Category Archives: Economics

‘The God That Failed’: Why the U.S. Cannot Now Re-Impose Its Civilisational Worldview, by Alastair Crooke

The US lacks the power to impose its vision on the world. From Alastair Crooke at strategic-culture.org:

It was always a paradox: John Stuart Mill, in his seminal (1859), On Liberty, never doubted that a universal civilisation, grounded in liberal values, was the eventual destination of all of humankind. He looked forward to an ‘Exact Science of Human Nature’, which would formulate laws of psychology and society as precise and universal as those of the physical sciences. Yet, not only did that science never emerge, in today’s world, such social ‘laws’ are taken as strictly (western) cultural constructs, rather than as laws or science.

So, not only was the claim to universal civilisation not supported by evidence, but the very idea of humans sharing a common destination (‘End of Times’) is nothing more than an apocalyptic remnant of Latin Christianity, and of one minor current in Judaism. Mill’s was always a matter of secularized religion – faith – rather than empiricism. A shared human ‘destination’ does not exist in Orthodox Christianity, Taoism or Buddhism. It could never therefore qualify as universal.

Liberal core tenets of individual autonomy, freedom, industry, free trade and commerce essentially reflected the triumph of the Protestant worldview in Europe’s 30-years’ civil war. It was not fully even a Christian view, but more a Protestant one.

This narrow, sectarian pillar was able to be projected into a universal project – only so long as it was underpinned by power. In Mill’s day, the civilisational claim served Europe’s need for colonial validation. Mill tacitly acknowledges this when he validates the clearing of the indigenous American populations for not having tamed the wilderness, nor made the land productive.

Continue reading

The Corona Crisis Could Bring a New Era of Decline for American Core Cities, by Ryan McMaken

If the corona crisis doesn’t bring that new era of decline, rioting, looting, and defending or eliminating police departments probably will. From Ryan McMaken at mises.org:

Manufacturing company 7-Sigma made headlines when it decided to leave Minneapolis as a result of the company’s plant being burned by rioters. “They don’t care about my business,” 7-Sigma owner Kris Wyrobek old the Star-Tribune. After more than thirty years in the city, the company isn’t staying, nor are any of the company’s fifty jobs.

But the costs of being victimized in protests is just one of many reasons homeowners and businesses may be realizing life and business in central cities has lost its luster. The ongoing threat of more business lockdowns, more riots, higher taxes, and failing schools may induce many Americans to flee, once again, to the suburbs as their parents or grandparents did.

This goes well beyond the fear of the disease many journalists have assumed is behind the observed beginnings of an exodus from cities. Yes, many in the upper classes have fled the cities for their mountain homes and yachts for “health reasons.” But these people are relatively few in number and their thinking quixotic. They can afford to drop everything and leave cities overnight.

But the larger impacts are likely to be felt as middle class homeowners and business owners conclude they’d simply rather avoid the edicts and neglect of mayors and city councils in central cities who think nothing of issuing job-destroying “stay-at-home” orders while allowing rioters and vandals free rein.

Continue reading

A collapsing dollar and China’s monetary strategy, by Alasdair Macleod

It’s not currently in China’s interest to destroy the dollar (US authorities are doing a fine job of that on their own) but when the final destruction occurs, a Chinese gold-backed yuan could supplant the dollar as the world’s reserve currency. From Alasdair Macleod at goldmoney.com:

This article describes how China can escape the fate of a dollar collapse by tying the yuan to gold. There is little doubt she has access to sufficient gold. Currently, her interest is to preserve the dollar, not destroy it, because it is the principal means of Chinese foreign interests being secured .

Furthermore, a return to sound money requires China to reverse its interventionism under Xi, returning to Deng Xiaoping’s original vision. Sound money can only last if the relationship between the state and the wider economy is properly addressed.

Of all the major economies, China’s is best placed to implement a sound money solution. At the moment it seems unlikely the necessary reforms will be forthcoming; but a general collapse of the global fiat currency regime presents the opportunity for reassessment and change.

Introduction

In last week’s Insight I examined the position of the US dollar, given the Fed’s current monetary policies, and concluded that the Fed’s dollar is likely to become valueless by the end of this year. The consequences for other major currencies — the euro, yen and pound — are that they are likely to fall with the dollar. This is because they adopt the same monetary policies, the same macroeconomic fallacies, and through the Bank for International Settlements, G7 and G20 meetings agree to continue to be bound by common policies. While the intention is for all to survive by working together, instead it ensures that they all sink together.

