Category Archives: Debt

Global Inflation watch, by Alasdair Macleod

Currency debasement is inflation, and governments and central banks are debasing their currencies with abandon. From Alasdair Macleod at goldmoney.com:

his article posits that fiat currencies are on the path to hyperinflation and looks at the evidence in the prices of financial assets and commodities. So far, gold has notably underperformed, which indicates that the early signals of hyperinflation are confined to the cryptocurrencies, whose participants broadly understand fiat debasement, to equities reflecting the desire not to maintain cash and deposit balances, and in international trade, where commodity prices of all stripes have risen in price.

Given that the early warnings of hyperinflation of money supply are here, the article then looks at the qualities required of a sound money to replace fiat currencies.

Introduction

Figure 1 shows how prices have moved from the Friday before the Fed’s announcement on 23 March that it would go all-in on its support for the US economy with unlimited quantitative easing. It amounted to a commitment to hyperinflate the money supply if needed. Before the Fed cut its funds rate to zero on 16 March nearly all these prices were falling.


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Since late-March every category has seen increases in prices. Sector and specialist analysts will always claim that there are identifiable reasons why prices for an individual category or commodity have risen. But the fact is that with the exception of the dollar and the other fiat currencies listed in the table all prices have risen. This cannot happen without the dollar and these currencies losing purchasing power.

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Saudi Aramco’s Landmark IPO Is Costing The Kingdom Billions, by Simon Watkins

An IPO is supposed to leave you flush with cash, not put you deeper in the hole. From Simon Watkins at oilprice.com:

The initial public offering (IPO) of Saudi Aramco that was heralded by Crown Prince Mohammed bin Salman (MbS) as being a showcase flotation for raising massive new capital for the Kingdom and anchoring a major expansion of its international equities market presence has proven only to put Aramco into a debt spiral and highlighted a myriad of problems in Saudi Arabia to international investors. Now, Aramco is digging itself further into serious debt through bond issuances simply to pay for the huge dividend payments promised by MbS that were absolutely required to persuade anyone to buy into the omni-toxic IPO. At this rate, the debt taken on by Aramco and other Saudi bond offerings to pay for the dividends will be far more than the amount of money raised in the IPO. As a direct result of MbS deciding to go ahead with yet another oil price war at the same time as the COVID-19 pandemic was gathering pace and destroying demand for oil, Aramco’s finances have suffered a massive hit. For the first half of this year, the company saw a 50 percent plunge in net profit and at the beginning of this month, it reported another massive drop in profits of 44.6 percent for the third quarter, falling to SAR44.21 billion (US$11.79 billion) from SAR79.84 billion in the same period last year. On the other side of the balance sheet, though, is the stark fact that because the company’s IPO was so toxic on so many levels that it was shunned by Western investors and had to be off-loaded to buyers who were either bullied or bribed into buying the stock Aramco is left having to pay massive guaranteed dividend payments for the foreseeable future to those shareholders.

This huge guaranteed dividend payment of US$18.75 billion per quarter – US$75 billion for a full year – will have to be paid for through budget cuts over and above the US$15 billion in Aramco’s annual capital spending alluded to by Aramco’s chief executive officer, Amin Nasser, just after the first half profits figures were unveiled. This will take the total down from around US$40 billion to around US$25 billion. Further reports have stated that even this US$25 billion figure is set to be reduced by another US$5 billion, taking the total capital spending in this year from US$25 billion to US$20 billion.

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The Post Covid World, The WEF’s Diabolical Project: “Resetting the Future of Work Agenda” – After “The Great Reset”. A Horrifying Future, by Peter Koenig

The great resetters are going to reset things back, way back. From Peter Koenig at globalresearch.ca:

The World Economic Forum (WEF) has just published (October 2020) a so-called White Paper, entitled “Resetting the Future of Work Agenda – in a Post-Covid World”.

This 31-page document reads like a blueprint on how to “execute” – because an execution (or implementation) would be – “Covid-19 – The Great Reset” (July 2020), by Klaus Schwab, founder and CEO (since the foundation of the WEF in 1974) and his associate Thierry Malleret.

