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- Nov 17, 2019 10:23am Nov 17, 2019 10:23am
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- Nov 18, 2019 7:36am Nov 18, 2019 7:36am
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- Nov 18, 2019 8:55am Nov 18, 2019 8:55am
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- Nov 18, 2019 5:40pm Nov 18, 2019 5:40pm
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Authored by Michael Snyder via The Most Important News.com,
I have so many bad economic numbers to share with you that I don’t even know where to start. I had anticipated that the U.S. economic slowdown would accelerate during the fourth quarter of 2019, and that is precisely what has happened. The Federal Reserve is trying to do all that it can to keep us from officially slipping into a recession, and the federal government is literally spending money as if tomorrow will never come, but all of that intervention has not been enough to reverse our economic momentum. We are really starting to see conditions begin to deteriorate very rapidly now, and 2020 is already shaping up to be the most pivotal year for the U.S. economy since 2008.
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Let me start my analysis by discussing how U.S. consumers are doing right now. According to CBS News, a major new study that was just released found that 70 percent of all Americans are struggling financially…
Many Americans remain in precarious financial shape even as the economy continues to grow, with 7 of 10 saying they struggling with at least one aspect of financial stability, such as paying bills or saving money.
The findings come from a survey of more than 5,400 Americans from the Financial Health Network, a nonprofit financial services consultancy. The project, which started a year ago, is aimed at assessing people’s financial health by asking about debt, savings, bills and wages, among other issues.
That sure doesn’t sound like a “booming economy”, does it?
And even though things are already really tough for millions upon millions of American families, it appears that things are rapidly getting worse. In fact, we just witnessed the largest decline for the Bloomberg Consumer Comfort Index since 2008…
Despite stocks soaring to record highs, The Bloomberg Consumer Comfort index fell last week to 58.0 from 59.1 a week earlier, and has now plunged 5.4 points in three weeks, the biggest such drop since 2008…
Yes, the employment situation in this country is still relatively stable for the moment, but the truth is that most of the “jobs” that have been “created” in recent years actually pay very little. If you can believe it, 58 million jobs in the United States currently pay less than $793 a week…
There are now roughly 105 million production and non supervisory jobs in the U.S. That’s 83 percent of all private sector jobs. And more than half of them — 58 million — pay less than the average weekly U.S. wage of $793. Many of these jobs don’t offer health care or other benefits.
These are the best jobs that many Americans can find and the most hours they can get.
And I discussed in a previous article, 50 percent of all U.S. workers currently make less than $33,000 a year.
In recent years, many families have increasingly turned to debt in order to maintain their “middle class lifestyles”, but now a lot of those debts are starting to go bad.
In fact, the New York Fed just announced that serious auto loan delinquencies in the United States have hit a brand new record high. The following comes from Wolf Richter…
Serious auto-loan delinquencies – auto loans that are 90 days or more past due – in the third quarter of 2019, after an amazing trajectory, reached a historic high of $62 billion, according to data from the New York Fed today
Do you remember the subprime mortgage meltdown of 2008?
Well, a very similar thing is happening right now with auto loans.
Meanwhile, the bad economic numbers just keep rolling in. Here are a few new data points that we have gotten since my last article…
- We just witnessed the worst decline for U.S. industrial production since 2009.
- The Cass Freight Index has just fallen for the 11th month in a row.
- Sears has announced that they will be laying off hundreds of workers as they continue to close stores at a very rapid pace.
At this point, it is going to be a real challenge to keep U.S. GDP growth above zero for the fourth quarter. If you can believe it, the latest forecast from the Atlanta Fed is projecting a fourth quarter growth rate of just 0.3 percent…
The GDP Now model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2019 is 0.3 percent on November 15, down from 1.0 percent on November 8. After this morning’s retail trade releases from the U.S. Census Bureau, and this morning’s industrial production report from the Federal Reserve Board of Governors, the nowcasts of fourth-quarter real personal consumption expenditures growth and fourth-quarter real gross private domestic investment growth decreased from 2.1 percent and -2.3 percent, respectively, to 1.7 percent and -4.4 percent, respectively.
That is terrible.
We aren’t talking about 3 percent. They are projecting growth of “0.3 percent”, and if we slip below zero we could actually be in the beginning of a recession right now without even realizing it yet.
The Federal Reserve has been attempting to bolster the economy by cutting interest rates and by pumping massive amounts of money into the financial system.
They are telling us that this new round of money creation is “not QE”, but from the very beginning I have been pointing out that it really is more quantitative easing, and many in the financial world are starting to acknowledge this reality…
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After a month of constant verbal gymnastics (and diarrhea from financial pundit sycophants who can’t think creatively or originally and merely parrot their echo chamber in hopes of likes/retweets) by the Fed that the recent launch of $60 billion in T-Bill purchases is anything but QE (whatever you do, don’t call it “QE 4”, just call it “NOT QE” please), one bank finally had the guts to say what was so obvious to anyone who isn’t challenged by simple logic: the Fed’s “NOT QE” is really “QE.”
In a note warning that the Fed’s latest purchase program – whether one calls it QE or NOT QE – will have big, potentially catastrophic costs, Bank of America’s Ralph Axel writes that in the aftermath of the Fed’s new program of T-bill purchases to increase the amount of reserves in the banking system, the Fed made an effort to repeatedly inform markets that this is not a new round of quantitative easing, and yet as the BofA strategist notes, “in important ways it is similar.”
But as I discussed earlier, all of the Fed’s efforts are not working.
No matter how hard they try, they have not been able to reverse our economic momentum.
And many people believe that what we have seen so far is just the tip of the iceberg. In fact, trends forecaster Gerald Celente is convinced that we are heading for “the Greatest Depression”…
You think you have a crisis in a country near you now? You haven’t seen anything. When the Greatest Depression hits, people are going to be escaping violence, poverty, corruption — civil wars are happening in front of everybody’s eyes. And you think you’ve got a homeless problem in a city near you? You haven’t seen anything. You are going to see homeless everywhere. This is out of control and it’s going to only get worse as the global economy slows down…
And you know what?
He’s right.
What is coming is going to make 2008 look like a Sunday picnic, and our society is completely and utterly unprepared for what is about to happen.
