Money Flow Trading Method along with Risk Management

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Why The Market Melted Up Despite The Carnage In Gaza
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BY PORTFOLIO ARMOR
SATURDAY, NOV 04, 2023 - 7:39
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Gaza Shows The World Is Less Risky Than We Thought
A couple of weeks ago, we suggested risk-averse investors consider our Hedged Portfolio Method in the event the Israel-Hamas war spreads (War Clouds Call For Bulletproof Investing).
That turned out to be a good suggestion, as our aggressive hedged portfolios continued to outperform the market during this week's melt-up...

Hedged portfolio created by Portfolio Armor on May 4th, tracked as of Friday's close.

But at the risk of talking down our book, we have to admit that concerns about the Israel-Hamas war spreading now appear overblown. Not only that, but the war in Gaza might expedite an end to the war in the Ukraine. Let's consider why.

The "Axis Of Resistance" Doesn't Want The Smoke
Israel's response to Hamas's massacres on October 7th has excited observers on both the far right and the far left with the prospect of an "Axis Of Resistance" (Iran, Hamas, and Hezbollah, plus other parties, depending on the pundit) taking advantage of Israel getting bogged down in Gaza to destroy the Jewish State. Here's Pepe Escobar, for example ("Iran-Russia Set A Western Trap In Palestine"):
Iran is able to block the Strait of Hormuz in a flash. For starters, that would be some sort of poetic justice retribution for Israel aiming to gobble up, illegally, all the multibillion-dollar natural gas discovered offshore Gaza: this is, incidentally, one of the absolutely key reasons for the ethnic cleansing of Palestine.

Yet the real deal will be to bring down the Wall Street-engineered $618 trillion derivative structure, as confirmed for years by analysts at Goldman Sachs and JP Morgan, as well as independent Persian Gulf energy traders. [...]
Ali Fadavi, IRGC’s deputy commander-in-chief, cut to the chase: “We have technologies in the military field that no one knows about, and the Americans will know about them when we use them.”

Cue to Iranian hypersonic Fattah missiles – cousins to the Khinzal and the DF-27 – traveling at Mach 15, and able to reach any target in Israel in 400 seconds.

And yet, Iran has made no attempt to block the Strait of Hormuz, and has launched no missiles at Israel, and crude oil prices languish around $80 per barrel.
Or take Kevin Barrett ("Gaza: Where Is Hezbollah?"):
As the world waits for Seyyed Hassan Nasrallah’s critically important speech tomorrow, Challenger whistleblower Richard Cook forwarded this message from the Axis of Resistance with the preface:
Check out this incredibly important statement by a leader of the Resistance Axis.

As I read commentaries by Western authors it is staggering to consider the general level of ignorance of those who believe that all the West needs to do is convene a “coalition” of the great powers, revive the “two-state solution,” or prevail on Israel to go-slow and take-it-easy in order to root out the Hamas “terrorists” and “win the war.” None of these commentators ever thinks to go directly to the Palestinians on the ground or to other members of the Resistance and listen to what they are saying. These people have the Anglo-American-Zionist empire directly in their sights and are not afraid.

It turns out the leader of the Axis of Resistance was afraid to give his big speech in person.

While it's true that a neocon war on Iran would be costly for the U.S. and Israel, it would be disastrous for Iran, and the Iranians know that. So they, and the rest of the Axis of Resistance, will likely content themselves with bluster and some Hezbollah skirmishes on Israel's northern border, while Hamas continues to get reduced in Gaza. Despite their tough talk, they don't appear willing to take serious risks on behalf of the Palestinians of Gaza.

This past week suggested that Israel can invade Gaza and bomb the hell out of it, and its major adversaries like Iran won't join the fight.
The War In Gaza Weakens Ukraine

Fears of the Russia-Ukraine War sparking World War III were based on the prospect that Ukrainian forces might threaten to take Crimea, and Russia, unable to defend Crimea conventionally, might resort to nuclear weapons. So anything that weakens Ukraine and increases the chances of Russia winning lowers the prospect of World War III. The Israel-Hamas war does that, in a few ways:

 

1. Every piece of ammunition the U.S. sends to Israel is one it can't send to Ukraine.
2. The Israeli military is now running adds in Ukraine recruiting soldiers. Every Ukrainian soldier who goes to Israel is one fewer that Zelensky can throw against Russia.
3. The Israel-Hamas war has knocked the Ukraine war off of the front page, which makes it harder for Zelensky to successfully beg for more aid. Also, given the high civilian casualties in Gaza, Israel makes Russia look restrained, which hurts Zelensky's attempts to demonize Russia to gain more sympathy and aid.
4. Western officials and media groups appear to have lost interest in the Ukraine War and are now saying the Ukrainians can't win and should negotiate.

So, to sum up: if scenes of devastation in Gaza haven't sparked regional war yet, they probably won't. And the Israel-Hamas war has likely shortened the Ukraine war.
Another reason for markets to rally into the end of the year. If you're worried they won't, you can use our website to hedge, or you can tail us on some of our bearish trades in our trading Substack/occasional email list, which you can subscribe to below.

If You Want To Stay In Touch
You can scan for optimal hedges for individual securities, find our current top ten names, and create hedged portfolios on our website. You can also follow Portfolio Armor on Twitter here, or become a free subscriber to our trading Substack using the link below (we're using that for our occasional emails now).

Contributor posts published on Zero Hedge do not necessarily represent the views and opinions of Zero Hedge, and are not selected, edited or screened by Zero Hedge editors.

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Home | Wire | Fiscal Rules Do Not Undermine Investment, But Government Profligacy Does
Fiscal Rules Do Not Undermine Investment, But Government Profligacy Does

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TAGS Big GovernmentGlobal EconomyPoliticsTaxes and Spending

Mihai Macovei
To prevent public debt from soaring in the wake of the global financial crisis in 2009, Germany has enshrined a “debt brake” in its constitution. The debt brake sets strict limits on federal public debt levels and restrains government borrowing. This fiscal rule has served its purpose, and public debt has been on a downward path, dropping by about 15 percentage points of gross domestic product (GDP) since its introduction. Yet the government suspended it during the pandemic and raised an extra €370 billion of debt in 2020 and 2021. It also tried to circumvent this rule on several occasions by setting up off-balance sheet funds, such as a €100 billion special fund for military spending during the war in Ukraine.

In 2022, the German parliament decided to shift about €60 billion from the unused debt contracted during the covid-19 crisis into a new climate fund to finance Germany’s green transition. However, to everyone’s surprise, the Federal Constitutional Court ruled this move illegal, leaving politicians scratching their heads on how to pay for the planned lavish green subsidies. Instead of realizing that the financing shortage is primarily due to a bloated welfare system and stagnating economy, green and leftist politicians are blaming the debt brake and trying to get rid of it.

Rules Can Improve Fiscal Performance
The German debt brake limits the net structural borrowing of the federal government to 0.35 percent of GDP per year but retains some flexibility by allowing additional borrowing during economic downturns. In addition, the rule can be suspended in case of natural disasters or emergency situations, as it was done from 2020 to 2022 because of the pandemic. The German debt brake is much stricter than the European Union’s fiscal framework, which allows for a structural deficit of 3 percent of GDP per year. The German fiscal rule is one of the most stringent in the world, both because of its tight numerical target and the constitution anchor.
Switzerland had also introduced a hard debt brake more than twenty years ago. The rule was approved by a large majority of voters in a constitutional referendum and subsequently served as a blueprint for the German rule. Moreover, the Swiss cantons benefit from a long tradition of fiscal rules and decentralized fiscal autonomy. Another case in point is Sweden, which also has a strict fiscal framework based on numerical rules, such as a structural surplus budget target of one-third of a percent of GDP and a public debt ceiling of 35 percent of GDP.

Over the past thirty years, fiscal rules have become very popular, and the number of countries that have introduced them surged from less than ten in 1990 to over a hundred by 2021, according to the International Monetary Fund (IMF). The adoption of fiscal rules has often been driven by financial and economic crises that triggered sharp rises of public debt. Several EU countries have adopted national rules in parallel with the common EU fiscal framework.

With such a high number of countries using fiscal rules, one may wonder why government debt has ballooned around the world in recent years. The answer is simple: the design of the fiscal rules is key, and in many countries, the rules are either too soft or their implementation is too lax. Fiscal rules are effective only when they come with a strong political commitment, a robust legal basis to ensure adequate enforcement, and strict monitoring by independent fiscal institutions.

A survey by the Swiss Federal Finance Administration concluded that rules improve fiscal performance in terms of better budget balances, lower debt, and reduced spending volatility. In addition, empirical research showed that fiscal rules are associated with more-accurate budget forecasts and improved sovereign bond ratings. This explains why even countries with softer fiscal rules, such as Australia and the Netherlands, still benefit from better medium-term budget planning and improved fiscal outcomes. In recent years, public debt has declined to moderate levels in Germany and other countries with fiscal rules—despite the pandemic and war in Ukraine—whereas it has grown to very high levels in the United States and the United Kingdom (Figure 1). As a matter of fact, the US Government Accountability Office recommends that the US introduces strict fiscal rules as well to correct its “unsustainable long-term fiscal path.”

Figure 1: Government debt
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Source: Data from the “World Economic Outlook Database,” International Monetary Fund, accessed January 31, 2024.


Fiscal Rules Do Not Undermine Public Investment
Despite its success, the debt brake has ended up under strong criticism from both mainstream pundits and leftist politicians in Germany. They describe it as “overzealous” and a “straitjacket” on public investment, endangering the greening and modernization of the economy. For quite some time, the debt brake has been a scapegoat for Germany’s underinvestment in infrastructure—railways, bridges, schools, and digital infrastructure.

However, this is not true. First, the €60 billion represents only about 1.5 percent of GDP and is hardly a game changer in a country like Germany where government spends a whopping 50 percent of GDP. Second, if Germany cannot finance public investment within this huge budget envelope, then the problem lies elsewhere—bloated government consumption, excessive social spending, heavy bureaucracy, and environmental regulations.

As a counterexample, in Korea, public investment relative to GDP is more than double than in Germany while total government spending is about half (i.e., 25 percent of GDP), and there is not much complaint about Korea’s infrastructure. Third, the German fiscal rule is quite flexible as it pursues a structural deficit target over the business cycle and allows for escape clauses in case of emergency so that it does not penalize investment in times of fiscal adjustment.

In principle, fiscal rules are not an obstacle to public investment. They only ensure that the latter is financed in a transparent way by tax revenues and not by government deficits and runaway debt. The same survey by the Swiss Federal Finance Administration showed that a majority of the reviewed studies suggests that fiscal rules may undermine public investment only if they are rigidly applied whereas fiscal rules with built-in flexibility do not undermine public investment. It can actually be argued that by disciplining current consumption, reducing the debt burden, and minimizing the cost of capital, fiscal rules provide more leeway for investments, both public and private. Figure 2 shows that countries with strict fiscal rules like Switzerland and Sweden actually have higher public investments than the more profligate UK and the US, while Germany does not lag behind by much.

Figure 2: Public investment
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Source: Data from “Government at a Glance 2023,” Organisation for Economic Co-operation and Development, accessed January 31, 2024.

Public versus Market Investment
One key element that the majority of mainstream pundits seems to ignore is that not all public investment is useful and productive. As a matter of fact, public investment can be quite wasteful if it is politically motivated, poorly planned, bureaucratically managed, and subjected to fraud and corruption. According to the IMF, countries waste on average about a third of their infrastructure spending due to inefficiencies, and the loss can go up to half in low-income countries. According to Murray Rothbard, public investment represents a diversion of economic resources from their most valued uses as determined by individuals in the market process. By misallocating factors of production, the social and economic usefulness of government spending can be negative in many instances.

Public investment inefficiencies are certainly more limited in the case of Germany than in low-income countries. However, in this case, the transition of Germany to carbon neutrality by 2045 is by all means a politically motivated project. Its scientific justification and proposed policy actions are highly debatable and have nothing to do with consumer preferences. Most “green investments” are in reality a pile of subsidies for electric vehicle and battery factories, charging infrastructure, bike lanes, hydrogen production capacities, and other projects that individuals would not otherwise undertake freely.

In addition, the democratic foundation of this mega country project is very flimsy. The green transition comes with a huge price tag, estimated at about €6 trillion or 150 percent of GDP. It would normally require a popular vote via referendum, rather than implementation via top-down decisions by politicians close to the Green Party. The Green Party won a mere 15 percent of votes in the last elections, and its support has eroded ever since. On the other hand, similar to the Swiss, the majority of Germans support the debt brake, according to a survey by the broadcaster ZDF.

It is probably high time for the German political elites to acknowledge that their overambitious green agenda is hardly affordable given the country’s weak growth potential and the massive burden of its welfare state. Instead of removing the debt brake and financing the huge cost of the green transition through the back door, they should rather ask directly for public approval in a democratic way.

Author:
Contact Mihai Macovei
Dr. Mihai Macovei ([email protected]) is an associated researcher at the Ludwig von Mises Institute Romania.

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Kevin Carmichael

Economics Columnist & Editor-at-Large
Saturday, February 3, 2024
Dear Reader,

A key pillar of Mark Carney’s book Value(s) is his contention that capitalism needs more government because markets are amoral. Recent history is on his side. Leaving profit-maximizing companies and welfare-maximizing consumers to pursue their desires unchecked led to a massive financial crisis, a climate crisis and social networks that addict children, hurt our mental health and undermine democracy.

Carney, who shared the 2021 National Business Book Award, argues that liberal democracies lost their way by forgetting that capitalism was meant to be anchored by moral values. Milton Friedman effectively put an end to that idea in 1970 with his essay on why the only values managers should worry about are profit margins, stock prices and dividend cheques. By the late 1980s, the dominant ethos of business was the pursuit of wealth, so much so that Oliver Stone’s film Wall Street, a critique of ruthless corporate raiders that entrenched “greed is good” in the lexicon, ended up inspiring a generation of bankers.

Alas, it’s easier to critique the moral emptiness of modern capitalism than to do something about it. A decade after the Great Recession, the banks that caused it had paid more than US$320 billion in fines, but only one banker from the U.S. or the U.K. had gone to jail. The ESG movement has stoked a political backlash against “woke capitalism,” blunting the Business Roundtable’s embrace of stakeholder capitalism in 2019.

If societies are unhappy with the way business conducts itself, regulation remains the most effective way to curb capitalism’s ethical shortcomings. With little fanfare, Canada’s banking regulator has gone about doing something to that effect.

Earlier this week, the Office of the Superintendent of Financial Institutions published integrity guidelines that, among other things, give OSFI the authority to pass judgment on the character of the leaders of the banks and insurance companies that it regulates.
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OSFI superintendent Peter Routledge speaks at a Scotiabank event on Sept. 7, 2023.
In effect, the regulator has decided that Gekko-inspired bankers represent a threat to financial stability, making character a risk vector that needs oversight.

“The way people behave depends to an extent on their character,” the guidelines state. “Responsible persons and leaders who behave honestly and responsibly demonstrate elements of good character. The more senior someone is in an organization, the more power and influence they typically wield. It is, therefore, particularly important that responsible persons demonstrate integrity through their actions, behaviours, and decisions.”