They call “Resetting the Future” a White Paper, meaning it’s not quite a final version. It is a draft of sorts, a trial balloon, to measure people’s reactions. It reads indeed like an executioner’s tale. Many people may not read it – have no awareness of its existence. If they did, they would go up in arms and fight this latest totalitarian blueprint, offered to the world by the WEF.

It promises a horrifying future to some 80%-plus of the (surviving) population. George Orwell’s “1984” reads like a benign fantasy, as compared to what the WEF has in mind for humanity.

The time frame is ten years – by 2030 – the UN agenda 2021 – 2030 should be implemented.

Planned business measures in response to COVID-19:

  • An acceleration of digitized work processes, leading to 84% of all work processes as digital, or virtual / video conferences.
  • Some 83% of people are planned to work remotely – i.e. no more interaction between colleagues – absolute social distancing, separation of humanity from the human contact.
  • About 50% of all tasks are planned to be automated – in other words, human input will be drastically diminished, even while remote working.
  • Accelerate the digitization of upskilling / reskilling (e.g. education technology providers) – 42% of skill upgrading or training for new skills will be digitized, in other words, no human contact – all on computer, Artificial Intelligence (AI), algorithms.

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Doug Casey on the COVID Thanksgiving Restrictions and the “Great Reset”

It’s pretty clear that we’re heading toward a totalitarianism that’s even more total than what we have now. From Doug Casey at internationalman.com:

COVID Thanksgiving

International Man: Thanksgiving and the holiday season are here. The COVID hysteria has justified a new wave of government restrictions.

Many governors and mayors are ordering citizens to “stay at home” and cancel their traditional plans.

Is this a “new normal” in which local officials feel emboldened to dictate more and more of what people can do in their own homes?

Doug Casey: There’s not much question about it. First, let me draw your attention to an important fundamental: the type of people who go into government. It doesn’t matter if it’s national, state, county, or city government.

They’re the kind of people who think they know what’s best for others and like bossing them around. They see the virus as a great opportunity to make themselves important and to cement themselves in power. They want to deconstruct America. The phrase “build back better” is being used not just by people in the new Biden regime but by people all over the world.

These people see the COVID hysteria as an excuse for a “Great Reset.” They don’t describe exactly what the elements of the Great Reset might be, but they’re hitting the same notes sung by the people that go to the World Economic Forum in Davos. They’re promoting a great change in the world at large and America in particular.

It appears the world is ready for it; however, it’s for the same reasons that Biden won the election. I listed six factors why I thought Biden would win in our interview a couple of months ago: the virus hysteria, a pending economic collapse, negative demographics, the moral collapse of the old order, and the Deep State, and, of course, cheating—which was critical in the short term. There’s no question that stormy times are ahead.

We’re headed for a great leap forward—to borrow a phrase from Mao—in State power. Much higher taxes, much higher inflation, much more regulation, a big drop in the general standard of living, and a fair measure of social chaos.

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Money Is A Weapon of Mass Destruction, by Paul Rosenberg

Fiat money may be the most destructive instrumentality on the planet. From Paul Rosenberg at freemansperspective.com:

Money wasn’t always our enemy, of course; I’m old enough that I knew people who were alive before it was weaponized. But modern money – dollars, euros and so on – are so destructive that they’re threatening not just individuals, but Western civilization itself.

If that sounds a bit over the top, please read on. Before we’re done I think I’ll convince you otherwise.

I call fiat currency a weapon of mass destruction because it has caused far more widespread damage than chemical weapons ever have, and has assuredly destroyed more human potential than nuclear weapons. The nuke destroys horrifyingly but rarely; fiat money destroys minute by minute, day by day, over multiple decades and in shocking proportions.

How Money Destroys

How money destroys is not immediately obvious. We grow up learning to count it and spend it, then to make it, but few of us ever learn anything more about it, even in university-level programs.

