Category Archives: Economics

US Follows Ukraine, Syria Roadmap for Venezuelan Regime Change, by Whitney Webb

The US government is basically following the blueprint it laid out in Ukraine and Syria. Unfortunately, neither of those has turned out particularly well, and prospects don’t look any better in Venezuela. From Whitney Webb at theantimedia.org:

Since the decision of the Trump administration on Wednesday to recognize a member of the Venezuelan opposition, Juan Guaidó, as an unelected “interim president,” the situation in the South American country has become increasingly tense, with efforts to force the current government of Venezuela — led by Nicolás Maduro — out of power having grown in intensity over the past few days.

Despite the enormous pressure, his government faces from both local and international sources, Maduro has managed to maintain his position thanks to a combination of factors. These include the loyalty of the country’s well-armed military, in addition to popular support from Venezuelans who recently voted for Maduro, as well as Venezuelans who may not like Maduro but prefer him to a politician hand-picked and foisted upon them by the United States.

Yet, the long-standing campaign of the United States to effect regime change in Venezuela — a campaign that has been ongoing ever since Hugo Chávez, Maduro’s predecessor and mentor, was elected in 1998 — has shown time and again that the U.S. is unwilling to let go of its dream of installing a “friendly” government in the world’s most oil-rich country.

For that reason, if the Trump administration’s attempt to simply install a Venezuelan president fails to produce the intended result (regime change), there is substantial concern that the U.S. will turn to other means to bring about a change in government, including the instigation of a new proxy war.

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Will Policy Makers Turn a Global Economic Slowdown Into a Crisis? by Daniel Lacalle

This is a far better description of how the economy actually works than anything you’d get out of economics textbooks. From Daniel Lacalle at mises.org:

The recent macroeconomic data of the leading economies point to a widespread slowdown. What is more concerning is not just a logical moderation in the path of growth, but the acceleration in the weakening of economies that were supposed to be stronger and healthier. It is even more concerning that this aggressive worsening of key leading indicators in China, the EU, and most emerging economies happens at the peak of the largest monetary and fiscal stimulus in decades.

It is easy to blame this widespread weakening on political headlines, trade wars, and — of course —Trump, but it would be disingenuous to believe those are the real factors behind the negative economic surprise.

The pace of global recoveries since 1975 has been slower and weaker, consistently, according to the OECD. Recoveries take longer and happen slower. At the same time, periods of crisis are less aggressive albeit more frequent than prior to 1975.  Another interesting evidence of the crises and recoveries since 1975 is that almost all economies end the recession period with more debt than before.

These factors are all concerning, but the evidence also shows that economic progress has continued regardless and that the main factors of wellbeing have improved dramatically. I had the opportunity of meeting Johan Norberg, author of “Progress” and we discussed all the positive elements we have seen in the past decades. In the same period, from 1975 to 2018, extreme poverty has been reduced to all-time lows. Hunger, poverty, illiteracy,  child mortality… all those terrible problems have been dramatically reduced to the lowest levels in history. That is the positive.

However, recognizing the positive is important, but ignoring the risks is dangerous. Global debt has ballooned to all-time highs, more than three times the world GDP. For those elements of progress to continue improving, we must stop the race of perverse incentives created by the wrong analysis of the origin of crises and the solutions that are often proposed in mainstream economics and politics.  I agree with Johan Norberg that the two main factors that have driven the phenomenal progress we have seen are free markets and openness. The freedom to innovate, experiment, create and share must come with the right incentives.

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As Germany and France Come Apart, So Too Will the EU, by Charles Hugh Smith

The rulers are talking consolidaton and ever-larger governments, but the people are headed the opposite direction. From Charles Hugh Smith at oftwominds.com:

When is a nation-state no longer a functional state? It’s an interesting question to ask of the European nation-states trapped in the devolving European Union. Longtime correspondent Mark G. recently posed seven indicators of dissolving national sovereignty; here’s his commentary:

“RE: The Ghosts of 1968 (February 14, 2018):

In France the “Ghosts of 1968” have become the Poltergeists of 2018. This looks like another real watershed in European and world history. Once again Parisian mobs have appeared and have collectively realized they now hold the real power. And their issues are all anti-EU (European Union) and anti-NWO. (New World Order)

I’m honing my German Collapse Scenario as more data flows in, as it is in ever-faster and larger quantities. ‘Germany’ will implode in parallel with the EU.

