Money Flow Trading Method along with Risk Management

my login ID is D291049992, who's account# 01045760?

sorry to bother you Mr. Benjamin, I am not very familiar with FXCM Trade Station, that's why I asked you, I have been using MT4 since day one. I will be ok soon, practice, practice, and practice, lol.

As we start just post all your questions here and you can call me anytime at my home/office.

Have a nice weekend. We have had RISK ON all day so I have not made any trades today and will only consider trades starting on Monday.


Benjamin

World News

https://finviz.com/news.ashx?v=2

World Futures

https://finviz.com/futures.ashx

Forex Prices

https://finviz.com/forex.ashx

Cryptocurrency Prices

https://finviz.com/crypto.ashx

Bond & Notes Charts

https://finviz.com/futures_charts.ashx?t=BONDS&p=d1

Charts 10 Year Notes

https://finviz.com/futures_charts.ashx?t=ZN&p=d1

Charts 5 Year Notes

https://finviz.com/futures_charts.ashx?t=ZF&p=d1

Charts GOLD

https://finviz.com/futures_charts.ashx?t=GC&p=m5

Charts DJIA DOW 30

https://finviz.com/futures_charts.ashx?t=YM&p=m5

Charts 2 Year Notes

https://finviz.com/futures_charts.ashx?t=ZT&p=d1

Charts USD

https://finviz.com/futures_charts.ashx?t=DX&p=m5

Charts Euro EUR/USD

https://finviz.com/forex_charts.ashx?t=EURUSD&tf=m5

Charts British Pound GBP/USD

https://finviz.com/forex_charts.ashx?t=GBPUSD&tf=m5

Charts YEN USD/JPY

https://finviz.com/forex_charts.ashx?t=USDJPY&tf=m5


Benjamin

https://www.zerohedge.com/news/2019-...ops+to+zero%29

Whether traders are actually buying stocks, or as the case now appears to be for 12 consecutive weeks, they are not, is mostly irrelevant: even with 3 straight months of outflows from mutual funds and ETFs, the important thing is that someone is pushing the market higher, and whether that is buybacks or a massive short squeeze, the S&P is rapidly approaching the massive resistance level at 2,800 where three of the last four breakout attempts have fizzled.
https://zh-prod-1cc738ca-7d3b-4a72-b...0critical1.png


So while technicals will surely be a major hurdle to overcome, there is a case that sends the S&P back to its all time highs around 2,950. According to BofA chief investment strategist Michael Hartnett, while catalysts for the S&P move from 2350 to 2750 were bearish positioning and panicking policy makers, the catalysts for fresh upside to new highs would be "green shoots" & "greed" even as few see EPS acceleration, while most think the Fed is "pushing-on-a-string."

To make it easier for the bulls, Hartnett then lays out an indicative "green shoots" checklist for EPS emerging from the upcoming earnings recession, would include the following items:

1. US 2s10s yield curve steepens to 50bps from 16bps,
2. Asia export growth up 7% YoY from -2%,
3. global PMI up above 53.0 from 50.7 (Feb survey data poor),
4. China financial conditions index (CHBGMCI) up to 95 from 84, which as we noted previously is already taking place thanks to a gargantuan credit impulse/injection which saw China's Total Social Financing explode in January to the tune of over 5% of GDP.

https://zh-prod-1cc738ca-7d3b-4a72-b...ing%20bofa.jpg


In addition to the checklist, there are specific lead indicators which will suggest if the dreary macro picture is improving, and these include the Korean KOSPI stock index, Asia FX via the ADXY, strength in semiconductors (SOX) and homebuilders (XHB), and continued rise in oil, all of which currently are trending in the right direction for bulls; In fact, the only major risk-on signal missing right now is a weaker dollar, as DXY lower would show higher dollar liquidity is easing global financial conditions.


So assuming all of this happens, and the market rally is finally justified by improving fundamentals, what then?
Well, as often happens with market, that will be the bearish case, one that result in higher commodity prices and rising inflation, prompting the Fed to resume hiking once again. In fact, according to Hartnett, the upcoming episode of market euphoria and "greed" will be merely a redux of events that took place during the run up to the dot com speculative bubble of 1998/1999, which occurred in the following sequence:

1. Asia/EM/LTCM credit shock on Wall St
2. "baby bear market"
3. Fed panic
4. resilient US macro
5. Sept'98 Fed cuts
6. Oct'98 stocks inflect higher versus bonds
7. Nov'98 inflation expectations trough
8. Feb'99 commodities inflect higher versus corporate bonds
9. Jun'99 Fed starts hiking rates again to burst bubble
10. Mar'2000 bubble bursts.

And visually, this is what the 1998/1999 scenario looked like. It culminated with the bursting of the first tech bubble and a recession.
https://zh-prod-1cc738ca-7d3b-4a72-b...99%20redux.jpg


Finally, as he always does, Hartnett concludes with two trade ideas - the first one is the rational, or consensus trade, and the second the contrarian, irrational trade:

1. Today's rational trade is consensus trade: "sell-into-strength", own corporate bonds, EM assets, US stocks, growth stocks, defensive stocks with yield.
2. Today's contrarian is to be long the irrational: stay long in anticipation of green shoots & "greed" via inflation plays such as commodities, Europe & Japan, value stocks, and cheap cyclicals;

Hartnett's conclusion: "be an irrational contrarian."

thanks for your prompt reply, how would I know( not you ) that it was RISK ON all day?? you too have wonderful weekend

RISK ON IS ALWAYS WHEN THE DOW 30 and the other North American Equity Markets are going up. It is that simple. That is why you always should have your TV next to your trading Set Up to see what the equity markets are doing between 9:30 AM and 4:00 PM.

Is that clear ? I am sure that it is. take care.


Benjamin

https://www.zerohedge.com/news/2019-...ops+to+zero%29

One of the recurring market themes we have observed in recent weeks is that just because hedge funds have been painfully - if only from a P&L perspective - underexposed to the recent rally in the stock market, the "pain trade" is higher and that the higher the market rises, the more investors will be forced to enter the market. This thesis has been most aggressively pitched by JPM's Marko Kolanovic who believes that as VIX drops, resulting in greater leverage among the systematic community, the more buyers will emerge, creating a positive feedback loop that sends the market higher for the next three months.


And at least superficially, this take is accurate because as the following chart from Goldman Sachs Prime Services as of Feb 15 2019 shows, both gross and net hedge fund exposure is near the lowest level of the past 2 years. As noted earlier, in its latest hedge fund monitor publiations, Goldman said that hedge fund gross exposures have rebounded modestly alongside the equity market "but remain well below levels registered during most of the prior 18 months", and adds that at roughly 230%, current gross exposures are similar to levels in late November 2018.
https://zh-prod-1cc738ca-7d3b-4a72-b...20exposure.jpg


Yet while it is hardly a secret that hedge funds have been underexposed to the market, where the confusion remains is why hedge funds - despite assurances by the likes of JPM that it is only a matter of time - have so far refused to jump into stocks. In fact, as we reported earlier, according to EPFR US equity funds saw another $4.6 billion outflow in the latest week, the 12th consecutive week of outflows, in other words for the entire duration of the past 9 weeks rally, investors have been continuously selling stocks even as they have been aggressively bidding up every fixed income product.
https://zh-prod-1cc738ca-7d3b-4a72-b...ows%202.22.jpg


But while it remains a mystery why professional investors continue to boycott the market, even as the S&P is rapidly approaching both 2,800 and its Sept 2018 all time highs, we now have a good idea of what has caused the relentless lifting in the market, even without the aggressive participation of retail and institutional investors (who, in fact, have continued to sell risk assets).


The answer, which we doubt will come as a surprise to many, is that in addition to buybacks which as noted earlier today are tracking some +91% higher compared to the same period in 2018 according to BofA client data suggesting another record year for stock repurchases, is stock buybacks.