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- Nov 19, 2019 11:04am Nov 19, 2019 11:04am
- | Commercial Member | Joined Dec 2014 | 11,443 Posts
Russia Prepares To Cut All Ties With West After US Secret Service “Taster” Mysteriously Dies—And Trump Joins President Kennedy In “Treasonous Death Watch”
November 19, 2019
Alarming Trump-Clinton Death Drama Masks Biggest CIA Takedown Since Cuban Missile Crisis
By: Sorcha Faal, and as reported to her Western Subscribers
An extremely alarming highly-classified “Of Special Importance” new Foreign Intelligence Service (SVR) report circulating in the Kremlin today lists at the top of its present national security concerns three seemingly disparate events that occurred in the United States over a 24-hour time span during 16-17 November 2019—the first occurring on Saturday 16 November when President Donald Trump was suddenly rushed without notice to Walter Reed Hospital for a “worrisome and unusual incident” that high-level unnamed sources say was due to “Trump being tested for deliberate poisoning of food with a time delayed chemical agent”, an incident matching what occurred last July-2018 when 19-year Secret Service veteran Nole Edward Remagen suddenly died and was returned to America from Scotland in a bio-hazard body bag after his testing toiletries personally used First Lady Melania Trump—the second occurring on Sunday 17 November when Deep State coup leader Hillary Clinton was evacuated from the plane she was flying on after it experienced a “smoke and shaking” event that left debris on the runway—and the third also occurring on Sunday 17 November when Fort Lauderdale-Florida experienced the most damaging fire in this cities history—a fire involving two mega yachts named Reflections and Lohengrin worth over $24 million—whose owner of Reflections is Chip McElroy—with Chip McElroy also being the owner of McElroy Manufacturing in Tusla-Oklahoma where he’s been involved in large donations to Democrat Party candidates since 2006—and since 2016, also sees Chip McElroy serving on the board of directors of the private and highly secretive US military contractor Pryer Aerospace—a US military contractor that partnered with its Turkish counterpart during the 2017 Aviation Forum held in Hamburg-Germany—and whose central occurrence tying all three of these events together was President Trump meeting with Turkish President Recep Tayyip Erdogan in the White House three days prior on 13 November—the aftermath of which is being felt throughout all of Turkey today as 130 of their top military officers are being sought out an arrested—arrests ordered by against these military officers who were secret operatives financed by the CIA in their failed 15 July 2016 coup against Erdogan—a coup Erdogan said was led by now retired US Army General Joseph Votel—and aided by General Votel’s protégé US Army General Raymond Anthony Thomas III—who was the former Associate Director of the Central Intelligence Agency whom the Pentagon claims is the Commander of United States Special Operations—but stands opposed to the United States Special Operations Command itself claiming that it’s true Commander is US Army General Richard D. Clarke—all of which points to a secret war now being underway between President Trump and elements within his own CIA and US military he’s intent on taking down, the likes of which have not been seen since the 1962 Cuban Missile Crisis—a crisis preceded by the Bay of Pigs fiasco that saw renegade elements within the CIA and US military trying to force President John F. Kennedy into war with Cuba—saw President Kennedy fighting back against this treachery with his vow “to splinter the CIA in a thousand pieces and scatter it to the winds”—but before he could, saw President Kennedy being publically executed on 23 November 1963 when his head was blown off while he sat next to his wife—all the secret files of which President Trump still retains in his possession. [Note: Some words and/or phrases appearing in quotes in this report are English language approximations of Russian words/phrases having no exact counterpart.]
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According to the very limited information contained in this highly-classified report we’re permitted to comment on, appearing to cause the gravest concern among SVR analysts is the powerful Republican Party US Senator Ron Johnson having just revealed that there is a “second sleeper cell working in the Executive Branch against President Trump”—one of whose operatives US Army Lieutenant Colonel Alexander Vindman has now been accused by Senator Johnson of leaking top-secret information—top-secret information Colonel Vindman leaked to a leftist publication whose article US House Intelligence Committee Chairman Adam Schiff used to promote his Trump-Ukraine impeachment coup hoax.
Equally appearing to be gravely concerning to these SVR analysts is that this Trump-Ukraine impeachment coup hoax has now been turned into what is being called a “Pelosi Disaster”—a reference to Democrat Party leader US House Speaker Nancy Pelosi placing all of the Deep State’s demented hopes into this sham investigation that the American people are refusing to even watch or pay attention to—a result so disastrous the entire field of Democrat presidential candidates has gone dark and won’t even mention impeachment—all of whom became terrified this week when the Democrats dark money group House Majority Forward released their shock findings exposing what their own voters really think—and in part states:
The core perception voters bring to the discussion of Trump is that he is a businessman, not a politician.
Because he is not a politician, the standards that would apply to a politician are not applied to him.
His businessman persona also gives him credibility on economic issues, including trade.
Almost nobody in the groups said they are intentionally following impeachment news.
Several are avoiding it.
There was a great deal of ambivalence about impeachment and apparently more support for dropping it than pursuing it.
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With the United States Supreme Court yesterday blocking the Democrats from obtaining President Trump’s financial records, this report concludes, these demented socialists were further sidelined when another US Federal Court ordered the Democrats to give Trump notice if they were going to try to get his New York State tax returns so his attorney’s could also block that effort—an order joined by another US Federal Court blocking these Democrats from receiving secret grand jury testimony from the failed Muller Probe that saw one of its judges pondering the obvious with the words “Would that impermissibly involve this court in an impeachment proceeding?”—a fact obvious because impeachment is a political exercise having nothing to do with the court—but if should be elevated by leftist US Federal Judges to the Supreme Court, has as it pertains to impeachment witnesses, has it now being warned: “If this case is ultimately decided by the Supreme Court, it will be one of the most consequential separation of powers cases in American constitutional history — however it is decided”—all of which is occurring at the same time top American political scientists are warning that “this impeachment fight is scarier than you think”—all of whom studied what their democracy is going through and agree “it usually doesn’t end well”—most particularly because what America is now going through is called “Regime Cleavage”—that describes a division within the population marked by conflict about the foundations of the governing system itself and constitutional democracy—and in societies facing a regime cleavage, a growing number of citizens and officials believe that norms, institutions and laws may be ignored, subverted or replaced—a belief fully exhibited by the socialist Democrat Party and its Deep State allies and the leftist mainstream propaganda media—an exhibition of actual lawlessness and subversion caused by none of them having any answer to Trump’s anti-war posture—an anti-war posture that Trump was elected to achieve after 801,000 peoples were killed and $6.4 trillion of American treasure lost in fighting needless and endless wars—but that he can only achieve by destroying all that oppose him—and appears to be a destruction soon coming after it was announced a few hours ago that Department of Justice Inspector General Michael Horowitz will be testifying before the United States Senate on 11 December about his findings---findings everyone knows will be accompanied by criminal arrest warrants—but no one knowing as of yet how numerous they will be—or if they’ll include former President Obama whom Trump has already accused of committing treason.
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November 19, 2019 EU and US all rights reserved. Permission to use this report in its entirety is granted under the condition it is linked to its original source at WhatDoesItMean.Com. Freebase content licensed under CC-BY and GFDL.
[Note: Many governments and their intelligence services actively campaign against the information found in these reports so as not to alarm their citizens about the many catastrophic Earth changes and events to come, a stance that the Sisters of Sorcha Faal strongly disagree with in believing that it is every human being’s right to know the truth. Due to our mission’s conflicts with that of those governments, the responses of their ‘agents’ has been a longstanding misinformation/misdirection campaign designed to discredit us, and others like us, that is exampled in numerous places, including HERE.]
[Note: The WhatDoesItMean.com website was created for and donated to the Sisters of Sorcha Faal in 2003 by a small group of American computer experts led by the late global technology guru Wayne Green(1922-2013) to counter the propaganda being used by the West to promote their illegal 2003 invasion of Iraq.]
[Note: The word Kremlin (fortress inside a city) as used in this report refers to Russian citadels, including in Moscow, having cathedrals wherein female Schema monks (Orthodox nuns) reside, many of whom are devoted to the mission of the Sisters of Sorcha Faal.]
Blood vs. Ballot Box: America Sets Itself On Civil War Collision Course
America Now Under Mortal Threat As World Around It Burns
Democrat Party “Burn The Ships!” Strategy To Destroy Trump Forewarns American Annihilation
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- Post #7,346
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- Nov 19, 2019 11:26am Nov 19, 2019 11:26am
- | Commercial Member | Joined Dec 2014 | 11,443 Posts
QUESTION: There are people claiming that Fed cannot buy directly from the Treasury and they are buying the same day issue in this Repo Crisis so that means they are monetizing the debt because foreigners are fleeing us Debt. This seems to lack any real substance and is nothing but opinion once again. Would you comment on this new conspiracy theory?