Continue reading→

David Stockman on What Could Happen If the Fed Loses Control

It looks like the Fed has already lost control. From David Stockman at internationalman.com:

International Man: Recently, Fed Chairman Jerome Powell said the central bank’s money printing is designed to help average Americans, and not Wall Street.

What’s your take on this?

David Stockman: Yes, and if dogs could whistle, the world would be a chorus!

The truth is, in an economy encumbered with nearly $78 trillion of debt already—including $16.2 trillion on households, $16.8 trillion on business, $23 trillion on governments—the last thing we need is even lower interest rates and even bigger incentives to take on debt and leverage.

In fact, in a debt-saturated system, the Fed’s massive bond purchases never transmit anything outside the canyons of Wall Street. This money-printing madness only drives bond prices higher and cap rates lower—meaning relentless and systematic inflation of financial assets’ prices.

As a practical matter, of course, the bottom 90% don’t own enough stock or even inflated government and corporate bonds to shake a stick at. Instead, what meager savings they have accumulated languish in bank deposits, CDs or money market funds earning exactly what the Fed has decreed—nothing!

So, when Powell says he’s only trying to help the average American, you have to wonder whether he is just stupid or the greatest lying fraud yet to occupy the big chair at the Fed.

Continue reading

MMT: Not Modern, Not Monetary, Not a Theory, by Jeff Deist

Jeff Deist spares SLL the trouble of debunking the Modern Monetary Theory fantasy. From Deist at mises.org:

Modern monetary theory (MMT) has a new champion, and a new bible. Stephanie Kelton, economics professor at SUNY Stony Brook, is the author of The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy. Professor Kelton was an advisor to the Bernie Sanders presidential campaigns, and her ideas increasingly find purchase with left progressives. It is certainly possible that she has a future either in a Biden administration or even on the Federal Reserve Board, which is a testament to how quickly our political and cultural landscape has shifted toward left progressivism. And left progressivism requires a “New Economics” to provide intellectual cover for what is essentially a political argument for painless free stuff from government.

Kelton’s essential argument, first advanced by MMT guru Warren Mosler in the 1990s, is quite simple: federal spending is unconstrained by revenue. Taxes function only to regulate demand and hence inflation; federal borrowing functions only to regulate interest rates. Sovereign government treasuries can create and spend as much money as they like to stimulate growth, especially when the economy is underperforming. If inflation spikes, taxes can be imposed to take money out of the economy.

Continue reading

Where’s the Omelet? Black Lives Matter Chicago Answers George Orwell’s Question, by Mark Glennon

The string of absurdities that is Black Lives Matter’s political philosophy reaches its apogee with the group’s embrace of Marxism. From Mark Glennon at wirepoints.org:

“You can’t make an omelet without breaking eggs.” In George Orwell’s day — the 1930s — that’s what supporters of violent, Marxist revolution often said in justification.

Orwell, the stunningly prescient author of Nineteen Eighty-Four, had a simple response: “Where’s the omelet?”

An honest look at the omelet offered by Black Lives Matter is long overdue, particularly for BLM Chicago. What do they want? Do its supporters and apologists know?

Where’s their omelet?

BLM co-founder Patrisse Cullers

In an interview about Black Lives Matter, its national co-founder Patrisse Cullors said, “We actually do have an ideological frame. “Myself and Alicia [Alicia Garza, another co-founder] in particular are trained organizers. We are trained Marxists.”

Chicago BLMers are likewise trained.

Watch the video meeting they hosted last week titled, “Black Abolitionist Huddle: On How We Win Police Abolition.” You will see that many of them are very fluent with Marxist rhetoric, particularly the modern version focused on toppling “late stage capitalism.”

Continue reading

David Stockman on Fiscal Disaster, Social Unrest, and the Presidential Election

The fiat debt the Federal Reserve has created has to go somewhere, and it’s going into stocks. From David Stockman at internationalman.com:

Fiscal Disaster
International Man: Recently, massive riots have broken out in many cities across the US.

Despite the unrest—and the economic damage from the shutdowns—the stock market continues to rally.

It seems that markets don’t reflect earnings, economic prosperity, or growth. What is going on here?

David Stockman: It’s quite simple. The Fed has unleashed the greatest torrent of liquidity ever, and it’s finding its way into a relentless, massive bid for risk assets.