For the evidence we once again go to Goldman which notes that mirroring the decline in gross exposures, the share of S&P 500 market cap held short is now at the lowest level since 2007, and as shown in the chart below, after peaking at 2.5% in 2015, just ahead of the Jan 2017 Shanghai Accord, short interest as a share of S&P 500 market cap has continued to slide lower and now equals just 1.7%.
https://zh-prod-1cc738ca-7d3b-4a72-b...s/SPX%20SI.jpg


And whether the short squeeze has been forced or due to funds covering bearish exposure, this dramatic reduction in short activity has resulted in stocks with the highest ratio of short interest to float cap to significantly outperform in most sectors during the recent market rebound, as shown in the next chart.
https://zh-prod-1cc738ca-7d3b-4a72-b...0q1%202019.jpg


Two final observations: as shown in the next chart, the 50 stocks with market caps larger than $1 billion with the highest short interest outstanding relative to cap have posted a median YTD return of 24%.
https://zh-prod-1cc738ca-7d3b-4a72-b...ver%2050bn.jpg


And what has been true YTD, is also valid on the last trading day of the week: as shown in the final chart, today the most shorted stocks have once again significantly outperformed the S&P500, and with today's latest widespread short squeeze, the most shorted stocks have outperformed the Russell 2000 for the week...
https://zh-prod-1cc738ca-7d3b-4a72-b...2019-02-22.jpg

COMMENTS FROM BENJAMIN: You now can see by this excellent report alone why research and information as valuable as what you read here gives you an EDGE in your trading.

If there is anyone not certain why then just post your questions here. I will stop posting everyday on March 1, 2019 as I have explained recently.

Is the Recent Rise in Gold Predicting Coming Stagflation?

David ErfleFriday February 22, 2019


Kitco Commentaries | Opinions, Ideas and Markets Talk

(Kitco News) - The term "stagflation" was first used in the United Kingdom by politician Iain Macleod in the 1960’s, while he was speaking in the House of Commons. At the time, MacLeod was speaking about inflation on one side and stagnation on the other, calling it a "stagnation situation." It was later used again to describe the recessionary period during the 1970’s following the oil crisis, which fueled the gold price to soar from $35 in 1971 to $850 per ounce in January, 1980.
Rising taxes in the eurozone has increased the cost of doing business and is causing prices to rise. However, they have been rising only because of higher costs and not demand. Therefore, you have rising prices defined as inflation but without the economic growth or demand, creating a breeding ground for stagflation. This has been instigating rising civil unrest as the standard of living is declining with the net disposable income.


Moreover, the World Trade Organization (WTO) warned on Tuesday that its leading indicator of world trade in goods fell to its lowest level in nine years. Many economists believe the WTO’s latest indicator signal could be a precursor of a major slowdown in the global economy, with possibly negative repercussions for the U.S. economy. It also underscored the continued trade dispute between the U.S. and its chief trading partner, China.


I believe these factors have been the root cause of the gold price beginning to break out in most major currencies, while also ignoring recent firmness in the U.S. dollar. Gold has already made an all-time high in the commodity driven Australian dollar and is closing in on an all-time high in another commodity driven currency, the Canadian dollar. Whether its gold priced in CNY, EUR, JPY or AUD, it’s all the same chart - gold has had a strong rally in every currency and is going up in real terms, not because of U.S. dollar weakness.


This week's buying in materials came mainly from gold and copper stocks as both commodities are having a strong week. In fact, copper is breaking out of an eight-month base and closed Wednesday at its highest level since July of 2018.

The market may also be anticipating a trade deal with China as talks between the second largest economy and the U.S. are reported to be making progress with negotiations to continue during the coming week. The aim of the talks is to reach an agreement before March 2nd, when President Trump said he would raise tariffs on US$200 billion worth of Chinese goods to 25% from 10%.

Oil prices also look set to continue to increase after OPEC said that production from its members fell by nearly 800,000 barrels a day in January to 30.8 million bbl/day. This, combined with Saudi Arabia stating that it would cut output by at least 500,000 bbl/day more than originally planned to 9.8 million bbl/day, saw crude oil hit a three-month high yesterday. This suggests that investors are taking a second look at commodity assets due to possible rising inflation.

Moreover, as the gold complex continues its move higher along with a firm U.S. dollar and rising equities, the GDX surged to its highest level in nearly a year on Wednesday. After some lower volume profit taking yesterday, the global miner ETF appears headed for a test of long-term resistance at $25, which was the high formed during the first quarter of 2018. After consolidating between the start of 2017 through the summer of 2018, miners appear to be back in rally mode and have begun to lead the stock market.

The ratio of the GDX divided by the S&P 500 has also been trending higher once the stock market began to sell off in October of last year. This is the first time since early 2016 that gold miners have performed better than the stock market and is another positive sign of gold possibly completing a nearly six year basing pattern soon. An April Gold monthly close above $1362 next Thursday would confirm a technical bottom being in place for long suffering bulls.

However, minutes from the Fed's January meeting on Wednesday showed some members willing to stay "patient" on any rate hikes as long as inflation shows no signs of rebounding. This stance was expected, so gold began to sell off from strong resistance at $1350 after the minutes were released. The market could also be beginning to price in the possibility that any inflationary threat from higher commodity prices might be enough to cause some members of the Fed to have second thoughts about their newly-adopted dovish stance.

Nevertheless, the rising gold price in commodity based major currencies towards all-time highs could be signaling a coming period of stagflation where economic growth has been declining and the rise of commodities is signaling coming inflation. Annual growth rates have been in a bear market since the 1950’s and the bigger government becomes, the more it must extract from the economy to sustain itself. Central Bank gold buying is also up an astounding 74% year-over-year, which is the highest annual net purchases since Nixon closed the gold window in 1971.

The main economic theory of stagflation is that the confluence of stagnation and inflation are results of a poorly constructed economic policy. Many analysts feel the Fed is making a mistake by announcing a pause in its rate hike policy, which may eventually put them behind the inflation curve. If this is indeed the case, when combined with the already declining global economic growth, gold could be sniffing stagflation coming into the global economy.

Stop by my website at www.juniorminerjunky.com and sign up for my free email list. You will receive this column in your inbox each week, along with current interviews and subscription information.

By David Erfle Contributor to Kitco News
[email protected]

Here is the link to the original Kitco post:

https://www.kitco.com/commentaries/2019-02-22/Is-the-Recent-Rise-in-Gold-Predicting-Coming-Stagflation.html

Junior Miner Junky Subscription Information:

http://www.juniorminerjunky.com/subscribe
JMJ friend and subscriber Cory Fleck interviewed me earlier this week and we discussed my thoughts on the move higher in gold. Still within a backdrop of low sentiment, gold is continuing the trend higher. There are many encouraging signs for the metal as it seems slowly money mangers are allocating a little money to the PMs. Also GDX put in a gap on Tuesday and back on January 25th. We weigh in on which of these gaps might be filled. Please click on the link below to listen in.
https://ecp.yusercontent.com/mail?ur...PCBX1Csl3g--~C


Korelin Economics Report - 19 February 2019 - Gold Breaking Out Against Other Currencies & a GDX Gap Higher with David Erfle.



Copyright 2017 DAVID ERFLE, All rights reserved.

https://www.zerohedge.com/news/2019-...-national-debt

Authored by Mac Slavo via SHTFplan.com,
Peter Schiff, the CEO and chief global strategist of Euro Pacific Capital Inc. says that the real national emergency is not at the southern border. The real ticking time bomb is the national debt.
https://zh-prod-1cc738ca-7d3b-4a72-b...51245263_3.jpg


We are headed for a train wreck in this country because of the national debt and yet nobody seems concerned about it. In fact, many Americans have taken to emulating the federal government by getting themselves buried in massive amounts of debt as well, compounding the issue. According to Seeking Alpha‘s report by Schiff Gold, we should all we wary of the government’s overspending and desire to tax more to make up for it. Just because we haven’t suffered a crisis – YET- based on this debt doesn’t mean that one isn’t coming.