Fundamentally, fiat currencies destroy because they hijack human will on a massive scale. Here’s how it happens:

  1. Money (currency) is one half of every commercial transaction, and those transactions involve nearly every aspect of every life in the Western world, from birth to death. That’s immense scope.
  2. Fiat currency is created at roughly zero cost, by governments and the friends of governments.
  3. Money is used to buy all the necessities of life. Thus it is deeply and inherently motivating, and to more or less every human on the planet.
  4. Because of the above, anyone creating new currency units can motivate millions of human beings: powerfully, on demand, and at almost no cost.

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Why I’m Hopeful About 2021, by Charles Hugh Smith

The object is not to restore the 2019 status quo, but to let it crash and replace it with something better. From Charles Hugh Smith at oftwominds.com:

What we need is not a return to the corrupt, tottering kleptocracy of 2019, but a re-democratization of capital, agency and money.

I’m hopeful about 2021, and no, it’s not because of the vaccines or the end of lockdowns or anything related to Covid. The status quo is cheering the fantasy that we’ll soon return to the debt-soaked glory days of 2019 when everything was peachy.

The problem with this “brand” of magical thinking is that stripped of self-serving PR, the world of 2019 was an autocratic kleptocracy stripmining the planet to enrich the few at the expense of the many. Viewed through this lens, what’s hopeful isn’t returning to an autocratic kleptocracy but moving beyond it.

The most hopeful thing in my mind is that the Status Quo is devolving from its internal contradictions and excesses. Here’s the status quo in a nutshell:

The solution to too much debt is more debt.

The solution to autocratic elites hogging wealth and power is to give the elites more wealth and power.

And so on: every status quo “solution” boils down to doing more of what’s failed spectacularly because it serves the interests of the few at the top of the wealth-power pyramid.

The Great Reset is a perfect example of this insanity: now that we’ve destroyed the planet with our private jets, greed and corruption, give us even more power over you.

The status quo is a perverse, intensely destructive system with powerful incentives for predation, exploitation, fraud and complicity. That’s the world of 2019; do we really want to go back to that? And even if we could, how long would it last? Another year or two? And at what cost to social cohesion and the planet?

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Taxpayers Face $435 Billion in Student-Loan Losses, Already Baked in: Leaked Education-Department Study, by Wolf Richter

If they’re admitting to $435 billion in losses you know they’re a lot bigger. From Wolf Richter at wolfstreet.com:

Most of the losses come from established income-based repayment programs that include debt forgiveness at the end. No one has ever put a number to it until now.

In 2009, the US government entered the business of reckless, no-matter-what lending to students, even to older students with subprime credit ratings and to students at iffy for-profit colleges with dubious degree programs. And then tuition soared, and student housing went upscale and became a global asset class with its own commercial mortgage-backed securities (CMBS) that are now experiencing record delinquency rates. And Apple and textbook publishers and everyone began feeding at the big trough, with students just being the conduit for this money. Student-loan balances on the government’s financial statement skyrocketed from $147 billion in 2009 to $1.37 trillion at the beginning of 2020, despite the 11% decline in student enrollment since 2011.

Taxpayers face a loss of $435 billion on the $1.37 trillion in student loans on the government’s financial statement at the beginning of this year, even if no additional loans are issued going forward, according to an internal study by the Department of Education, reported by the Wall Street Journal which reviewed the documents. Most of the losses would come from the already established income-based repayment programs and the debt forgiveness at the end of their term.

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The U.S. Government Will Inflate To The Bitter End, by MN Gordon

When you only have one solution to your problems, you go with that solution. From MN Gordon at economicprism.com:

The big news organizations say Joe Biden’s the next president of the USA.  That claims of election fraud and fixing are baseless.  Do you believe them?  Do you trust them?

Regardless, Biden’s acting as if.  He’s talking to foreign leaders.  He’s meeting with vaccine makers.  He’s making big plans.  He’s planning big things.  But, apparently, he’s not progressive enough.

This week, for example, an organization called Justice Democrats accused Biden of appointing corporate-friendly insiders.  They say these “corporate-friendly insiders […] will not help usher in the most progressive Democratic administration in generations.”

Certainly, Biden’s getting plenty of advice.  The political puppet has left many strings to be pulled.  Elizabeth Warren and Chuck Schumer want Biden to erase the first $50,000 of a person’s student loan debt.  According to Schumer, “Joe Biden can do that with the pen as opposed to legislation.”