It’s hard to read that and not worry about government overreach. You can use math to estimate how much cash a bank should keep in reserve to keep it from failing, but how do you measure character? Assuming you could thread society’s core beliefs into an ethical standard, should a liberal democracy’s banking regulator have the right to overrule a board’s hiring decisions?

Well, maybe. The financial industry hasn’t covered itself in glory in recent decades, and though examples of Canadian malfeasance are rare, the stakes warrant extraordinary levels of diligence. A banking licence comes with privileges, such as taxpayer-backed deposit insurance and, in the case of the biggest lenders, an implicit guarantee of a government bailout should one ever be needed. The banks are special, and therefore warrant special attention.

The lax approach of American and British regulators contributed to one of the worst recessions in history. But there’s an opportunity cost to punishing bad behaviour after the fact instead of trying to prevent it. Carney wrote that the capital that the banks used to pay their fines could have supported around US$5 trillion in lending to households and businesses.
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Michael Douglas playing Gordon Gekko on the set of Wall Street.

Peter Routledge, the superintendent, insists he isn’t some woke renegade. In an interview, he said the integrity guidelines, which also include measures to protect banks from foreign interference, represent OSFI’s best attempt to implement Parliament’s overhaul of the Office of the Superintendent of Financial Institutions Act last year. The industry had time to review draft guidelines and no one appears to have complained too loudly. Nonetheless, Routledge said, the regulator will apply the new standards carefully and he is open to adjustments.

“I can’t mention names, but there have been institutions that have been undermined by character issues,” Routledge said. He clarified that none of the bad actors on his mind were under his jurisdiction, but that doesn’t mean it could never happen here. “I can’t ignore it,” he said.

If the guidance sounds a little abstract, that’s because it is. Unlike the U.S., Canada’s approach to financial regulation is to set out principles rather than publish thousands of pages of prescriptive rules. The idea is that a rules-based approach inevitably creates loopholes that bad actors are adept at finding, while a principles-based approach leaves more room for regulatory discretion. OSFI will want to know what financial institutions did to ensure they hired leaders of good character, but it isn’t going to provide a checklist of the moral virtues that it thinks make for an ethical banker.

“We don’t give them the Ten Commandments,” Routledge said. “We won’t define it. We’ll just say to the boards, ‘We expect you to define it.’”

Still, it might be time to watch Wall Street as its director intended: a morality tale, not a how-to.

Kevin Carmichael is The Logic’s economics columnist and editor-at-large. He has spent more than two decades covering economics, business and finance for outlets including Bloomberg News, The Globe and Mail and the Financial Post, where he also served as editor-in-chief.

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What Will the Fed do in 2024?

Posted Jan 3, 2024 By Martin Armstrong |

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Everyone wants to know what the Federal Reserve will do in 2024. Of course, people want to believe that the Fed will slash interest rates in the New Year. The pundits cling to every word except when, at the start of the month of December, Powell boldly criticized the Biden Administration, saying that his outrageous spending is “unsustainable” and central banks do not criticize their governments. They certainly do not criticize each other. I have met with the boards of central banks worldwide because I understand their predicament. Unless you have been behind those closed doors, you will never comprehend the intricacies that are taking place.
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The Federal Open Market Committee (FOMC) held rates at the 5.25% to 5.5% range at their last meeting in December 2023. Additionally, the committee indicated the possibility of at least three rate cuts in 2024, as their favored gauges for inflation appear to be easing. The “dot plot,” which reflects individual members’ expectations, suggests the potential for four rate cuts in 2025 and three more in 2026, bringing the rate down to between 2% and 2.25%. Now, that is simply what the public has been led to believe.

The Fed’s last decision reflects a cautious approach to policy tightening, considering multiple factors unknown to the public before any further adjustments. The committee’s PUBLIC decision and future outlook are based on the evolving economic conditions in relation to inflation and the labor market.
The Federal Open Market Committee will meet in 2024 as follows:

1. Jan. 30-31
2. Mar. 19-20
3. Apr. 30 – May 1
4. Jun. 11-12
5. Jul. 30-31
6. Sept. 17-18
7. Nov. 6-7
8. Dec. 17-18

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There are simply things I cannot publish on the public blog. I have posted articles on the Socrates private blog that explain the Fed’s direction for 2024 in further detail. Now, consider the dates above and consider what events align with them. Further details will be provided in the Year-End Report, which should be out by the end of this week.
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The Federal Reserve cannot criticize the federal government. The most significant issues facing our economy are simply out of the Fed’s hands: war, taxation, and government spending. Chairman Jerome Powell surprised everyone when he called current government spending “unsustainable.” While not a direct criticism, Powell issued a stark warning that aligns with our Revolution Cycle of 72 years. In 1951, the central bank defied the US government by refusing to purchase debt to prevent rate hikes amid the Korean War.

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The Resistible Rise Of The New Normal Reich
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BY TYLER DURDEN

SUNDAY, FEB 04, 2024 - 10:10 PM

Authored by C.J. Hopkins via Consent Factory,
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So, the German authorities have filed an appeal to overturn my acquittal in criminal court last week. Apparently, their plan is to keep putting me on trial until they get a judge who is willing to convict me of something, or to bankrupt me with legal costs. Silly me, for a moment there, I was actually starting to believe this was over.

Let me quickly review how I got here for anyone just tuning in.
I am an author and a political satirist and commentator. In August 2022, I posted two Tweets criticizing mask mandates and making fun of Karl Lauterbach, Germany’s Minister of Health. Both Tweets included an image from the cover artwork of my latest book, The Rise of The New Normal Reich: Consent Factory Essays, Vol. III (2020-2021).
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Last week, a judge acquitted me of those charges, after which she launched into a tirade in which she insulted me at some length, and then strapped on a “Covid mask” and stalked out of the courtroom. During her diatribe, she made a big show of proclaiming that, by acquitting me of the fabricated hate-crime charges, she was proving that “Germany is not a totalitarian state” … you know, the kind of totalitarian state where books are banned, political speech is censored, and dissident authors are harassed by the police and subjected to ridiculous show trials.

The judge didn’t have much choice but to acquit me, because the relevant German law is clear, as my attorney had reminded her in his pretrial pleading, and because my case had received some international press. Also, the public gallery was packed, and there was a fair amount of independent media in the courtroom. Unlike the German mainstream media, which have been churning out government propaganda like the proverbial Goebbelsian keyboard instrument for years, and which were too busy covering the totally-organic government-sponsored mass demonstrations against the government’s only political opposition to devote any attention to my political prosecution, the banning of my book, government censorship, and so on, some of the alternative German media are still interested in actual journalism.

The prosecutor, who appeared to be drunk or on some kind of high-grade sedatives, was very clearly unhappy to be there performing in front of a sold-out house. He spent the proceedings hidden behind one of those Plexiglass “anti-Covid” panels that cashiers still have to sit behind in grocery stores and other retail establishments, so I couldn’t make out every word he slurred. The gist of his argument was, although I didn’t intend to “disseminate pro-Nazi propaganda,” I nonetheless “disseminated pro-Nazi propaganda,” by comparing New Normal Germany to Nazi Germany, and “unnecessarily using a swastika in an artwork.”

My favorite part of the prosecutor’s argument was made in a pretrial pleading to the court, not during the actual trial itself. He accused me of “relativizing the Holocaust” because he claimed that comparing New Normal Germany to Nazi Germany is factually inaccurate, which assertion is revealing, and just staggeringly ignorant.

Here’s a translation of the excerpt from his pleading (emphasis in italics mine):
“… the accused is interested in relativizing this Nazi tyranny, which is also the aim of supporters of this ideology in a different form. By specifically using the swastika, the accused equates the crisis management measures of the years 2020-2022, which came about within constitutional procedures and were enacted and implemented by and through democratically legitimized institutions, with the dictatorial methods of the Nazi regime and thus – regardless of his intention – promotes the normalization of National Socialist ideas and actions.”

Of course, the history of the transformation of Germany into a Nazi dictatorship by means of “constitutional procedures and democratic processes” is extremely well-documented. In the election of July 1932, the Nazi Party won 37.3% of the vote and became the largest party in the Reichstag. On January 30, 1933, von Hindenburg appointed Adolf Hitler Germany’s chancellor. In the aftermath of the Reichstag fire, Hitler convinced von Hindenburg to pass the Reichstag Fire Decree, which severely curtailed the liberties and rights of German citizens. And then the Enabling Act of 1933 was passed by the Reichstag on March 23. This law gave the government the power to override individual rights prescribed by the constitution, because of a so-called “state of emergency.” All this “came about within constitutional procedures and was enacted and implemented by and through democratically legitimized institutions.”

The judge did her best to stop me from reciting all that history in court, to prevent me from “relativizing the Holocaust” again, right there, in her courtroom, in front of everyone, or to prevent the prosecutor from coming off as a jackass, but it was too late, her questioning had opened the door.

A hilarious episode then ensued, in which the judge projected king-size enlargements of my Tweets on a screen with an overhead projector, like the ones they used to use in elementary school, and then interrogated me at considerable length about whether the swastikas in the offending artwork were “on the mask” or “behind the mask.” For a moment, I considered requesting a recess in which to ask the artist, Anthony Freda, to prepare, sign, and telefax a notarized affidavit to the court explaining the details of his creative process and his state of mind at “the time of creation,” but I remembered that it was only 6AM in New York, which I thought might be a bit too early for Anthony.

Yes, the whole trial was as farcical as it sounds, but, the thing is, prosecutions like mine are never meant to make it into court in the first place. The game the German authorities were playing is somewhat like the plea-bargain game that the prosecutors play in the USA, which American readers will be familiar with from watching all those cop shows on television. The way this game works in Germany is, they charge you with a misdemeanor crime, and hit you with a hefty fine, but one that is significantly less than what you will have to pay a lawyer to fight it in court. They are counting on you just paying the fine, and avoiding a trial, where a judge can double or triple your fine or even sentence you to prison. It doesn’t matter if they have no actual legal arguments to support the charges. It’s basically just a bullying tactic.

I have never responded well to bullies. I have an aversion to totalitarians, fascists, and other such authoritarian control freaks who get their rocks off intimidating, and dominating, and preying on the weak. My natural instinct, when threatened by bullies and other varieties of fascist creeps, is to get all up their faces and call their bluff.

Which doesn’t always turn out so well. Cops, for example, will just beat the living snot out of you if you get up in their faces, as will most of your hardened criminal types. But it typically works with petty public officials and other such “respectable authorities” … or at least those who are forced to maintain the appearance of adherence to the rule of law and fundamental democratic principles.

This is an important point, because it is The New Normal Reich’s “Achilles Heel.” I explained this in a previous essay, Pathologized Totalitarianism 101, back in November of 2021.

“New Normal totalitarianism — and any global-capitalist form of totalitarianism — cannot display itself as totalitarianism, or even authoritarianism. It cannot acknowledge its political nature. In order to exist, it must not exist. Above all, it must erase its violence (the violence that all politics ultimately comes down to) and appear to us as an essentially beneficent response to a legitimate ‘global health crisis,’ and a ‘climate change crisis,’ and a ‘racism crisis,’ and whatever other ‘global crises’ GloboCap thinks will terrorize the masses into [a state of] mindless, order-following hysteria […] This pathologization of totalitarianism is the most significant difference between New Normal totalitarianism and 20th-Century totalitarianism.”

In other words, this new, emerging form of global-capitalist totalitarianism cannot afford to look like “totalitarianism.” It can’t put on jackboots and black leather trench coats and start goose-stepping around with big fascist-looking banners, and putting people up against walls and shooting them, at least not here in the heart of the empire.

The only way this form of totalitarianism works is if people like my judge, and the countless thousands of New Normal Germans that have been out in the streets here displaying their unquestioning allegiance to the Reich, and demanding the banning of political opposition, and the segregation and persecution of “the Unvaccinated,” or displaying solidarity with Ukrainian neo-Nazis, or supporting Israel’s liquidation of Gaza, or whatever they’ve been instructed to unquestioningly support or display solidarity with tomorrow … the only way it works (i.e., this new totalitarianism) is if people, and not just German people, but Americans, and Brits, and Canadians, and Australians, and “Good New Normals” all throughout the West, are allowed to keep telling themselves and each other that they’re “the good guys,” the ones who are “defending democracy,” as they march us down the road to totalitarianism.

Yes, I know, I’m repeating myself. I am going to keep repeating myself. Because the only way this doesn’t all end in an extremely ugly and dystopian scenario is if we get through to those “Good New Normals.” I’m not talking about trying to convince them of anything, or winning arguments about “the virus,” or “vaccines,” or Israel, or Trump, or calling them names. I am talking about confronting them with what they are doing. I’m talking about short-circuiting their mental programming — even if just for a few fleeting seconds — by holding an accurate mirror up to them, and forcing them to look directly into it, and recognize what it is they’ve become.

That is what I did in criminal court last week. It’s why the judge was forced to acquit me, and why she felt compelled to deliver that tirade, and strap on her mask to make a big statement. She could have convicted me. She probably wanted to. In her mind, and in the minds of most New Normals, people like me are existential threats. However, to convict me, she would have had to watch herself make a mockery of the law and behave like a fascist … like a totalitarian functionary.

Call me a hopeless idealist if you want, but I have to believe that somewhere deep down inside even the most fanatical New Normals (or most of them anyway) is a decent human being, with principles, who does not want to be a fascist (or a least doesn’t want to look like a fascist), and who can still be reached, if they can be forced into the position that judge was forced into last week.

I have to believe that each brief short-circuit, each momentary glimpse at themselves in the mirror, cumulatively, over the course of time, is eating away at their mental conditioning.

In any event, that’s the theory I’ve been operating under for quite a while. I guess I’ll try it out again at my next show trial.

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Inflation Hits Us All, Even Of Two Minds
February 1, 2024
Those subscribed as of February 29 will lock in the current rate for the life of the blog, those subscribing on March 1 or later will pay the inflation-adjusted rate.



Inflation hits us all, even Of Two Minds. I started accepting subscriptions in 2011 at $5/month. According to officially calculated inflation (which understates real-world inflation), what $1 bought in 2011 now costs $1.40. Ouch. What $1 bought in January 2020 now costs $1.20. In effect, $5 is now worth in the neighborhood of $3.

Like every other enterprise with expenses, Of Two Minds must get back above water. From March 1, 2024, the subscription rate will be $7/month. (The $1/month option in Patreon will go to $2/month.) This increase gets the rate back to where it was a decade ago in terms of purchasing power.

The good news is current subscribers on every platform (Substack, Patreon, PayPal/checks/quatloos) will keep the current rate for as long as the blog remains active. If you find any value in supporting Of Two Minds, it makes sense to subscribe in February to lock in the current inflation-ravaged rates--in effect, a 40% discount.

OK, so what's the value proposition in subscribing to Of Two Minds? My short-and-sweet "elevator speech" is: Understanding is wealth, too. What I mean by this is a great quantity of commentary and analysis is focused on preserving financial wealth in the tumult ahead. This is common-sense, as having money makes life a lot easier than not having money.