On Friday, President Donald Trump declared a national emergency so he could build a wall at the southern border. Based on that declaration, the president will reallocate $6.5 billion from other government programs to fund a border wall. But the problem isn’t that we don’t have a wall, says Schiff. The problem is we’ve already built a wall of debt.


“Of course, the real national emergency is not the lack of a wall, the failure to build a wall, but building up the national debt.” –Peter Schiff via Seeking Alpha

The United States debt surpassed the $22 trillion mark just last week and continues to rocket upward with no end in sight and this is just the very tip of the iceberg.
“This is just a funded portion of the debt. This is where the US government sells a bond and somebody owns that bond. It doesn’t include [unfunded] liabilities like what the government owes for Social Security, or guaranteed bank deposits, or mortgages, or student loans, or all that nonsense. That’s not there. Those are contingent liabilities. They’re just as real. They’re not even part of the national debt.” –Peter Schiff via Seeking Alpha


Americans have become far too comfortable with selling their children into slavery to the government because of the debt, and they continue to be oblivious to what they are doing.

“We are headed for a train wreck in this country because of the national debt. What Trump has been building while he hasn’t been building a wall is he’s been building up the size of government, and he’s been building up the deficits that have been necessary to finance that government buildup.” –Peter Schiff via Seeking Alpha

Many have claimed that the national debt isn’t that big of a deal because it’s been growing quickly for years and nothing bad has ever happened. But Schiff begs to differ. He thinks everyone should be concerned.

“Just because we haven’t suffered a crisis – yet- based on this debt doesn’t mean that one isn’t coming. In fact, there’s no way around it. It’s just a question of when. It’s not a question of if, it’s a question of when, and I think when is a lot closer than a lot of people think.” –Peter Schiff via Seeking Alpha

PLEASE WATCH - THANK YOU

https://www.zerohedge.com/news/2019-...debt-right-now

The Utterly Unbelievable Scale of U.S. Debt Right Now
- Last week, the United States national debt ticked above US$22 trillion for the first time, an amount equivalent to $67,000 per U.S. citizen
- The U.S. federal government owes more money than any other institution in the history of human civilization and it’s just getting worse
- Below, a few factoids about just how eye-wateringly, bone-chillingly large the U.S. debt has become

- The U.S. debt is now higher than the combined market value of the Fortune 500 and just with the money it spends on interest, the U.S. could run Canada or Mexico
- Debt from one Trump term could pay for another WWII and all the gold ever mined would only pay off the debt accumulated under Obama
- All the gold in the world mined since the dawn of time adds to about 190,040 tonnes or 6.7 billion ounces. At the current per-ounce price of about $1,300, the world’s goal hoard worth over $8.5 trillion would be not enough to pay off the U.S. debt accumulated between 2009 and 2016
by Tristan Hopper in National Post
https://news.goldcore.com/ie/wp-cont...old-plates.jpg


Gold bars worth a small fortune that would only cover a few hours’ worth of U.S. debt accumulation
U.S. debt is now higher than the combined market value of the Fortune 500
The Fortune 500 list includes all the recognizable titans of American business from Apple to Amazon to Exxon-Mobil to the list’s ranking 500th spot, the uniform and laundry company Cintas. Taken together, they basically constitute every major consumer, media, industrial and entertainment product in the United States. If you are the average westerner, the Fortune 500 is responsible for most of your wardrobe, your diet, your home and your leisure pursuits.
The sheer size of Amazon alone is difficult to picture: Millions of products, thousands of employees, hundreds of buildings. And yet, add up the market values of all 500 companies and it’s equivalent to just $21.7 trillion.


Thus, even if the United States nationalized the most profitable segment of its private sector and immediately auctioned them off for cash, it would still have $300 billion owing on its debt. (This would also destroy the world economy. Don’t nationalize things to pay off debts, everybody).
https://news.goldcore.com/ie/wp-cont...llar-ascii.png


Every second, the U.S. national debt grows by about $46,000. In the time it takes you to look at this photo, the debt will have swelled much more than $46,000
Holding a $22 trillion pile of debt is not cheap. Although the United States benefits from ludicrously cheap interest rates on its treasury bills, in 2019 it will spend $383 billion just to service its debt. By 2023, interest payments are expected to be larger even than the U.S. defence budget. Even now, $383 billion dwarfs the entire federal budget of Canada. Even at a time of its own unprecedented government spending, Ottawa will burn through the equivalent of only US$254.35 billion in 2019. This means that, merely with the money it uses to service the debt, the United States could run the entire Canadian government and still have enough left over to run most provinces. And if the Americans don’t feel like running Canada with their debt servicing money, they could also run Mexico.
Their southern neighbour has a federal budget of only $291.5 billion for 2019.


All the gold ever mined would only pay off the debt accumulated under Obama
U.S. debt has been steadily climbing ever since the Sept. 11 attacks, but under Obama it was sent into overdrive. Not all of this was Obama’s fault; the Great Recession, ongoing Asian wars and a boom in entitlement spending on retiring Baby Boomers all helped swell the tab. But still, in eight years of the Obama presidency, the U.S. national debt jumped from $11.1 trillion to $19.85 trillion. Coincidentally, this $8.75 trillion debt surge is the same as the combined value of all the gold ever mined. Every nugget pulled out of the Klondike, every ounce plundered from the Aztecs, every gold bar leach-mined out of Australia: It all adds to about 190,040 tonnes or 6.7 billion ounces. At the current per-ounce price of about $1,300, the world’s goal hoard would be just enough to pay off the U.S. debt accumulated between 2009 and 2016.


Debt from one Trump term could pay for another WWII
President Donald Trump, meanwhile, has only accelerated the Obama-era debt accumulation. In the 25 months since Trump was inaugurated, his administration has overseen a $2 trillion increase to the debt. Given current conditions, that figure is likely to surpass $4 trillion by the end of Trump’s first term. According to the Congressional Research Service, $4 trillion also happens to be the inflation-adjusted cost of U.S. involvement in the Second World War. And let’s take a moment to remember how expensive that war was for the United States. American forces led efforts to defeat two major military powers simultaneously while spearheading the greatest military industrial buildup in history. Every single automotive factory in the United States was retooled to produce equipment for the government. Total wartime aircraft production was almost 300,000, with the Manhattan Project alone costing the modern-day equivalent of $22 billion. At the time, the U.S. contribution to World War II was the most shockingly exorbitant expenditure of resources ever seen, with government spending in some years of the war being equivalent to more than 50 per cent of GDP. But now, an extra $4 trillion in debt is simply budgetary routine.


One year of debt could pay for everything NASA has ever done
Since 1958, NASA has landed six manned missions on the moon, sent 26 probes to Mars, launched 135 shuttle missions and blasted two spacecraft into interstellar space. And that’s just its space stuff: NASA has also spent years dominating aircraft and earth science research, including some of the most critical data confirming the existence of anthropogenic climate change. Add it all up, and the combined cost for 61 years of NASA is an inflation-adjusted $1.16 trillion. For context, over just the last 12 months (from Jan. 31, 2018 to Jan. 31, 2019), the United States piled up an extra $1.5 trillion in debt.


Jeff Bezos’ fortune would cover only 34 days of debt accumulation
There’s a lot of talk lately about how rich people should pay more taxes. However, given the sheer scale of U.S. spending right now it would take an awful lot of these extra taxes to come close to running a balanced budget. For example, consider Amazon founder Jeff Bezos, the richest man in the world. His net worth is roughly $136 billion. Right now, the U.S. adds another $4 billion to its debt every day. Thus, if Bezos gave his entire fortune to the U.S. government, it would only cover 34 days of debt accumulation. And this is just new debt. If Bezos’ fortune was used to cover all U.S. federal spending, it would run out in only 11 days. Bezos is one among 26 billionaires who collectively control $1.4 trillion – a wealth equivalent to that owned by nearly four billion of the world’s poorest. Still, even that $1.4 trillion would only cover a year’s worth of U.S. debt accumulation and about four months’ worth of federal spending overall.