DU
ANSWER: You are correct. This makes no sense. The Repo Market is overnight. Banks buy the T-Bills because they are Primary Dealers and MUST buy in the auctions to retain that position. Simply because they put them into Repo the same day means nothing. They buy them back the next day. This is complete nonsense and it once again demonstrates that all people look at is domestic issues.
The claim foreigners are selling US debt is absurd. Foreign buying of US debt is intensifying as European banks ship cash to their US branches who are buying the debt and posting cash at the Fed in the excess reserve facility because of the fear of a banking crisis in Europe. So they are supposed to be selling US debt forcing the Fed to monetize because they prefer negative yielding debt in Euro with the Euro declining? Perhaps if you need to lose money for a tax write off!
The Repo Crisis has NOTHING to do with the Fed hiding some problem in the USA and the Fed is not monetizing the debt using Repo.
We have a major crisis unfolding and neither the central banks nor the primary dealer banks will talk about what is taking place behind the curtain.
This is a very MAJOR CRISIS, and it will get far worse. I am rushing to get this report out ASAP because this can be the mother of all financial crises that is over the heads of domestic analysis and mainstream press will NEVER report it unless it would impeach Trump.
Categories: Banking Crisis, Central Banks, Conspiracy, Sovereign Debt Crisis
« Lagarde – ECB – Euro
- Post #7,347
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- Nov 19, 2019 4:47pm Nov 19, 2019 4:47pm
- | Commercial Member | Joined Dec 2014 | 11,443 Posts
Executive Order 6102 Led to the Fall of America’s Money System
Guest Post by Bill Bonner
Today, we woke up with a disagreeable headache… and a depressing hypothesis:
The Supreme Court has been derelict in its duty for the last 80 years. For years, the Court has looked the other way as the feds robbed one class of citizen (ordinary, working people) and rewarded another (the elite).
As a result, the American empire faces a catastrophic money crisis… probably accompanied by internal schisms, social breakdowns, and dangerous political scuffles.
Let’s begin by looking again at the connection between time and money.
Losing Time
If you work by the hour, the guy with money can buy your time. That’s what it really means to say someone is “rich” – he has more time because he can control not only his own, but yours, too.
The guy who had $1,000 worth of stocks in 1971 could buy approximately 260 of the average working man’s hours. Today, that $1,000 worth of stocks is worth about $32,000… which, at today’s $28-per-hour average, will buy 1,140 hours of the typical working man’s time – about four times as much as in 1971.
In other words, compared to the wage earner, the capitalist is four times as rich.
Invert it, and you see about the same thing. A working man would have had to labor for 224 hours to buy the 30 Dow stocks in 1971. Today, his time is much less valuable; he has to sweat for 1,000 hours to buy the Dow.
That’s why the liberals whine about “inequality”… and probably why Donald J. Trump was elected. Few people may have done the math, but a lot of people suspected a rat.
And they were right.
Many – including the president – pointed their fingers… but at the wrong rat!
They thought it was the foreigners who had done them dirty: the Chinese with their “unfair trade practices” and the Mexicans “pouring across the border, stealing our jobs,” was the jingo.
For their part, investors, the rich, and the cronies and insiders thought they were smart. They earned their wealth fair and square, they believed, by funding America’s enterprises… and by carefully allocating precious capital to worthy businesses run by able corporate champions.
But the fix was in.
Executive Order 6102
How exactly was the fix put in place?
In 1933, the matter first came before the Supreme Court. Franklin Roosevelt’s Executive Order 6102 made it illegal for citizens to own gold, except in the smallest of quantities.
It came to the Supremes in a series of disputes called the Gold Clause Cases. “Where in the Constitution did the president get that power?” people wondered.
Back then, some investors recalled that the feds can play fast and loose with the dollar, as Lincoln had during the War Between the States.
Gold clauses in contracts protected them by insisting on gold as a means of settling up. Eliminating the gold clause meant taking away the ability to protect against inflation… and substantially altering the terms of the deal.
But the Supremes went along with it. Colleague Dan Denning, our coauthor on The Bonner-Denning Letter, tells the tale:
First, let me quote a few brief passages from [Justice James] McReynolds’ dissent. They capture the spirit of his objection and the relationship between sound money and political liberty. McReynolds writes that:
“Just men regard repudiation and spoliation of citizens by their sovereign with abhorrence; but we are asked to affirm that the Constitution has granted power to accomplish both.
“No definite delegation of such a power exists; and we cannot believe the farseeing framers, who labored with hope of establishing justice and securing the blessings of liberty, intended that the expected government should have authority to annihilate its own obligations and destroy the very rights which they were endeavoring to protect.
“Not only is there no permission for such actions; they are inhibited. And no plenitude of words can conform them to our charter.”
McReynolds went on to make the point that when you buy a bond or make a loan, “the creditor agrees to accept and the debtor undertakes to return the thing loaned or its equivalent.”
Because Roosevelt’s Executive Order meant companies could be paid back in depreciated dollars instead of gold coins or gold equal to the value of the original loan, McReynolds recognized that this was a de facto default.
The gold clause guaranteeing creditors be paid back in gold or something of equal value “prevents the borrower from availing itself of a possibility of discharge of the debt in depreciated currency.”
Congress went along with it, too. And then, still in the minority, McReynolds saw the handwriting on the wall: The feds themselves might be the main beneficiaries.
Congress would be able to borrow… and then wipe out its own debt by inflation. McReynolds:
We are dealing here with a debased standard, adopted with the definite purpose to destroy obligations. Such arbitrary and oppressive action is not within any congressional power heretofore recognized. The authority of Congress to create legal tender obligations in times of peace is derived from the power to borrow money; this cannot be extended to embrace the destruction of all credits. […]
For the government to say, we have violated our contract but have escaped the consequences through our own statute, would be monstrous. In matters of contractual obligation the government cannot legislate so as to excuse itself. […]
Whatever may be the situation now confronting us, it is the outcome of attempts to destroy lawful undertakings by legislative action; and this we think the Court should disapprove in no uncertain terms. […]
Loss of reputation for honorable dealing will bring us unending humiliation; the impending legal and moral chaos is appalling.
Humiliation Afoot
With the gold clause out of the way, the coast was clear. The feds floated out one program after another, meddling in every aspect of human life.
There was now a third party in almost every transaction – the federal regulator.
By the 1950s, the fake wars had begun, too – major wars – with no declaration or funding from Congress.
By the 1960s, the Johnson team had a full-scale war in Vietnam (a country with no capacity or intention to harm the U.S.).
In addition, it launched a War on Poverty, too… intended to create a Great Society, where the lambs would lie down with the wolves and fruit would hang from every ghetto palm.
But humiliation was afoot. It was soon clear that the feds were going to run out of money.
And this time, it was the Nixon team that shirked its duty. Rather than admit that it had overspent, President Richard Nixon repudiated the last link with real money and the ability of foreign governments to exchange their dollars for gold at the promised rate.
Now, the feds had gone Full Paper. Their money was nothing but pieces of paper backed by what was soon to be the world’s biggest debtor.
And now, there was nothing stopping them… There was nothing to stop the chaos McReynolds foresaw.
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- Edited 7:14am Nov 20, 2019 7:02am | Edited 7:14am
- | Commercial Member | Joined Dec 2014 | 11,443 Posts
According to the IMF (International Monetary Fund) and the IIF (Institute of International finance) global debt has soared to a new record high. The level of government debt around the world has ballooned since the financial crisis, reaching levels never seen before during peacetime. This has happened in the middle of an unprecedented monetary experiment that injected more than $20 trillion in the economy and lowered interest rates to the lowest levels seen in decades. The balance sheet of the major central banks rose to levels never seen before, with the Bank Of Japan at 100% of the country’s GDP, the ECB at 40% and the Federal Reserve at 20%.
