Category Archives: Currencies

The Latest Lie from on-High: An “Independent Federal Reserve”, by Matthew Piepenburg

Central banks are never independent from the governments that create them. From Matthew Piepenburg at goldswitzerland.com:

Earlier in July, U.S. President Biden came away from a meeting with Fed Chairman Jerome Powell and calmly announced that in addition to inflation being “short term,” we should fear not, as Biden also “made it clear to Chairman Powell that the Fed remains independent,” but “will act as needed.”

Whewwww. Where to even begin in unpacking the lighthouse of reality behind so much verbal fog?

When it comes to market analysis, no one wants to hear political opinions within finance reports, left or right.

We get this.

Thus, rather than run the risk of offending the left, right or center, I’ll be frank in confessing my foundational view that nearly all politico’s (and Fed Chairs) have been universally comical when it comes to math, history or blunt-speak.

In short, the math, facts and warning signs rising by the hour (and outlined below) make it easy to be an equal-opportunity cynic when it comes to fiscal leadership or political “truth.”

So, let’s get back to Biden’s recent observations…

Deconstructing Biden-Speak

As for inflation being “short-term,” we’ve written ad nauseum about our stance on this fiction many times elsewhere.

But as for Biden’s declaration about the Fed being “independent,” let me wipe the coffee I just spilled on my shirt and speak plainly: That’s a lie.

First of all, if the Fed were as “independent” as Biden claims, then how can Biden be so certain they “will act as needed”?

Aren’t “independent” actors supposed to act as they, rather than the politicians, decide or “need”?

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David Stockman on Why Money Printing Doesn’t Generate Economic Growth

How can the simple act of printing out scrip or making an electronic bookkeeping entry generate anything real, like increased productivity or real economic growth? From David Stockman at internationalman.com:

Fed stimulus

To understand the Fed’s culpability for the inflationary disaster afflicting the American economy, it is necessary to start with the Big Lie that underlies all of its destructive machinations: the claim that market capitalism gravitates toward cyclical instability, recession and chronic shortfall from its potential Full Employment path.

From this presumption, there flows an alleged requirement for continuous central bank “stimulus.” Deft action by the central banking arm of the state is purportedly needed to compensate for the inherent prosperity-retarding imperfections of the free market.

If Fed policy has actually been reducing cyclical instability and pushing the $21 trillion US economy ever closer to its Full Employment potential, then productivity growth should be rising over time commensurate with the Fed’s more aggressive deployment of its “stimulus” policies.

In this context, it should be noted that productivity growth is a purer measure of monetary policy impact than total real GDP growth. That’s because the latter is in part driven by long-run demographics and the annual growth of the labor supply.

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Paying More and Getting Less, by Michael Maharrey

Paying more and getting less is what you always get when you put the government in charge of delivering anything, including the medium of exchange. From Michael Maharrey at schiffgold.com:

In the Federal Reserve’s new world of “transitory” inflation, Americans are paying more to get less.

Retail sales were up 0.6% from May to June. According to the Commerce Department, American consumers spent $621 billion on retail goods and services last month. With the big 1.7% drop in May, retail sales remained below levels in March and April.

Meanwhile, price increases in June far outran the increase in retail sales. In fact, they outran retail sales for the entirety of the second quarter. Consumers paid significantly more in every retail category.

  • Food bought at stores – up 0.8%
  • Prices at restaurants, delis, cafeterias, etc.  – up 0.7%
  • The price of gasoline – up 2.5%
  • Durable good prices including appliances, electronics, autos. furniture, etc. up 3.5%

These were price increases in just one single month. Overall, CPI popped 0.9% month-on-month in June. So far this year, prices have risen 3.6%.

Since retail sales are expressed in dollar amounts, they reflect rising prices. In other words, just because dollar widget sales increase doesn’t mean people bought more widgets. It could be that they bought fewer widgets but paid more for them. This is exactly what’s happening in many retail sales segments.

Consider gasoline, for example. Gas station sales rose by 2.5% in June to $47 billion. But the price of gasoline also rose 2.5% in June. That means consumers bought about the same amount of gasoline in June as they did in May, but they paid more for it.