Free Registration (including Research Reports) for 2019 Gold Summit here
In one year, the per-household share of the debt could buy a new car

According to its most recent census figures, the United States has 118,825,921 households. This means that the $1.5 trillion in debt accumulated over just the past year is equal to about $12,605 per household. This would be just enough for every single household in the United States to buy a brand-new Nissan Versa. When accounting for the total $22 trillion debt, that per-household share jumps to $185,000, enough to buy a new Ferrari or Bentley. The per capita share of the debt is particularly dramatic when compared to the U.S.’ northern neighbour. As recently as the 1990s, Canada was so debt-ridden that it was considered one of the worst economic basketcases in the G20. Today, per-capita Canadian federal debt is equal to US$13,588.51. In the U.S., the same figure is nearly five times higher at $67,000 per American.


The U.S. just built history’s most expensive warship. It cost five days’ worth of deficit.
The USS Gerald R. Ford, an aircraft carrier commissioned in 2017, is the largest and most expensive warship ever built at US$12.9 billion. For context, HMS Dreadnought, the super-powerful 1906 battleship that revolutionized naval warfare, only cost the modern equivalent of about $273 million. For 2019, the U.S. budget deficit is expected to be $897 billion. This means that only five days’ worth of deficit would be enough to fully cover the cost of the USS Gerald Ford. And the deficit merely represents new instances of the government spending money it doesn’t have. Total debt accumulation is even higher, since the existing debt continues to balloon on its own if it’s not being paid off (and the Americans haven’t even tried to pay down their debt since 2000).


The vast majority of this is entitlement spending
It would be tempting to assume that the United States is piling up all this debt because of big, tangible budget items: Battleships, fighter jets, highways, disaster relief, etc. But the majority of U.S. spending is eaten up by cheques: Millions of relatively small-denomination cheques handed out as entitlement spending. The U.S. government will spend $4.4 trillion in 2019, of which only $3.5 trillion will be covered by tax revenues. Of that $4.4 trillion, $2.7 trillion is spent on what is known as “mandatory spending”: Social security, Medicare, Medicaid and the like. As a result, much of the expansion in U.S. spending is due to factors beyond the government’s control: Higher healthcare costs and more retired Baby Boomers collecting pension cheques.


This is all happening during good times
Throughout U.S. history, periods of massive debt accumulation have usually coincided with bad times: The Great Depression, the Civil War, etc. By any economic measure, however, the United States is currently doing fantastic. Major foreign wars have been stepped down. The jobless rate is at a 49-year low. Economic growth has been topping four per cent. The last time the U.S. economy was this good, the federal government was running budget surpluses to pay down the debt, rather than piling up debt faster than ever. The implication is that when the boom inevitably ends, U.S. deficits are set to explode even faster. “The economy is going well and we are looking at deficits that are four per cent of GDP going forward,” Congressional Budget Office director Keith Hall said in late January.

“That is an unusual thing.”


Courtesy of the National Post

https://moneymaven.io/mishtalk/econo...EKPbHe5LZ-Tlw/

As the British prime minister heads to Egypt for an EU-Arab summit in Sharm el-Sheikh, the bloc’s chief negotiator publicly said he believed there remained “a chance” of ratifying the deal. But he told a French radio channel: “Today I am more worried than before” over the talks, adding that the UK needed to make decisions fast.


The EU official also told ambassadors privately, after the negotiations with the UK’s Brexit secretary, Stephen Barclay, and a visit by May to Brussels, that the chances of an “accidental” no-deal Brexit were high.

The Commons is expected to vote on an amendment next week on whether to force May to request an extension by mid-March if a deal is not agreed by MPs. But with the political situation in London volatile, the EU capitals have been warned by Barnier to be ready for the UK to crash out.

“There will be no deal in the desert,” a senior EU official said. Noting that the EU already had a full agenda for the summit and that at least four EU leaders were not expected to take part: the official said: “Even if we wanted to we couldn’t, but thirdly we don’t want to.”


Repeated "No Clarity" Lie
The EU keeps repeating there was no clarity on what the UK wants.
Actually it is very clear what the UK wants.

1. A fair deal
2. A solution to the backstop

We are in this mess because May agreed to a horrid deal and the UK won't let her out of it.

Take-It-Or-Leave-It
If May would only turn this around, and vote for the Malthouse Compromise, then present that to the EU as her own take-it-or-leave-it offer, one of two things would happen, both good.

The EU would either agree, or it wouldn't. Both are excellent opportunities and the second is actually better for the UK.

The Malthouse compromise would keep the UK in a customs unions for two more years, allowing both sides to figure out a compromise.

The even better alternative, is the EU says no. In that case, the EU gets no Brexit breakup payments at all.
I strongly suggest that if only May would present this offer, the EU would be forced to take it.

Either way, the UK wins.

Mike "Mish" Shedlock

https://seekingalpha.com/article/424...oadblock=false

https://moneymaven.io/mishtalk/econo...EWdUi-hPtPj5A/

Economic Stupidity and Fed Groupthink Remain "Well-Anchored"
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byMish

18 hrs[COLOR=rgba(0, 0, 0, 0.38)]-edited[/color]


NY Fed President John Willims reiterated complete nonsense on the Phillips Curve and inflation expectations today.

Williams Worried About Too-Low Inflation
As noted in the Wall Street Journal, N.Y. Fed’s John Williams Calls for Reassessing Inflation-Targeting Framework.
Also consider Fed Should Be Vigilant About Too-Low Inflation

1. The Federal Reserve needs to make sure that tight labor markets do not spark a sustained surge in inflation, but equally that inflation expectations do not get stuck too low, New York Federal Reserve Bank President John Williams said.
2. "I concur that we must remain vigilant regarding a sustained takeoff in inflation," New York Federal Reserve Bank President John Williams said.
3. Inflation's recent track record of riding well below the Fed's 2-percent target is, therefore, concerning, he said.

Phillips Curve Nonsense Yet Again
In case you missed it, point number one is the many times discredited Phillips Curve.
A New York Fed speech out today by John Williams asks Is the Phillips Curve Dead or Is It Just Hibernating?

The apparent breakdown in this simple price Phillips curve in the past 30 years reflects a number of structural changes in the U.S. economy. The Federal Reserve’s success in re-anchoring inflation expectations at a low level can explain the decline in inflation persistence seen in the data. However, the role of well-anchored expectations in flattening the Phillips curve is not obvious, and as HMS note, this flattening is not as clear in the wage inflation equations. This suggests other forces are at work.

We must be equally vigilant that inflation expectations do not get anchored at too low a level. So far during this expansion, core and overall PCE inflation has averaged about 1.5 percent, well below the Fed’s 2 percent target. Taking a longer perspective, over the past 25 years, core and overall inflation have both averaged 1.8 percent.

This persistent undershoot of the Fed’s target risks undermining the 2 percent inflation anchor. In this regard, research by Ulrike Malmendier and Stefan Nagel is sobering. They find that inflation expectations are heavily influenced by the inflation experience in one’s own lifetime, which implies that decades of too low inflation can become embedded in expectations. Indeed, we have seen some worrying signs of a deterioration of measures of longer-run inflation expectations in recent years.

Inflation Expectations
Got that? The Phillips curve has not worked for 30 years because the Fed was successful anchoring inflation expectations at a low level "in one's own lifetime" as if anyone was ever concerned about inflation in any other lifetime.

Nonetheless, Williams concludes "In summary, the Phillips curve is alive and well. I wholeheartedly agree with the authors that we must not be complacent about inflation expectations becoming unmoored, whether at too high or too low a level."

