Category Archives: banking

The Inversion, by Robert Gore

Getting along by going along with the patently absurd.

A seamless web, they all believe because they all believe.

The Gordian Knot, Robert Gore, 2000

If it seems like the world has turned upside down it’s because it has. Right is wrong and wrong is right. Truth is lies and lies are truth. Knowledge is ignorance and ignorance is knowledge. Success is failure and failure is success. Reality is illusion and illusion is reality.

It would be comforting to say that this inversion is a plot by nefarious others. Comforting, but not true, in the pre-inversion meaning of the word true. Rather it stems from answers to questions that confront everyone. To think for yourself or believe with the group? To stand alone or cower with the crowd? It’s the conflict between the individual and the collective, and between what’s true and what’s believed.

We live in an age of fear. It’s not fear of germs, war, poverty or any other tangible threat that most besets humanity. It’s the fear of being disliked and ostracized by the group.

If every age has its emblematic technology, ours is social media, with its cloying likes and thumbs up and its vicious cancellations, doxing, and deplatforming. No longer must you wander through life plagued by that nagging insecurity—am I liked? Now you can keep virtual score: you not only know if you’re liked or disliked, you know how much and by whom. Unfortunately, that knowledge doesn’t seem to help; the scoreboards only amplify the insecurity. What was once an occasionally troubling question, privately asked of one’s self, has become a widely held, public obsession.

The official Covid-19 response is the apotheosis of inversion and probably the one that runs it off the rails. There’s a model that has repeatedly erred predicting infection and death rates by orders of magnitude. Use it! Politicians and bureaucrats, the two most power-hungry groups on the planet, are clamoring for unlimited powers to destroy jobs, businesses, economies, lives, and liberty. Give it to ’em, no questions asked! Sunshine, Vitamin D, fresh air, and exercise prevent diseases and lessen their symptoms’ severity. Lock ’em up! Lockdowns aren’t working. Lock ’em up harder! Masks don’t prevent or hinder viral transmission, their packaging says so. Double, triple, or better yet, quadruple mask! At high cycle thresholds, the PCR test throws off many false positives, inflating case counts. Crank up the cycle thresholds until Biden gets in office! Cheap medicines hydroxychloroquine, and ivermectin both prevent and cure the disease, provided it’s not too far advanced. Discourage their use! They work better than expensive vaccines. Make vaccinations mandatory! Scores of reputable and eminent doctors and scientists are questioning and criticizing the protocols. Censor them and follow our shapeshifting science! Death counts are inflated because hospitals have a financial incentive to attribute deaths to Covid-19 and anybody who has tested positive and subsequently dies of whatever cause is labeled a Covid-19 death. If they scare people into saving just one life…. The cure is far worse than the disease. Shut up or we’ll shut you up! There’s always germs out there and they constantly mutate, this horseshit could last forever. New Normal, Great Reset. It will last forever, and it will get worse, won’t it? We’ll circle back on that.

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Peer pressure is the fundamental force of the social universe. Anyone who’s part of a collective will be pressured to accept its consensus on matters trivial and important. Congruence between what a collective believes and truth is happenstance. The larger the group, the higher the chance of incongruence.

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Wilder, Wealthy, and Wise, by John Wilder

The price of a Big Mac is a rough and ready indicator of both inflation and the relative value of currencies. From John Wilder at wilderwealthywise.com:

A Roy-ale With Cheese®. What do they call a Big Mac©?” – Pulp Fiction

Picard doesn’t have an iPhone® he got unlimited Data with his Android©.

The last time I had a Double Quarter Pounder with Cheese™ from McDonalds© here in Modern Mayberry, it cost me $4.79. It was over a month ago, but I remember biting into the bun feeling the warm hamburger . . . warm? Dangit.

I looked down. It was raw. Ugh. I was done.