If this monetary experiment has proven anything it is that lower rates and higher liquidity are not tools to help deleverage, but to incentivize debt. Furthermore, this dangerous experiment has proven that a policy that was designed as a temporary measure due to exceptional circumstances has become the new norm. The so-called normalization process lasted only a few months in 2018, only to resume asset purchases and rate cuts.
Despite the largest fiscal and monetary stimulus in decades, global economic growth is weakening and leading economies’ productivity growth is close to zero. Money velocity, a measure of economic activity relative to money supply, worsens.
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We have explained many times why this happens. Low rates and high liquidity are perverse incentives to maintain the crowding out of government from the private sector, they also perpetuate overcapacity due to endless refinancing of non-productive and obsolete sectors t lower rates, and the number of zombie companies -those that cannot pay their interest expenses with operating profits- rises. We are witnessing in real-time the process of zombification of the economy and the largest transfer of wealth from savers and productive sectors to the indebted and unproductive.
However, as monetary history has always shown, when central planners face the evidence of low growth, poor productivity and higher debt, their decision is never to stop the monetary madness, but to accelerate it. That is why the message that the ECB (European Central Bank) and the IMF are trying to convey is that there is a savings glut and that the reason why negative rates are not working as expected is that economic agents do not believe rates will stay low for longer, so they hold on to investment and consumption decisions. Complete nonsense.
With the household, corporate and government debt at still elevated levels and close to pre-crisis highs, the notion of excess savings is ludicrous. What informs such a misinformed opinion? The often-repeated “there is no inflation” fallacy. If money supply is high and rates are low but inflation does not creep up, then surely there must be a savings glut. False. There is massive inflation in financial assets and housing but there is also a very clear rise in inflation in non-replicable goods and services versus replicable ones, which means that the official consumer price indices (CPI) misrepresent the true cost of living increase. That is the reason why there are demonstrations all over the eurozone against the rising cost of living at the same time as the ECB repeats that there is no inflation.
When central planners blame economic agents for a non-existent savings glut and repeat that there is no inflation when there clearly is a lot, they also tend to add a conclusion: if households and corporates are unwilling to spend or invest, then the government must do it. This is, again, a false premise. Households and corporates are spending and investing. There is no evidence of a lack of capital expenditure, let alone solvent credit demand. The private sector is simply not investing and spending as much as governments would want them to, among other reasons because the private sector does suffer the consequences of taking a higher risk when the evidence of debt saturation is clear to all those who risk their capital.
Unfortunately, the next wave of central bank action will be the full monetization of government excess. The excuse will be the so-called “climate emergency” and “green deals”. Yet governments do not have better or more information about the best course of action in the energy transition, and by artificially picking winners and losers, ignoring the positive forces of competition and creative destruction to deliver faster innovation and progress, governments tend to delay, not accelerate change.
In any case, it will happen. The ECB, always happy to repeat the mistakes of Japan with an even stronger impetus, is likely to start new programs of debt monetization for green projects and claim it is a different, radical and new measure… as if it was not doing so already with the Juncker and Green Energy Directives.
The result is easy to predict, unfortunately. Governments hate two things that disruptive technologies do: reduce consumer prices and generate lower tax revenues. Yes, disruptive technologies are, by definition, disinflationary both in CPI and in tax receipts. Furthermore, disruptive technologies also demolish government control of the economy. These three reasons, lower inflation, lower tax revenues, and less control, are the reasons why governments will never adopt true changes in the economic growth pattern. And because of these reasons, the massive spending financed with new money creation is likely to be even worse for economic growth. Not only it is likely to be an even bigger crowding-out of the private sector, but make economies less dynamic, less productive and more indebted.
There are ways to incentivize change and a green revolution. It is called competition and creative destruction. None of those are favored by governments, not because they are evil, but because governments have the incentive to maintain the obsolete sectors via subsidies.
If the previous $20 trillion stimuli have delivered more debt, less growth, and rising discontent among the middle class that always pays for government experiments, the next one will likely be the last step towards full Japanization. If anything, what are already prudent spending and investment decisions from the private sector are likely to be even more conservative, and the resulting negative productivity growth will mean lower salaries and employment but higher debt and a larger size of government in the economy… Which is, in reality, the ultimate goal of these massive plans.
The reader may think that this time is different but it is not, because the incentives are the same. What I am completely sure is that, once it fails as well, many will demand even more stimuli to solve the problem.
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- Nov 20, 2019 7:25am Nov 20, 2019 7:25am
- | Commercial Member | Joined Dec 2014 | 11,443 Posts
Political and Social Conflict Is Accelerating: Here's Why
November 19, 2019
All the status quo "fixes" only hasten the collapse of the status quo.
That economic, social and political conflict is accelerating is self-evident. What's open to debate are the core drivers of conflict / disorder /unraveling.
Here's the core self-reinforcing dynamic in my view:
1. The status quo elites can no longer mask soaring costs of essentials nor soaring wealth / income inequality between the top .01% (Oligarchs), the top 9.99% who enrich the Oligarchs with their discretionary spending and technocratic/managerial labor, and the bottom 90% who are rapidly losing ground on all fronts: economic, social and political.
2. The elites' "fixes" to the social / political conflicts unleashed by the rigged financial system and winner take most economic order are politically expedient, meaning they don't actually address the sources of conflict, they merely paper them over with PR as a means of preserving the elites' wealth and power.
3. The elites' fundamental financial "fix" is to create trillions in newly issued currency and distribute it to the banks, financiers, super-wealthy families and global corporations-- the top .01% Oligarchs.
4. This "fix" accelerates the asymmetric distribution of wealth by enabling the already-wealthy to buy more productive assets, fund stock buybacks, etc., while forcing the bottom 90% to borrow money from the Oligarchs to make ends meet: the rich get richer, the poor get more indebted.
5. The only possible output of these inputs (political expediency to preserve the elites' wealth and power, the creation and distribution to the Oligarch class of trillions in new currency) is the acceleration of the very erosion that fueled social / political conflicts in the first place. In effect, the elites' "fixes" are accelerating the conflicts that will ultimately lead to their downfall.
This is why the unraveling cannot be reversed or stopped: all the enormous efforts being expended by the elites to maintain the status quo exactly as it is now, with the vast majority of wealth and power in their hands, preclude the structural changes needed to re-set the status quo onto a more sustainable (i.e. more transparent, productive, efficient and decentralized) and less rigged-to-benefit-the-few path.
All the status quo "fixes" only hasten the collapse of the status quo. My longtime colleague Gordon T. Long has laid out the stages of this inevitable descent into conflict and collapse in a series of charts which we discuss in our latest video conversation Coming Era of Political & Social Conflict (29:13).
These stages are predictable because human nature is predictable. That elites will follow a pathway of expediency to preserve their wealth and power is predictable, and this pathway includes the debauchment of currency (printing ever greater sums to add to their wealth and placate the masses), the substitution of credit for capital, the political disenfranchisement of the masses, increasingly oppressive financial repression and social / political conflicts that spiral out of control as the inherently unstable financial house of cards collapses.
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Since the elites won't allow an orderly re-set that reduces their wealth and power, the re-set will result from spiraling conflicts and the collapse of all that is viewed as permanent, i.e. the financial and political status quo.