In Search of the Phillips Curve
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Phillips Curve Not Alive and Well

1. Jan 15, 2019: Yet Another Fed Study Concludes Phillip's Curve is Nonsense
2. August 29, 2017: Fed Study Shows Phillips Curve Is Useless: Admitting the Obvious

Wikipedia offers this amusing comment: "In recent years the slope of the Phillips curve appears to have declined and there has been significant questioning of the usefulness of the Phillips curve in predicting inflation. Nonetheless, the Phillips curve remains the primary framework for understanding and forecasting inflation used in central banks."


Believers Hold Firm
In March of 2017, then Fed Chair Janet Yellen commented in a post-FOMC Q&A “The Phillips Curve is Alive“.
Stanley Fischer, then Vice-Chair also mentioned falling unemployment as a determinant for rising inflation.
The Phillips Curve is not alive and well. It was never alive to begin with. Yet, Fed groupthink economists still insists the Phillips Curve works.


Inflation Expectations Well Anchored
Similarly, inflation expectation groupthink is in play.

It's safe to say that all the Fed presidents believe in inflation expectations. If they don't, they do not become Fed presidents.
Moreover, they all believe inflation expectations are "well-anchored", and In the case of John Williams, "too well-anchored".

The idea behind inflation expectations is that if consumers think prices will go down, they will hold off purchases and the economy will collapse. The corollary is that is consumers think inflation will rise, they will rush out and buy things causing the economy to overheat.
Let's test the theory out with a set of practical question regarding the CPI and spending habits.

CPI Percentage Weights
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Inflation Expectations Rebuttal
I blasted the inflation expectations theories in my post Stupidity Well Anchored: Absurdity of Inflation Expectations in Graphic Form.

Inflation Expectations Q&A
Q: If consumers think the price of food will drop, will they stop eating out?
Q: If consumers think the price of food will drop, will they stop eating at home?
Q: If consumers think the price of natural gas will drop, will they stop heating their homes and stop cooking to wait for the event.
Q: If consumers think the price of gas will drop, will they stop driving or not fill up their car if it is running on empty?
Q: If consumers think the price of gas will rise, can they do anything about it other than fill up their tank more frequently?
Q: If consumers think the price of rent will drop, will they hold off renting until that happens?
Q: If consumers think the price of rent will rise, will they rent two apartments to take advantage?
Q: If consumers think the price of plane tickets, taxis, and bus tickets will drop, will they hold off taking the plane the train or the bus?
Q: If consumers think the price of plane tickets, taxis, and bus tickets will rise, will they rush out and buy multiple tickets driving the prices even higher up?
Q: If people need an operation, will they hold off if they think prices might drop next month?
Q: If people need an operation, will they have two operations if they expect the price will go up?

Inelastic Items
All of the above questions represent inelastic items.
Those constitute 80.254% of the CPI. Commodities other than food and energy constitute the remaining 19.746% of the CPI. Let’s hone in on that portion with additional Q&A.

Q. If someone needs a refrigerator, toaster, stove or a toilet because it broke, will they wait two months if for some reason they think prices will decline?
Q. If someone does not need a refrigerator, toaster, stove or a toilet will they buy one anyway if they think prices will jump?
Q. The prices of TVs and electronics drop consistently. Better deals are always around the corner. Does that stop people from buying TVs and electronics?
Q. If people thought the price of TVs was about to jump, would they buy multiple TVs to take advantage?
For sure, some people will wait for year-end clearances to buy cars, but most don’t. And if a car breaks down, consumers will fix it immediately, they will not wait for specials.


Stupidity Well-Anchored
The only thing that’s “well-anchored” is the stupidity of the belief that inflation expectations matter.


Asset Irony
People will rush to buy stocks in a bubble if they think prices will rise. They will hold off buying stocks if they expect prices will go down.
People will buy houses to rent or fix up if they think home prices will rise. They will hold off housing speculation if they expect prices will drop.
The very things where expectations do matter are the very things the Fed and mainstream media ignore.


BIS Deflation Study
The BIS did a historical study and found routine deflation was not any problem at all.

“*Deflation may actually boost output. Lower prices increase real incomes and wealth. And they may also make export goods more competitive*,” stated the study.
Thus, Williams' concern about "too-low" inflation is seriously misguided.

It’s asset bubble deflation that is damaging. When asset bubbles burst, debt deflation results.


Central banks’ seriously misguided attempts to defeat routine consumer price deflation is what fuels the destructive asset bubbles that eventually collapse.
For a discussion of the BIS study, please see Historical Perspective on CPI Deflations: How Damaging are They?


Mike "Mish" Shedlock

https://mises.org/wire/socialism-cap...venezuelas-oil

Socialism, Capital, and Venezuela's Oil

1. https://mises-media.s3.amazonaws.com...?itok=SF7vgEZj

02/22/2019Omar López-Arce

Amidst the current social and political turmoil in Venezuela, a discussion over what could drive a foreign military intervention in the country has been making headlines lately. To my surprise, Venezuela’s oil reserves ( the largest in the world ) are among the top reasons people believe the US Government would be after.

However, the current shape of the oil industry and the way the market is behaving suggest otherwise.

No matter how large, Venezuela’s oil reserves are economically unattractive, at least under the current state of both the industry and the South American nation.

Fortunately, we live no longer in the 70’s or 80’s, where oil was used as a pretext (a rather immoral one) for sending troops to oil-rich countries in the Middle East. In 2019, conversely, OPEC has lost geopolitical power , thus has less influence on the market; oil prices are somewhat stable, and the shale-oil producers in the US have managed to lower their breakeven, which has made them stronger global challengers.

Any sensible investor would bet their money where it likely yields profit. Moreover, in Venezuela, existing capital has fled the country, and new investments are unlikely to land on a place with no rule of law and where people struggle to get food and other basic goods.

But even if the decision came down to either adding a rig on a Texan field or starting an oil exploration project in Venezuela, it would be much wiser to improve the efficiency of what’s currently being produced —and working well— rather than going for the long shot amid blindness.

To assess the relative economic importance of each option, we must think like investors. Let’s start with the basics: BP provides a clear and simple disclaimer for the definition of “oil reserves”, it reads:
“Nobody knows or can know how much oil exists under the earth's surface or how much it will be possible to produce in the future”.

The above confirms a maxim of business: risk and uncertainty. Now, to understand the extend of both in our exercise, have in mind that some oil reserves are buried under virgin, unexploited fields, which in turn will demand a massive investment. You’d have to start from scratch. In the same way, consider this additional challenge: drilling for oil is one thing, but securing a place for all those barrels in the refining market is another. Think 2019, not 1980.


Now let’s compare the historical production of both nations. From 2007 to 2017 (note that Venezuela’s socialist regime started in 1998), oil production in Venezuela plunged. Daily production declined about one million barrels if we compare 2017’s output to that from 2007. Conversely, OPEC’s oil production increased in four million barrels along the same period.

When the so-called owner of the largest proven oil reserves of the planet is unable to keep up with oil demand, that should raise a red flag.

Oil output brings us to look at the efficiency of each party. While Venezuela’s state-owned oil company has been struggling to meet production objectives , failing to honor contractual commitments with buyers, the shale-oil producers in the US have managed to re-design their business strategies and business models, and succeeded in adapting to the new “lower-for-longer” trade prices.

Given these facts, where would you invest? What scenario is more attractive —or less risky for that matter—: Venezuela with the largest oil reserves, or the United States, the largest oil producer? Well, it all comes down to a cost-benefit analysis. On one side there are indeed 300B barrels of oil underground , but even if only a fraction of that was extracted, an investor would have to incur huge costs and bear risks that go beyond the industry-related ones. On the American side, in contrast, you have much fewer reserves to exploit, but there’s already existing working capital, technology, know-how and even the option of dealing directly with the owner of the land (mineral rights play a decisive role).


In short, American producers are exploiting their reserves while Venezuela’s reserves are idle and buried. It’s a no-brainer.

It's also important to note that the socialist regime in Venezuela disregards the fact that capital needs to be renewed. Instead, they believe that printing money will keep the nation afloat. This is one of the original mistakes of a central planner. Paper money itself does not attract investors.