Food and beverage store sales ticked up by 0.6% in June to $75 billion. Meanwhile, the CPI for food bought in stores jumped 0.8%, Again, consumers paid more to get less.

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Fiat Money Economies Are Built on Lies, by Thorsten Polleit

They don’t call it funny money for nothing. The only guarantee you have of fiat money’s value is the promise from the government not to print up too much of it. That’s a sucker bet. From Thorsten Polleit at mises.org:

Now and then, it pays to take a step back to get a broader perspective on things, to look beyond the daily financial news, to see through the short-term ups and downs in the market to find out what is really at the heart of the matter. If we do that, we will not miss the fact that we are living in the age of fiat currencies, a world in which basically everything bears their fingerprints: the economic and financial system, politics—even people’s cultural norms, values, and morals will not escape the broader consequences of fiat currencies.

You may not notice it in your daily use of fiat currencies—that is, for instance, when receiving wages, buying goods and services, paying down mortgages, depositing money with the bank for saving purposes—that something is terribly wrong with fiat currencies, be it in the form of the US dollar, the euro, the Chinese renminbi, the Japanese yen, the British pound, or the Swiss franc. However, the truth is that all these fiat currencies suffer from severe economic and ethical flaws, which are actually not difficult to understand.

Fiat currencies are produced by central banks and commercial banks’ credit expansion. In fact, central banks in cahoots with commercial banks increase the outstanding money supply by extending loans to firms, private households, and government entities. It amounts to money creation from thin air or—in a way—counterfeiting money. Issuing new fiat currencies sets into motion a boom, an illusion of prosperity. Consumption and investment expand, the economy enjoys higher corporate profits, increased employment, rising stock, housing prices, etc.

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Quantitative easing: how the world got hooked on magicked-up money, by Ann Pettifor

Central banking is a gateway drug to quantitative easing and then, perpetual debt monetization. From Ann Pettifor at prospectmagazine.co.uk:

Going cold turkey would finish off a dysfunctional global financial system that’s now hopelessly addicted to emergency infusions. The only solution is surgery on the system itself

The world economy is a mess. The system, notionally governed by the invisible hand of the market, is no longer governed in any meaningful way: private excess puffs up bubbles that government indulgence ensures can never burst. We seem condemned to volatile commodity prices, wild capital flows, worsening imbalances in trade, taxation and income, and—before long—the next sovereign debt crisis. And then there’s inequality. During lockdown, the total wealth of billionaires rose by $5 trillion to $13 trillion in 12 months, the most dramatic surge ever registered on the annual Forbes billionaire list.

Where do such riches come from? Compared to before the pandemic, there’s less real economic activity: we are collectively poorer. And yet within a year of the great panic of March 2020, many asset prices were surging. Wall Street and the City of London are again awash with liquidity—and in a speculative mood. One vogue is for something called SPACs, or “special purpose acquisition companies.” That sounds so vague as to bring to mind the South Sea Bubble companies of 1720, whose pitch is remembered as “carrying on an undertaking of great advantage but nobody to know what it is.”

How is this mismatch between financial markets and underlying reality possible? Because just like in the aftermath of the Great Recession, the civil servants in our central banks spotted the dreadful potential of unchecked panic, and rode to the rescue of private speculators by flushing the system with made-up money through a process we’ve come to know as quantitative easing.

Commentators on both the right and the left are increasingly fixated on the role of QE. In a way, that’s understandable. The policy—deployed on and off ever since the financial crash—has been pursued to an extraordinary degree in the face of Covid-19. By this June, the US Federal Reserve’s balance sheet had doubled in size since the pandemic began, and has now swelled by 800 per cent since 2007.

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Liquidity Crisis: Wells Fargo & Repo Markets Sound Alarms, by Matthew Piepenburg

If you’re debt is rising at a 45-degree and the wherewithal to pay that debt is only rising at a 25-degree angle, sooner or later you’re going to run out of money. From Matthew Piepenburg at goldswitzerland.com:

Every financial crisis ultimately boils down to a liquidity crisis, namely: Not enough fiat dollars to keep the financial wheels sufficiently greased.

Below, we look at two warning signs from Wells Fargo (NYSE: WFC) and the reverse repo market which warn of precisely that: a liquidity crisis.