Don't think it won't happen just because it hasn't happened yet.
If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.
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- Post #7,350
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- Edited 11:01am Nov 20, 2019 7:37am | Edited 11:01am
- | Commercial Member | Joined Dec 2014 | 11,443 Posts
Custodial Risk in New York City
Guest Post by Martin Armstrong
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There is about $17 trillion in outstanding negative-yielding bonds. It is far too complicated to go into great detail on a mere blog post. Suffice to say that the negative-yielding bonds are going to crash like something not witnessed since 1931. While a complete default is not likely prior to 2025/2026, we are going to witness the start of the collapse in 2020. These bonds have been bought by PUNTERS who are just trading them back and forth like a game of musical chairs. When the music stops, a lot of people will get caught holding these new 2.0 versions of financial debt bombs.
Nobody is buying these things to actually hold. It is more akin to trading commodities where people are not actually interested in taking deliveries of lumber, hogs, silos of wheat or bars of silver. These are trading instruments only.
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I strongly urge people to write to the White House and demand LEGAL REFORM in New York City. The entire fate of both the world economy and the domestic economy rests on the integrity of the rule of law which no longer exists. President Trump has the power to address this problem. He could clean house in the SEC and CFTC who will ALWAYS protect the bankers, as is the case in the Department of Justice. The banks have blown up the entire world economy. M.F. Global was using their clients’ money for its own punting and lost big time. Not a single banker was EVER changed, no less Corzine.
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Judge Martin Glenn presided on M.F. Global bankruptcy and created the first BAIL-IN without Congressional Authority. He was the first one to engage in FORCED LOANS by abandoning the rule of law to help the bankers and protect Corzine from losses by taking client accounts to cover M.F. Global’s losses. That is no different from what we saw in Cyprus. He simply allowed the confiscation of client funds when in fact the rule of law should have been that the bankers were responsible and M.F. Global’s losses and it should have been reversed. Never should the clients’ funds be taken for M.F. Global’s losses to the NY Bankers.
What Judge Martin Glenn’s ruling warns is you should NOT trust any company based in New York City. No other circuit would uphold what Glenn did to protect Corzine. While Glenn could not prosecute Corzine, the Department of Justice closed its eyes as did the SEC and CFTC. We lack legal integrity and that leaves a COUNTRY RISK that we would have to warn a client about if we were dealing with a third-world country. This is part of the reason China is still lagging behind.
There MUST BE a straight forward Rule of Law or capital that cannot invest if there are no definitive rules.
As far as Panama is concerned, it has been one place that people have moved. Another is Thailand if you are looking at Asia.
- Post #7,351
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- Nov 20, 2019 11:13am Nov 20, 2019 11:13am
- | Commercial Member | Joined Dec 2014 | 11,443 Posts
Posted Nov 20, 2019 by Martin Armstrong
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QUESTION: Regarding the repo crisis blog. Surely president Trump would be interested in what you do. Am I just being naive? I mean if the administration were kept informed by Socrates, knowing it’s history, wouldn’t they try to adapt?
At some point they have to admit your right.
MH
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ANSWER: I think Trump himself would certainly adapt. The problem is there has been a massive defense perimeter around Trump. I do know some people read. But I also know many people have tried to penetrate that defensive perimeter without success. It would take thousands of people writing to the White House to perhaps make a dent. His statement that he thinks the Fed should have negative interest rates demonstrates he is being kept in the dark.
Once upon a time, I could write to the President and get a response in a matter of days. Trump is being deliberately kept in the dark. While our computer shows he should win, it also shows he may not finish out a second term. I do not think that is due to some impeachment. My concern remains that he has one thing in common with JFK. They both were against war. Even JFK stated in the debate with Nixon that the decline in the dollar was because the military was expanding globally. His comments even sparked the first gold panic in 1960.
My concern is that the coup against Trump from the intelligence agencies is all about they see him as curtailing their power. The Neo-Cons hate him with a passion for he will not just invade Iran. Then we have the Monetary Crisis Cycle. Trump would be the BEST person to have there during that crisis. Any career politician will do whatever it takes to support government at the expense of the people. Trump will return to the private sector so he would NEVER agree to a law that would harm his own business prospects in the future.
I do not know how many people it would take to write to the White House. It may simply be deflected to ensure he is kept in the dark.
Categories: Politics
« The Coming British Elections
- Post #7,352
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- Nov 20, 2019 11:19am Nov 20, 2019 11:19am
- | Commercial Member | Joined Dec 2014 | 11,443 Posts
Blog/Banking Crisis
Posted Nov 20, 2019 by Martin Armstrong
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QUESTION: The distinction between the Repo Crisis and Quantitative Easing is the duration and purpose as distinguished from 2007-2009?
HS
ANSWER: Yes. Under QE, the Fed was buying in 30-year bonds in hope of creating a shortage of long-term paper that would in theory lead to consideration of buying long-term mortgage paper. It was trying to reduce the competition of government long-term debt with the private sector. That is when I warned that such a policy would fail because it was INDIRECT and the assumption that the holder of the 30-year bond they were buying-in was American. I warned on Capital Hill that the Chinese were selling their 30-year debt holdings to the Fed and reducing their maturity to 5 years. Hence, the stimulus was being exported and today, the dollar hoarding is massive. Even 70% of physical dollars are outside the USA.
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Here once again we have people who have no understanding of banking spouting out nonsense that this is QE because the Fed’s balance sheet must be expanding. Under QE, they permanently bought-in debt. Here in the Repo Crisis, they are acting as the middle-man providing liquidity on a 24 hours basis BECAUSE banks do not trust banks. These people who scream QE and other nonsense are oblivious to what this crisis is all about and why the Fed is in the Repo Market and cannot withdraw. This is a GLOBAL CRISIS that they have no understanding about because they are caught up in the banks own the Fed and trying to pretend this is QE so we will have hyperinflation which they forecast back in 2007-2009 that also never happened.
The Fed was originally created to be a bailout system for banks. The banks had to contribute the money as a fund and became the shareholders because the taxpayer was not supposed to bailout the banks. Simulation was buying private sector debt – not government. Congress usurped the Fed for World War I ordering it only buy US government debt to fund the war and never restored the Fed to its original design. The FDR usurped all the power into Washington ending the purpose of the Fed and the independent branches which use to maintain individual interest rates according to their local economies. FDR wanted to fund socialism and he usurped the Fed making a single interest rate.
Then for World War II, FDR demanded the Fed support the bonds at par, which was a form of QE. That led to a crisis in 1951 and the Fed revolted against the White House.
Those who keep claiming the banks control the Fed because they own shares is so off the mark. The banks have no say in the Fed because that ownership is nominal and the Fed has been usurped by Government and is nationalized. The Repo Crisis is by no means to aid the banks. The Fed jumped in because the banks do not trust banks for another reason which sent the Repo Rate to 10% and that demonstrated that the Fed has lost control of even short-term rates.
These people who have no clue of the banking structure make up these conspiracy theories that dominate people’s thinking so much so it blinds them to the real crisis that is unfolding which is the Mother of All Financial Crises. So while they are focused of QE and who owns the Fed, they are blind to the real crisis behind the curtain. The press will never report it because it will not impeach Trump, and they are clueless unless someone who is involved speaks and there is a veil of silence here for a very important reason. So they will spin all the conspiracy theories to keep people looking in the wrong direction and that helps to cover-up the real crisis.
Even if this were QE, all the screaming they did before produced deflation, not hyperinflation. So once again we have the same theory they are selling which was a total failure the last time. I support if you keep yelling “QE” long enough, then might be right one day.
