Category Archives: Business

Will the Federal Reserve Cause the Next Riots? by Ron Paul

What the Fed is doing now will be the final nail in the coffin for the economy, and it’s hard not to see how the coming Greater Depression won’t spark riots. From Ron Paul at ronpaulinstitute.org:

Federal Reserve Chair Jerome Powell and San Francisco Fed President Mary Daly both recently denied that the Federal Reserve’s policies create economic inequality. Unfortunately for Powell, Daly, and other Fed promoters, a cursory look at the Fed’s operations shows that the central bank is the leading cause of economic inequality.

The Federal Reserve manipulates the money supply by buying and selling government securities. This means that when the Fed decides to pump money into the economy, it does so by putting it in the pockets of wealthy, and oftentimes politically-connected, investors who are able to spend the new money before the Fed’s actions result in widespread inflation. Wealthy individuals also tend to be among the first to invest in the bubbles that form when the Fed distorts interest rates, which are the price of money. These investors may lose some money when the bubble bursts, but these losses are usually outweighed by their gains, so they end up profiting from the Fed-created boom-bubble-bust cycle.

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The World Is Drowning In Debt, by Daniel Lacalle

The numbers are terrifying, and their real-world consequences will be even more so. From Daniel Lacalle at dlacalle.com:

According to the IMF, global fiscal support in response to the crisis will be more than 9 trillion US dollars, approximately 12% of world GDP. This premature, clearly rushed, probably excessive, and often misguided chain of so-called stimulus plans will distort public finances in a way in which we have not seen since World War II. The enormous increase in public spending and the fall in output will lead to a global government debt figure close to 105% of GDP.

If we add government and private debt, we are talking about 200 trillion US dollars of debt, a global increase of over 35% of GDP, well above the 20% seen after the 2008 crisis, and all in a single year.

This brutal increase in indebtedness is not going to prevent economies from falling rapidly. The main problem of this global stimulus chain is that it is entirely oriented to support bloated government spending, and artificially low bond yields. That is the reason why such a massive global monetary and fiscal response is not doing much to prevent the collapse in jobs, investment, and growth. Most businesses, small ones with no debt and no assets, are being wiped out.

Most of this new debt has been created to sustain a level of public spending that was designed for a cyclical boom, not a crisis and to help large companies that were already in trouble in 2018 and 2019, the so-called ‘zombie’ companies.

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The new deal is a bad old deal, by Alasdair Macleod

The Internet’s best economist explains why the New Deal was a huge mistake, and why we’re about to repeat it, except this time only huger. From Alasdair Macleod at goldmoney.com:

So far, the current economic situation, together with the response by major governments, compares with the run-in to the depression of the 1930s. Yet to come in the repetitious credit cycle is the collapse in financial asset values and a banking crisis.

When the scale of the banking crisis is known the scale of monetary inflation involved will become more obvious. But in the politics of it, Trump is being set up as the equivalent of Herbert Hoover, and presumably Joe Biden, if he is well advised, will soon campaign as a latter-day Roosevelt. In Britain, Boris Johnson has already called for a modern “new deal”, and in his “Hundred Days” his Chancellor is delivering it.

In the thirties, prices fell, only offset by the dollar’s devaluation in January 1934. This time, monetary inflation knows no limit. The wealth destruction through monetary inflation will be an added burden to contend with compared with the situation ninety years ago.

Introduction

Boris Johnson recently compared his reconstruction plan with Franklin D Roosevelt’s New Deal. Such is the myth of FDR and his new deal that even libertarian Boris now invokes them. Unless he is just being political, he shows he knows little about the economic situation that led to the depression.

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Safety First is a Bad Ideology, by Diana W. Thomas

At what point do the costs of preventing or ameliorating a risk outweigh the benefits of doing so, and does it matter if someone else is bearing the costs? From Diana W. Thomas at aier.org:

bubble wrap

When you walk out of your house, or enter the public street, you are on shared ground, a community space. During the pandemic of 2020, community spaces that are private venues, like Disney, have closed down just as often as community spaces that are public venues, like schools and playgrounds.

Public and private distinctions do not make a difference. Risk is the key factor to understanding why common spaces are closed and likely to remain so, at least in the way we were used to. In what is called the asymmetric loss function, a decision maker’s cost of a mistake in one direction is many times greater than the cost of error in the other direction.