So-called ‘states’ with:

1. no effective military forces
2. no control of their own borders
3. no control of their currency and banks
4. a government with a ‘diverse’ population in which the majority either has no loyalty to Berlin (recent ‘refugee’ immigrants) or has dropped its loyalty (large parts of Bavaria and Baden-Wurttemberg), and which is also losing the allegiance of the many eastern European immigrants in Germany. These people are among the most energized opponents of the ‘refugee’ influx.
5. Fast rising anarchy and lawlessness by the recent ‘refugee’ immigrants, and which is well known to the population, as are the official orders to the police to minimize crime statistics reporting by not opening official cases.

and

6. A mass media believed by no one due to the bald lies it broadcasts 24/7 daily about numbers 1-5.

…will soon cease to exist. This is confirmed by:

7. The continuing spiral of the ruling post WWII political parties into their own political black holes. CDU/CSU on the right and SDP on the left have all lost their hold on the modern German population.

The biggest joke of all is that Theresa May is negotiating the terms of “Brexit” from the EU with a political corpse and not a viable polity.

Another round or lap is coming soon. Personally I think the only thing staving off another eurozone banking crisis is the absolute certainty that no imaginable German government can currently agree to the slightest external concession without risking an internal political collapse.

Thus all the various Eurozone elites involved are refraining from provoking such a crisis for calculated narrow reasons. This leaves it to a European mob in some capital to initiate it by confronting a national government with either internal political collapse or re-entering EU-wide monetary and fiscal conflict with the ECB/EU gang.

And yes, I’m sure you spotted the next part. Poland and Hungary acting on behalf of the Phoenix Rising Ersatz Austro-Hungarian Empire will twist the EU’s tail at that time as hard as they can for maximum regional advantage.”

The fracturing of Germany is conventionally viewed as somewhere between implausible and impossible, and the same can be said of France and Germany drifting apart and the EU dissolving: the mainstream is committed to presenting Germany, the German-French alliance, the euro and the EU as rock-solid.

Yet if we follow the logic and evidence presented in these seven points, we are forced to conclude that the fractures in France, Germany and the EU are widening by the day, and that the ceaseless propaganda spewed by the ruling elites isn’t mending the fractures or restoring the illusion of stability.

(Regarding the French yellow vest dissenters: the 80,000 mobilized security forces are intentionally seeking to incite violence to justify crushing the yellow vestdissenters with massive paramilitary force: French Democracy Dead or Alive?)

In the long run of history, the apparent solidity of 20 or 30 years can shatter very rapidly as populations under increasing financial and political stress default to much more enduring divisions and loyalties.

The Yellow Vests Get it Right, by Robert Gore

Financial nuclear warheads.

The mainstream media has degenerated irreparably. Here’s a reliable rule of thumb: if it’s important it’s not covered; if it’s covered it’s not important. Stories in the American mainstream press about Yellow Vest protests have been few. One aspect of the protests, transcendently important, has received scant coverage.

The Yellow Vest protestors have called for a coordinated run on French banks. Whether they realize it or not, they’re playing with nuclear warheads that could annihilate not just the French, but Europe’s and the entire world’s financial system. Because inextricably linked to the ends of contemporary governments―how much they can screw up the lives of those who must live under them—is the question of means―how do they fund their misrule? The short answer is taxes and debt.

Since 1971, when President Nixon 
“temporarily” suspended international convertibility of dollars for gold (it’s never been reinstated), the monetary basis of the global economy has been fiat debt. Neither government or central bank debt nor currencies are tethered to any real constraint, like precious metals (see “Real Money,” SLL). Thus, politicians and monetary officials can create as much debt as they want: debt by fiat.

Government and central bank debt is at the apex of the global debt pyramid. The next tier is commercial banks that have accounts at central banks. Those accounts are bank assets and central bank liabilities, or debts. Central banks expand their fiat liabilities to banks in exchange for banks’ fiat government debt, an exchange called debt monetization, which is a bit of a misnomer since no “Real Money” is involved. The “monetization” is the central bank’s fiat expansion of banks’ accounts with the central bank in exchange for fiat government debt, which expands banks’ assets available for loans to governments, businesses, and individuals.