From Debt Binge to Credit Crunch: A Chronicle of Excess

In a world in which consumers, corporations, and sovereigns have falsely confused debt-based growth as actual growth, a liquidity crisis is not a theoretical debate, but a mathematical certainty.

For years, self-serving politico’s, central bankers, Wall Street sell-siders, and a woefully unsophisticated cadre of main stream financial “journalists” have endeavored to downplay this rise-and-“pop” certainty by deliberately ignoring the $280T debt elephant in the global living room.

Of course, that debt, for years, has been “monetized” by increasingly debased currencies and rising money supplies created literally from central bank mouse-clicks rather than productivity, as evidenced by the embarrassing fact that global GDP is less than 1/3 of the global debt.

Needless to say, money (i.e., “liquidity”) created out of thin air, and then justified with even thinner (yet comfortably titled) policies like Modern Monetary Theory has its temporary charms.

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What Happens When the Chickens Come Home to Roost? by MN Gordon

Chickens coming home to roost is a colorful way to say actions have consequences, and the consequences when the everything bubble pops will be epochal. From MN Gordon at economicprism.com:

What happens when the chickens come home to roost?

This is today’s question.  But what is the answer?  In just a moment we’ll offer several thoughts and ruminations.  First, however, we must take stock of the chickens…

This week, for example, the chicken counters at the Bureau of Labor Statistics reported consumer prices, as measured by the consumer price index, increased in June at a year over year rate of 5.4 percent.  This marks the fastest pace of rising consumer prices since 2008.  And if you exclude food and energy, prices in June rose year over year by 4.5 percent…the fastest surge since November 1991.

In reality, consumer prices have increased much higher.  The ‘unofficial’ rate of consumer price inflation, as calculated using methodologies in place in 1980, is about 14 percent.  This rate of inflation is exceedingly caustic to retirees, savers, and wage earners.

Still, the Federal Reserve doesn’t think it’s a problem.  On Thursday, Federal Reserve Chair Jay Powell told the Senate Banking Committee he’s “not concerned” with rising cost of living.  He’s still asserting price inflation is transitory; that soon the price of used cars will abate and inflation will fall below the Fed’s 2 percent annual target.

We’ve all heard Powell’s fictions before.  If you recall, the Fed’s once ballyhooed normalization of 2018-19 was a great big sham.  Sure, $700 billion was contracted from the Fed’s Balance sheet between October 2017 and August 2019.  But that was in the wake of a $3.5 trillion expansion.  And it was quickly followed by another $4.3 trillion balance sheet expansion from September 2019 through the present.

What to make of it…

Layers of Dumbassery

Price inflation, like coronavirus or fentanyl, is a man-made scourge.  It’s a product of central bank directed money supply inflation.  And it’s made possible by debt based paper money.

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This “Temporary” Inflation Is Turning into an Inflation Spiral, by Wolf Richter

The inflation won’t be temporary because the fiat debt creation that’s fueling it hasn’t been. From Wolf Richter at wolfstreet.com:

Get Used to Higher Inflation. My Thoughts on the Biggest Mess I’ve Seen in Decades.

his year, inflation blasted off with a vengeance, and the last four months have seen the hottest pace of inflation since the 1980s.

The consumer price index – the CPI – rose 5% year-over-year for May. The June reading will come out in a couple of days [update: June CPI came in at 5.4%]. 5% of annual inflation is bad enough. But the pace of inflation over the past four months has been much higher, clocking in at over 8% annualized.

Surely, some inflation measures will tick down in the near future, giving everyone false hopes, before rising again. The first bout of inflation always looks temporary. But during those first bouts of inflation, that’s when the triggers of “persistent” inflation – namely the inflationary mindset and inflation expectations – are being unleashed.

So now the Fed keeps repeating time after time that this is temporary and that it will go away on its own because it was caused by temporary factors, namely a demand shock that occurred because the government spread $5 trillion in borrowed stimulus money since March last year; and because the Fed printed $4 trillion over the same period and repressed interest rates to 0%.