Individuals with asymmetric loss functions are extremely risk averse when it comes to potential losses. Individuals often employ asymmetric loss functions in everyday life. For most people being 30 minutes early for a flight, for example, is much less costly than being 30 minutes late.

But, because people are different, individuals decide for themselves how late they can arrive and risk missing a flight. Things get trickier when decisions regarding risk tolerance are made for common spaces and groups, because one size doesn’t always fit all. Weighing downside risks too heavily can be socially costly, because some valuable private activities are prohibited.

Historically and across cultures, individual risk-taking is associated with growth and prosperity while minimizing risk and emphasizing potential social losses is not. In the last several decades, public tolerance of risk has shifted towards lower socially acceptable levels of risk-taking and in the long run, these changes may leave us all worse off.

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An Open Letter Challenge To Twitter CEO Jack Dorsey On Censorship, by Jason Sullivan and Bill Binney

You have to wonder if Jack Dorsey will ever read this letter, but it has some worthwhile sentiments. From Jason Sullivan and Bill Binney at zerohedge.com:

Open Letter to Jack Dorsey…

The American People and Social Media

“We seek a free flow of information… we are not afraid to entrust the American people with unpleasant facts, foreign ideas, alien philosophies, and competitive values.”

– John F. Kennedy, February 1962

Dear Mr. Dorsey,

At the September 5, 2018, U.S. Congressional Hearing in which you gave testimony under oath, you stated, in part:

Twitter does not use political ideology to make any decisions, whether related to ranking content on our service or how we enforce our rules. We believe strongly in being impartial, and we strive to enforce our rules impartially. We do not shadowban anyone based on political ideology. From a simple business perspective and to serve the public conversation, Twitter is incentivized to keep all voices on the platform.”

What we now know, thanks to multiple media investigations, is that; not only is Twitter engaged in censorship, but that it also openly weights its decisions by subjective terminology like “highest potential for harm” meant to obscure its motive of silencing any opposition to the mainstream narrative of both political “sides.”

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American collusion: Weaponizing media, Big Tech and government, by James Grundvig

They’re pulling out all the stops to see that President Trump is not reelected. From James Grundvig at wnd.com:

The planners quickly deployed the “insurance policy” after Donald J. Trump won the presidential election in 2016. Like an annuity, the payments to the policyholders would be small and steady at first, then lead, they hoped, to a much bigger payoff: the removal of President Trump from office.

At least that was the plan. Three and a half years later, the big day never arrived.

From the unsubstantiated Steele dossier, the discredited Russiagate investigation, to the FISA court abuses, the potholed-strewn road to impeachment circled back to the Mueller Report, which was supposed to clinch the deal. Without a smoking gun on the president, the Mueller team reached and then overreached, picking off a few Trump confidants, in an attempt to tighten the noose. The results were half-baked. That’s usually what the FBI perjury trap produces. Plea deals; no evidence of collusion.

Sure, Robert Mueller collected a few big scalps in Gen. Michael Flynn and Roger Stone. But now that Flynn’s indictment unraveled, the insurance claim has turned into a liability for the policyholders. Trump is still president. And now the investigation into collusion has moved in the other direction focusing on the planners of the insurance policy.

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Doug Casey on the Dangers of Global Regulation

Regulation is almost always counterproductive, whether it’s global or not. From Doug Casey at caseyresearch.com:

Rachel’s note: Regular readers know Doug Casey believes you can always bet on the government to do the wrong thing. Whether it’s the dangerous response to the COVID-19 pandemic, or overregulation abroad, government intervention often creates more problems than it solves.

And today, Doug discusses the dangers surrounding globalism… and explains why we actually live in a fascist system…

Daily Dispatch: Doug, we’d like to get your take on the question of “Globalist vs. Globalism.” Not so long ago, the right was in favor of embracing a global economy, in order to access cheaper labor and other benefits of outsourcing. Whereas the left was against that whole idea, as they wanted to be more protectionist in their local economy.

But now, to the average man at least, that seems to have flipped. Now the right seems to be more protectionist, and the left wants to be more global. Is that an overly simplistic take on things? What’s your view?