Since the eve of the Lockdown Nation disaster on March 11, the Fed’s balance sheet has erupted from $4.3 trillion to nearly $7.2 trillion. That’s $32 billion per day—including weekends, Easter, and nationwide riot days.

Worse still, at their June meeting, the mad money printers domiciled in the Eccles Building promised to keep printing $120 billion per month to buy US Treasuries and other assets for an indefinite period. That should get us to a $10 trillion balance in less than two years’ time.

What this means, of course, is that honest price discovery in the canyons of Wall Street is deader than a doornail. We now have a putative capitalist economy in which the most important prices in all of capitalism—the prices of financial assets—are pegged, rigged, and manipulated by the central banking agents of the state.

The result, of course, is speculation and malinvestment on a biblical scale.

Continue reading

The crisis goes up a gear, by Alasdair Macleod

The world may be only months away from the collapse of fiat currencies, led by the dollar. From Alasdair Macleod at goldmoney.com:

Dollar-denominated financial markets appeared to suffer a dramatic change on or about the 23 March. This article examines the possibility that it marks the beginning of the end for the Fed’s dollar.

At this stage of an evolving economic and financial crisis, such thoughts are necessarily speculative. But an imminent banking crisis is now a near certainty, with most global systemically important banks in a weaker position than at the time of the Lehman crisis. US markets appear oblivious to this risk, though the ratings of G-SIBs in other jurisdictions do reflect specific banking risks rather than a systemic one at this stage.

A banking collapse will be a game-changer for financial markets, and we should then worry that the Fed has bound the dollar’s future to their fortunes.

The dollar could fail completely by the end of this year. Against that possibility a reset might be implemented, perhaps by reintroducing the greenback, which is not the same as the Fed’s dollar. Any reset is likely to fail unless the US Government desists from inflationary financing, which requires a radically changed mindset, even harder to imagine in a presidential election year.

Continue reading→

 

The Modelers Thought of Everything Except Reality, by the American Institute for Economic Research staff

Models, at their best, are simplifications of reality that even the best modelers admit don’t fully capture reality. At their worst, models aren’t even in the same time zone as reality. From the AIER staff at aier.org:

The Modelers Thought of Everything Except Reality

As a site focused on economics, AIER would rather have stayed away from commentary on diseases and their mitigation. In normal times, we would have.

The archives of AIER dating back to 1933 show that we had no comments on the polio epidemic (1948-1951), the Asian Flu (1957-59), the Hong Kong flu (1968-69), the Avian bird flu (2006), or the Swine flu pandemic of 2009, which was a strain most like 1918 and therefore, one might suppose, would have caused panic but did not.

We had nothing to say because disease mitigation is a job for medical professionals, not economists and certainly not politicians.

The problem is that this time, the disease mitigators (some of them, the ones in power and with the ear of politicians) didn’t stay out of economics. Indeed, their plans for mitigation trampled all over commerce, life, and the freedoms that are necessary to make it function. For a few months in 2020, the presumptuous model-building disease mitigators became central planners, overriding the wisdom of not only medical professionals but also economists, philosophers, political scientists, historians, and everyone else including legislatures and voters.

Continue reading→

EU Economy Traveling Along Same Worn Dead-end Road, by Bruce Wilds

The problem with the majority of Europeans is they really think economic growth comes from and is directed by governments and central banks. From Bruce Wilds at brucewilds.blogspot.com:

With so many countries across the world facing difficulties, many people have yet to notice the Euro-Zone has become a place where hope goes to die. The last round of elections in the Euro-Zone should bring little comfort to those supporting a stronger Europe. Huge gains were made by forces seeking more power for the populist agenda. In short, it is a boost for the rights of individual nations to have more say in how they are governed.  Two of the most pressing issues are that insolvent Italy struggles with a stagnant economy and Spain is coming apart politically with Catalan separatists defying Spain’s Prime Minister.

To avoid the union coming apart at the seams and a miserable future, the European Commission recently unveiled an unprecedented  €750BN CoVid-19 recovery plan. It consists of €500 billion in grants to member states, and €250 billion would be available in loans. This means they are asking for the power to borrow. This is geared to tackle the worst recession in European history and shore up Italy. It would mean transforming the EU’s central finances to allow for it to raise unprecedented sums on the capital markets and hand out the bulk of the proceeds as grants to hard-pressed member states.

Continue reading