What our local McDonalds® misses in quality they make up for by taking longer than any other fast-food place in town. Why do we go there? The fries and the $1 drinks. Anything more complicated than that is like asking a puppy to land a P-51 Mustang. You know the puppy really wants to make you happy, but it’s really only good at looking cute and sleeping.

I think the employees at McDonalds© must like to sleep. A lot.

We have exactly five fast-food restaurants in town, and my theory is that there are have two excellent managers that make good food, promptly. We also have one manager that’s not great, but focuses on making the food tasty and the orders correct even though you might not get it in ten minutes. We have another that makes good ice cream, but the burgers taste like NHL® puck rejects. Then we have the last in line – the manager of McDonalds©.

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28 trillion reasons to have a Plan B, by Simon Black

The US government and its central bank are just going to keep issuing debt until markets stop them from doing so. From Simon Black at sovereignman.com:

At the close of business on Monday March 1st, just a few days ago, the US national debt crossed $28 trillion for the first time in history.

To the penny, in fact, the national debt hit $28,004,376,276,999.35.

And bear in mind that figure doesn’t include the $1.9 trillion in ‘Covid stimulus’ that Uncle Sam is about to pass, let alone all the other deficit spending that they were already expecting for this current fiscal year.

So you can already see how the debt will quickly rocket past $30 trillion in no time at all.

It’s noteworthy that it took the United States more than two centuries to accumulate its first trillion dollars in debt– a milestone first reached on October 22, 1981.

In those two centuries (74,984 days, to be exact), the US fought two world wars, battled the Spanish Flu pandemic, dealt with the Great Depression, waged Cold War against the Soviet Union, fought the Civil War against itself, put a man on the moon, etc. before breaching $1 trillion in debt.

This most recent trillion of debt took a mere 152 days to accumulate.

Think about that: nearly 75,000 days for the first trillion, 152 days for the last trillion.

Even more startling, it was only September 2017 that the national debt first crossed the $20 trillion milestone.

So when the debt undoubtedly hits $30 trillion over the next few months, that means it will have grown $10 trillion in less than four years.

And there is absolutely no end in sight. The Treasury Department and the Federal Reserve are both in lockstep fanaticism: no amount of debt is too much, no amount of money printing is too much.

They find it perfectly logical for the government to restrain large portions of the economy and provide financial incentives for people to be economically unproductive, but then make up the difference by printing money and going into debt.

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Money and statistical delusions, by Alasdair Macleod

Much of this article will be tough sledding for noneconomists. For the short version and the upshot of the article, skip to the last section, GDP Fallacies. From Alasdair Macleod at goldmoney.com:

I can prove anything with statistics, except the truth

— Lord Canning, c. 1819

Does Canning’s aphorism still hold true, given that data collection and statistical analysis have progressed beyond all recognition in the last two hundred years? This article tests that proposition.

It is still true, because of the interests for which statistics are deployed. We know, or should know, that CPI indexation of prices fails to reflect the true rate of decline in the purchasing power of fiat currencies. That is at least a simple case of governments saving money on indexation. But being economical with the statistical truth is a far wider practice encompassing input suppression, misleading deployment, and their use to support beliefs and preferred outcomes instead of backing up properly reasoned economic and monetary a priori theory.

This article finds that the application of all these methods corrupt monetary statistics, including the three principal components of the equation of exchange. This analysis is sparked by recent changes to the definition of M1 money supply in the US.

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The Global Inflation Nightmare That You Have Been Warned About Is Here, by Michael Snyder

Inflation means inflation whatever passes for the money supply. Inflation has varying effects on the general price level and on specific prices. That said, if you inflate the money supply like developed world governments and their central banks have been doing the last year, it’s a pretty good bet that it will drive up most prices. From Michael Snyder at themostimportantnews.com:

If you thought that authorities all over the planet could print, borrow and spend money like there was no tomorrow without any consequences, you were being delusional.  Since the beginning of the COVID pandemic, we have witnessed the greatest monetary binge in world history.  Of course that was going to cause enormous problems.  Of course that was going to cause nightmarish inflation.  Anyone with an ounce of common sense should have been able to see that.  When the value of money is tied to nothing, “more money” is always such a tempting solution for those in power.  But as history has demonstrated over and over again, going down that path almost always leads to tragedy.

