both mechanical and subtle.  Here in the USA the automated elegance of this ongoing operation receives little attention.

NFL football.  EBT card acceptance at Del Taco.  Adam Schiff’s impeachment extravaganza.  You name it.  Bread and circuses like these – and many others – offer the American populace countless opportunities for chasing the wild goose.

All the while, and with little fanfare, debts pile up like deadwood in Sequoia National Forest.  These debts, both public and private, stand little chance of ever being honestly repaid.  According to the IMF, global debt –  both public and private – has reached an all-time high of $188 trillion.  That comes to about 230 percent of world output.

Certainly, some of the private debt will be defaulted on during the next credit crisis and depression.  But when it comes to the public debt, governments do everything they can to prevent an outright default.  Central banks crank up the printing press and attempt to inflate it away.

After Nixon temporarily suspended the Bretton Woods Agreement in 1971, the money supply could be expanded without technical limitations.  This includes issuing new debt to pay for government spending above and beyond tax receipts.  Hence, since 1971, government directed money supply inflation has been the standard operating procedure in the U.S. and much of the world.

Downright Disgraceful

Expanding the money supply has the effect of dissipating wealth from the currency.  The process allows governments, which are first in line to spend this newly created money, a back door into your bank account.  Without levying taxes, they get access to your wealth and future earnings and leave you with money of diminished value.

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

The Zeitgeist Knows

The Zeitgeist Knows


Who said the global economy was a permanent installation in the human condition? The head cheerleader was The New York Times’s Tom Friedman, with his 1999 book, The Lexus and the Olive Tree, the trumpet blast for the new order of things. Since then, we partied like it was 1999, with a few grand mal seizures of the banking system along the way, some experiments in creating failed states abroad, and the descent of America’s middle-class into a Disney version of Hieronymus Bosch’s Last Judgment — which is kind of what you see on the streets of Los Angeles these days.

Guess what: the global economy is winding down, and pretty rapidly. Trade wars are the most obvious symptom. The tensions underlying that spring from human population overshoot with its punishing externalities, resource depletion, and the perversities of money in accelerated motion, generating friction and heat. They also come from the fact that techno-industrialism was a story with a beginning, a middle, and an end — and we’re closer to the end than we are to the middle. There will be no going back to the prior party, whatever way we pretend to negotiate our way around or through these quandaries.

The USA-China romance was bound to end in divorce, which Mr. Trump is surreptitiously suing for now under the guise of a negotiated trade rebalancing. The US has got a chronic financial disease known as Triffin’s Dilemma, a set of disorders endemic to any world reserve currency. The disease initially expressed itself in President Nixon’s ditching the US dollar’s gold backing in 1971. By then, the world had noticed the dollar’s declining value trend-line, and threatened to drain Fort Knox to counter the effects of holding those dollars. Since then, all world currencies have been based on nothing but the idea that national economies would forever and always pump out more wealth.

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

Watergate—the First Deep State Coup

Watergate—the First Deep State Coup

James Fulford writes: The Mueller Report, which was supposed to be about alleged “Russian collusion” with Trump, is due out, and many people in the Democrat/Media conglomerate are hoping for a rerun of Watergate, which they think of as a victory for the Rule of Law. It wasn’t, and we need to have one of those famous “conversations” about what it was, and why it mustn’t happen again.

In 1972, Richard Nixon was reelected with 520 electoral votes. He was running on winning the Vietnam War and also fighting a War on Crime. His opponent, George McGovern (17 electoral votes) was running on a plan to lose the Vietnam War, and surrender on the War on Crime.

But by August 1974, Nixon was removed from office, and in April 1975, Vietnamese Communist troops occupied Saigon. What finished off South Vietnam was the “Watergate Congress” which voted to cut off all supplies. For details see James Webb’s Peace? Defeat? What Did the Vietnam War Protesters Want?American Enterprise Institute, May/June 1997.

Who did this? Well, the Democrat-controlled Senate investigated the hell out of a break-and-enter committed by Republicans, which they never did when LBJ, JFK, Truman, and FDR engaged in similar activities. See It Didn’t Start With Watergate , [PDF]by Victor Lasky, published in 1977. On the Senate investigative staff was a young, far-Left Wellesley graduate named Hillary Clinton.

The Democratic media, which hated Nixon with the same kind of hate they now display towards Trump, did the same thing, led by the famous Woodward and Bernstein, who probably get too much “credit” for this.

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

The 12-Step Method of Regime Change

The 12-Step Method of Regime Change

On 15 September 1970, US President Richard Nixon and National Security Advisor Henry Kissinger authorised the US government to do everything possible to undermine the incoming government of the socialist president of Chile, Salvador Allende. Nixon and Kissinger, according to the notes kept by CIA Director Richard Helms, wanted to ‘make the economy scream’ in Chile; they were ‘not concerned [about the] risks involved’. War was acceptable to them as long as Allende’s government was removed from power. The CIA started Project FUBELT, with $10 million as a first instalment to begin the covert destabilisation of the country.