Categories: Banking Crisis, Economics
« Is the Fed Monetizing Debt with the Repo Market? Or is this the Mother of All Financial Crises?
- Post #7,353
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- Nov 20, 2019 11:28am Nov 20, 2019 11:28am
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- Post #7,354
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- Nov 21, 2019 8:50am Nov 21, 2019 8:50am
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- Post #7,355
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- Edited 9:48pm Nov 21, 2019 9:01am | Edited 9:48pm
- | Commercial Member | Joined Dec 2014 | 11,443 Posts
The Great Unknown of U.S. Credit Markets
Can you hear that through the pitch-black darkness? That faint scratching overhead feinting with your mind? What could it be, that undeniable thing going bump in the night?
Adult though you may be, the bogeymen of your childhood waste no time in haunting you anew. That vivid imagination so prized by parents and teachers is instantly your own worst enemy, contriving the ghastliest possibilities that validate your worst fears of the unknown innate in what the eye can’t see.
Would you feel better knowing your ancestors were justifiably filled with dread once the sun set? We mere mortals did not always dominate the animal kingdom. Our species would not self-actualize until the advent of technologies that enabled us to slay the beasts that roam until this day. We were once the hunted and that very dread was essential to survival, an inner element that could trigger the flight instinct when the predator was sure to prevail, as in eat its prey alive. We’re not talking ancient history here wither. Between 1932 and 1947, three generations of lions killed 1,500 people in the Njombe District of southern Tanzania. So deft were the prides, they set traps to catch humans.
In most corners of the world, the dark is simply the intentional absence of light, a condition that can be righted and lighted with the tap of a phone screen. As for our trepidations, lean on the wisdom of Marcus Aurelius, but not the one you may be thinking -- emperor of Rome, leader of 75 million, a quarter of the world’s population, until his death in 180 A.D. Rather call upon his philosophy as he wrote in “The Meditations,” in Koine Greek, the same dialect the New Testament was written in. This was Aurelius’ personal journal, one he never intended for publication. Of the unknown, he dashed unfounded fears citing Socrates who, “used to call popular beliefs ‘the monsters under the bed’ – only useful for frightening children with.”
A year ago, central bankers’ worst nightmares were more than mere frights. From out of the shadows, liquidity vaporized into the murky midst, reducing the once brave to so many cowering children in corners. Visions of credit market calamities hoped to be vanquished to the nether world rose from the ashes of the Great Financial Crisis, leaving leaders with no choice but to bend to the will of markets.
- Post #7,356
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- Nov 21, 2019 9:43pm Nov 21, 2019 9:43pm
- | Commercial Member | Joined Dec 2014 | 11,443 Posts
Authored by Michael Snyder via The Economic Collapse blog,
We just witnessed one of the most monumental events of the entire decade, and yet most Americans still don’t understand what has happened.
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In recent months, the global economy and stock markets around the world have been buoyed by the hope that the U.S. and China would soon sign a new trade agreement. Unfortunately, there is no way that is going to happen now. On Tuesday, the Senate unanimously passed the “Hong Kong Human Rights and Democracy Act of 2019”, and the House of Representatives passed the same bill by a 417 to 1 vote on Wednesday.
Needless to say, the Chinese are beyond angry that Congress has done this. In part one of this article, I showed that China is warning the U.S. to “rein in the horse at the edge of the precipice” and that there will be “revenge” if this bill is allowed to become law. And it looks like this bill will actually become law, because Bloomberg is reporting that President Trump is fully expected to sign it…
President Donald Trump is expected to sign legislation passed by Congress supporting Hong Kong protesters, setting up a confrontation with China that could imperil a long-awaited trade deal between the world’s two largest economies.
Before I go any further, there is something that I want to address. Earlier today, one of my readers emailed me and accused me of siding with China because I am warning about what will happen if trade negotiations fail. Of course that is not true at all. I have been writing about the horrific human rights abuses in China for many years, and they are one of the most tyrannical regimes on the entire planet today. But our two economies have become deeply intertwined over the past two decades, and there are going to be very serious consequences now that we are rapidly becoming bitter enemies. Anyone that doesn’t see this is simply not being rational.
As I have detailed repeatedly in recent months, the global economy has already entered a very serious slowdown. One of the only things that could reverse our economic momentum in the short-term would be a comprehensive trade agreement between the United States and China. But now that our relationship with China has been destroyed, there isn’t going to be a deal.
Some mainstream news sources are reporting that all of this rancor about Hong Kong could delay a trade deal, but that is just more wishful thinking.
Over in China, they are being much more realistic. In fact, the editor of the Global Times, Hu Xijin, just said that the Chinese are “prepared for the worst-case scenario“…
Few Chinese believe that China and the US can reach a deal soon. Given current poor China policy of the US, people tend to believe the significance of a trade deal, if reached, will be limited. China wants a deal but is prepared for the worst-case scenario, a prolonged trade war.
And he followed that up with another tweet that openly taunted U.S. farmers…
So a friendly reminder to American farmers: Don’t rush to buy more land or get bigger tractors. Wait until a China-US trade deal is truly signed and still valid six months after. It’s safer by then.
As the two largest economies on the entire planet decouple from one another, it is going to cause global economic activity as a whole to dramatically slow down. Corporate revenues will fall, credit markets will start to tighten, and fear will increasingly creep into global financial markets.
I have repeatedly warned that conditions are ideal for our first major crisis since 2008, and this conflict with China could be more than enough to push us over the edge.
And already we are getting more bad economic news day after day. For example, we just learned that U.S. rail traffic this month is way down compared to last year…
Nowhere is the slowdown in the U.S. economy more obvious than in places like Class 8 Heavy Duty Truck orders and rail traffic. We already wrote about how Class 8 orders continued to fall in October and new data the American Association of Railroads (AAR) now shows that last week’s rail traffic and intermodal container usage both plunged.
The AAR reported total carloads for the week ended Nov. 9 came in at 248,905, down 5.1% compared with the same week in 2018. U.S. weekly intermodal volume was 266,364 containers and trailers, down 6.7% compared to 2018, according to Railway Age.
Unless a miracle happens with China, the economic numbers are going to continue to get worse.
Sadly, a miracle seems exceedingly unlikely now. As I pointed out in part one, the only way that our relationship with China can be fixed is if Congress repeals the bill that it just passed, and there is no way that is going to happen.
And we better hope that our trade war with China doesn’t escalate into a real war at some point.
According to a report that was released earlier this year, we are very ill-prepared to fight any sort of a conventional war with China in the Western Pacific…
The University of Sydney’s United States Studies Centre’s new report Averting Crisis, said: ‘China’s growing arsenal of accurate long-range missiles poses a major threat to almost all American, allied and partner bases, airstrips, ports and military installations in the Western Pacific.
In addition, U.S. military officials are deeply concerned by how rapidly China has been upgrading their strategic nuclear arsenal. For example, they now possess a “submarine-launched missile capable of obliterating San Francisco”…
China has tested a new submarine-launched missile capable of obliterating San Francisco, an insider has revealed, in a massive boost to the country’s ‘deterrent’.
The Chinese navy tested its state-of-the-art JL-3 missile in Bohai Bay in the Yellow Sea last month, sources said.
The nuclear-capable missile has a 5,600 mile range, significantly longer than its predecessor the JL-2, which could strike targets 4,350 miles away.
We certainly aren’t at that point yet, but without a doubt the Chinese now consider us to be their primary global enemy.