Fiat money is not capital.


To better understand the role of capital, let me use a hypothetical situation to explain it. Imagine that a certain amount of oil has been found in Mars. For the sake of the example, assume that you have been chosen to decide what to send on the very first cargo ship to the Red Planet. The goal is to ensure that oil is extracted in the most efficient way. Be aware that the room inside the ship is limited. What would you rather send? Hundreds of suitcases full of the currency of your choice, or drills with their bits, computers with top-notch software, pumps, a kit for setting up an internet connection and as much knowledge as possible (books, manuals, drawings, etc.)?

No matter how much oil there is underground. If capital is absent, “proven reserves” are nothing more than a number on a chart. As Mises pointed out: “ In a socialist economy there are capital goods, but no capital “.

One can hardly think of a single legitimate reason to use tax dollars for invading a nation. Though among the silliest, "the-largest-oil-reserves-in-the-planet" argument is on top of the list.

Omar Lopez-Arce has worked for the oil and gas industry since 2005. He is a Mechanical Engineer and holds a Masters Degree in International Business. He has been assigned to Mexico, Colombia, Ecuador and is currently based in Houston, Texas. Follow him on Twitter.

https://www.themorganreport.com/blog...ll-over-again/

https://www.zerohedge.com/news/2019-...ops+to+zero%29

https://www.zerohedge.com/news/2019-...ops+to+zero%29

The Return To A Gold Exchange Standard
https://zh-prod-1cc738ca-7d3b-4a72-b...?itok=LY4e264-


by Tyler Durden
Sat, 02/23/2019 - 12:35


Authored by Alasdair Macleod via GoldMoney.com,
This article makes the obvious point that a return to a gold standard is the only way nations can contain the interest cost of servicing debt, given the alternative is inflationist policies that can only lead to far higher interest rates and currency destruction. The topic is timely, given the self-harm of American economic and geopolitical policies, which are already leading America into a cyclical slump. Meanwhile, American fears of Asian domination of global economic, monetary and political outcomes have come true. The upcoming credit crisis is likely to kill off the welfare state model in the West by destroying their unbacked paper currencies, while China, Russia and their Asian allies have the means to prosper.
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The fragility of state finances
In my last Goldmoney article I explained why the monetary policies of inflationist economists and policy makers would end up destroying fiat currencies.

The destruction will come from ordinary people, who are forced by law to use the state’s money for settling their day-to-day transactions. Ordinary people, each one a trinity of production, consumption and saving, will eventually wake up to the fraud of monetary inflation and discard their government’s medium of exchange as intrinsically worthless.

They always have, eventually. This has been proved by experience and should be uncontroversial. For the issuer of a currency, the risk of this happening heightens when credit markets become destabilised and confidence in the full faith and credit, which is the only backing a fiat currency has, begins to be questioned either by its users or foreigners or both. And when it does, a currency starts to rapidly lose purchasing power and the whole interest rate structure moves higher.

The state’s finances are then ruined, because by that time the state will have accumulated a lethal combination of existing unrepayable debt and escalating welfare liabilities. Today, most governments, including the US, are already ensnared in this debt trap, only the public has yet to realise the consequences and the planners are not about to tell them. The difficulty for nearly all governments is the deterioration in their finances will eventually wipe out their currencies unless a solution is found.

There is a solution that if taken allows the state to survive. It could be modelled on Steve Hanke’s (of John Hopkins University) preferred solution of a currency board, that when strictly observed removes the state’s ability to create money out of thin air. He recommends this solution to currency debasement and the evils that come with it for Venezuela and the like, linking a distressed emerging market currency to the dollar. But here we are considering stabilising the dollar itself and all the other currencies linked to it. The currency board in this case can only be linked to gold, which has always been the peoples’ money, free of issuer risk. In former times this was the basis of a gold exchange standard.

Professor Hanke’s currency board is a rule-based system designed to achieve the same thing. Once the system is in place, every currency unit subsequently put into public circulation by the monetary authority must be physically backed by a defined weight of gold bullion. This was the method of the gold exchange standard adopted by the Bank of England under the terms of the Bank Charter Act of 1844. A modern currency board, consisting of digitised currency, effectively works the same way.

A currency board system is not the best mechanism whereby currency is made exchangeable for gold. Its weakness is it relies on the state fulfilling its obligations, so it would be better to use gold directly, either in physical or digitised form. America reneged on its gold exchange standard in 1933/34, when it first banned gold ownership and then devalued the dollar. That was simply theft by the state from its citizens. Therefore, other safeguards for a gold exchange standard must be in place.

A return to a credible gold exchange standard will then put a cap on interest rates and therefore government borrowing costs. Instead of nominal rates of 10% going on 20% and beyond, a gold exchange standard will probably cap long-term government borrowing rates in a two to five per cent range. It also allows businesses with viable investment plans to progress as well. Not only is it an obvious solution, but it is similar to that adopted in the UK following the Napoleonic wars.

Britain had government debt levels in 1815 greater than that of all advanced nations today relative to the size of her economy, with the single exception of Japan.

She introduced the gold sovereign coin in 1816, comprised of 0.2354 ounces of gold, as circulating money with a face value of one pound. Over the following nine decades, not only did she pay down her government debt from over 200% of GDP to about 30%, but her economy became the most advanced and wealthy in the world. This was achieved with sound money, whose purchasing power rose significantly over those nine decades, while the quality of life for everyone improved. A sovereign was still one pound, only it bought much more.

Ordinary people were encouraged to work, spend and save. They aspired to make their families better off. The vast majority succeeded, and for those few unfortunates who fell by the wayside, charitable institutions were set up by successful philanthropists to provide both housing and employment.

It was never the function of the state to support them. It would be too much to claim that it was a perfect world, or indeed that everyone behaved as gentlefolk with the best of Victorian values, but the difference between the successful laissez-faire economy in Britain with its relatively minor faults compared with the bureaucratic socialism that succeeded it is stark.

The key is in the creation and preservation of personal wealth, contrasting with socialist redistribution and wealth destruction, which has steadily undermined formerly successful economies. The future is coalescing towards an inflationary collapse for all Western governments, the manner of which is described in more detail in the following section. For prescient politicians, it creates the opportunity to reverse out of socialism, because the silent majority, which just wants commercial stability in preference to state handouts, if properly led will support a move away from destructive socialism. It is not a simple task, because all advice that a politician receives today is predicated on the creed of inflationism and socialist imperatives.

Why and how an inflationary collapse occurs
Monetarists are fully aware that if a government increases the quantity of money in circulation, its purchasing power declines. Their theory is based on the days when gold was money and describes the effect of imports and exports of monetary gold on the general price level.

Pure monetarists appear to assume the same is basically true of fiat currencies, unbacked by gold. But there is a fundamental difference. When gold is used as money for settling cross-border trade, an arbitrage takes place, correcting price differentials. When prices are generally low in one country, that country would achieve sales of commodities and goods in other countries where prices were higher. Gold then flows to the lower price centre, raising its prices towards those of other countries. With unbacked national currencies, this does not happen.


Instead, national currencies earned through cross-border trade are usually sold in the foreign exchanges, and the determinant of trade flows is no longer an arbitrage based on a common form of money. The pure link between money and trade has gone, and whether foreigners retain or sell currency earned by exports depends mostly on their confidence in it. That is a matter for speculation, not trade.

Domestic users of state-issued currency are divorced from these issues, because foreign currencies do not circulate domestically as a medium of exchange. Instead of being a form of money accepted beyond national boundaries, as gold was formerly, there is no value anchor for domestic use. For this reason, a national currency’s purchasing power becomes a matter of trust, and it is that trust that risks being undermined in a credit crisis. The less trustworthy a government, the more rapidly a currency is in risk of decline.