CIA memorandum on Project FUBELT, 16 September 1970.

US business firms, such as the telecommunication giant ITT, the soft drink maker Pepsi Cola and copper monopolies such as Anaconda and Kennecott, put pressure on the US government once Allende nationalised the copper sector on 11 July 1971. Chileans celebrated this day as the Day of National Dignity (Dia de la Dignidad Nacional). The CIA began to make contact with sections of the military seen to be against Allende. Three years later, on 11 September 1973, these military men moved against Allende, who died in the regime change operation. The US ‘created the conditions’ as US National Security Advisor Henry Kissinger put it, to which US President Richard Nixon answered, ‘that is the way it is going to be played’. Such is the mood of international gangsterism.

Phone Call between Richard Nixon (P) and Henry Kissinger (K) on 16 September 1973.

Chile entered the dark night of a military dictatorship that turned over the country to US monopoly firms. US advisors rushed in to strengthen the nerve of General Augusto Pinochet’s cabinet.

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

Trump Walks Back Syria Pullout As Noose Tightens

Trump Walks Back Syria Pullout As Noose Tightens

If anyone still thinks that Donald Trump has some master plan to kill off his Deep State adversaries they should check themselves into therapy. I know withdrawal is hard, but admitting you have a problem is the first step to curing it.

He doesn’t have a plan. He may fight them but it won’t be with any kind of master plan to trap them in some beautiful bit of political judo.

Frankly, Vladimir Putin he is not.

No, Trump is winging things at this point. While he still has the office he’s trying to do some of the things he promised. Doing that may keep him in power for a few more months.

But with his walking back the timetable for pulling troops out of Syria after a visit from Lindsay Graham (R-MIC/AIPAC) should tell you all you need to know about Trump’s willingness to stand up to the pressure he’s under.

Add to that the opening salvo from Mitt Romney (R-Wall St.) and it becomes pretty clear that Trump was told what the score really is. When, not if, the Democrats push for impeachment or a 25th Amendment proceeding against him Graham and Romney will lead a GOP revolt against him, siding with Senate Democrats to get rid of him.

That’s been the point of this from the beginning. Pat Buchanan and I both talked about this from the moment he was elected. Pat reminding us of what happened to Nixon who was hounded out of office because he did the unthinkable — ending the Vietnam War.

I’ve been simply looking at this from the standard libertarian perspective that “War is the health of the state” and Trump’s opposition to our Middle East follies would net him nothing but contempt.

…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.

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The Fed’s Easy-Money Policies Aren’t Helping Income Growth

The Fed’s Easy-Money Policies Aren’t Helping Income Growth

inequality1.PNG

Back in August, Bloomberg interviewed Karen Petrou about her research on quantitative easing and the Fed’s policies since the 2008 financial crisis. What she has discovered has not been encouraging for people who aren’t already high-income, and in recent research presented to the New York Fed, she concluded “Post-crisis monetary and regulatory policy had an unintended but nonetheless dramatic impact on the income and wealth divides.”

This assessment is based on her own work, but also on a 2018 report released by the Minneapolis Fed.1  The report showed that both income and wealth growth in the US have been much better for higher-income households in recent decades

Notably, when indexed to 1971 (the year Nixon ended the last link between gold and the dollar) we can see the disparity between the top wealth groups and other groups:

income_wealth.PNG

 Petrou continues:

What did we learn [from the Minneapolis Fed report]? This new dataset shows clearly that U.S. wealth inequality is the worst it has been throughout the entire U.S. post-war period. We also know now that the U.S. middle class is even more “hollowed out” than we thought in terms of income, with any gains made by the lower-middle class sharply reversed after 2007.

Indeed, the report concludes: “…half of all American households have less wealth today in real terms than the median household had in 1970.”

A closer look at income data also suggests that income growth has been especially anemic since 2007. Using data from the Census Bureau’s 2017 report on income and poverty, we find that incomes for the 90th percentile are increasingly pulling away from both the median (50th percentile) income and from the 20th-percentile income.2

income_percentile.PNG

 The household income for the 20th percentile increased 70 percent since 1971, while it has only increased 20 percent at the 20th percentile.