Doug Casey: Well, to start with, these are just labels that don’t really mean anything – other than deciding what variety of statism you want.

The truth is that individuals and companies should be able to trade with each other with absolutely no restrictions, interference, or comment of any type from governments. No quotas, no duties, no incentives… nothing.

Governments bring absolutely nothing to the party. It’s a sham, a myth, and a delusion that government acts in the interest of the country it controls. Government (and the people who control it) act in their own interests and those of their cronies. I’m sorry if that sounds harsh, and runs counter to what we were taught in grade school civics, or what sanctimonious Deep Staters like to repeat. But it’s the case with late-stage U.S. “capitalism.”

“Globalists,” “Globalism,” there’s barely any difference. It’s just busybodies deciding what products the real producers may or may not create, and what entrepreneurs can or can’t do. Saying one is good and the other is bad is the wrong way to look at it. It politicizes the question.

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The Great American Shale Oil & Gas Massacre: Bankruptcies, Defaulted Debts, Worthless Shares, Collapsed Prices of Oil & Gas. by Wolf Richter

The carnage in the oil and gas patch has been gruesome. From Wolf Richter at wolfstreet.com:

The bankruptcy epicenter is in Texas.

The Great American Oil Bust started in mid-2014, when the price of crude-oil benchmark WTI began its long decline from over $100 a barrel to, briefly, minus -$37 a barrel in April 2020. Bankruptcies of US companies in the oil and gas sector started piling up in 2015. In 2016, the total amount of debt listed in these filings hit $82 billion. Bankruptcy filings continued, with smaller dollar amounts of debt involved. In 2019, the shakeout got rougher.

And this year promises to be a banner year, as larger oil-and-gas companies with billions of dollars in debt collapsed, after having wobbled through the prior years of the oil bust.

The 44 bankruptcy filings in the first half of 2020 among US exploration and production companies (E&P), oilfield services companies (OFS), and “midstream” companies (gather, transport, process, and store oil and natural gas) involved $55 billion in debts, according to data compiled by law firm Haynes and Boone. This first-half total beat all prior full-year totals of the Great American Oil Bust except the full-year total of 2016:

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Major Tax Increases are About to Slam America as Cities and States Want You to Pay for Covid Fallout, by Isaac Davis

Cities and states have locked down economies and allowed rioters to destroy businesses, and now they want their taxpayers to pick up the tab. They can’t squeeze blood from stones, though. From Isaac Davis at wakingtimes.com:

Just prior to the global Coronavirus outbreak, serious signs of an emerging financial crisis began to emerge. As people were beginning to realize that yet another central bank engineered ‘bust’ was coming down on us, we were thrown into lockdown, shuttering millions of businesses and sending millions of people to the unemployment line.

Now, a few months later, we are starting to realize just how deep the economic fallout will be, and Americans are scrambling to adjust their lifestyles to a totally new world order. At the top of the food chain, though, is government. City, county, state and federal.

In the midst of such a bizarre and frightful socioeconomic crisis, the tax man is hurting too. Tax revenues at all levels of government have plummeted like never before, and the pain is especially acute for city budgets who’ve seen sales tax revenue nosedive. While the American citizenry is seeing a drastic drop in income, so is Uncle Sam and all of his bureaucratic agencies.

Take a look at some of the numbers.

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Dispatch from the Front, by Rod Peet, Jr.

One man’s lonely stand on principle. From Rod Peet Jr. at lewrockwell.com:

“The enemy of my enemy is my friend.”

I thought my employer was my friend. I was approaching retirement without a job and it appeared I would be in dire straits during that final phase of life. Then I was given my latest job. It wasn’t an act of friendship, per se. More an act of capitalism. We both benefited. I made close acquaintances there. It felt like an act of friendship to me. Retirement was going to be OK.

Then the corona virus struck. It appeared to be a more aggressive form of the flu but the flu nonetheless. Precautions should be taken. Wash hands, isolate the sick, protect the elderly. Fine. Common sense response.

Then everyone’s enemy, the government, struck. Governments across the country began to engage in criminal activity (see U.S. Constitution, Amendment 1; Texas Constitution, Bill of Rights, Sections 6, 19, 27, 28, 29; Title 18, U.S.C., Section 242).

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