This is why monetarism, which was based on gold as ubiquitous money, is no longer the sole determinant of currency values. It is true that an increase in the quantity of circulating money devalues the existing stock, but if the population as a whole is prepared to increase its preference for money, usually expressed as a savings ratio, there need be no detrimental effect on its purchasing power.

With fiat currencies we enter a world where statistics reflect the quantity of money, and never the confidence people have in it. Additionally, we should observe that statistics can tell you everything and nothing, but never the truth. It is possible for an economy to collapse, but statistically appear healthy as the following example illustrates.

Imagine, for a moment, that modern statisticians and their methods existed at the time of the Weimar Republic. Government finances were covered by approximately ten per cent taxes and ninety per cent monetary inflation. It was a government whose finances were run on the lines recommended by today’s modern monetary theorists.


There can be no doubt the low level of taxation was an encouragement to business and permitted the redeployment of earnings for investment. A falling exchange rate delivers excess profits for export businesses as well. Interest rates were attractive relative to the rate of price inflation, and the economy, statistically anyway, was expanding rapidly.

This was certainly true measured in nominal GDP, the basic measure of economic activity today. Official prices, which are always the latest gathered and indexed, lag monetary debasement by at least a month, possibly two or even three. To this we must also mention governments always under-record price inflation, which is the natural consequence of earlier debasement. Therefore, even after an official price deflator is applied to nominal GDP, “real” GDP growth in Germany between 1918 and early-1923 would be judged by today’s government economists to be booming.

Interestingly, Joseph Stiglitz and a raft of left-leaning economists and politicians believed Hugo Chavez’s socialist policies were successful in 2007, when statistics revealed a similar interpretation for Venezuela’s inflation-ridden economy. However, instead of Germany being deemed to be in an economic boom, in 1920 economists in the classical and Austrian traditions saw it for what it was. Even Keynes wrote about it in his Tract on Monetary Reform, published coincidentally in late-1923 when the papiermark finally collapsed.

Germany’s inflation may have been a statistical success, but it concealed crippling wealth destruction through the transfer of wealth and wages from private individuals to the state through monetary debasement. As Lenin is reputed to have said, “The way to crush the bourgeoisie is to grind them down between the millstones of taxation and inflation.”


In Germany, inflationary financing started before the First World War to finance a build-up of armaments. At the outbreak of war, gold convertibility was suspended, and the unbacked papiermark began its inflationary drift. Exploiting the facility to issue valueless pieces of paper as currency and for the people to circulate them as legal tender became the principal source of government funds.

This trick worked until approximately May 1923. By then, the purchasing power of the mark had fallen consistently at a relatively even pace. It then took only seven months to lose all its purchasing power, when the public collectively realised what was happening, and manically dumped their marks for anything. It was the katastrophenhausse, or crack-up boom, the end of life for a state’s unbacked currency.


It was the pattern firmly established in all fiat currency collapses, which, besides the currencies in existence today, has happened to all of them throughout the history of post-barter trade, without any known exception. It is the familiar route along which the dollar and other paper currencies are travelling today. Now that we are entering a statistical slowdown in most major economies, Weimar-style financing is set to return to centre-stage. The fate for unbacked state currencies, unless somehow averted, will be the same.


The lesson from Weimar and today’s monetary inflation is that the period before the public cottons on to it can be prolonged. In Germany it was 1914-1923, followed by a swift seven-month collapse. Today it is from 1971 and still counting. But the final collapse could be as rapid as Germany’s between May and November 1923.

Doubtless, we will see rising price inflation later this year, but that statistic will continue to be suppressed. With the gap between the effect of accelerating monetary inflation and the official rate of price inflation widening, we could see for a brief period the statistical recovery in GDP that so badly misled Professor Stiglitz and others observing Venezuela’s economy twelve years ago.

A gold standard alone is insufficient
A major problem for governments when price inflation begins to rise is the notional cost of borrowing, because markets alive to the decline in the currency’s purchasing power will drive interest rates higher, despite official attempts to suppress them. So far, the problem has been successfully covered up by central banks rigging government debt markets, and by government statisticians masking the true rate of price inflation through statistical trickery. In future, efforts to keep a lid on reality will presumably intensify as a core feature of monetary and economic policy. In light of another wave of monetary debasement, the question then arises whether markets will permit this market rigging to continue. If not, the purchasing power of unbacked currencies will be visibly undermined by the erosion of public confidence in them.

We cannot know this outcome for sure until it is well on the way. The Lehman credit crisis led to a global explosion in the quantity of money as central banks worked in tandem to rescue the banks and the entire financial world. That injection still circulates in the global blood-stream. A second globally-coordinated monetary debasement is just starting, notably with China leading the way. A realistic assumption must be that this time the purchasing power of state currencies will be the victim of a severe monetary overdose.

This being the case, there is bound to be an upward adjustment in nominal interest rates forced on central banks by the markets. Government financing becomes overtly inflationary, embarking on a modern equivalent of the papiermark route. How else do you describe accelerated quantitative easing?

A loss of confidence in currencies is always reflected in the prices of gold and silver, which by then should be heading considerably higher. Crypto-currencies could compound the problem by becoming an alternative for people no longer content to retain bank deposits.

Governments and their central banks will be at a fork in the road. One direction towards monetary stability is rough, tough, suspension-breaking, but leads to a better place. The other towards accelerating monetary debasement is smoother, more familiar, but just out of sight leads to a cliff-edge of monetary destruction.


Which road will your government take?
Western governments are poorly equipped to make this decision. There are a few people in the political establishment who might understand the choice, but they will have to deliberately put the clock back, and reverse government policy away from socialism and state regulation towards free markets and sound money. They will be fighting the neo-Keynesian economic establishment, the inflationists who form the overwhelming majority of experts and advisers. These neo-Keynesians populate the central banks and government treasury departments almost to the exclusion of all other economic theorists. Spending ministers and secretaries of state will have to be told to reduce their power-bases, which goes against their personal ambitions and political instincts.


It will take an extraordinary feat of leadership to succeed.
In favour of a brave statesman will be the free-market instincts of the silent majority. It is only at times of crisis that a statesman can muster this support. In a different context, Churchill in 1940 comes to mind. The public will not know the solution, but with the right leadership they can be led along the path to economic and monetary salvation. The currency will have to be stabilised by making it convertible into gold bullion, and government spending will have to be slashed, by as much as a quarter or a third in most advanced economies. This means enacting legislation cancelling government responsibilities, something that could require a state of emergency. The message to the electorate must be the government owes you nothing. And so that you can look after yourself, the government must encourage individuals to accumulate personal wealth by removing taxation from savings.


Obviously, the most socialist welfare states will face the greatest challenge. There will be extreme tension between financial reality and entrenched interests. There can be no doubt that their currencies are most likely to fail.

The Eurozone poses a particular challenge, with one currency circulating between nineteen member states. Conventional opinion is that all the troubles visited on the PIGS (Portugal, Italy, Greece and Spain) are due to an inflexible currency. Here, there is likely to be a split, with Germany and perhaps a northern faction gravitating towards the protection of a gold standard, while the PIGS will press for more interest rate suppression and infinite supplies of easy money from the ECB.


The US is a pivot of disaster
The US has a different but more worrying problem. It refuses to accept its decline as the dominant super-power, retreating into trade protection and autarky.

Consequently, the US Government is taking destructive decisions. Since President Trump was elected, he accelerated inflationary financing late in the credit cycle in the belief it would lead to greater tax income in due course. He has also replayed the Smoot-Hawley Tariff Act of 1930, in the belief that trade protectionism somehow makes America great again (MAGA). Instead, it has crashed global trade, just as it did in the 1930s. MAGA is a fateful combination of tax cuts and trade protectionism. It is a curious form of self-harm, which backfires badly on American consumers and corporations. And it does not help foster good relations with America’s creditors, who have allowed America to live beyond her means for decades.