But the vast majority of commentary and analysis implicitly makes two assumptions I find questionable: 1. the status quo will continue operating more or less as it does now far into the future, and 2) financial wealth is the master form of wealth that guarantees all other forms of wealth (health, agency, mobility, etc.)

In my view, there is no way the status quo can chug along virtually unchanged for decades to come. There are two basic reasons: 1) do the math: the limits of the real world cannot be dissolved by trickery, and 2) the core systems of the status quo are obsolete. They are being defended not because they work but because those being enriched by the systems want to maintain their power and perquisites.

Another way of saying this is that the forces that have been tailwinds--hyper-globalization, hyper-financialization and stable global arrangements--have shifted into headwinds. What were deemed solutions have become problems, and doing more of what worked in the past only accelerates the unwinding.

We are accustomed to technological obsolescence, in which a new technology seamlessly replaces previous technologies: DVDs replaced videocassettes/VCRs, etc. This model of obsolescence is consumerist: all we need to do is buy the new technology and toss the old one in the landfill.

Obsolete systems are much more difficult to replace, for everyone being enriched by these arrangements will move Heaven and Earth to keep them firmly in place, lest their share of the gravy train diminish.

The maximization of self-interest comes at the cost of system stability. Put another way, the system can either be optimized for self-enrichment or for dynamic stability, but it cannot be optimized for both, as self-enrichment is best served by monopoly--the destruction of the dynamic stability created by competition--or by reducing adaptability as a means of locking in private gains.

And so various policies are ramped up to keep all the machinery in its current configuration. These policies may be for show, accomplishing little, or they may reach extremes, as only extremes can keep the machinery duct-taped together as obsolescence decays the system's functionality.

We can anticipate the uneven unraveling of systems which no longer respond to extreme policy "saves." I expect healthcare, higher education, commercial real state and banking, and the financial system based on extremes of debt and speculative leverage to all unravel, despite the hasty passage of ever more extreme policies.

Human nature being what it is (as opposed to idealized versions of what we wish it were), by definition any system which is currently enriching us cannot be obsolete. It merely needs some sacrifice-free adjustment to restore its vitality. In other words, the status quo is by definition permanent and forever because we wish it to be so.

As for financial wealth guaranteeing all the other forms of wealth: this assumes the status quo will continue on unchanged, and everyone with gold, bitcoin, farmland, etc. will be able to keep all these forms of wealth as society unravels around them. History suggests this isn't how social disorder works.

Where my analysis differs from the majority is I anticipate a social revolution that cannot be tamped down with financial or political sops. Sociological forces are not as controllable as financial or political forces, and if (as I foresee) sociological forces become the primary drivers of transformation, financial trickery (let's just lower interest rates again, etc.) or political sops (let's increase the childcare tax credit, etc.) will only exacerbate the sense that the system is broken and incapable of adapting to social realities and novel conditions.

For the past 40 years, finance and markets have dominated policy. Politics has done nothing consequential to reverse the decay and stagnation created by globalization and financialization. The political structure has done zero to reverse the wealth inequality driven by Federal Reserve policy, or the speculative mania that the Fed has fueled.

If we're entering the culmination of Turchin's 50-year cycle, the Kondratieff credit cycle and the 4th Turning's 80-year cycle, financial extremes will unwind, either because the people finally demand action or the system will veer completely out of equilibrium and what seems impossible now (the expropriation of all extreme wealth, regardless of source, etc.) will become "obvious" solutions.

There are few limits on what might happen since the status quo is incapable of doing anything other than protecting elite perquisites while wringing its hands in public, as everyone is on the take to the tune of millions and they believe the inequalities that are enriching them can persist forever.

Nothing is forever, and the system is already so far from equilibrium that more of the same policy tweaks have zero chance of stopping an unwinding as extreme in the opposite direction as the current inequality.

Since the vast majority of all commentary and analysis assumes the status quo will continue on virtually unchanged for years or decades to come, what is the value of projections based on such a false premise?

The starting point of my analysis is unstable systems are not predictable, yet everyone is supremely confident in their understanding and projections of what will unfold. I have zero confidence in such projections because the system is no longer linear or predictable. Maybe I'm wrong, but if I'm confident about anything, it's that the system has already crossed the event horizon of nonlinear instability. Nothing's broken on the surface, and so we're living in the eye of the hurricane, thinking the storm has passed.

Self-organizing open systems evolve in unpredictable ways, and life may well become more interesting and demanding than we might expect. Small changes cascade faster than anyone anticipates, and suddenly the entire downtown business district is a ghost town, and there's no pathway back to its previous vitality and stability.

That which is obsolete cannot be preserved, though much else can be ruined by throwing good money after bad in vain attempts to restore what is beyond restoration without a bottom-up system reset that sends the current status quo arrangements into the dustbin of history.

One dynamic that is scale-invariant is we only act decisively after crisis has cracked something we took for granted wide open. We ignore all the well-meaning advice to clean up our diet and start exercising until we have a heart attack.

My sense is many of you support Of Two Minds financially as part of your own quest for authenticity and to validate what you sense. I too rely on you for the same two qualities: to cling fast to what shreds of authenticity remain and validate the intuition that the endless loop of cheerleading is little more than hubris and simulacra.

Abundance, blah-blah-blah. OK, so what happened to our leisure? Where's the abundance of leisure? Where's the abundance of quality in goods and services? Where's the abundance of well-earned trust in institutions?

The sense that everything is a self-serving con job of one sort or another is pervasive, and this increases the value of understanding systems and the social dynamics that will drive adaptation and change.

Of Two Minds will never have the audience of those promising to increase and secure your financial wealth, as the focus here is on all forms of wealth and security, which begins with understanding the forces at work beneath the surface and moves on to health, productive real-world assets you control directly, and a home you own in a locale that is conducive to social networks of other productive, willing-to-share people.

It seems to me that we are on a voyage that is best described as spiritual, for it may well demand we learn and adapt in both the practical world of everyday life and in our inner world of insight and grace.

Onward to self-reliance, reciprocity and frugality

Surprise, Surprise!
Just when you thought it was safe to buy bonds, this happens. The 10-year Treasury yield, the world’s most important financial benchmark, dropped back below 4% last week, in a move that foretold easier financial conditions. Then came the announcement of the unemployment data for January, along with revisions to the data that came before it, and the effect on the bond market was immediate:
https://ecp.yusercontent.com/mail?ur...CtJnHiY5yQ--~D

Evidently, the number came as a surprise. Sharp moves like that don’t happen otherwise. But in the greater scheme of things, the payrolls data merely moved the bond market back to where it had been for most of the year so far. That implies at least a little dubiousness about how much the report can be relied on. That’s fair because on its face, it suggests that the increasingly plausible narrative of a steadily slowing jobs market, backed by numerous threads of data over the last few months, needs to be thrown out. An extra 353,000 people were added to American payrolls last month. And while these numbers are notoriously subject to revision, it’s notable that the December payrolls were revised sharply upward. The labor market isn’t decelerating; if anything, it’s gaining speed again.

This led traders to cut back sharply the probability of a rate cut at the Fed’s meeting next month — although after Chair Jerome Powell poured cold water on such a prospect last week, and this data, it’s perhaps surprising that markets perceive any chance of a cut at all:
https://ecp.yusercontent.com/mail?ur...mhZoJJjWjQ--~D

Such numbers automatically weaken the case for cuts by demonstrating that current financial conditions aren’t getting in the way of people finding jobs. If policy is working manifestly well, why risk changing it? Within the data, the strongest argument against cuts came from wages.

The Fed has consistently put the labor market at the center of its attempt to limit inflation. This follows one of the most famous economic models, the Phillips Curve, which shows a trade-off between inflation and unemployment; more people in work would mean higher inflation and vice versa. The mechanism supposed to make it work is the wage market. With prices rising, in a strong labor market workers can negotiate higher wages to compensate, and that will push prices up further. That’s the theory.

The nastiest surprise in the data was a rebound in the rate of increase of average hourly earnings. It’s still way above pre-pandemic levels, and far too high for the central bank. The question is how best to measure them. The following chart compares rises in average hourly earnings with the overall wage inflation shown by the Atlanta Fed’s Wage Tracker survey, which uses census data, going back 2007. One advantage of this approach is obvious. The average-hourly earnings number is prone to compositional effects, so when many low-paid workers were laid off at the beginning of the pandemic, it automatically increased (and appeared to decrease a year later once this effect dropped out). That incident aside, the two numbers are deviating by the most in their shared history. Both also suggest that consumers should be much happier than they currently are, as they’re receiving raises well ahead of inflation:
https://ecp.yusercontent.com/mail?ur...xZHI7wEnwg--~D

Standard Chartered Plc’s strategist Steven Englander offered some very interesting research on this last month. First, if you take the average-hourly earnings number, and also the employment cost index, and deflate them by the consumer price index, we find that wages are barely ahead now of where they were on the eve of the pandemic. In the three preceding years, real wages had risen steadily:
https://ecp.yusercontent.com/mail?ur...Pf8rtUW7VQ--~D

As for the Atlanta Fed numbers that suggest things are better still, Englander finds an “implicit sampling bias.”

To be in the sample, an individual must have been working for the entire year. This leaves out workers who were unemployed 12 months earlier but took jobs, as well as labor force re-entrants and newcomers. It is possible that this job continuity is associated with higher wage growth.

Taken together, this might help explain why so many in the US still seem disaffected with an economy that looks so strong. Wage rises are still not covering the increase in out-of-pocket expenses, as measured by the Consumer Price Index, and people are still feeling the effects.

Housekeeping
Thank you for reading this newsletter, and particular thanks to those who helped by filling in our audience survey late last year. Gratifyingly, nobody seems to want us to make big changes, so we won’t; but it did produce a few suggestions, such as starting with an executive summary, trimming back the length, and doing more data journalism and visualization, which we will experiment with in the next few weeks. It also revealed that I was remiss in not explaining the role of the invaluable Isabelle Lee, who came aboard as reporter for the newsletter back in July 2022, and is now moving on. We’ll introduce her replacement tomorrow.

To be clear as I should have been before — ultimate responsibility for all the judgments in this newsletter rests with me. In the (very rare) event that Isabelle wrote something I disagreed with, it was changed. But she has been a full partner (or more) in the reporting that goes into it. When pieces have been signed by Isabelle alone, that’s because I couldn’t find anything significant worth changing. They were her work. I’m sorry I wasn’t clear about this, and I hope she gets the credit she deserves. I’m profoundly grateful for the great working relationship we’ve enjoyed over the last 18 months. And now, over to the Survival Tip, which for the first time is not written (or edited) by me:

Survival Tips
Hello, Isabelle here. This is the first time I’m writing this section as I wrap up 18 months or so of contributing to Points of Return. John joked that it would be fitting to culminate our partnership by giving readers tips on “How to Survive John.” I immediately agreed. One of the most common questions I’m asked is, “What is he like?” I have met many brilliant people, but for all of John’s market expertise and encyclopedic knowledge of the Bloomberg terminal (ask him about any function and he will likely be an expert), it is his kindness that stands out the most. John is always available to mentor and has successfully infected me with his love of fancy charts, showed me how the WIRP page is not all that complicated, and shared valuable tips on how to survive our exciting yet competitive industry.

As I move on to other things at Bloomberg (I will continue to be a cross-asset reporter; but now will be giving it my full focus. Please sign up for the “Five Things You Need to Know” daily newsletter that I write here), I will certainly miss our work dynamic. This includes emailing him first thing in the morning, having him walk over to my desk to ask what is on tap today and, most of all, going to source meetings together. We each have distinct styles. I bring out my voice recorder and type notes on my iPhone while John whips out a black notebook and writes in shorthand. We couldn't be more different in background and generation, just like many of the readers of this column, but are united by a common interest in trying to make sense of the markets. And it seemed to work. Thank you, John!

Like Bloomberg's Points of Return? Subscribe for unlimited access to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close.
More From Bloomberg Opinion:

1. Marc Champion: Biden’s Air Strikes Won’t Work and Nor Would Hitting Iran
2. Hal Brands: The US Can’t — and Shouldn’t — Escape the Middle East
3. Matt Yglesias: Zuckerberg’s Apology Isn’t Enough

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What You Aren’t Being Told About The World You Live In
How The “Conspiracy Theory” Label Was Conceived To Derail The Truth Movement
How Covert American Agents Infiltrate the Internet to Manipulate, Deceive and Destroy Reputations


February 4, 2024
Americans Targeted By Same “TechCamp” Operation That Ignited Ukraine Civil War
By: Sorcha Faal, and as reported to her Western Subscribers

A forewarning new Security Council (SC) report circulating in the Kremlin today first noting the Ukraine Nazi Regime launched a terrorist strike at a bakery yesterday killing up to 28 innocent Russian civilians, says in quick response to this genocidal atrocity caused by socialist Western colonial weapons given to its corrupt puppet state, Foreign Ministry spokeswoman Maria Zakharova observed: “We suggest that Parisians imagine how they go in the morning for a baguette, and Rome’s residents – to have a cup of coffee with cornetto – but instead of freshly-baked pastry return home with relatives wounded or killed by Ukrainian terrorists”.

Present in Russia during the latest Ukraine Nazi Regime terrorist attack against innocent civilians yesterday, this report notes, is America’s most trusted and popular newsman Tucker Carlson, who arrived in Moscow on a Turkish Airlines flight from Istanbul this past Thursday—it remains unclear what business he has in Russia, however, rumors of his intention to interview President Putin have been circulating since last year—and top Kremlin spokesman Dmitry Peskov did not rule out the possibility of Carlson interviewing President Putin when asked about it in September, though he explained that President Putin would wait to sit down with any American journalist until the US population was no longer so “seriously stupefied by Russia-hating propaganda”.

Should Carlson be granted an interview, this report continues, President Putin would direct his attention to German investigative journalist Thomas Roper, who, in his chilling article “Is The Document On The Destruction Of The German Economy A Fake?”, methodically describes the steps he took to conclusively prove beyond all shadow of doubt that the classified RAND Corporation think tank document describing how the United States plans to destroy the German economy is authentic.

Earlier today, this report details, the iconic 116-year-old Berlin flagship retailer Kaufhaus des Westens, which can be translated as “department store of the West” and survived two world wars, declared bankruptcy—American geopolitical analysts previously assessed: “In a world where Germany and Russia are friends and trading partners, there is no need for US military bases, no need for expensive US-made weapons and missile systems, and no need for NATO...There’s also no need to transact energy deals in US Dollars or to stockpile US Treasuries to balance accounts...Transactions between business partners can be conducted in their own currencies which is bound to precipitate a sharp decline in the value of the dollar and a dramatic shift in economic power”—and American futurologist George Friedman, who founded the world’s most powerful private intelligence Stratfor (aka “The Shadow CIA”), most factually observed to the Chicago Council on Global Affairs: “The primordial interest of the United States, over which for centuries we have fought wars– the First, the Second and Cold Wars– has been the relationship between Germany and Russia, because united there, they’re the only force that could threaten us...And to make sure that that doesn’t happen”.