In our case, it will be the poorest people on the planet that suffer the most.  According to Bloomberg, basic food staples are dramatically spiking in price all over the globe…

Global food prices are going up, and the timing couldn’t be worse.

In Indonesia, tofu is 30% more expensive than it was in December. In Brazil, the price of local mainstay turtle beans is up 54% compared to last January. In Russia, consumers are paying 61% more for sugar than a year ago.

And as Albert Edwards has pointed out, annual inflation in cereals has hit 20 percent, which represents “the highest annual rise since mid-2011 when the Arab Spring was in full flow!”

If prices continue to rise like this, it is just a matter of time before we see widespread food riots all over the globe.

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Warren Buffett: “Retirees face a bleak future”, by Simon Black

Negative real interest rates mean there’s no way to save for retirement with even a modicum of safety. From Simon Black at sovereignman.com:

Warren Buffett minced no words in his most recent annual shareholder letter (which came out over the weekend) when he told investors that “retirees face a bleak future.”

Buffett was referring to the pitifully low interest rates that dominate fixed income investments (like bonds and annuities).

In September 1981, he writes, investors could buy a 10-year US government bond yielding nearly 16%.

Now, inflation was a lot higher in the 1980s than it is today. But even after adjusting for inflation, the average annual yield for any investor who held that 1981 bond to maturity over the next decade would have been 5.7% per year.

Today, that same 10 year bond yields just 1.4%. But the official inflation rate in the United States is also 1.4%. This means that, after adjusting for inflation, your net yield today is ZERO.

What’s even more incredible is that there are obvious signs inflation may be on the rise; for example, the most recent Producer Price Index of wholesale price inflation reached its highest level since 2009.

Yet simultaneously the Federal Reserve keeps saying that they want to keep interest rates low. And they’re doing their best to push the 10-year yield even lower than 1.4%.

In other words, inflation could go higher, and interest rates lower. So anyone who buys bonds will actually suffer a negative yield after adjusting for inflation.

And this is precisely what Buffett was talking about.

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Party Like It’s 1984, by James Howard Kunstler

There’s no way Americans are going to allow themselves to be herded into The Great Reset. So says James Howard Kunstler at kunstler.com:

Chalk up a fatal blow to The Patriarchy. That avatar of toxic masculinity, Mr. Potato Head has been dumped into the same humid chamber of perdition where the ghosts of Nathan Bedford Forrest, Theodore Bilbo, and Phyllis Schlafly howl and squirm — liberating the billions of potatoes world-wide from the mental prison of binary sexuality. The move by Hasbro (bro? really??) may yet disappoint the legions in Wokesterdom as a-bridge-not-far-enough while they await the debut of Transitioning Potato Head, complete with play hormone syringe and play scalpel, so that the under-six crowd can begin to map out their own gender reassignments without the meddling of Adult 1 and Adult 2, formerly known as Mommy and Daddy.

Was it mere coincidence that the action in Toyland happened the same week that one Rachel Levine was grilled in hir Senate confirmation hearing for the post as Assistant Secretary for Health in the Department of Health and Human Services? The hearing tilted toward transphobia when Senator Rand Paul (R-KY) asked zie, a little too aggressively, if they were in favor of pubescent children opting for sexual reassignment in opposition to xyr parents. The nominee, who hirself transitioned from “male” to “female” in 2011, answered that transgender medical issues are “complex and nuanced.” True (perhaps). And probably more than a Senator who transitioned from ophthalmologist to politician might appreciate.

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Oil and Debt: Why Our Financial System Is Unsustainable, by Charles Hugh Smith

Energy is and will always be the dominant variable. From Charles Hugh Smith at oftwominds.com:

How much energy, water and food will the “money” created out of thin air in the future buy?