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

The Global 1% Is Destroying Democracy

The Global 1% Is Destroying Democracy

Unraveling a web of dark money

“Wherever you live in the world, you’ve been robbed. Not by a hidden bandit, but a global kleptocracy: the super-rich who’ve managed to rob the poor blind in every corner of the globe for the past seven decades.” — Michelle Chen

We’re living in a time of global income inequality on a scale never before seen in history. Money is concentrated in the hands of fewer and fewer people around the world, and every year they have more of it than ever before. According to the 2018 World Inequality Report, those belonging to the wealthiest 0.1 percent of the global population have, since 1980, increased their combined wealth by as much as the poorest 50 percent. The combined net worth of all 2,208 of the world’s known billionaires is twice that of the poorest 2.5 billion people. By 2030, members of the wealthiest one percent of the global population are projected to hold 64 percent — a full two-thirds — of the world’s wealth.

It wasn’t supposed to turn out this way. The world’s top economists sat down in Bretton Woods, New Hampshire, in 1944, to figure out how to prevent the world economy from ever again becoming as destabilized as it was in the years leading up to World War I. They envisioned a global financial system that would stop countries from manipulating their exchange rates, curtail unrestricted international cash flows, and lock speculative capital behind national borders.

At first, financial globalization — which generated international institutions like the World Bank and the International Monetary Fund, and tied currencies to the U.S. dollar, which was tied to gold — worked exactly as intended. It laid the economic foundation for a period of unprecedented prosperity and stability in the second half of the 20th century.

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The Idea That the Fed Is ‘Independent’ Is Absurd

President Donald Trump sparked controversy — as is his wont — when he recently told CNBC that he was “not thrilled” with the Federal Reserve’s announced hikes in short-term interest rates, which he claimed would hinder the economic expansion for which his administration had worked so hard. “I’m letting them [the Fed] do what they feel is best,” he added, but this assurance was not enough to prevent journalists and policy experts from pronouncing Trump’s remarks as unprecedented interference with the central bank’s independence.

It may be unusual for a president to openly voice such criticism, but it wouldn’t be the first time one has pressured the Federal Reserve for short-term political gain. In 1965, President Lyndon Johnson considered firing then-Fed Chairman William McChesney Martin, but upon learning this would probably be illegal, he opted instead to dress down the recalcitrant central bank chief at his Texas ranch. By Martin’s later account, a heated argument erupted that resulted in the president shoving him against a wall. According to financial journalist Sebastian Mallaby, as LBJ pushed Martin around the room, he yelled, “Boys are dying in Vietnam, and Bill Martin doesn’t care.”

Better known is President Richard Nixon’s tape-recorded collaboration with Fed Chairman Arthur Burns, Martin’s replacement, who maintained an easy-money policy to stimulate the economy before the 1972 election, which contributed to Tricky Dick’s landslide victory and fueled price inflation for the rest of the decade. In terms of the resulting capital destruction and economic dislocations, this episode is one of modern U.S. history’s greatest object lessons about the risks of executive power reaching beyond its constitutional authority.

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The Degrading Facts of a Fake Money Hole in the Head

The Degrading Facts of a Fake Money Hole in the Head

Squishy Fact Finding Mission

Today we begin with the facts.  But not just the facts; the facts of the facts.  We want to better understand just what it is that is provoking today’s ludicrous world. To clarify, we are not after the cold hard facts; those with no opinions, like the commutative property of addition. Rather, we are after the warm squishy facts; the type of facts that depend on what the meaning of ‘is’ is.

Fact-related pleas… [PT]

The facts, as far as we can tell, are that we are presently living in a land of extreme confusion.  The genesis of this extreme confusion is today’s fake money system.  And the destructive effects of this fake money system have spread out like a virus into nearly all aspects of daily life.

Plain and simple, central bank fiat money creation, multiplied by commercial banks through fractional-reserve banking, propagates financial and economic chaos.  The experience of long periods of money supply expansion punctuated by abrupt, episodic contractions, has the effect of whipsawing the working stiff’s efforts to get ahead. This trifecta of offenses has debased the rewards of hard work, saving money, and paying one’s way.

Quite frankly, these facts are insulting. In particular, they are insulting for those running in the rat race for their family’s daily bread. These facts are also insulting for retirees, who worked for four decades only to have their life savings extracted by the depredations of the fake money system.

 

Early rat race conditioning [PT]

Short-Sighted Decisions

The facts are that on August 15, 1971, Tricky Dick Nixon stiffed the world unconditionally.  He defaulted on the Bretton Woods system, and terminated the agreement that allowed member nations to redeem their paper dollars, acquired through trade, for gold.  But that’s not the half of it…

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The CIA Owns the US and European Media

The CIA Owns the US and European Media

William Blum shares with us his correspondence with Washington Post presstitute Michael Birnbaum. As you can tell from Birnbaum’s replies, he comes across as either very stupid or as a CIA asset.