To fracture the relationship between Russia and Germany, this report notes, the socialist Obama-Biden Regime overthrew the democratically elected government of Ukraine in 2014—an overthrow of the Ukrainian government Strator founder George Friedman branded: “It really was the most blatant coup in history”—was a blatant coup masterminded by top socialist Obama-Biden Regime official Assistant Secretary of State Victoria Nuland—and after master coup plotter Nuland suddenly appeared in Kiev this past week, top Kremlin spokesman Dmitry Peskov observed: “As a rule, Victoria Nuland’s visit to Kiev does not bring anything good...We remember this from 2014, when she was handing out cookies”.

On 20 November 2013, just prior to “the most blatant coup in history”, this report continues, Ukraine Parliament Member Oleg Tsarov stood before his fellow lawmakers to gravely warn:
Honourable Colleagues, Honourable Vladimir Vasiljevitch, in my role as a representative of the Ukrainian people, activists of the public organisation “Volya” turned to me providing clear evidence that within our territory, with support and direct participation of the US Embassy in Kiev the “TechCamp” project is realized, under which preparations are being made for a civil war in Ukraine.

The “TechCamp” project prepares specialists for:
Information warfare and the discrediting of state institutions using modern media
Potential revolutionaries for organising protests
And the toppling of the State Order.

The project is currently overseen and under the responsibility of the US ambassador to Ukraine, Geoffrey R. Pyatt.

After the conversation with the organisation “Volya” I have learned that they succeeded to access facilities in the project “TechCamp” by disguising as a team of IT specialists.

To their surprise, briefings on peculiarities of modern media were held. American instructors explained how social networks and Internet technologies can be used for targeted manipulation of public opinion as well as to activate protest potential, to provoke violent unrest on the territory of Ukraine, radicalisation of the population, and triggering of infighting.

American instructors show examples of successful use of social networks used to organise protests in Egypt, Tunisia, and Libya.

For exposing the American State Department coup project designed to topple governments deceptively named “TechCamp”, this report details, Ukraine Parliament Member Oleg Tsarov was targeted for death and fled to Russia—last October, it saw Ukrainian Nazi Regime assassins gravely wounding Tsarovwith gunshots—upon recovering, Tsarov has kept the world informed about what the “TechCamp” project is doing to Ukraine, and yesterday revealed about what they are now doing: “The Synod of the schismatic Orthodox Church of Ukraine decided to exclude the day of memory of St. Prince Alexander Nevsky from the church calendar...Let me remind you that at one time Alexander Yaroslavich was the Grand Duke of Kyiv and defended the Orthodox faith throughout Russia...But schismatics have their own view of history...Such people can even exclude Jesus Christ himself”.

Not being told to the American peoples, this report concludes, is that at the exact same time in 2013 the socialist Obama-Biden regime unleashed its “TechCamp” project to ignite a civil war in Ukraine, they also unleashed it all across the United States in major cities like Philadelphia, whose intended effects of now sees America on the brink of civil war—and aiding the “TechCamp” project specialists in America preparing for “information warfare...the discrediting of state institutions using modern media potential...and accumulating revolutionaries for organizing protests and the toppling of the State Order”, today it was warningly remembered: “Sunday is the 20th anniversary of Facebook’s launch...In twenty years, the company has grown into a major tool for manipulation, social engineering and control by the deep state, big business and Western intel agencies”.
[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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February 4, 2024 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.]

Kari Lake Warns “They’re Going To Have Me Murdered” As “Jellyfish Alien” Terror Grows

Assassination Season Officially Opens In America

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Assassination Season Officially Opens In America
https://www.whatdoesitmean.com/pppz2.jpghttps://www.whatdoesitmean.com/pppz1.jpghttps://www.whatdoesitmean.com/ujk1.jpg

“This country, America, has been around for over 240 years and we have never had one president who was assassinated by a person with no ties to the U.S. government.”
Cited quote is from American political songwriter James Thomas Kesterson Jr...
.
Special Report from Sister Ciara

My Dearest Friends:
On 16 January, the day after Iowa Caucus vote, the Axios article “31 Minutes: Trump's Historic Iowa Victory Puts America On Notice” revealed: “The astonishing speed and sweep of former President Trump's victory in the Iowa caucuses last night delivered a massive wakeup call to Republican skeptics still dreaming of a post-MAGA world...Inevitability has been the prevailing theme of Trump's quest for a third straight GOP nomination...His historic win in Iowa — declared by the networks just 31 minutes after caucusing began — moves the country one step closer to the longest general election campaign in modern history”—then this morning, Breitbart reported: “The Associated Press (AP) called the New Hampshire primary for former President Donald Trump 27 minutes faster than it called the Iowa caucuses...On Tuesday night, the AP called the race for Trump just four minutes after the polls closed...The reduced time between the two calls shows the establishment media’s recognition of Trump’s dominance in the Republican primary process”.

President Donald Trump’s last remaining opponent for the Republican Party presidential nomination is warmongering neocon former South Carolina Governor Nikki Haley, who spent $31 million on her losing New Hampshire primary bid, CNN reported that 70% of the voters in New Hampshire supporting Haley weren’t registered Republicans, and the New York Times worryingly assessed this morning: “The results on Tuesday night, when Trump followed his commanding victory in the Iowa caucuses with a compelling one in the New Hampshire primary, leave Haley with no plausible path to the Republican nomination, not unless something extraordinary happens”.

Along with its quadrennial presidential election season, America also has its annual deer hunting season, about which the article “AMERICA’S HUNTERS Pretty Amazing!” revealed: “There were over 600,000 hunters this season in the state of Wisconsin ...Allow me to restate that number: 600,000!...Over the last several months, Wisconsin's hunters became the eighth largest army in the world...That number pales in comparison to the 750,000 who hunted the woods of Pennsylvania and Michigan's 700,000 hunters...Toss in a quarter million hunters in West Virginia and it literally establishes the fact that the Hunters of those four states alone would comprise the largest army in the world...And then add in the total number of hunters in the other 46 states...It’s millions more”.

I started thinking about the American deer hunting season after Council on Foreign Relations (that’s been manipulating American elections and foreign policy for over a century) research fellow Jacob Ware released the day after the Iowa Caucus his open letter “Assassination Attempts Are On The Rise Worldwide — Is The US Next?”, wherein he warningly observed: “Barely one day passed in 2024 before another reminder was issued of one of the most serious developments in national security and terrorism — the increasing prevalence of political assassinations around the world...The United States has avoided a successful high-profile assassination during the recent escalation in domestic political violence, but not for the lack of trying”.

As evidence that the assassination season in America has officially opened begins with the article “Wall Street Donors Plan Haley Fundraiser After New Hampshire”—among these Wall Street donors will be Alex Soros, about whom it was just reported: “Alex Soros, the son of George Soros, sends a message via his Twitter account that is troubling...Being subtle like a brick through a window the billionaire leftist posts a picture of a “Bullet Hole” and “$47”...President Donald Trump is going to be the 47th President”—and anti-Trump political action committee Lincoln Project co-founder and board member Rick Wilson publicly issued the order: “The donor class can’t just sit back on the sidelines and say oh well, don’t worry, this will all work itself out...They’re still gonna have to go out and put a bullet in Donald Trump...That’s a fact”.

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The anti-Trump political action committee Lincoln Project publicly ordering the assassination of President Trump has been exposed for its vile pedophile crimes in articles like “The Real Lincoln Project Scandal”—it was further exposed in the beyond chilling 10-part documentary “Fall Of The Cabal” produced by award winning Dutch filmmaker Janet Ossebaard, who after documenting the crimes of globalist-socialist elites went missing for weeks in November and was found dead of a supposed suicide, which was followed by articles appearing like “'Pizzagate' Investigator, Who Exposed VIP Pedophile Network To Millions, Found Dead From "Suicide" ”.

https://www.whatdoesitmean.com/rjo21.png

At a public event yesterday, President Joe Biden was contentiously attacked by enraged leftist protesters, and when watching the lack of response from the Secret Service, reporters were caught on a hot mic fearfully observing: “Well, that was interesting...I guess that’s the way it’s gonna be...That’s gonna happen constantly...Gonna have to have a lot more security laid out around the place...They learned today”—is a fearful observation worth noting because the elites ruling America also publicly assassinated Democrat Party leader President John Kennedy—and as to why these elites hate and detest President Biden, it can be glimpsed in articles now appearing like “Billionaires Wanted To Save The News Industry. They’re Losing a Fortune”.

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In my Dear Sisters report “CIA Goes “007 James Bond” Bonkers As Ukraine Faces “Full-Blown Rebellion”” sent to you yesterday, they alerted you that Ukraine Nazi Regime leader President Vladimir Zelensky is preparing to place Director Lieutenant General Kyrylo Budanov of the Main Directorate of Intelligence of the Ministry of Defense of Ukraine in charge of the military—military spy chief Lieutenant General Budanov has no military command experience, but he has close ties with the CIA and is an expert in conducting assassinations and terrorist attacks in foreign countries—and as to how monstrously ruthless military spy chief Lieutenant General Budanov is, today it was beyond shockingly reported: “Kiev’s forces knowingly downed a Russian plane carrying Ukrainian prisoners of war that crashed on Wednesday, killing all on board...The attack used either US-made or German air defense systems”.

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For those knowing true history, the official assassination season in America always opens during and in the aftermath of its failed wars, with the last one claiming the lives of President John Kennedy and his brother Senator Robert Kennedy Sr., claimed the lives of anti-war civil rights leaders Malcolm X and Dr. Martin Luther King, gravely wounded President Ronald Reagan and Governor George Wallace, and nearly twice killed President Gerald Ford—and is a list that doesn't include the mysterious deaths of hundreds of powerful political and business leaders who chose the wrong side.

With the official assassination season in America open once again, its best defense to minimize deaths is a constantly alert media ready to fearlessly report the truth no matter what the consequences are, and for anyone still believing that the fake news leftist corporate media establishment will do this, well, I can only remind you about is that they are the ones that told you fairy tales about Vietnam, Iraq, Afghanistan and Ukraine military victories, which are just a small share of the lies they constantly brainwash you into believing.

Standing against these fake news leftist liars brainwashing you are my Dear Sisters, and the dwindling few others like them—but today they need your support to keep the truth flowing in these darkest of times, which is why I ask you to give what you can today so they can keep telling you the truth before it’s too late.
For those of you knowing these true things, I urgently plead for your support in our desperate hour of need, and is why I’ve always strongly reminded my Dearest Friends, if you prefer being lied to and deceived then, by all means, turn away from us, but, for those of you still wanting the truth, never forget that in aiding us, or others like us, our Dear Lord gave you this solemn promise: “Give, and it will be given to you. A good measure, pressed down, shaken together and running over, will be poured into your lap. For with the measure you use, it will be measured to you.”

With God,
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Gibson's Paradox

Aug 2, 2015·Alasdair Macleod

Gibson's paradox has defeated all the mainstream economists who have tried to resolve it, including Irving Fisher, John Maynard Keynes and Milton Friedman.

As Keynes noted, the paradox is that the price level and the nominal interest rate were positively correlated in the two centuries before he examined it in 1930.

Monetary theory posits the correlation should be between changes in the level of price inflation and interest rates. Empirical evidence shows there is no such correlation. The response from the Neo-Keynesian and monetarist schools has been to ignore Gibson's paradox instead of resolving it, so much so that few economics professors are aware of its existence today.
This paper explains the paradox in sound theoretical terms, and casts doubt on the assumptions behind the quantity theory of money, with important implications for monetary policy.

INTRODUCTION
Thomas Tooke in 1844 is generally thought to be the first to observe that the price level and nominal interest rates were positively correlated. It was Keynes who christened it Gibson's paradox after Alfred Gibson, a British economist who wrote about the correlation in 1923 in an article for Banker's Magazine. Keynes called it a paradox in 1930, because there was no satisfactory explanation for it. He wrote that "the price level and the nominal interest rate were positively correlated over long periods of economic history".1 Irving Fisher similarly had difficulties with it: "no problem in economics has been more hotly debated,"2 and even Milton Friedman was defeated: "The Gibson paradox remains an empirical phenomenon without a theoretical explanation".3 Others also attempted to resolve it, from Knut Wicksel4 to Barsky & Summers.5

Monetary theory would suggest the correlation should have been between changes in the level of price inflation and interest rates. This is the basis upon which central banks determine monetary policy, and now that the gold standard no longer exists, it is probably assumed by those that have looked at the paradox that it is no longer relevant. This appears to be a reasonable explanation for today's lack of interest in the subject, with many professional economists unaware of it.

Those economists who have examined the paradox generally agree that it existed. This paper will not go over their old ground other than to make a few pertinent observations:
• Data over the period covered, other than prices for British Government Consols cannot be deemed wholly reliable for two
reasons. Firstly, price data from 1730 to 1930, the period observed, cannot be rigorous; and secondly any observations of price levels by their nature must be selective and subjective as to their composition.
• Attempts to construct a theory to explain the paradox after the Second World War differ from earlier attempts, because the more recent academic consensus dismisses Say's Law, otherwise known as the law of the markets. Barsky & Summers in particular resort to mathematical explanations as part of their paper, thereby treating it as a problem of natural science and not a social science.
• The economists who have tackled the problem were unaware of the Austrian School's price and time-preference theories, or have dismissed them in favour of Neo-Keynesian and monetary economics. The silence of the Austrian School on the subject is an apparent anomaly.

The Author shows that the theoretical reasoning of the Austrian School leads to a satisfactory resolution of the paradox without having recourse to questionable statistics or mathematical method.

THE PARADOX
Gibson's paradox is based on the long-run empirical evidence between 1730 and 1930, a period of 200 years, when it was observed by Arthur Gibson that changes in the level of the yield on British Government Consols 2 ½% Stock positively correlated with the wholesale price level. No satisfactory theoretical explanation for this correlation has yet been published. It is shown in Chart 1 (Note: annual price data estimates from the Office for National Statistics are only available from 1750).
https://gm-media-library.s3.eu-west-...3a92f340f3.png

The quantity theory of money suggests that instead there should be a strong correlation between changes in interest rates and the rate of price inflation. However there is no discernible correlation between the two. Contrast Chart 2 below with Chart 1 above.
https://gm-media-library.s3.eu-west-...da048d1683.png

If Gibson's paradox is still relevant it presents a potential challenge to monetary policy. The question arises as to whether it is solely an empirical phenomenon of metallic, or sound money, or whether its validity persists to this day, hidden from us by the expansion of fiat currency and bank credit, and the central banks' success in substituting pure fiat currency in place of sound money. If the paradox is solely a consequence of metallic, or sound money, it might pose no threat to the modern currency system; otherwise it may have profound implications.

Modern macroeconomists appear ill-equipped to tackle this issue. The paradox is essentially a market phenomenon and macroeconomics is at odds with markets. An economist who favours macroeconomic theory will acknowledge a primary function of the state is to intervene in markets for a better outcome than a policy of laissez-faire; and that the needs and wants, the purposeful actions of ordinary people, collectively through markets free of exogenous factors, can be improved by government intervention. Yet it is ordinary people and their businesses that were behind the relationship between the interest rate on gold or gold substitutes and wholesale prices during the period the paradox was observed. For this reason an approach to the problem that is consistent with Say's law and denies the validity of conventional neo-classical economic theory is more likely to resolve the paradox.