Foreigners now own dollars in enormous amounts, for which interpret they are America’s reluctant bankers. They are now beginning to be net sellers as a consequence of a dollar glut in their hands, combined with America’s clumsy geopolitical manoeuvrings. TIC data for December showed foreigners sold a net $91.4bn[ii] – the largest monthly outflow during Trump’s presidency, and this only a few months after everyone believed foreigners were buying yet more dollars to service their own debts.


While ignoring its dependency on foreign finance, America is trying to strangle China’s economic and technical development, but that horse has already bolted.

Washington surely knows the jig is up, and that the US, Japan and Britain are merely islands on the periphery of a vitalised Eurasian powerhouse. We were all warned this would happen in one form or another by Halford Mackinder over a hundred years ago. America, it appears, is prepared to destroy herself rather than see Mackinder’s prophecy come true.


Consequently, the whole world is being thrown into a trade-induced slump, and the American government is central to the problem. We can expect its economy, along with all the others, to decline significantly in the coming months. It will be an encouragement for yet more inflationism. The monetary expansion which is sure to follow is set to lead to an acceleration in the decline in the dollar’s purchasing power, as foreigners turn from dollar bankers to dollar sellers. This will lead to an increase in the value of time-preference set by markets, and unless the Fed counters this increase sufficiently by raising its rates, the dollar will simply slide.


Under current circumstances, the 1980-81 Volcker solution of raising interest rates to 20% to stabilise the currency does not appear to be available. Furthermore, to reverse the Nixon shock of 1971 and reinstate gold backing for the dollar as a means of limiting the rise in interest rates is simply not in the establishment’s DNA. America, which is very much the guilty party in destroying its own Bretton Woods monetary arrangements, will find it very difficult to change its tack with such economic cluelessness at the top.


The SCO bloc
Things are very different in Asia. The eight members of the Shanghai Cooperation Organisation, together with those seeking to join, represent roughly half the world’s population. It is led by gold-friendly China and Russia. A further two billion people can be said to be directly affected by the way the SCO develops, including the populous nations of South-East Asia, the Middle East, and Sub-Saharan Africa. That leaves America’s questionable sphere of influence reduced to roughly one and a half billion souls out of a global population of seven. It is proof of Halford Mackinder’s foresight.


China and Russia still have significant infrastructure plans, which will stimulate Eurasian economic activity for at least the next decade, perhaps two. If the formerly advanced national economies slump, of course Asia will be adversely affected, but not as much as even China-watchers fear. The upcoming credit crisis is likely to mainly affect America, UK, Western Europe and their military and economic allies.

The SCO bloc could escape relatively lightly, if it takes the right avoiding action.
The threat to the SCO’s future is mainly from its current monetary policies, with China in particular using credit expansion to manage the economy. She has sought to control the consequences of domestic monetary policy through strict exchange controls, a strategy which has so far broadly succeeded.

The growing possibility of a dollar collapse will call for a radical change in China’s monetary policy. We know the direction this new policy will take from the actions of Russia, China and increasingly those of other SCO members, and that is to somehow incorporate gold into their paper monies. Furthermore, they are capable of doing it and making it stick.

While it is clear to us that China and Russia understand the importance of gold as true money, it is not clear whether they have a credible plan for its introduction into their monetary systems. The Russians seem to have a good grasp of the issues. China had a good grasp, but many of her economic advisors are now Western-trained in neo-Keynesian inflationary beliefs. Therefore, China is not wholly immune to the faults that are likely to destroy the dollar and other Western currencies.

But the central message in China’s successful cornering of the physical gold market is a switch will be made to sound money when it is strategically sensible, despite the neo-Keynesians in it ranks.


Almost none of the SCO nations have significant welfare commitments to their populations. It is therefore possible for them to contain government spending in an economic downturn. Not only can Russia and China introduce a gold exchange standard and make it stick, but fellow SCO members and those nations tied to it can either introduce their own gold exchange standards, or alternatively use gold-backed roubles and yuan to anchor their currencies.


The economic and monetary direction taken by the SCO in the coming years could turn out to be relatively successful, at least compared with the difficulties faced by the welfare states. Such an outcome would be immensely positive for humanity as a whole and be a lifeline for those of us deluded into inflation-funded socialism.

You never know, it might even force spendthrift Western governments to reform their ways and return to sound money policies.

The effect on the price of gold should be obvious. It is said that foreign students in Berlin in 1923 were able to buy houses with the spare change from their allowances, sent to them by their parents, usually in dollars or pounds. Dollars at that time were as good as gold. Today, a currency board or gold exchange standard would have to be fixed at a rate significantly higher than current fiat-currency prices. Gold is the ultimate protection from theft by currency debasement.

COMMENTS FROM BENJAMIN: Ladies & Gentleman

You now all can see into the FUTURE. Forget about currency trading for the moment. The more important thing that each and everyone of you reading this needs to do is to prepare for the guaranteed collapse of the World Financial System. At the MOST we have until the end of 2022 however more likely by the end of December 31, 2021.

The US elections to be held the first Tuesday of November 2020 will be a major turning point depending on who is elected. You need to contact trusted advisers who understand all these issues. Unfortunately in my learned opinion two many experts cannot see the forest for the trees. If you have any comments and or questions then please post them here.

https://www.zerohedge.com/news/2019-...ops+to+zero%29

They’re lying to us about Venezuela. Anyone with access to alternative media has access to the fact that they’re lying to us about Venezuela.

We know this for a fact. We also know for a fact that Venezuela has the largest proven oil reserves on planet Earth, and that in spite of all these appeals to the humanitarian impulses of the US empire the Trump administration is openly interested in controlling that oil. We also know for a fact that US interventionism in modern times is consistently disastrous, and consistently never truly about humanitarianism.

We also know for a fact that PNAC neocon Elliott Abrams, who is spearheading this “humanitarian aid” initiative, has previously used humanitarian aid as a pretext for arming militia groups in Nicaragua.

If you have access to alternative media, all of these facts are easily available to you. If all of these facts are easily available to you, and yet you still support the US government’s interventionism in Venezuela, you are a complete fucking moron.

That’s really all I wanted to say here. I have less than zero respect for those who join with Donald Trump, John Bolton, Elliott Abrams, Benjamin Netanyahu, Jair Bolsonaro, Nancy Pelosi, Joe Biden, Fox News and MSNBC in manufacturing consent for this agenda, and I don’t care who gets their feelings hurt by my saying so. If you’ve been a longtime reader of mine and you still support Trump’s starvation sanctions, CIA ops, grooming and attempted installation of US vassal Juan Guaidó, and brazen propaganda war upon the minds of the unsuspecting US populace with the goal of toppling a sovereign nation’s government, then my writing hasn’t gotten through to you and you have gotten nothing out of it.

I’ve interacted with so many Trump supporters since I started this gig who claim to be anti-interventionist and anti-neocon, yet once their president started ramping up yet another neocon regime change intervention in yet another resource-rich country just like Bush and Obama before him, they fell right in line just like Bush and Obama’s supporters did. Ask them why and they’ll mumble something inarticulate about the absence of US boots on the ground (a point Obama’s defenders also made about Libya and Syria) or about hating socialism, but in reality the reason they support Trump’s regime change interventionism in yet another oil-rich country is because they are foam-brained human livestock who believe whatever the leader of their tribe tells them to.


Not all Trump voters have done this, but many of them have. For the most part those who continue to support this president are at best deadly silent on Venezuela, and are at worst actively cheering this bullshit on with everything they’ve got.
I actually have more respect for the people who have always been plugged into the CIA/CNN narrative than I have for those who saw through it during Obama’s interventions but not during Trump’s. Someone who has always been plugged into the mainstream narratives on US regime change interventionism is like a guy with his head up his ass. Someone who saw through Obama’s depravity in Libya and Syria but fails to do the same with Venezuela is like a guy who pulled his head out of his ass, then soaked his hair with lube and willfully re-inserted it.

COMMENTS FROM BENJAMIN: The other view from this excellent research source...

http://www.whatdoesitmean.com/index2795pl.htm