Finance is often cloaked in arcane terminology and math, but the one dynamic that governs the future is actually very simple.

Here it is: all debt is borrowed against future supplies of affordable hydrocarbons (oil, coal and natural gas). Since global economic activity is ultimately dependent on a continued abundance of affordable energy, it follows that all money borrowed against future income is actually being borrowed against future supplies of affordable energy.

Many people believe that alternative “green” energy will soon replace most or all hydrocarbon energy sources, but the chart below shows why this belief is not realistic: all the “renewable” energy sources are about 3% of all energy consumed, with hydropower providing another few percent.

There are unavoidable headwinds to this appealing fantasy:

1. All “renewable” energy is actually “replaceable” energy, per analyst Nate Hagens: every 15-25 years (or less) much or all of the alt-energy systems and structures have to be replaced, and little of the necessary mining, manufacturing and transport can be performed with the “renewable” electricity these sources generate. Virtually all the heavy lifting of these processes require hydrocarbons and especially oil.

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Doug Casey on Rapidly Rising Taxes and 3 Other Imminent Dangers to Your Wealth

Broke governments are going to be even more unbelievably rapacious than they are now. From Doug Casey at internationalman.com:

dangers to your wealth

International Man: President Biden’s Treasury Secretary—and Obama Fed Chair—Janet Yellen recently floated the idea of taxing unrealized capital gains through a “mark-to-market” mechanism.

What is going on here?

Doug Casey: When you tax unrealized capital gains—as they do with foreign stocks in a number of countries, like New Zealand, where it made my life expensive and miserable while I was living there—any stock market assets that you have are marked to market annually. This is a big disincentive to own them because whether you sell the asset or not, you’re going to pay taxes as if you’d sold it.

This is why very few Kiwis own foreign stocks. They’re liable to be taxed on gains, whether or not they sell and actually pocket the gains. I presume that’s what Yellen is talking about. It would make it pointless to buy a stock like Berkshire Hathaway and just hold it for decades to escape capital gains taxes. But the bright side is that if this law was in force, Warren Buffett would no longer be able to whine about the injustice of paying fewer taxes than his secretary.

I question whether the proposal will be enacted, though, simply because it’s so stupidly destructive. It’s clear that Yellen needs to collect on some more six-figure speeches to gain a proper understanding of it and get off that hobby horse.

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With 5 New SPAC Pricing Every Single Day, Matt Taibbi Slams The Latest “Get-Super-Rich-Quick” Scheme, by Tyler Durden

A Special Purpose Acquisition Company is a company that’s solely set up to buy another company or companies. Yes, it’s as wacky as it sounds. From Tyler Durden at zerohedge.com:

One of the remarkable stories of 2020 – and even more so 2021 – one which has sparked many comparisons to 2007 just before the credit/housing bubble popped, has been the record surge of blank-check, or SPAC, issuance where investors – at a loss what to invest in – hand their money to a marquee investor who promises to find an appropriate investment over a given period of time or refund the money.

We first discussed the threat of the SPAC bubble back in December, around the time some wondered if the good times may be ending: in an interview with Bloomberg last month, Olympia McNerney, Goldman’s head of U.S. special purpose acquisition companies, described the U.S. SPAC market as being “perhaps too frenzied” and predicted volumes will become more “rational: as fund managers deal with what she described as indigestion.

In retrospect, the good times were only getting started. As Goldman’s Ben Snider wrote over the weekend, so far in 2021, 144 SPACs have gone public — averaging roughly five per trading day — raising a total of $44 billion. Just seven weeks into the year, this represents more than half the totals in 2020, which itself witnessed a 5x increase in SPAC activity relative to 2019. The good news is that unlike historically, when SPACs tended to underperform the market, the median of the 15 most popular SPACs has returned 8% YTD, with some generating much stronger returns and only one delivering a modestly negative YTD return.

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