WHY SAY'S LAW IS IMPORTANT
Say's law describes the fundamental framework within which markets work. By implication it holds that each one of us produces a good or service so that we can buy the goods and services we want: 6 we produce to consume so we are both producers and consumers. Put another way, we cannot acquire the wide range of things we need or want without providing our labour and specialist skills for profit, the profit we require to sustain ourselves. Furthermore, we may choose to defer some of this consumption for future use when it is surplus to our immediate needs. Deferred consumption is saving, the accumulation of wealth, which is either redeployed by the individual to maximise his own productive capacity, or made available to other individuals to enhance their skills for a return. The medium that facilitates all these activities is money, which effectively represents stored labour. It stands to reason that the money used has to be acceptable to all parties.

The primary purpose of money as a transaction medium is to enable all goods and services to be priced, thereby removing the inefficiencies of bartering. Money enables a buyer to compare the cost and benefits of one item against another, and for producers to compete and provide what consumers most want. The forum for this competition is the market, a term for an intangible entity, which facilitates the exchange of goods and services between producers and consumers. Consumers decide how they wish to allocate the fruits of their labour, and it is up to producers to anticipate and respond to these decisions. If someone is not productive and has no savings in order to consume and survive, he or she will require a subsidy, such as welfare or charity, provided from the surplus of other producers. Despite the flexibility money provides these human actions, they cannot be separated.

Therefore everyone is both a producer and consumer, or if unemployed, indirectly so. And it is the individual decision of the consumer what proportion of his production profit to put aside, or save for the future. Say's law describes economic reality, and was generally recognised as the fundamental law of economics until about 1930. But it was an inconvenient truth for some thinkers in the late nineteenth century, most notably for Karl Marx, who advocated state ownership of the means of production, and the national socialists of the early twentieth century who advocated state control of production through regulation. Both socialism and fascism were attempts by the state to subvert the free market process that allowed producers to have the freedom to respond to consumer demands, so both creeds contravened Say's law. Finally, Keynes began in the 1930s to work up a proposition to separate production from consumption and to dismantle the relationship between current and deferred consumption, which culminated in his General Theory, published in 1936.6

Keynes's influence on modern economics is fundamental to today's macroeconomic theories and has led to a widespread academic denial of Say's law. Modern academics, including Keynes himself, were therefore unsympathetic with the theoretical framework required to address the paradox, if only on the basis that it was commonly accepted over the period being considered. It is also an anomaly that the subject seems to have escaped the attention of London-based economists of the Austrian School, such as Robbins and Hayek for whom Say's law remained a fundamental basis of economic theory.

THE FINANCIAL AND ECONOMIC BACKGROUND TO 1730-1930
Gibson's paradox was recorded in Britain, so we must first examine the social and economic conditions that pertained in order to understand the circumstances behind the paradox, and to eliminate the possibility it was the result of circumstances rather than evidence of sound theory yet to be explained.

The increase in the above-ground stock of gold, which was the foundation of money and all money substitutes for much of the time, was a potential factor over the period observed. Uses for gold included jewellery and other adornments as well as money mostly in the form of coin, so it is not possible to establish accurately the money quantity. The observation was of British prices and bond yields, so it is the quantity of gold in circulation as money in Britain which matters, though there is the secondary consideration of gold in circulation in the hands of Britain's trading partners. During the whole period with the exception of the 8 disruption caused by the Napoleonic wars, the quantity of gold was regulated between Britain and her trading partners solely by the demands of trade. Given the low level of peacetime intervention by governments in free markets at that time, differences in prices between countries were arbitraged through gold movements. We can therefore reasonably take the global quantity of aboveground gold stocks as indicative of the quantity of money in circulation regulated only by the market's requirements; though bank credit or the over-issue of unbacked money became an increasing cyclical factor following the Bank Charter Act of 1844.

Prior to the Napoleonic Wars, Britain began to build herself into the most powerful trading economy in history, aided by her overseas possessions and influence, together with the declining influence of Spain after the War of the Spanish Succession. The development of trade with India in the eighteenth century will have increased British demand for gold. The wars against France following the French Revolution were costly both socially, involving nearly half a million men in the army and navy, and financially leading to a drain on gold reserves. Prices rose, driven by the increase in unbacked money substitutes issued by the country banks, and by the diversion of financial resources to support the war effort. This led to the suspension of specie payments on demand against bank notes in 1797. By that time the public had become used to accepting bank notes as a valid substitute for gold, so it continued to accept them in lieu of specie.

Following the Napoleonic wars, the economy had to adjust to peacetime. The Bullion Committee, which had been formed in 1810, recommended a resumption of specie payments to address the problem of rising prices, a recommendation rejected by the government. It was not until 1819, when the war had been over for four years that a second committee under the chairmanship of Robert Peel again recommended a return to specie payments, and from 1821 onwards a gradual resumption of cash payments for banknotes resumed.

The over-issue of notes by the banks during the Napoleonic wars led to the failure of eighty country banks in 1825. This was followed by two Acts of Parliament: in 1826 restricting the Bank of England's monopoly to a radius sixty-five miles from London but permitting it to compete with branches in the provincial towns; and in 1833 withdrawing the Bank of England's monopoly altogether. Banks were then free as a consequence to expand from single-office operations into branch networks through a process of expansion and mergers. The foundation of today's British banks dates from this time.

During this period the debate about the future of money and banking intensified, with the banking school arguing that banks should be free to issue notes as they saw fit, so long as they were prepared to meet all demands for encashment into specie. The currency school argued instead for bank note issues to be tied strictly to specie held in reserves. The controversy between these two schools ended with the Bank Charter Act of 1844, which required the Bank of England to back its note issue with gold, with the exception of £14,000,000 of unbacked notes already in circulation. The intention was for Bank of England notes to gradually replace those issued by other banks in England and Wales (Scottish banks still issue their own notes to this day).

Thus it was that the Bank Charter Act of 1844 sided with the currency school, so far as the note issue was concerned; but by neglecting the issuance of credit, modern fractional reserve banking was born.

It can be seen that Gibson's paradox had to survive substantial variations of economic and monetary conditions likely to disrupt any correlation between the level of wholesale prices and interest rates. If there was a common factor over the two centuries, it was that the domestic UK economy expanded rapidly, facilitated initially by a developing network of canals, which in addition to river and sea navigation enabled the transport of goods throughout the country for the first time. As the industrial revolution progressed, the new science of thermodynamics led to the development of steam power, fuelled by coal which was found and mined in abundance. The mechanisation of factories and mills together with the subsequent development of railways rapidly increased both productivity and the speed of transport and communications. Her position as an important global power gave Britain access to raw materials and overseas markets to fuel economic and technological progress. Britain was so successful that before the First World War eighty per cent of all shipping afloat at that time had been built in Britain. Finally, in the post-war decade to 1930 Britain underwent massive social and political changes, which were generally destructive to the accumulated wealth of the previous century.

GOLD SUPPLY
Without an increase in the quantities of gold available the expansion of economic activity brought about by the industrial revolution would have been expected to lead to a trend of falling prices. As it was, new mines were discovered, notably in California, the Klondike, South and West Africa, and Australia. By 1730 the estimated aboveground stocks accumulated through history were about 2,400 tonnes, and by 1930 they had increased to 33,000 tonnes.7 Britain's population increased from roughly seven million to forty-five million. In other words, the quantity of gold available for money increased at roughly double the rate of the British population over the two centuries.

Other things being equal, the net monetary effect from the increase in the quantity of above-ground gold stocks can be expected to reduce its purchasing power relative to goods; but it is an historical fact that the rapid industrialisation over the period raised the standard of living and life expectancy for the average person considerably, thereby offsetting the inflationary price effects of increased above-ground stocks, so much so that prices appear to have fallen by 20% between 1820 and 1900 according to the ONS figures used in Chart 1.

THE QUANTITY THEORY OF MONEY
The quantity theory as it is generally understood today dates back to David Ricardo, who ignored the transient effects of changes in the 11 quantity of money on prices in favour of a long-run equilibrium outcome. In 1809 Ricardo took the position that the reason for the increase in prices at that time was due to the Bank of England's over-issue of notes. His interest in this respect glossed over the short-run distortions identified by Cantillon and Hume. In the Ricardian version an increase in the quantity of money would simply result in a corresponding rise in prices.

While this relationship is intuitive, it makes the mistake of dividing money from commodities and putting it into a separate category. An alternative view, consistent with the theories of the Austrian School, is to regard money as a commodity whose special purpose is to act as a fungible medium of exchange, retaining value between exchanges. This being the case, it must be questioned whether or not it is right to put money on one side of an equation and the price level on the other.

This is not to deny that a change in the quantity of money for a given quantity of goods affects prices. That it is likely to do so is consistent with the relationship between the relative quantities of any exchangeable commodities. Furthermore, there is an issue of preferences changing between the relative ownership of one commodity compared with another; in this case between an indexed basket of goods and money. Changes in the general level of cash liquidity can have a disproportionate effect on prices, irrespective of changes in the quantity of money in issue at the time.

By ignoring these considerations it is possible to conclude that changes in the quantity of money in circulation are sufficient to control the price level. It is this assumption that Gibson's paradox challenges. To modern macroeconomists the price of money is its rate of interest, though to followers of the Austrian school, this is a gross error. To them, the price of money is not the rate of interest, but the reciprocal of the price of a good bought or sold with it. Furthermore, under this logic money has several prices for each good or service, which will differ between different buyers and sellers depending on all the circumstances specific to a transaction. This is consistent with the Austrian school's observation that prices are 12 entirely subjective and they cannot be determined by formula.

Macroeconomics does not recognise this approach, and averages prices to arrive at an indexed price level. Austrian school economists argue that mathematical methods are wholly inappropriate applied to the real world. Apples cannot be averaged with gin, nor can gin be averaged even with another brand of gin. Averaging the money-values of different products cannot escape this reality.

The rate of interest on money is its time-preference; and again, depending on what the money is intended to be exchanged for its time-preference must match inversely that of the individual good. In other words, by deferring the delivery of a good and paying for it up-front it should be possible to acquire it at a discount. There is the possession of the money foregone, the uncertainty of the contract being fulfilled and the scarcity of the good, which all combine into a time-preference for a particular deferred transaction.
The quantity theory of money ignores this temporal element in the exchange of money for goods. In doing so, it fails to account for the fact that in free markets demand for money, reflected in its time-preference, must correlate with demand for goods.

The quantity theory, by putting money on one side of an equation and goods on another suggests the relationship is otherwise. This gives us an insight into why the quantity theory of money is flawed, and when we explore the Gibsonian relationship between interest rates and the price level it will become obvious why interest rates do not correlate with the rate of price inflation.

THE SOLUTION TO GIBSON'S PARADOX
In the discussion covering the flaws in the quantity theory of money in the previous section clues were given as to how the paradox might be resolved. The starting point is to recognise that money is simply a commodity, albeit with a special function, to act as the temporary store of labour between production and consumption.

We can see that including money, commodities necessary for human progress were in demand during a period of unprecedented economic expansion over the two centuries between 1730 and 1930. In some cases, such as in exchange for harvested grains, the price of gold would have varied from season to season, often wildly. But with all the individual goods, there will have been a match with their time-preferences between manufactured goods and gold and gold substitutes. Therefore, the interest rate on money offered by banks is the other side of the time-preferences of the goods produced by their borrowers, who were predominantly manufacturers and merchants seeking trade finance.

The reason interest rates are set by the demands for money by manufacturers is they have to expend capital in order to produce. Capital becomes one of two essential elements of the price of a future good, the other essential being profit. The capital value of an asset used in production is the sum of the value of output it generates discounted to its present value. If prices of goods are rising, the producer can increase his time-preference in the expectation of higher end-prices for his production. Alternatively, if prices are not rising, or even falling he is limited in his time-preference.

This explains why when prices generally rose, bond yields, as proxy for term interest rates paid by borrowers, also rose. Equally, when prices fell, a producer was less able to bid up his time preferences, so term interest rates fell. In other words, before central banks took upon themselves to control interest rates, interest rates simply correlated to demand for capital from producers.
This analysis of the relationship between prices is wholly in accordance with Carl Menger's insight, that a price only exists for commodities and goods for which supply is limited to less than potential demand.8

POST-1930
After 1930 the paradox was still observed until the 1970s, when the relationship appeared to break down.
https://gm-media-library.s3.eu-west-...febdab1363.png

In the 1970s price inflation according to the ONS accelerated from 5.4% in 1969, to 17.1% in 1974. During that time the Bank of England only increased interest rates under pressure from the markets. Interest rate policy fed a growing preference for hoarding goods and reducing personal cash balances. In this case, the correlation between bond yields and the price level reflected a shift in public confidence in the future purchasing power of the currency, which drove the time-preferences in the market, instead of widespread demand for capital investment.

Bond yields topped out in autumn 1974 before declining; but interest rates finally peaked in 1979/80. This is not fully reflected in the bond yield shown in Chart 4, because the yield curve was sharply negative at that time.
Since that tumultuous decade correlation ceased, and the Bank of England appears to have gained control over interest rates from markets.

It is hardly surprising that when central banks implement monetary policies to ensure that the price level never falls, the normal relationship between the price level and interest rates is interrupted. The relationship between savers and investing producers, which is the basis of the Gibson observation, becomes impaired.

CONCLUSION
The following question was raised earlier in this paper:
If Gibson's paradox is still relevant it presents a potential challenge to monetary policy. The question arises as to whether it is solely an empirical phenomenon of metallic, or sound money, or whether its validity persists to this day, hidden from us by the expansion of fiat currency and bank credit, and the central banks' success in substituting pure fiat currency in place of sound money. If the Paradox is solely a consequence of metallic or sound money it might pose no threat to the modern currency system; otherwise it may have profound implications.

It is clear that the difference between markets historically and those of today is that interest rates were set by the demand for savings to invest in production, while today they are set by monetary policy. Monetary policy is not consistent with the basic function of interest rates, which is to reflect a market rate between savers and borrowers to balance supply and demand. Instead, monetarists believe otherwise, that interest rates can be used to regulate the quantity of money.

Gibson's paradox is not dependent on metallic or sound money so much as it is dependent on free markets distributing savings in accordance with demand from borrowers investing in their businesses. We must therefore conclude that monetary policies intended to suppress this effect do have profound implications.

Keynes in his General Theory in 1936 wrote the following in his concluding notes:
"I see, therefore, the rentier aspect of capitalism as a transitional phase which will disappear when it has done its work. And with the disappearance of its rentier aspect much else in it besides will suffer a sea-change. It will be, moreover, a great advantage of the order of events I am advocating, that the euthanasia of the rentier, of the functionless investor, will be nothing sudden, merely a gradual but prolonged continuance of what we have seen recently in Great Britain, and will need no revolution."9

The long, slow euthanasia of Keynes's rentier class is what has changed. Businesses obtain the funds for investment from other sources directed by the financial system. Savers are channelled increasingly into stock markets, where they participate in businesses as co-owners, instead of lending to them indirectly through the banking system. The banks provide working capital, mainly through the expansion of bank credit, at rates primarily determined not by supply and demand for savings, but set by central banks.