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The Tragedy Of The Euro, by Alasdair Macleod

The euro’s failure at inception wasn’t a certainty, but now it is. From Alasdair Macleod at goldmoney.com:

After two decades, the euro’s minders look set to drive the Eurozone into deep trouble. December was the last month of the ECB’s monthly purchases of government debt. A softening global economy will increase government deficits unexpectedly. The consequence will be a new cycle of sharply rising bond yields for the weakest Eurozone members, and systemically destabilising losses in the bond portfolios owned by Eurozone banks

The blame-game

It’s the twentieth anniversary of the euro’s existence, and far from being celebrated it is being blamed for many, if not all of the Eurozone’s ills.

However, the euro cannot be blamed for the monetary and policy failures of the ECB, national central banks and politicians. It is just a fiat currency, like all the others, only with a different provenance. All fiat currencies owe their function as a medium of exchange from the faith its users have in it. But unlike other currencies in their respective jurisdictions, the euro has become a talisman for monetary and economic failures in the European Union.

Recognise that, and we have a chance of understanding why the Eurozone has its troubles and why there are mounting risks of a new Eurozone systemic crisis. These troubles will not be resolved by replacing the euro with one of its founding components, or, indeed, a whole new fiat-money construct. It is here to stay, because it is not in the users’ interest to ditch it.

As is so often the case, the motivation for blaming the euro for some or all the Eurozone’s troubles is to shift responsibility from the real culprits, which are the institutions that created and manage it. This article briefly summarises the key points in the history of the euro project and notes how the mistakes of the past are being repeated without the safety-net of the ECB’s asset purchases.

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The rise of Socialism: Standing on the shoulders of morons, by Simon Black

Moron is an apt characterization of people who believe in a system that’s failed everywhere it’s been tried. From Simon Black at sovereignman.com:

I’ve spent the last several days in this quaint Colombian city near the Venezuelan border (though I’m presently at the airport, en route to Chile for a board meeting).

As I’ve discussed several times in the past, Colombia is great. It’s naturally gorgeous, incredibly cheap, and full of interesting opportunities.

The country has recently emerged from decades of civil war. And the rebuilding efforts will have a profound impact on the economy… most notably with the national infrastructure.

Colombia’s highways are pitiful.

The distance from here to Bogota is barely 400 kilometers– it shouldn’t be more than a 3-4 hour drive. But it takes almost nine hours thanks to the terrible highways.

Railways, ports, even digital infrastructure are all lacking in Colombia, in large part because of the decades-long war against the FARC. For years the government didn’t want to build more railways if the guerrillas were just going to destroy them.

With the war over, they’re dumping an enormous amount of money into modernizing the country, which invariably brings interesting opportunities.

Colombia is still cheap today.

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Yellow Vests: Shockwaves Felt Across the Continent, by Claudio Grass

The Yellow Vest protests are unique in a number of ways, and they’re probably harbingers of things to come. From Claudio Grass at lewrockwell.com:

When the first demonstrations on the streets of Paris were reported seven weeks ago, nobody could have foreseen the endurance, the tenacity and the viral effect of the Yellow Vests movement. After all, the French are known to protest and to strike, it’s part and parcel of their culture. However, by the time this article is being written, protests, marches and demonstrations have broken out in a multitude of European cities.

Why was it different this time?

To begin with, it is worth taking a closer look at the situation in France, the point of origin of this “contagion”. There are a few very important elements that set the Yellow Vests apart from past protesters. For one thing, unlike previous demonstrations, this one wasn’t led by the unions, nor was it organized by any identifiable political body. The protesters had no unified or homogenous political beliefs, party affiliations or ideological motivations. In fact, through interviews and public statements of individuals taking part in the demonstrations, it would appear that any organized elements, or members of the far-left or the far-right were a slim minority among the protesters. And while those few were the ones largely involved in the violent clashes with the police and the destruction of private and public property, the crushing majority of the Yellow Vests were peaceful, non-violent and largely unaffiliated with any particular political direction.

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