When I received my briefing as staff associate, House Defense Appropriations Subcommittee, which required top secret clearance, I was told by senior members of the staff that the Washington Post was a CIA asset. Watching the Washington Post’s takedown of President Richard Nixon with the orchestrated Watergate story, that became obvious. President Nixon had made too many overtures to the Soviets and too many arms limitations agreements, and he opened to China. Watching President Nixon’s peace initiatives water down the threat level from the Soviet Union and Maoist China, the military/security complex saw a threat to its budget and power and decided that Nixon had to go. The assassination of President John F. Kennedy had resulted in far too much skepticism about the Warren Commission Report, so the CIA decided to use the Washington Post to get rid of Nixon. To keep the clueless American left hating Nixon, the CIA used its assets in the leftwing to keep Nixon blamed for the Vietnam war, a war that Nixon inherited and did not want.

The CIA knew that Nixon’s problem was that he could not exit the war without losing his conservative base, which was convinced of the nonsensical “Domino Theory.” I have always wondered if the CIA concocted the “Domino Theory,” as it so well served them. Unable to get rid of the war “with honor,” Nixon was driven to brutal methods to force the North Vietnamese to accept a situation that he could depart without defeat and soiling America’s “honor” and losing his conservative support base. The North Vietnamese wouldn’t bend, but the US Congress did, and so the CIA succeeded in discrediting among both the leftwing and righwing Nixon’s war management. With no one to defend him, Nixon was an easy target for the CIA.

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Trump’s Tweets End the Myth of Fed Independence

Trump’s Tweets End the Myth of Fed Independence

President Trump’s recent Tweets expressing displeasure with the Federal Reserve’s (minor) interest rate increases led to accusations that President Trump is undermining the Federal Reserve’s independence. But, the critics ignore the fact that Federal Reserve “independence” is one of the great myths of American politics.

When it comes to intimidating the Federal Reserve, President Trump pales in comparison to President Lyndon Johnson. After the Federal Reserve increased interest rates in 1965, President Johnson summoned then-Fed Chairman William McChesney Martin to Johnson’s Texas ranch where Johnson shoved him against the wall. Physically assaulting the Fed chairman is probably a greater threat to Federal Reserve independence than questioning the Fed’s policies on Twitter.

While Johnson is an extreme example, history is full of cases where presidents pressured the Federal Reserve to adopt policies compatible with the presidents’ agendas — and helpful to their reelection campaigns. Presidents have been pressuring the Fed since its creation. President Warren Harding called on the Fed to lower rates. Richard Nixon was caught on tape joking with then-Fed chair Arthur Burns about Fed independence. And Lloyd Bentsen, President Bill Clinton’s first Treasury secretary, bragged about a “gentleman’s agreement” with then-Fed Chairman Alan Greenspan.

President Trump’s call for low interest rates contradicts Trump’s earlier correct criticism of the Fed’s low interest rate policy as harming middle-class Americans. Low rates can harm the middle class, but they also benefit spend-and-borrow politicians and their favorite special interests by lowering the federal government’s borrowing costs. Significant rate increases could make it impossible for the government to service its existing debt, thus making it difficult for President Trump and Congress to continue increasing welfare and warfare spending.

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This Isn’t Your Grandfather’s (1960s) Inflation Scare

This Isn’t Your Grandfather’s (1960s) Inflation Scare

inflation image 1

“This reminds me of the late 1960s when we experimented with low rates and fiscal stimulus to keep the economy at full employment and fund the Vietnam War. Today we don’t have a recession, let alone a war. We are setting the stage for accelerating inflation, just as we did in the late ‘60s.”
Paul Tudor Jones

As soon as the GOP followed its long-promised tax cuts with damn-the-deficit spending increases (who cares about the kids, right?), you knew to be ready for the Lyndon B. Johnson reminders.

And it’s worth remembering that LBJ pushed federal spending higher, pushed his central bank chairman against the wall (figuratively and, by several accounts, also literally) and eventually pushed inflation to post–Korean War highs.

Inflation kept climbing into Richard Nixon’s presidency, pausing for breath only during a brief 1970 recession (although without falling as Keynesian economists predicted) and then again during an attempt at wage and price controls that ended badly. Nixon’s controls disrupted commerce, angered businesses and consumers, and helped clear a path for the spiraling inflation of the mid- and late-1970s.

So naturally, when Donald Trump and the Republicans pulled off the biggest stimulus years into an expansion since LBJ’s guns, butter and batter the Fed chief, it should make us think twice about inflation risks—I’m not saying we shouldn’t do that.

But do the 1960s really tell us much about the inflation outlook today, or should that outlook reflect a different world, different economy and different conclusions?

I would say it’s more the latter, and I’ll give five reasons why.

1—Technology

I’ll make my first reason brief, because the deflationary effects of technology are both transparent and widely discussed, even if model-wielding economists often ignore them. When some of your country’s largest and most impactful companies are set up to help consumers pay lower prices, that should help to, well, contain prices.

…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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