Central banks' insistence on monetary solutions to economic problems have not only buried the Say's law relationship between savers and investing entrepreneurs, they have turned the principal objective of entrepreneurs from patient wealth creation through the accumulation of profits into ephemeral wealth creation through the accumulation of debt. They have been caught up in a credit cycle created by central banks and are no longer borrowing genuine savings from savers who expect to be repaid. If Gibson's paradox had been satisfactorily explained by Tooke or Gibson, the assumptions behind the quantity theory of money and its derivatives would have been thrown into doubt before they became central to monetary policy.

This is a dramatic claim perhaps, but it might have demolished the suppositions behind the quantity theory of money, which became Fisher's equation of exchange, and the brand of monetarism followed by the Chicago school under Milton Friedman. Misleading ideas, such as velocity of circulation in the equation of exchange would have not been taken as meaningful economic indicators. As it is Gibson's paradox is unknown to the majority of economists today, who assume the quantity theory of money is unchallengeable.

So, to put the explanation of Gibson's paradox at its simplest,
If the prices of goods are expected to rise, then their time preferences are bound to increase, and if they are expected to fall, their time preferences are bound to fall. That is why interest rates correlate with the price level.
Click here to view the entire Whitepaper as a PDF...

1 J M KEYNES, A TREATISE ON MONEY, VOL.2 P.1981930
2 IRVING FISHER, THE THEORY OF INTEREST, 1930.
3 FRIEDMAN AND SCHWARTZ, FROM GIBSON TO FISHER, EXPLORATIONS IN ECONOMIC RESEARCH NBER VOL. 3,2 (SPRING)
4 KNUT WICKSEL, INTEREST AND PRICES, 1936, TRANSLATED FROM THE GERMAN, GELDZINS UND GUTERPREISER, 1898.
5 NBER WORKING PAPER SERIES NO. 1680 GIBSON'S PARADOX AND THE GOLD STANDARD, 1985.
6 J M KEYNES, THE GENERAL THEORY OF EMPLOYMENT, INTEREST AND MONEY, 1936.
7 JAMES TURK, THE ABOVEGROUND GOLD STOCK: ITS IMPORTANCE AND ITS SIZE SEPT 2012 HTTPS://WWW.GOLDMONEY.COM/IMAGES/MED...DGOLDSTOCK.PDF (ACCESSED JULY 2015)
8 CARL MENGER: GRUNDSÄTZE DER VOLKSWIRTSCHAFTSLEHRE (PRINCIPLES OF ECONOMICS)1871.
9 JM KEYNES: THE GENERAL THEORY OF EMPLOYMENT, INTEREST AND MONEY PP 376 OF THE 1936 EDITION.

The views and opinions expressed in this article are those of the author(s) and do not reflect those of GoldMoney, unless expressly stated. The article is for general information purposes only and does not constitute either GoldMoney or the author(s) providing you with legal, financial, tax, investment, or accounting advice. You should not act or rely on any information contained in the article without first seeking independent professional advice. Care has been taken to ensure that the information in the article is reliable; however, GoldMoney does not represent that it is accurate, complete, up-to-date and/or to be taken as an indication of future results and it should not be relied upon as such. GoldMoney will not be held responsible for any claim, loss, damage, or inconvenience caused as a result of any information or opinion contained in this article and any action taken as a result of the opinions and information contained in this article is at your own risk.
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What makes a trader successful is discipline: doing the right thing with fidelity. What keeps a trader successful is innovation: doing new things and turning them into disciplines.

Thursday, September 25, 2014
A Preview of Trading Psychology 2.0: From Best Practices to Best Processes
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One of the great disappointments I encounter when I read writings on the topic of trading psychology is that they invariably touch upon the same themes: discipline, controlling emotions, etc. Having worked with traders and portfolio managers for over a decade now, there is so much more to the psychology of trading than "sticking to your process" that I decided I had to write a book about what I was experiencing but wasn't reading. The title reflects that interest: Trading Psychology 2.0: From Best Practices to Best Processes.

I think Ted Hayes hit on something important in his recent interview. He pointed out that the personality traits relevant to success among early career traders are different from those that generate success for experienced ones. Perhaps so much writing concerns discipline and emotional control, because those are the dominant concerns of the new traders who buy the books, haunt the websites, and seek the help.

At several of the firms where I work, no one even gets an interview unless they have years of experience managing significant capital with a solid track record of profitability and risk management. So by the time those traders join the firm, discipline and emotional control are not screaming priorities. Instead, they deal with other challenges. In Trading Psychology 2.0, I refer to these challenges by A-B-C:


* Adapting to changing markets
* Building on strengths
* Creating creativity

In adapting to different markets by leveraging their strengths and generating new ideas, successful market participants are not so different from successful businesses in fast-changing industries, such as technology or social media. When markets change from year to year, stasis is a formula for failure. The successful trader, like the successful tech firm, must constantly innovate. Moreover, once traders generate those innovations, they must turn best practices--what they do that is successful--and turn them into robust, best processes.

I think this is very, very important: What makes a trader successful is discipline: doing the right thing with fidelity. What keeps a trader successful is innovation: doing new things and turning them into disciplines. Conscientiousness makes for success, but it is openness that makes for adaptation. Trading psychology as a field has done a fine job of articulating the importance of discipline. My hope is that the new book will broaden the discussion to include a research-informed look at mastering change and innovation.

In order to be able to help you better it is VERY IMPORTANT that you share your thoughts and your QUESTIONS.


For further information please send me an email to [email protected]

 

1. https://assets.faireconomy.media/nfs...ar392875_2.gif BenjaminIs
2. | Commercial Member | Joined Dec 2014 | 10,691 Posts | Online Now

Good day fellow traders on Forex Factory. I have been trading Forex for over 20 years now and with the incredible movements on a monthly basis which has been caused by the intervention efforts of the world's central banks trading today is much different trading before 2008. Thus RISK MANAGEMENT must be a priority for any serious forex currency trader. You should never RISK more than 5% of your trading capital on any one trade plan. I also strongly suggest that you never trade more than 20% of your total trading capital at anytime. Example - If you are trading $50,000 in US Funds NEVER have more than 20% or $10,000 US Dollars on your various trade plans always using the 5% rule for risk on each trade plan being used.

The Money Flow Trading Method is based each trading day on Risk On or Risk Off which means are the markets heading down or heading up. I use the DOW to determine this each day. When the markets head down and we have Risk Off the money flows into US Dollars first and then the money is parked usually into US Bonds so the bonds go up and the yield goes down. Money also flows to GOLD.

I will give more explanations when the forex markets reopen on Sunday. If you have any comments or questions please post them on this thread. Tomorrow we have two important events the most important being the referendum in Italy.

The results will move the markets whichever result we see. This is a Fundamental Fact and that combined with Technical Indicators as to Support and Resistance along with investor perception of the meaning of the results short term will lead the direction of the market. I will be thinking of going short on USD/JPY depending on the results of course and Risk being off.

https://www.zerohedge.com/markets/bo...n-after-powell

Bonds, Bullion, Banks, & Bitcoin Battered As "Good News Is Bad News" Again After Powell
https://zh-prod-1cc738ca-7d3b-4a72-b.../picture-5.jpg

BY TYLER DURDEN

MONDAY, FEB 05, 2024 - 04:00 PM
Hotter than expected Services surveys - with a big jump in prices - was just the good news the market did not want to hear. Though no ZeroHedge reader should be surprised by this resurgence in economi 'animal spirits' - it is merely the lagged response of an economy that was fed a massive loosening of financial conditions late last year...
https://assets.zerohedge.com/s3fs-pu...?itok=Sv8nDCGu
Source: Bloomberg

As we saw a lot of last year: bad news is good and good news is bad, at least when it comes to trading a soft landing and the odds of rate-cuts in the short-term tumbled...
https://assets.zerohedge.com/s3fs-pu...?itok=aaH5BQhK
Source: Bloomberg

Unsurprisingly, this morning's data, Chair Powell's comments, along with the strong payrolls report, generally strong macro data points, and largely constructive earnings reports we have seen recently, are all combining in a step higher in 10-year UST yield, breaking out decidedly above 4.00%...
https://assets.zerohedge.com/s3fs-pu...?itok=nIQMsPR8
Source: Bloomberg

The entire curve was higher by 11-15bps today...
https://assets.zerohedge.com/s3fs-pu...?itok=cSI5rqeF
Source: Bloomberg

And higher rates hammered stocks...until they didn't. Stocks initially puked, only to revert dramatically higher (with Nasdaq getting back into green). Small Caps were clubbed like a baby seal today, as was The Dow, while Nasdaq couldn't quite hold green into the close...
https://assets.zerohedge.com/s3fs-pu...?itok=hc0bFebX

...thanks to a notable short-squeeze off the initial dump lows...
https://assets.zerohedge.com/s3fs-pu...?itok=Xj63tULo
Source: Bloomberg

Interestingly, 0-DTE traders tried twice to fade the gains in stocks...
https://assets.zerohedge.com/s3fs-pu...?itok=SG0UwgCa
Source: SpotGamma

Regional bank stocks closed red again with NYCB hammered...
https://assets.zerohedge.com/s3fs-pu...?itok=YAyexIx1

NVDA extended its insanely vertical recent rise after Goldman upgraded the AI giant. This pushed the RSI to massively overbought at 85...
https://assets.zerohedge.com/s3fs-pu...?itok=iLgq-bDW
Source: Bloomberg

Recently, bonds and stocks have been moving very differently. Today saw bond yields and stocks close at their highs of the day...
https://assets.zerohedge.com/s3fs-pu...?itok=hSa-YkGo
Source: Bloomberg

Here's why...

The higher 10Y yields go, the more demand for AI chips so bank ChatGPT algos can explain to idiot retail why soaring rates are great for you https://t.co/9zsRMvXxEE
— zerohedge (@zerohedge) February 5, 2024

With bond-stock correlation crashing to its lowest level in months...
https://assets.zerohedge.com/s3fs-pu...?itok=4NZoZqjn
Source: Bloomberg

The dollar extended gains today, rallying up to its 100DMA to its highest in 3 months (after bouncing off its 50DMA and breaking thru its 200DMA)...
https://assets.zerohedge.com/s3fs-pu...?itok=plkuwenN
Source: Bloomberg

Gold slipped to one week lows, but spot found support at $2020...
https://assets.zerohedge.com/s3fs-pu...?itok=Yp0IHUSQ
Source: Bloomberg

After falling back into January's range, oil managed small gains today with WTI testing above $73 briefly...
https://assets.zerohedge.com/s3fs-pu...?itok=jI2YWZw_
Source: Bloomberg

Bitcoin surged overnight, back above $43,500 before plunging back to earth after headlines about bankrupt crypto-lender Genesis Trading filed a motion to liquidate over $1.6 billion in crypto...
https://assets.zerohedge.com/s3fs-pu...?itok=Wdo4lhu4
Source: Bloomberg

Ethereum outperformed Bitcoin today, trading up to $2300...
https://assets.zerohedge.com/s3fs-pu...?itok=MEzb00D3
Source: Bloomberg

Finally, is the market pricing in a Trump victory?
https://assets.zerohedge.com/s3fs-pu...?itok=sZHyGdHo
Source: Bloomberg

Based on Goldman's Republican winners vs losers basket performance, it appears stocks are moving in sync with Trump's odds.

https://www.hussmanfunds.com/comment/mc240204/

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Cluster of Woe

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John P. Hussman, Ph.D.
President, Hussman Investment Trust

February 2024
By relentlessly depriving investors of risk-free return, the Federal Reserve has spawned an all-asset speculative bubble that we estimate will provide investors little but return-free risk. From a valuation standpoint, there is no ‘tradeoff’ between return and risk. Rather, depressed valuations tend to be followed by both strong long-term returns and modest subsequent losses, while extreme valuations tend to be followed by both poor long-term returns and deep subsequent losses.

Recall that the S&P 500 lagged Treasury bills from 1929-1947, 1966-1985, and 2000-2013. 50 years out of an 84-year period. When the investment horizon begins at extreme valuations, and doesn’t end at the same extremes, the retreat in valuations acts as a headwind that consumes the return that would otherwise be provided by dividends and growth in fundamentals.
– John P. Hussman, Ph.D., Return-Free Risk, January 2022

The total return of the S&P 500 remains behind Treasury bills since its January 2022 peak more than two years ago. Meanwhile, the technology-heavy Nasdaq 100 is only even with Treasury bills since the preponderance of warning flags I noted in our November 2021 comment, Motherlode. As I observed last month, the strongest stock market returns in the coming decade, perhaps longer, are likely to emerge during advances in the S&P 500 that attempt to catch up with the cumulative return of risk-free Treasury bills.

Our most reliable valuation measures are again beyond every extreme in U.S. history prior to March 2021, apart from 5 weeks surrounding the 1929 market peak.

Meanwhile, our most reliable gauge of market internals remains unfavorable as the result of persistent divergences across individual securities and sectors. Yet even though the market has lagged Treasury bills for more than two years, my impression is that investors feel an almost excruciating “fear of missing out” amid nominal record highs in the S&P 500 and Nasdaq 100, enthusiasm about an economic “soft landing,” and an expected “pivot” to lower interest rates. In my view, abandoning systematic investment discipline amid the most extreme market conditions in history would be a costly way to buy a fleeting sigh of relief.
https://www.hussmanfunds.com/wp-cont.../mc240204a.jpg

We know that valuations are informative about long-term returns and full-cycle losses, but not about short-term outcomes. The only way the market could reach valuations as extreme as today was to advance, unfazed, through every lesser extreme. So it’s not just extreme valuations, but the full combination of extreme valuations, divergent market internals, and a fresh preponderance of warning flags that holds us to a defensive outlook here.

Abandoning systematic investment discipline amid the most extreme market conditions in history would be a costly way to buy a fleeting sigh of relief.

Keep in mind that the entire total return of the S&P 500 in the complete market cycle since 2007 has emerged in periods when market internals were favorable, and the most extreme losses have emerged in periods when they were not. If the market is destined to proceed higher without limit, I expect a shift in market internals to capture that prospect. We adapted our investment discipline in 2017 and more fully in 2021 to prioritize the condition of market internals over other considerations such as valuations and overextended syndromes (see “How I acquired the ‘permabear’ label” for a full discussion). Our investment outlook will shift as those considerations shift.
https://www.hussmanfunds.com/wp-cont.../mc240204b.png

Cluster of Woe
Based on dozens of measures that include valuations, internals, overextension syndromes, and numerous technical, fundamental, and cyclical gauges we’ve developed over time, we estimate that current market conditions now “cluster” among the worst 0.1% instances in history – more similar to major market peaks and dissimilar to major market lows than 99.9% of all post-war periods.

