Category Archives: Economics

How to return to sound money, by Alasdair Macleod

Alasdair Macleod outlines how the US could return to gold-backed money. From Macleod at goldmoney.com:

Given the current fiat money system is on a path towards its own destruction it is not surprising that there has been increasing talk of a monetary reset. Without a completely different approach and by retaining the same institutions and macroeconomic concepts, any such reset is bound to fail.

This article provides a template for an enduring sound money solution that will deliver economic progress while eliminating destructive credit cycles. It posits that a properly constructed gold and gold substitute monetary system, which also includes the removal of bank credit inflation as a means of providing investment capital, is the only way that lasting stability and prosperity can be achieved. As well as the establishment of an incorruptible monetary system, the state’s role in the economy must be curtailed, budgets always balanced, banking reformed, and the private sector allowed to accumulate the wealth necessary to provide the investment for producers to produce. 

Monetary reform involves a clear understanding of why free markets succeed and why socialism, together with neo-Keynesian macroeconomics, are responsible for the impending monetary and economic collapse. It will require a complete change of socio-political and economic cultures, but properly approached it can be done.

Introduction

There has been very little commentary in recent years about the benefits of sound money, being limited almost entirely to followers of the Austrian school of economics. Even less has been written about how to back out of inflationism, end unsound money and return to a monetary arrangement which cannot be corrupted by governments and the banking system.

The most notable attempt was by Ludwig von Mises who appended a chapter on the subject in his updated 1952 version of The Theory of Money and Credit[i] The circumstances were very different from that of today. At that time, the US had corrupted its gold exchange standard to progressively exclude the ability of individuals to demand gold for paper dollars. And both Keynesianism and socialism, in the West at least, were in their earlier days. Today, we face more of an end game where considerable damage has been done since to the status of circulating money, and we face the prospect not of reform but of a collapse of the entire fiat money system.

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America Escalates Its “Democratic” Oil War in the Near East, by Michael Hudson

According to Michael Hudson, Soleimani was murdered because he would have been instrumental in Iraq’s quest to control its own oil. From Michael Hudson at counterpunch.org:

Photograph Source: http://www.dragonoil.comCC BY-SA 3.0

The mainstream media are carefully sidestepping the method behind America’s seeming madness in assassinating Islamic Revolutionary Guard general Qassim Suleimani to start the New Year. The logic behind the assassination was a long-standing application of U.S. global policy, not just a personality quirk of Donald Trump’s impulsive action. His assassination of Iranian military leader Suleimani was indeed a unilateral act of war in violation of international law, but it was a logical step in a long-standing U.S. strategy. It was explicitly authorized by the Senate in the funding bill for the Pentagon that it passed last year.

The assassination was intended to escalate America’s presence in Iraq to keep control of the region’s oil reserves, and to back Saudi Arabia’s Wahabi troops (Isis, Al Quaeda in Iraq, Al Nusra and other divisions of what are actually America’s foreign legion) to support U.S. control of Near Eastern oil as a buttress of the U.S. dollar. That remains the key to understanding this policy, and why it is in the process of escalating, not dying down.

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How the Fed Robs You of Your Life, by MN Gordon

Money is the tangible store of your time and effort. Depreciating money robs you of that time and effort, your life. From MN Gordon at economicprism.com:

Today, as we step into the New Year, we reach down to turn over a new leaf.  We want to make a fresh start.  We want to leave 2019’s bugaboos behind.

But, alas, lying beneath the fallen leaf, like rotting food waste, is last year’s fake money.  We can’t escape it.  But we refuse to believe in its permanence.

Victorian economist William Stanley Jevons, in his 1875 work, Money and the Mechanism of Exchange, stated that money has four functions.  It’s a medium of exchange, a common measure of value, a standard of value, and a store of value.

No doubt, today’s fake money, including the U.S. dollar, falls well short of Jevons’ four functions of money.  Certainly, it comes up short in its function as a store of value.

Hence, today’s money is not real money.  Rather, it’s fake money.  And this fake money has heinous implications on how people earn, save, invest, and pay their way in the world we live in.  Practically all aspects of everything have been distorted and disfigured by it.