For the moment, it is just a “cold war” that we are facing, and the Chinese are quite adept at playing global chess. They have lots of ways that they can hurt us, and most Americans don’t realize this.
But in the end nobody is going to “win” this conflict, and the entire planet is going to suffer.
Collectively, the economies of the United States and China account for approximately 40 percent of the GDP of the entire world.
As we cause chaos for one another, everyone else is going to experience tremendous pain as well.
The stage is set for a global nightmare, and at this point it doesn’t appear that there is a way that we will be able to escape it.
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- Nov 22, 2019 10:54am Nov 22, 2019 10:54am
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- Post #7,358
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- Nov 23, 2019 9:59am Nov 23, 2019 9:59am
- | Commercial Member | Joined Dec 2014 | 11,443 Posts
https://ecp.yusercontent.com/mail?ur...6.x0_v2HQg--~CThis week’s Torah portion of Chayei Sarah concludes with the passing of our forefather Abraham.
Our Rabbis of blessed memory teach that if we had to select one character trait which Abraham personified most fully, it would be the attribute of chesed, loving kindness towards those around him.
Abraham walked in the path of G-d who created an entire world for the purpose of doing good for his creations, Abraham continually struggled to improve and refine his performance of kindness, going through great pains as he reached for every opportunity to help and be of service to others.
Thanks to Abraham, the raw materials required to become a person of chesed, loving kindness, are within each of us, just waiting to be brought out into the open.
Rabbi M. Alterman asks, “How can we convert this great potential into reality?” His response is quite compelling.
“Rabbi Eliyahu Dessler, a leading 20th century Jewish thinker in England and Israel, writes that the world is comprised of two general categories of people: the givers and the takers.
The "taker", approaches every scenario with his eyes wide open to best take advantage of the people around him and grab the most for himself. Deception and trickery are his tools, and he is always looking to cut a deal and to possess. Even when he appears to be giving to others, his actions are tainted by an ulterior motive, transforming his "giving" into a perversion.
If provided the opportunity, he would love to receive everything for free. The taker's constant selfishness only leads to increased desires, jealousy, and the futile chasing after fleeting pleasures. A world of takers leads only to destruction.
Someone who is a "giver", on the other hand, looks into every life situation and tries to determine how he can best contribute to the well-being and happiness of another person, without setting his focus on what he will receive in return. His act of giving flows from the pure goodness in his heart.
Even when he receives from others, his immediate response is one of overwhelming gratitude, appreciation, and a desire to repay.
The perfected world is one in which everyone seeks to benefit his fellow man, and a society of givers lives in the ultimate happiness and tranquillity.”
Rabbi Yonah Rosner
- Post #7,359
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- Edited 2:21pm Nov 23, 2019 1:03pm | Edited 2:21pm
- | Commercial Member | Joined Dec 2014 | 11,443 Posts
Guest Post by Doug Casey
My regular readers know why I believe the gold price is poised to move from its current level of around $1,460 per ounce to $2,000… $3,000, and beyond.
Right now, we are exiting the eye of the giant financial hurricane that we entered in 2007, and we’re going into its trailing edge. It’s going to be much more severe, different, and longer lasting than what we saw in 2008 and 2009.
In a desperate attempt to stave off a day of financial reckoning during the 2008 financial crisis, global central banks began printing trillions of new currency units. The printing continues to this day. And it’s not just the Federal Reserve that’s doing it: it’s just the leader of the pack. The U.S., Japan, Europe, China… all major central banks are participating in the biggest increase in global monetary units in history.
These reckless policies have produced not just billions, but trillions, in malinvestment that will inevitably be liquidated. This will lead us to an economic disaster that will in many ways dwarf the Great Depression of 1929–1946. Paper currencies will fall apart, as they have many times throughout history.
This isn’t some vague prediction about the future. It’s happening right now. The Canadian dollar has lost 26% of its value since 2013. The Australian dollar has lost 36% of its value during the same time. The Japanese yen and the euro have crashed in value. And the U.S. dollar is currently just the healthiest horse on its way to the glue factory.
These moves show that we’re in the early stages of a currency crisis. But if you make the right moves, you could actually make windfall gains instead of suffering losses. Here’s how to do it…
The huge winner during this crisis will be the only currency that has real value: gold.
Gold has been used as money for thousands of years because it has a unique combination of qualities. Let me spell it out very briefly: It’s durable (almost indestructible – that’s why we don’t use food as money), divisible (each divided piece is valuable – that’s why we don’t use artwork as money), convenient (its unit value is very high – that’s why iron isn’t a good money), consistent (all .999 gold is identical – that’s why we don’t use real estate as money), and has value in and of itself (which is why we shouldn’t use paper as money). Just as important, governments can’t create gold out of thin air. It’s the only financial asset that’s not simultaneously someone else’s liability.
When people wake up and realize that most banks and governments are bankrupt, they’ll flock to gold… just as they’ve done for centuries. Gold will rise multiples of its current value. I expect a 200% rise from current levels, at the minimum. There are many reasons, which we don’t have room to cover here, why gold could see a truly significant gain. And in real terms, not just against paper money.
This should produce a corresponding bull market in gold stocks… of an even greater magnitude. A true mania for gold stocks could develop over the coming years. This could make anyone who buys gold stocks at their current depressed levels very rich.
What History Teaches Us About Great Speculations
Many of the best speculations have a political element to them.
Governments are constantly creating distortions in the market, causing misallocations of capital. Whenever possible, the speculator tries to find out what these distortions are, because their consequences are predictable.
They result in trends you can bet on. Because you can almost always count on the government to do the wrong thing, you can almost always safely bet against them. It’s as if the government were guaranteeing your success.
The classic example, not just coincidentally, concerns gold.
The U.S. government suppressed its price for decades while creating huge numbers of dollars before it exploded upward in 1971. Speculators who understood some basic economics positioned themselves accordingly. Over the next nine years, gold climbed more than 2,000% and many gold stocks climbed by more than 5,000%.
Governments are constantly manipulating and distorting the monetary situation. Gold in particular, as the market’s alternative to government money, is always affected by that. So gold stocks are really a way to short government – or go long on government stupidity, as it were.
The bad news is that governments act chaotically, spastically.
The beast jerks to the tugs on its strings held by various puppeteers. But while it’s often hard to predict price movements in the short term, the long term is a near certainty. You can bet confidently on the end results of chronic government monetary stupidity.
Mining stocks are extremely volatile for that very same reason. That’s good news, however, because volatility makes it possible, from time to time, to get not just doubles or triples but 10-baggers, 20-baggers, and even 100-to-1 shots.
When gold starts moving higher, it’s going to direct a lot of attention towards gold stocks. When people get gold fever, they are not just driven by greed, they’re usually driven by fear as well, so you get both of the most powerful market motivators working for you at once. It’s a rare class of securities that can benefit from fear and greed at once.
Remember that the Fed’s pumping-up of the money supply ignited a huge bubble in tech stocks in the late ’90s, and then an even more massive global bubble in real estate that burst in 2008. But they’re still creating tons of dollars.
This will inevitably ignite other asset bubbles. Where? I can’t say for certain, but I say the odds are extremely high that as gold goes up, a lot of this funny money is going to pour into these gold stocks, which are not just a microcap area of the market but a nanocap area of the market. The combined market capitalization of the 10 biggest U.S.-listed gold stocks is less than 8% of the size of Facebook alone.
I’ve said it before, and I’ll say it again: When the public gets the bit in its teeth and wants to buy gold stocks, it’s going to be like trying to siphon the contents of the Hoover Dam through a garden hose.