I call this the “Cluster of Woe” because the handful of similarly extreme instances (most notably in 1972, 1987, 1998, 2000, 2018, 2020, and 2022) were typically followed by abrupt market losses of 10%-30% over the next 6-10 weeks (average -12.5%), with losses at the smaller end of that range often seeing deeper follow-through later. Still, I treat these outcomes as “regularities” rather than “forecasts,” and my impression is that investors don’t accept those regularities anyway.

You may recall that the most recent instance prior to this one was in July 2023 (see Air Pockets, Free-Falls, and More Cowbell). It was followed by a quick 10% air-pocket into late-October, but with no deeper follow-through as yet.

A somewhat less pointed way to think about current conditions is to identify instances in history that were “closest” based on a broad set of key cyclical market indicators (valuations, market internals, overextended syndromes, and various proprietary gauges). The chart below shows these “nearest neighbors” since 1998 as red bars.

These neighbors include a number of less extreme instances than those noted above, and not all of them were followed by steep declines. For example, the 2014 similarity was simply resolved by the S&P 500 going nowhere over the next two years. Without making near-term forecasts, suffice it to say that current conditions are the sort of rare market extremes that tend to resolve badly.
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The market losses that resolve extreme overextension are not just short-term events. Combinations of rich valuations, unfavorable internals, and extreme overextension like these often occur at or near important cyclical market peaks. The potential for a near-term ‘air pocket’ or ‘free fall’ isn’t a forecast so much as a regularity that should not be ruled out. Even passive investors should examine their exposures carefully, and rebalance their portfolios to reflect their actual level of risk tolerance.

You’ll notice that none of the foregoing discussion is focused on recession probabilities, employment, inflation, or earnings expectations. The reason is that the consequences of steep overvaluation, unfavorable internals, and extreme overextension seem to be largely indifferent to these considerations. There’s often no identifiable ‘catalyst’ associated with various market peaks, air pockets, and free-falls. Catalysts tend to emerge later, if at all. To some extent, the initial losses are more behavioral than economic – extreme overextension simply tends to become exhausted, followed by concerted attempts by speculators to exit at still-elevated levels.
– John P. Hussman, Ph.D., Air Pockets, Free-Falls, and More Cowbell, July 24, 2023

The chart below shows the relationship between MarketCap/GVA and subsequent 10-year average annual nominal S&P 500 total returns, in data since 1928. The only instances more extreme than today were 28 weeks surrounding the 2022 peak, and 5 weeks surrounding the 1929 market peak. The present extreme is about three times the valuation that has historically been associated with run-of-the-mill S&P 500 total returns averaging 10% annually.
https://www.hussmanfunds.com/wp-cont.../mc240204d.png

For investors inclined to take current earnings and Wall Street’s “forward operating earnings” estimates at face value, it’s worth noting that earnings-based measures are also extreme from a historical perspective. As I’ve noted before, the S&P 500 “forward operating” P/E only became popular in the late-1990’s, and data hardly exist prior to 1980. Still, there’s a better correlation between the S&P 500 forward operating P/E and the Shiller cyclically-adjusted P/E (CAPE) than investors imagine, so we can use the CAPE to proxy how the forward P/E would have behaved historically.

The chart below offers that perspective. The current level of more than 20 on the forward P/E is beyond every extreme in history except for the periods closely surrounding the 2000 and 2022 market extremes.
https://www.hussmanfunds.com/wp-cont.../mc240204e.png

On the subject of corporate earnings, it’s worth repeating that the surplus of one sector of the economy (income in excess of consumption and net investment) is always the deficit of other sectors (government, households, and foreign trading partners). That’s not a theory, it’s just an accounting identity. Nothing – not monetary policy, not debt creation, not bank lending – nothing changes the arithmetic. It’s just math.

When investors look at current record profit margins and corporate free cash flow, they should recognize that this apparent prosperity is possible only because of massive deficits in the government sector, and depressed savings in the household sector in recent years. Sustaining one requires sustaining the other. Again, that’s not a theory, it’s just arithmetic.

The chart below is a slight rearrangement of our usual “sectoral deficits” chart. The blue line in the chart below shows U.S. corporate free cash flow (profits less investment). The red line is inverted, and shows the sum of U.S. government and household income in excess of consumption and net investment. There are a few addbacks and deductions to avoid double-counting and I’ve left out the foreign sector for simplicity.

The key point is simple: the “prosperity” of U.S. corporations here is the mirror image of massive government deficits and weak household savings.
https://www.hussmanfunds.com/wp-cont.../mc240204f.png

While temporary pandemic subsidies drove a brief push to record profit margins in 2021, the larger structural difficulty for both government and households has been a progressive collapse in their income as a share of GDP, resulting from a combination of aggressive tax cuts and weak growth in wage and salary compensation. Corporations have been the primary beneficiaries of both. The problem for investors is that maintaining deficits of this size is likely to prove unsustainable without a debt crisis.
https://www.hussmanfunds.com/wp-cont.../mc240204g.png

Be careful what you wish for
On the subject of Federal Reserve rate cuts, it’s worth emphasizing that the entire total return of the S&P 500 during periods of easy monetary policy has accrued in periods when market internals were favorable as well. That’s not to say that the market can’t advance amid a combination of easy money and unfavorable market internals – it’s just that on average, it’s been the single worst combination for investors. Recall that the Fed eased aggressively and persistently throughout the 2000-2002 and 2007-2009 market collapses.

One way to emphasize this point is to examine the losses of the S&P 500 in the context of monetary policy. The red bars in the chart below show points where the fed funds target rate had been reduced by 2% from its 3-year high. The blue line shows the corresponding drawdown of the S&P 500 from its own 3-year high at each point. Notice that by the time the fed funds rate was down by 2%, the S&P 500 had typically either already had, or was just about to have, a steep loss. More often than not, the U.S. economy was also in recession.
https://www.hussmanfunds.com/wp-cont.../mc240204h.png

Notice that in most cases, the market was falling as the Fed was cutting rates. That’s the only way you can get the Fed funds rate down by 2% with an S&P 500 drawdown already in place. Again, it’s when rate cuts are joined by improved market internals (particularly if valuations have also improved materially) that all the lights go green. That was equally true amid zero interest policies and quantitative easing – nearly all of the total return of the S&P 500 occurred when in periods when market internals were favorable. Fed easing, in itself, isn’t nearly enough, particularly if recession risk is still present.

Recession risk is still present
Amid the enthusiasm and now nearly unanimous consensus that recession risk is behind us, I’ll reiterate our own view: the data remain consistent with a U.S. economy at the borderline of recession, but we would need more evidence to expect that outcome with confidence.

The chart below shows our Economic Activity Composite based on regional and national purchasing managers and Fed surveys. After a brief pop in the fourth quarter, this composite has again turned lower, and is already at levels that have historically been consistent with emerging recession.
https://www.hussmanfunds.com/wp-cont.../mc240204j.png

Within these surveys, the “leading” components define what I’ve called “order surplus”: new orders, plus backlogs, minus existing inventories. This measure tends to lead the “headline” index by about 3 months. Again, the current level has dropped to levels that have historically defined the borderline of fresh recessions.
https://www.hussmanfunds.com/wp-cont.../mc240204k.png

Despite the apparently strong jobs report last week, the “aggregate hours” index actually fell, and is also down quarter-over-quarter. The number of jobs may have increased, but hours have been cut. As my friend Lakshman Achuthan at ECRI notes, this is a symptom of what economists call “labor hoarding” – the attempt to cut labor costs without cutting jobs themselves. It may turn out that this is the correct response to an economy that touches the threshold of recession and doesn’t continue lower. Still, for now, we believe the economy is still at that threshold.
https://www.hussmanfunds.com/wp-cont.../mc240204m.png

Another way to see this shift in labor composition is to note that the January report featured a drop of 63,000 jobs in the “Employed: Usually Work Full Time” classification, while “Part-Time Due to Economic Reasons” classification grew by 211,000, with “Slack Work or Business Conditions” cited among 34,000 of those workers. As a result, jobs classified as part time due to economic reasons are growing faster than those classified as usually full time. Not surprisingly, that tends to be indicative of an economy at the threshold of recession.
https://www.hussmanfunds.com/wp-cont.../mc240204n.png

Two additional disparities are worth monitoring. The chart below shows the year-over-year growth of real Gross Domestic Income versus real Gross Domestic Product. Technically, these measure the same thing, just in different ways, and they’re normally identical aside from a small statistical disparity. In a few cases, however, as when the U.S. was rolling into global financial crisis, GDI fell into contraction well before GDP. Currently, GDI is again in contraction year-over-year, making it difficult to take the robust 4th quarter GDP figures at face value. It may be best to allow the possibility that a “soft landing” may not be as sure as it seems.
https://www.hussmanfunds.com/wp-cont.../mc240204p.png

We observe a similar disparity in job surveys that also measure the same thing in different ways. In this case, job growth as measured by the “household survey,” which delivers the unemployment rate, has been markedly weaker than the “establishment survey,” which delivers the “headline” jobs number. Here, the household survey is clearly more volatile. Because it’s not as heavily “smoothed,” quick swings can sometimes be informative about emerging trends, but those swings can also represent noise.

As with all noise reduction problems, it’s best to draw information by combining multiple sensors. In the context of weakening order surplus, employment composition, and GDI, the weak job creation in the household sector contributes to our view that recession concerns shouldn’t be easily dismissed.
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In the bond market, we would characterize the prevailing 4.02% yield on 10-year Treasury bonds as “reasonable but inadequate.” The only change to last month’s comment is that our best systematic benchmark (below which 10-year Treasury bonds have historically lagged T-bills) presently stands at about 5.2%. That’s not a forecast, just a benchmark of what we would view as an adequate yield, relative to T-bills. Our view of precious metals shares is generally favorable, but remember they’re more volatile, and that upward pressure on bond yields can be a headwind, as we saw after last week’s employment report.

As for the stock market, the bottom line is this. We estimate that current market conditions now “cluster” among the worst 0.1% instances in history – more similar to major market peaks and dissimilar to major market lows than 99.9% of all post-war periods. Without making forecasts, it’s fair to say that we would not be surprised by a near-term market loss on the order of 10% or more in the S&P 500, nor would we be surprised by a full-cycle market loss on the order of 50-65%, nor a U.S. recession that the consensus seems to have ruled out.

Emphatically – emphatically – our investment outlook will change as market conditions change. A favorable shift in market internals would encourage us to adopt a neutral or constructive outlook (albeit with position limits and safety nets) even amid current overvalued, overbought, overbullish extremes. We made those constructive adaptations to our investment discipline in 2017 and 2021, and we are serious about adhering to that discipline. For now, however, we are equally serious about the downside risk, and frankly, the crash risk, implied by prevailing extremes.

I generally try to avoid near term forecasts of market direction. The predictable amount of market return over a one-week period is overwhelmed by short-term volatility, and forecasts based on longer time horizons implicitly assume that the Market Climate we identify will not change over the forecast period. Given my general avoidance of forecasts, there are very few situations when I would state my views about the market as a ‘warning.’ Unfortunately, in contrast to more general Market Climates that we observe from week to week, the current set of conditions provides no historical examples when stocks have followed with decent returns. Every single instance has been a disaster. We can’t rule out the possibility that investors will adopt a fresh willingness to speculate (which we would observe through an improvement in market internals). Such speculation might prolong the current advance modestly, but even this would not substantially alter the risks that have ultimately been associated with overvalued, overbought, overbullish conditions.
– John P. Hussman, Ph.D., Warning – Examine All Risk Exposures, October 15, 2007

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The foregoing comments represent the general investment analysis and economic views of the Advisor, and are provided solely for the purpose of information, instruction and discourse.

Prospectuses for the Hussman Strategic Growth Fund, the Hussman Strategic Total Return Fund, and the Hussman Strategic Allocation Fund, as well as Fund reports and other information, are available by clicking “The Funds” menu button from any page of this website.

Estimates of prospective return and risk for equities, bonds, and other financial markets are forward-looking statements based the analysis and reasonable beliefs of Hussman Strategic Advisors. They are not a guarantee of future performance, and are not indicative of the prospective returns of any of the Hussman Funds. Actual returns may differ substantially from the estimates provided. Estimates of prospective long-term returns for the S&P 500 reflect our standard valuation methodology, focusing on the relationship between current market prices and earnings, dividends and other fundamentals, adjusted for variability over the economic cycle. Further details relating to MarketCap/GVA (the ratio of nonfinancial market capitalization to gross-value added, including estimated foreign revenues) and our Margin-Adjusted P/E (MAPE) can be found in the Market Comment Archive under the Knowledge Center tab of this website. MarketCap/GVA: Hussman 05/18/15. MAPE: Hussman 05/05/14, Hussman 09/04/17.



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Exploiting the edge from historical market patterns

THURSDAY, DECEMBER 28, 2023

Three Best Practices of Successful Traders

https://blogger.googleusercontent.co...KkXGQ3ppLdguFA

With this post, I'll be taking an extended sabbatical in order to complete my next book and related projects. I thought a worthy final post would summarize the best practices of traders who have experienced success in 2023, with the aim of improving yourself and your trading processes in 2024.


Best Practice #1: Moving From Reactive Trading to Planned Trading
Very often, the psychological challenges that traders face occur because they are making trading decisions in the heat of the moment, when they are most likely to be stressed and impulsive. Successful traders have intensively studied their most successful trading and know what they do best. They then turn their best practices into trading rules, so that they know exactly what kinds of opportunities to look for in markets, how to express those opportunities, how to size the positions and manage them, etc. The beauty of knowing what you do best and how you do it is that you can then mentally rehearse the right actions as part of preparation for the day. Biofeedback and visualization methods can be helpful in that mental rehearsal. Keeping the right kind of trading journal also helps greatly in focusing on your learning lessons. Knowing your best trading also enables you to stand apart from markets when opportunity isn't present. The best traders I work with patiently wait for their opportunity and don't feel a need to trade. They are like the baseball batter who knows the pitcher well and is willing to wait for a good pitch in the strike zone.

Best Practice #2: Drawing Upon Your Strengths
Here is a short personality quiz designed to identify your strengths. Here is a way of interpreting the results. The successful traders I've worked with know who they are, what they're good at, and what excites and challenges them. They also are aware of their flaws and can leverage those into strengths. Because they find ways of trading that leverage their strengths and are meaningful to them, they have no problem staying engaged in markets during challenging times. They also draw upon their strengths outside of their involvement in markets, so that their personal activities are an ongoing source of fulfillment. The right work-life balance isn't just spending time in activities outside of trading; it's making use of the best of you in relationships and in personal pursuits. The number one occupational hazard for full-time traders is burnout. When we don't achieve work-life balance based on what is meaningful to us, we lose work efficiency and we become less creative. I've often advised traders to always make sure they have passions in life that are greater than their passion for trading. If your only strength is trading, that becomes a vulnerability.