Take the dollar, for instance.  Over the last 100-years, it has lost over 95-percent of its value.  Yet, even with this poor performance, the dollar has one of the better track records going.  In fact, many currencies that were around just a short century ago have vanished from the face of the earth.  They’ve been debased to bird cage liner.

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Gold’s outlook for 2020, by Alasdair Macleod

The best monetary  economist on the internet expounds on fiat currencies’ and gold’s prospects for the coming year. From Alasdair Macleod at goldmoney.com:

This article is an overview of the economic conditions that will drive the gold price in 2020 and beyond. The turn of the credit cycle, the effect on government deficits and how they are to be financed are addressed.

In the absence of foreign demand for new US Treasuries and of a rise in the savings rate the US budget deficit can only be financed by monetary inflation. This is bound to lead to higher bond yields as the dollar’s falling purchasing power accelerates due to the sheer quantity of new dollars entering circulation. The relationship between rising bond yields and the gold price is also discussed.

It may turn out that the recent extraordinary events on Comex, with the expansion of open interest failing to suppress the gold price, are an early recognition in some quarters of the US Government’s debt trap.

The strains leading to a crisis for fiat currencies are emerging into plain sight.

 

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David Stockman on How Trump Could Really Make US Industry Competitive Again

Other than some minor regulatory relief, Trump’s policies have hurt more than helped the US economy. From David Stockman at internationalman.com:

International Man: Trump’s America First economic policy seemed to help him win the 2016 election. He promised to renegotiate America’s trade deals and bring jobs back to the United States.

As president, Trump has used tariffs and other protectionist measures to try to reduce the trade deficit.

What do you think of Trump’s trade policies and tariffs?

David Stockman: The trade policies are idiotic. They haven’t improved the trade deficit. And have caused other problems.

We got the numbers in now for 2018 and we had the largest trade deficit in history!

The first point is that his trade policies are not accomplishing anything. In fact, it’s thrown many sectors under the bus. Manufacturers that import components from China are now paying much higher prices because of the tariff charge.

Farmers have gotten thrown under the bus in a major way. The whole agricultural export system that was patiently developed over many, many years has essentially been destroyed through retaliation.

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The Year in Bad Ideas, by Max Gulker

The year almost past saw the ascendence of some uncommonly stupid ideas. From Max Gulker at aier.com:

At first glance 2019 was a rough year for anyone in favor of an economy and society guided from the bottom up by people with the freedom to exchange, cooperate, and think as they choose. The highly visible left flank of the Democratic Party, fully embracing socialism in name and approach, erupted with proposals that would drastically change the country in ways they intend and many more in ways they do not. Meanwhile, the Republican Party’s debt from its Faustian bargain with President Donald Trump began to come due.

What can we learn from bad ideas? Plenty, if we approach them with curiosity rather than assumed intellectual or moral deficiency on the part of those trafficking in them. The truth, that people have a really hard time understanding the benefits of free markets and bottom-up organization, is both difficult and galvanizing. Free-market ideas don’t really have a place in the current incarnation of our two-party system. We’re free agents and that can open a world of new possibilities if we let it.

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Doug Casey: “This is Going to be One for the Record Books”

Doug Casey thinks the impending depression will be off the charts. SLL is not arguing with him. From Casey at internationalman.com:

economic depression

Just because society experiences turmoil doesn’t mean your personal life has to. And a depression doesn’t have to be depressing. Most of the real wealth in the world will still exist—it will just change ownership.

What is a depression?

We’re now at the tail end of a very long, but in many ways a very weak and artificial, economic expansion. At the same time we’ve had one of the strongest securities bull markets in history. Both are the result of trillions of new dollars created over the last decade. Right now very few people are willing to consider the possibility of tough times—let alone The Greater Depression.

But, perverse though it may seem, this is the very best time to think about it. The U.S. economy is a house of cards, built on quicksand, with a tsunami on the way. I urge everyone to read up on the topic. For now, I’ll only briefly touch on the nature of depressions. There are at least three good definitions of the term:

  1. A period of time when most people’s standard of living drops significantly.
  2. A period of time when distortions and misallocations of capital are liquidated.
  3. A period of time when the business cycle climaxes.

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