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The Lobster in Beijing’s Pot, by Anne Stevenson-Yang

The Chinese government is showing China’s entrepreneurs, executives, and financiers who’s boss. From Anne Stevenson-Yang at themarket.ch:

The fiasco surrounding the IPO of the Chinese ride-hailing service Didi is a warning signal: Beijing is taking increasingly tough action against capital outflows from the People’s Republic. This is a red flag for investors in Chinese internet giants such as Alibaba, Tencent and Baidu.

Bright-orange splotches appear on Gila monsters when they want to show that they can spew poison if predators mess with them. Male dogs hump females. And when Chinese companies make billions in portable, hard currency by listing overseas, as Didi Global Inc. (DIDI) did in its IPO on June 30, Chinese regulators flex their muscles.

The wishful among the investment community see this as a one-off. It is a tectonic shift.

China’s July 4 order to halt new downloads of the Didi app on the excuse that user data security was being compromised tanked the new listing and led to comments by Chinese officials about how companies really need to get their approval before an IPO.

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Ending Anonymity: Why the WEF’s Partnership Against Cybercrime Threatens the Future of Privacy, by Whitney Webb

If there is no privacy there is no freedom.

This article is the only article I’m posting today (7/13). It is a very important but lengthy article. It’s one of the rare instances where I deem it more worthwhile to spend a half-an-hour reading a single article than browsing through SLL’s daily selection of multiple articles. It details the plans which will culminate in requiring government permission to use the internet, eliminating anonymous posting and commentary, and making central-bank issued digital currencies the only mediums of exchange. Whitney Webb has detailed the stories behind Jeffrey Epstein, Covid-19, and now Cyberpolygon. Her work is always exhaustively researched, with extensive links to her internet-accessible sources. With the permission of Webb and the site where this story is originally published, The Last American Vagabond (thelastamericanvagabond.com), I am posting the entire story and it will be featured for the rest of the week. Her other articles at The Last American Vagabond, some of which I’ve posted on SLL, are also highly recommended. Note well the last paragraph of this article.

All of this should serve as a poignant reminder that, as much as our lives have become interconnected with the internet and online activity, the fight to protect human freedom, dignity and liberty against a predatory, global oligarchy is fundamentally one that must take place in the real world, not only online. May the coming “cyber war”, whatever form it takes, remind many that online activism must be accompanied by real world actions and organizing.

Cyber Polygon

Ending Anonymity: Why the WEF’s Partnership Against Cybercrime Threatens the Future of Privacy, by Whitney Webb

With many focusing on tomorrow’s Cyber Polygon exercise, less attention has been paid to the World Economic Forum’s real ambitions in cybersecurity – to create a global organization aimed at gutting even the possibility of anonymity online. With the governments of the US, UK and Israel on board, along with some of the world’s most powerful corporations, it is important to pay attention to their endgame, not just the simulations.

Amid a series of warnings and simulations in the past year regarding a massive cyber attack that could soon bring down the global financial system, the “information sharing group” of the largest banks and private financial organizations in the United States warned earlier this year that banks “will encounter growing danger” from “converging” nation-state and criminal hackers over the course of 2021 and in the years that follow.

The organization, called the Financial Services Information Sharing and Analysis Center (FS-ISAC), made the claim in its 2021 “Navigating Cyber” report, which assesses the events of 2020 and provides a forecast for the current year. That forecast, which casts a devastating cyber attack on the financial system through third parties as practically inevitable, also makes the case for a “global fincyber [financial-cyber] utility” as the main solution to the catastrophic scenarios it predicts.

Perhaps unsurprisingly, an organization close to top FS-ISAC members has recently been involved in laying the groundwork for that very “global fincyber utility” — the World Economic Forum, which recently produced the model for such a utility through its Partnership against Cybercrime (WEF-PAC) project. Not only are top individuals at FS-ISAC involved in WEF cybersecurity projects like Cyber Polygon, but FS-ISAC’s CEO was also an adviser to the WEF-Carnegie Endowment for International Peace report that warned that the global financial system was increasingly vulnerable to cyber attacks and was the subject of the first article in this 2-part series.

Another article, published earlier this year at Unlimited Hangout, also explored the WEF’s Cyber Polygon 2020 simulation of a cyber attack targeting the global financial system. Another iteration of Cyber Polygon is due to take place tomorrow July 9th and will focus on simulating a supply chain cyber attack.

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