Best Practice #3: Creativity
The greatest weakness of traders overall is that they are looking at the same markets, processing the same information, and trading from the same charts and ideas as others. There is very little original in their thinking or trading. They are like the business owner who sets up a shop to compete with surrounding businesses, but who copies what they do. If you don't do different and distinctive things in markets, you won't achieve different and distinctive results. This is a topic I address in the Trading Psychology 2.0 book and that I've also tackled in the blog here and here. As the book emphasizes, there are specific techniques and processes we can learn to become better and more differentiated idea generators. The key is to look at new information and integrate information in new ways. Teamwork--networking with others who have backgrounds and skills different from us--is a valuable practice that can help us expand our horizons. In my own trading, I have found the best results by focusing on data that others don't look at, from high-frequency measures of buying and selling to patterns of breadth across time frames among equity sectors.

I hope this helps you coach yourself to greater success. As further resources, please check out this series of articles on trading psychology techniques (links to all articles at the bottom of the post); this post on best practices; and this post on learning from our best trades. If there is a specific trading psychology topic you are interested in, there's a good likelihood you can find something by doing a search for "TraderFeed topic". So, for instance, a search for "TraderFeed trading discipline" yields relevant posts. If you are interested in a collection of self-help techniques for your trading psychology, The Daily Trading Coach book might be most helpful.

Best of luck for a happy, healthy, and prosperous 2024!

https://mailchi.mp/mises.org/victim-...6?e=3ce7e52948

Money-Supply Growth Has Stabilized as Stealth Liquidity Keeps Bubbles on Life Support

1. https://cdn.mises.org/styles/slidesh...?itok=nj901AFq

Ryan McMaken

Money supply growth fell again in December, remaining deep in negative territory after turning negative in November 2022 for the first time in twenty-eight years. December's drop continues a steep downward trend from the unprecedented highs experienced during much of the past two years.

Since April 2021, money supply growth has slowed quickly, and since late 2022, we've been seeing the money supply repeatedly contract, year over year. The last time the year-over-year (YOY) change in the money supply slipped into negative territory was in November 1994. At that time, negative growth continued for fifteen months, finally turning positive again in January 1996.

Money-supply growth has now been negative for fourteen months in a row. During December 2023, the downturn continued as YOY growth in the money supply was at –7.32 percent. That's up slightly from November's rate of decline which was of –8.36 percent, and was far below December 2022's rate of —2.2 percent. With negative growth now lasting more than a year and coming in below negative five percent for the past twelve months in a row, money-supply contraction is the largest we've seen since the Great Depression. Prior to this year, at no other point for at least sixty years has the money supply fallen by more than 6 percent (YoY) in any month.
https://cdn.mises.org/styles/max_116...?itok=-kofZ7Jb

The money supply metric used here—the "true," or Rothbard-Salerno, money supply measure (TMS)—is the metric developed by Murray Rothbard and Joseph Salerno, and is designed to provide a better measure of money supply fluctuations than M2. (The Mises Institute now offers regular updates on this metric and its growth.)

In recent months, M2 growth rates have followed a similar course to TMS growth rates, although TMS has fallen faster than M2. In December 2023, the M2 growth rate was –2.35 percent. That's down from November's growth rate of –2.99 percent. December 2023's growth rate was also down from December 2022's rate of 0.98 percent.

Money supply growth can often be a helpful measure of economic activity and an indicator of coming recessions. During periods of economic boom, money supply tends to grow quickly as commercial banks make more loans. Recessions, on the other hand, tend to be preceded by slowing rates of money supply growth.
It should be noted that the money supply does not need to actually contract to signal a recession and the boom-bust cycle. As shown by Ludwig von Mises, recessions are often preceded by a mere slowing in money supply growth. But the drop into negative territory we've seen in recent months does help illustrate just how far and how rapidly money supply growth has fallen. That is generally a red flag for economic growth and employment.

The fact that the money supply is shrinking at all is remarkable because the money supply in modern times almost never gets smaller. The money supply has now fallen by approximately $2.8 trillion (or 13.1 percent) since the peak in April 2022. Proportionally, the drop in money supply since 2022 is the largest fall we've seen since the Depression. (Rothbard estimates that in the lead-up to the Great Depression, the money supply fell by 12 percent from its peak of $73 billion in mid-1929 to $64 billion at the end of 1932.)

In spite of this recent drop in total money supply, the trend in money-supply remains well above what existed during the twenty-year period from 1989 to 2009. To return to this trend, the money supply would have to drop at least another $3 trillion or so—or 15 percent—down to a total below $15 trillion. Moreover, as of December, total money supply was still up 32 percent (or $4.6 trillion) since January 2020.
https://cdn.mises.org/styles/max_116...?itok=2WvAVXk4

Since 2009, the TMS money supply is now up by nearly 186 percent. (M2 has grown by 141 percent in that period.) Out of the current money supply of $18.9 trillion, $4.6 trillion—or 24 percent—of that has been created since January 2020. Since 2009, $12.2 trillion of the current money supply has been created. In other words, nearly two-thirds of the total existing money supply have been created just in the past thirteen years.

With these kinds of totals, a ten-percent drop only puts a small dent in the huge edifice of newly created money. The US economy still faces a very large monetary overhang from the past several years, and this is partly why after eighteen months of slowing money-supply growth, we are only now starting to see a slowdown in the labor market. (For example, job openings have fallen 22 percent over the past year, but have not yet returned to pre-covid levels.) The inflationary boom has not yet ended. Moreover, even thought year-over-year comparisons remain starkly negative, the total money supply has been largely unchanged on a month-to-month basis in the most recent six months. Specifically, the total. TMS money supply rose slightly to $19 in July 2023, and has been nearly flat since then, hovering around $18.9 trillion. From November to December 2023, the TMS measure rose a slight 0.3 percent from $18.9 trillion to $19.0 trillion.

As economist Daniel Lacalle explained here at mises.org last month, sizable drops in the money supply have nonetheless been repeatedly mitigated by behind-the-scenes efforts at the Fed to make sure that liquidity continues to move into the banking system. As Lacalle noted, this should be apparent to the millions of Americans who have received ads from their banks asking customers to take out new loans at relatively low interest rates. This does not happen when liquidity is in an unmitigated state of collapse.

Nonetheless, the overall monetary slowdown has been sufficient to considerably weaken the economy. The Philadelphia Fed's manufacturing index is in recession territory. The Leading Indicators index keeps looking worse. The yield curve points to recession. Temp jobs were down, year-over-year, which often indicates approaching recession. Default rates are rising.

On the other hand, continued slowing in price-inflation growth has led to calls for the Federal Reserve to once again embrace expansionist monetary policy. Thanks to continued signs of strength in the job market, however, the Fed insists that it does not plan to cut rates in the near future.

Given that the money supply has flat-lined in recent months, the calls for a return to easy money are essentially a call for more price-inflation. At this point, a Fed effort to push back down interest rates and increase lending would not stabilize the money supply so much as send quickly upward, accelerating CPI growth once again.

In other words, if the Fed reverses course now, prices will only spiral upward. It didn't have to be this way, but ordinary people are now paying the price for a decade of easy money cheered by Wall Street and the profligates in Washington. The only way to put the economy on a more stable long-term path is for the Fed to stop pumping new money into the economy. That means a falling money supply and popping economic bubbles. But it also lays the groundwork for a real economy—i.e., an economy not built on endless bubbles—built by saving and investment rather than spending made possible by artificially low interest rates and easy money.

Author:
Contact Ryan McMaken

Ryan McMaken (@ryanmcmaken) is executive editor at the Mises Institute. Send him your article submissions for the Mises Wire and Power and Market, but read article guidelines first. Ryan has a bachelor's degree in economics and a master's degree in public policy, finance, and international relations from the University of Colorado. He was a housing economist for the State of Colorado. He is the author of Breaking Away: The Case of Secession, Radical Decentralization, and Smaller Polities and Commie Cowboys: The Bourgeoisie and the Nation-State in the Western Genre.

https://alasdairmacleod.substack.com...m_medium=email

Who owns the gold?

7 February, 2024

https://substackcdn.com/image/fetch/..._1218x1534.png

MACLEODFINANCE

FEB 7, 2024

An overlooked aspect of geopolitics is the defensive action taken by Asian hegemons and their close allies against a collapse of the Western currency system.
Unlike our economists who are overwhelmingly Keynesian, the economic tradition from Soviet and communist China was that the West’s capitalist system would collapse. Admittedly, China’s economists have increasingly studied in the West and picked up Keynesian concepts, but they remain acutely aware of the weaknesses of our capitalist system.

This is why they have secretly accumulated gold as the ultimate protection against a collapse of the fiat dollar and allied currencies. The only reason preventing China from putting her renminbi onto a gold standard immediately is that it would trigger a collapse in Western currencies, with consequences for her export industries. She will only take this action defensively. Russia would probably prefer a more immediate move to back the rouble with gold but is constrained in her partnership with China.

This article assesses the hidden gold reserves of China and Russia and their potential deployment.

China has been accumulating gold ever since the Peoples Bank was appointed to manage the nation’s gold and silver accumulation in 1983. Bearing in mind that gold was in a massive bear market until 2002, large quantities of bullion became available at low prices. The Chinese state had accumulated sufficient gold for itself through importation of bullion, importing doré for refining, and investment in gold mining to permit its citizens to begin buying in late-2001. By then, I estimate that China had secretly built up holdings of about 20,000 tonnes, and the state has continued to add to its holdings ever since. The Shanghai Gold Exchange was set up in 2002, and to date 23,000 tonnes have been withdrawn from its vaults into public ownership.

To this day, China follows a strict policy of not allowing any gold which has entered the country to be exported. And between the Chinese state and its general public, accumulated gold is likely to be in excess of 50,000 tonnes.

Whether China will declare all her gold as monetary reserves is a question for the future. However, Russia entered into a policy of gold accumulation much later. But so far, between official reserves and the State Fund of Russia (the Gosfund) it is believed Russia has some 12,000 tonnes at its disposal, exceeding America’s official reserves of 8,134 tonnes. Furthermore, Russia is planning to increase mine output from over 300 tonnes to 500 tonnes annually, and the Gosfund is still buying from domestic sources.[i]

The contrast with the western alliance’s fiat currencies couldn’t be greater. The consequences are clear: other nations in the SCO and BRICS grouping are now selling dollars for gold, which is why central banks are estimated by the World Gold Council to have accumulated over 1,100 tonnes in 2022 and a similar quantity in 2023. That accumulation is likely to accelerate as the price of gold measured in western fiat rises (i.e., the dollar and other fiat currencies decline) in a global bullion market already lacking liquidity.

The consequences for US Government funding are dire. For decades, the US Government has relied on foreigners accumulating dollars and reinvesting them in US Treasury stock. The liquidation of these holdings for gold, at a time when budget deficits are rising steeply, is likely to propel dollar bond yields sharply higher.
We are already seeing dollar holdings and financial assets in foreign hands beginning to decline, which according to the US Treasury’s TIC figures have fallen from a peak of $34 trillion to about $32 trillion currently. Admittedly most of this decline has been due to valuation effects, reflecting the rise in interest rates and bond yields over the last year.

At the St Petersburg International Forum in June 2022 attended by 81 official delegations, President Putin made it clear that dollars and euro reserves should be sold for fear of confiscation and due to their losing purchasing power. Not only has Putin primed foreign governments to dump their dollar and euro reserves, but NATO’s aggression over Ukraine and now the Middle East is bound to continue driving up commodity and energy values in fiat currencies, and therefore the natural level of interest rates and bond yields. In short, by his response to NATO aggression, Putin has the power to destroy the alliance’s currency and financial systems. And given that Russia, China, and the entire SCO membership would ultimately benefit from a gold standard, there is every reason for Putin to take the nuclear option, not of the warhead variety, but the financial. WW3 will centre on this issue.

This is the reality behind not just the accumulation of bullion in the Asian axis, but its promotion for trade settlement in the growing BRICS community.
[i] See https://www.gokhran.ru/ru/press/news/2233/index.phtml

https://www.theburningplatform.com/2...sQ#more-328337


America Is Undergoing Genocide

Guest Post by Paul Craig Roberts
It is not a conspiracy theory that the 300,000 immigrant-invaders (official count) entering the US unopposed each month are recruits organized by NGOs and not refugees from political persecution. The NGOs that are underwriting the invasion provide maps of the routes along which food and shelter are provided. Roads and bridges are being constructed to aid the invasion.

One of the NGOs is the Hebrew Immigrant Aid Society (HIAS), of which the current director of the US Department of Homeland Security, Alejandro Mayorkas, himself a Jew, was a board member until December 2020. According to an article on substack, HIAS has received $100,000,000 from the US government in the past three years. https://jasonpowers.substack.com/p/u...hs-and-doj-are

Mayorkas is foreign born and himself an immigrant-invader. Yet, he is the director of Homeland Security for the United States. On January 31, the House Committee on Homeland Security voted to approve articles of impeachment of Mayorkas for “willful and systemic refusal to comply with the law” in enforcing border policy and “breach of public trust.” There has been no investigation of whether it was Mayorkas who gave $100,000,000 of US taxpayers money to a Jewish NGO engaged in the organized invasion of the US.

According to the report on substack, HIAS has a processing center in the Darien Gap used to collect the immigrant-invaders and to send them on their guided and provisioned way. Apparently, Mayorkas is aware of this, and possibly is helping to finance it. But don’t expect Congress to investigate anything that might reflect unfavorably on a Jewish organization.

Another problem is Vanita Gupta, daughter of Indian immigrants, who is Associate Attorney General of the US. Gupta has been active in investigating police departments, in enforcing LGBTQ2 rights and hate crime prosecutions, and winning settlements for illegal immigrant children. Her father is a director of Avantor, a company that makes in Mexico acetic anhydride, a product used in producing heroin and methamphetamine. As the Democrats’ open border policy facilitates the drug trade, the question is whether an associate attorney general who fights for immigrant-invaders and whose father is involved in a corporation that produces a product used in the drug trade has a conflict of interest.

Governance in a tower of babel is problematic, especially when the most recent citizens are people of color with racial privileges that give them preferred entry into top positions. Many of the immigrant-invaders arrive from countries in which it is commonplace that officials privatize their offices for money or for ideological and social agendas. When a Western government has so many government officials from countries outside the Western tradition, how does the country remain Western? Isn’t it transformed into something else? (With the collapse of the integrity of Western public and private institutions, third world behavior has become characteristic of US officials. Fani Willis, the Fulton County district attorney, and Letitia James are examples.)

Under the Democrats, each and every month illegal immigrants are permitted to enter the US in numbers (official, the real number might be higher) equal to the population of Pittsburg, Pennsylvania. Think about it. Every year the Democrats’ open border policy saddles us with 12 cities the size of Pittsburgh full of third world immigrants who know nothing of Western ways.

it is a new form of genocide that America is undergoing. It is unclear to me if there is enough of America left to be able to rescue itself. Rescue is certainly impossible as long as gullible, insouciant, hapless Americans continue to vote Democrat.

Not that the Republicans are much different. As far as I can tell, the only difference between the two parties is that Republicans do not hate white people, and it is not their policy to destroy them and to replace a white country with people of color.

But Republicans lack a fighting spirit. They themselves are part of the Establishment, and they are content to milk the situation to their own end.
Just as nothing will be done about the genocide of the Palestinians, nothing will be done about the American genocide. White people are an endangered species. Their governments are conspiring against them.

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