Will Biden listen to them?  Will he listen to progressive superstar Alexandria Ocasio-Cortez?  On Monday, Ms. Ocasio-Cortez, tweeted:

“Student loan forgiveness is good, actually.

“We should also push for tuition-free public colleges to avoid this huge debt bubble from financially decimating ppl every generation.  It’s one of the easiest progressive policies to ‘pay for,’ w/ multiple avenues from a Wall St transaction tax to an ultra-wealth tax to cover it.”

Wow!  Biden hasn’t even moved into the White House and things have gone stoopid silly.  Where to begin?

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The global reset scam, by Alasdair Macleod

It doesn’t matter much if you shift from paper money to digital money if they’re both worthless. From Alasdair Macleod at goldmoney.com:

This article takes a tilt at increasing speculation about statist global resets, and why plans such as those promoted by the World Economic Forum will fail. Central bank digital currencies will simply run out of time.

Instead, the collapse of unbacked fiat currencies will end all supra-national government solutions to their policy failures. Already, there is mounting evidence of money beginning to flee bank accounts into stocks, commodities and even bitcoin. This is an early warning of a rapidly developing monetary collapse.

Moreover, nothing can now stop the collapse of fiat currencies, and with it schemes to control humanity for the convenience and ambitions of government planners. There can only be one statist solution and that is to mobilise gold reserves to back and save their currencies, which in order to succeed will have to be fully convertible into circulating gold coinage. It will also require the role of governments to be reset into a non-welfare, non-interventionist minimalist role, which can only be achieved after a complete collapse of the current fiat-financed system.

Anything less will fail.

The Deep State and The Blob fuel conspiracy theories

Increasingly, people are beginning to realise that their world is undergoing a period of rapid change, with the future of fiat money now uncertain. For most, it is too difficult to even contemplate. But growing uncertainties are driving wild speculation about what those in authority now have in store for the human race in the form of a global reset. It is a time for conspiracy theorists, aided and abetted by our politicians and central bankers who are being increasingly evasive, because events are spiralling out of their control.

Then there is America’s Deep State, or the British equivalent, the more recently christened Blob; an amorphous entity comprised of the permanent bureaucracy with its own agenda. These faceless planners have moved on from merely making ministers’ lives difficult if they deviate from the blob’s predetermined course — immortalised in “Yes Minister” and its sequel series “Yes Prime Minister”.

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Is There Really A China Economic Miracle? by Daniel Lacalle

There are so many holes and lies in China’s economic statistics that they bely the vaunted economic miracle. Also, it should not be forgotten that much of China’s growth, like so-called growth in much of the rest of the world, is bought on credit. From Daniel Lacalle at hedgeye.com:

 

Is There Really A China Economic Miracle? - 11 16 2020 11 21 49 AM

The year 2020 will be an extremely tough year for the European economy. Added to an unprecedented drop is a strong impact in the fourth quarter due to the new lockdowns. 

Morgan Stanley estimates that the eurozone’s GDP will fall by 2.2% in the fourth quarter, a 7% drop in the full year 2020. In addition, the investment bank lowers the outlook for 2021 with a rebound of only 5% in the average of the euro area, delaying the recovery of 2019 GDP to 2023.

The “jobless recovery” is even more worrying. The apparently spectacular rebound data for the third quarter resulted in zero job creation. Unemployment in the eurozone in September stood at 8.3% and in Spain at 16.5%, not counting the millions of furloughed jobs in Europe.

In this environment, the United States’ recovery seems much stronger. GDP recovered in the third quarter to just 3.5% below 2019 levels. Unemployment has fallen to 6.9% in October but remains well above the record employment levels of 2019.   

However, the data from China is apparently spectacular. The manufacturing and services index already show an enviable expansion. GDP for the first three quarters is already growing at 0.7% after an expansion of 4.9% in the third quarter. Urban unemployment in China is 5.4% after shooting to a paltry 6%. What is behind the Chinese miracle compared to the poor eurozone?

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