Gold stocks, as a class, are going to be explosive. Now, you’ve got to remember that most of them are junk. Most will never, ever find an economic deposit. But it’s hopes and dreams that drive them, not reality, and even those without merit can still go up 10, 20, or 30 times your entry price.
And companies that actually have the goods can go much higher than that.
You buy gold, the metal, because you’re prudent. It’s for safety, liquidity, insurance. The gold stocks, even though they explore for or mine gold, are at the polar opposite of the investment spectrum; you buy them for their extreme volatility, and the chance they offer for spectacular gains. It’s rather paradoxical, actually.
Why Gold Stocks Are an Ideal “Asymmetric Bet”
Because these stocks have the potential to go 10, 50, or even 100 times your entry price, they offer something called “asymmetry.”
You probably learned about symmetry in grade school. It’s when the parts of something have equal form and size. For example, cut a square in half and the two parts are symmetrical.
Symmetry is attractive in some forms. The more symmetrical someone’s face is, the more physically attractive they are considered to be. Symmetry is often attractive in architecture.
But when it comes to investing and speculating in the financial markets, the expert financial operator eschews symmetry. Symmetry is for suckers.
The expert financial operator hunts for extreme asymmetry.
An asymmetric bet is one where the potential upside of a position greatly exceeds its potential downside. If you risk $1 for the chance of making $20, you’re making an asymmetric bet – especially if the odds are very good you could be right.
Amateur investors too often risk 100% of their money in the pursuit of a 10% return. These are horrible odds. But the financially and statistically illiterate take them. You might do better in a casino or most sports betting. It’s one of the key reasons most people struggle in the market.
I’ve always been more attracted to asymmetric bets… where I stand a good chance of making 10, 50, even 100 times the amount I’m risking. I’m not interested in even bets. I’m only taking the field if my potential upside is much, much greater than my potential downside.
Because of the extreme asymmetry gold stocks offer – because of their extreme upside potential when they’re cheap – you don’t have to take a big position in them to make a huge impact on your net worth. A modest investment of $25,000 right now could turn into $500,000 in five years. It has happened before and it will happen again.
Right now gold stocks are near a historic low. I’m buying them aggressively. At this point, it’s possible that the shares of a quality exploration company or a quality development company (i.e., one that has found a deposit and is advancing it toward production) could still go down 10%, 20%, 30%, or even 50%. But there’s an excellent chance that the same stock will go up by 10, 30, or even 50 times.
I hate to use such hard-to-believe numbers, but that is the way this market works.
When current government policies inflate the coming resource bubble, the odds are excellent we’ll be laughing all the way to the bank. Assuming the bank is still there…
No one, including me, knows that a gold mania is just around the corner. But having operated in this market for over 40 years, I can tell you this is a very reasonable time to be buying these volatile stocks. And it’s absolutely a great time to start educating yourself about them.
There’s an excellent chance a truly massive bubble is going to be ignited in this area. If so, the returns are going to be historic.
With global tensions spiking, thousands of Americans are moving their IRA or 401(k) into an IRA backed by physical gold. Now, thanks to a little-known IRS Tax Law, you can too. Learn how with a free info kit on gold from Birch Gold Group. It reveals how physical precious metals can protect your savings, and how to open a Gold IRA. Click here to get your free Info Kit on Gold.
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- Edited 2:22pm Nov 23, 2019 1:05pm | Edited 2:22pm
- | Commercial Member | Joined Dec 2014 | 11,443 Posts
Historic changes in the world economic system don’t happen overnight. In fact, they can take decades.
One of those changes has been taking place since May 2014 – namely, the weakening of the U.S. dollar’s hegemony as the global reserve currency.
Agora Financial put it plainly in a recent issue of their 5-Minute Forecast, stating, “You don’t have to buy into imminent ‘collapse’ to know the rest of the world wants to get out from under the dollar’s thumb.”
The data backs this dire proclamation, as the dollar has lost more and more of its share of the global reserve every quarter except one since Q4 2016, according to the International Monetary Fund’s official report. (At the same time, the euro has been steadily gaining share.)
The most current data in Q2 2019 shows that the share of dollars held in reserve around the world has reduced to 61.63%:
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So the world is slowly turning away from the dollar, a sluggish process Agora calls “de-dollarization.” They claim this process has its origins in May 2014, “when Russian media described a ‘de-dollarization meeting’ among Russian and Chinese leaders.”
Since then, more countries have started taking part in the “de-dollarization” process, which has escalated thanks to economic sanctions the U.S. imposed in May 2018 to make sure the dollar “stays in power.”
The Lawfare blog reports that this escalation may have “incensed” these countries:
When President Trump withdrew from the JCPOA in May 2018, the United States not only reimposed on Iran sanctions that existed prior to the agreement but also added new sanctions. As Hilary Hurd noted on Lawfare, “An estimated 700 individuals, entities, and aircraft are now subject to U.S. sanctions, including over 300 targets not previously sanctioned and more than 50 Iranian banks and their foreign subsidiaries.”
But these countries may have found a workaround for these sanctions, one that presents a clear and present danger to the U.S. dollar hegemony.
“Strength in Numbers” May Make the Dollar Dance Nervously
The list of countries that want to dethrone the dollar includes, but isn’t limited to: “Russia, Iran, Venezuela, Cuba, Sudan, Zimbabwe, Myanmar, the Democratic Republic of the Congo, North Korea and […] also countries like China, Pakistan and Turkey, which are not under full sanctions but rather targets of other punitive economic measures.”
Individually, these countries wouldn’t stand a chance against the still-established dollar hegemony, but together they “equal America’s economic output,” according to Agora.
The European workaround being developed for these countries to bypass using the U.S. dollar in business transactions, while avoiding sanctions, is called INSTEX:
The Instrument in Support of Trade Exchanges (INSTEX) is European Special Purpose Vehicle (SPV), a legal entity created specifically to allow companies based in the European Union—and, in the future, potentially elsewhere—to continue to engage in business with Iran without running afoul of U.S. sanctions.
Germany has also called for an independent payment system, suggesting an alternative to the traditional SWIFT system just last year. France may also join the fray.
Granted, INSTEX still faces a number of hurdles in order to provide a robust alternative to SWIFT and usurp U.S. economic policy.
That said, according to Lawfare: “Even if INSTEX fails, it seems certain that the international desire for a dollar-independent payment system will only grow as the U.S. continues to expand its extraterritorial economic policies.”
Put simply, if the U.S. keeps pushing, this growing number of countries will continue finding new ways to push back.
And if the U.S. dollar ever loses its hegemony as global reserve currency, it could represent a monumental sea change for the U.S. economy.
Best to Prepare in Case Things Go Haywire
As the dollar keeps weakening, at some point silver and gold prices could be positioned to “break out.”
For example, it happened in 2017, when gold rose to new heights as the dollar dropped after a simple Fed announcement.
Losing global hegemony will likely have way more impact on the dollar. Both silver and gold could perform well as a hedge against the dollar if foreign countries continue to move away from it.
After 8 long years of ultra-loose monetary policy from the Federal Reserve, it’s no secret that inflation is primed to soar. If your IRA or 401(k) is exposed to this threat, it’s critical to act now! That’s why thousands of Americans are moving their retirement into a Gold IRA. Learn how you can too with a free info kit on gold from Birch Gold Group. It reveals the little-known IRS Tax Law to move your IRA or 401(k) into gold. Click here to get your free Info Kit on Gold.