Category Archives: Economics

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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A Farewell to “Bargain Shopping”, by James Howard Kunstler

James Howard Kunstler illustrates the connection between imploding debt and imploding rural America. From Kunstler at kunstler.com:

“May God save the country for it is evident the people will not.”
—Millard Fillmore, 13th POTUS, born this day, 1800

France has its Yellow Vests. Here in USA, we have a few poor shlubs hoisting the “Going Out of Business” signs on the highway in front of the K-Mart. The store in my little flyover town in upstate New York announced that it would shutter in March, and the sign-hoisting shlubs appeared out on Route 29 the first Saturday in January, an apt kick-off to a nervous new year. K-Mart’s parent company, Sears, is moving into liquidation, meaning anything that’s not nailed down must be converted into cash to pay off its creditors.

The store’s closing is viewed as both an injury and an insult to the town. There just isn’t anywhere else to buy a long list of ordinary goods, from dish-towels to tennis balls without a 17-mile journey west, which means an hour behind the wheel coming-and-going, plus whatever time you spend picking stuff up inside. And, of course, many people in town feel that this is just another way of Wall Street saying “…you deplorable, pathetic, tapped-out, drug-addled, tattoo-bedizened yokels are not worthy of a K-Mart….”

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Predators and Saprophytes, by Robert Gore

They’re not your protectors if they’re eating you.

Bruno walks into a neighborhood shop and threatens the shopkeeper with unspecified “bad things” if the shopkeeper doesn’t fork over $200 a week. The shopkeeper pays. If Bruno runs a “legitimate” protection racket, bad things don’t happen.

You can skip a class, indeed an entire four-year program in political theory, if you realize that governments are everywhere and always protection rackets. Fork over money and personal freedom and the state will protect you from bad things, specified or otherwise. Sometimes the state aligns itself with a deity or deities, demanding not just money and obedience but worship, too.

What if the shopkeeper pays Bruno, but his shop is still beset with burglaries? What if he discovers that Bruno is the burglar? The shopkeeper faces the same quandary as billions of people who are subjugated by governments: they need protection from their protection rackets. The protector has dropped all pretense of protection and has become a predator.

When the Soviet Union conducted its first successful atomic bomb test on August 29, 1949, it undercut the protection-racket rationale for governments. No one realized it at the time, but how can you run a protection racket if you can’t protect those you’re purportedly protecting from annihilation? Perhaps that wasn’t the case in 1949―the US still had a lead in nuclear armaments―but by 1955, when the Soviets detonated their first hydrogen bomb, it was clear that all either the Soviet or American government could offer its people was assured destruction of the other side, and most likely their own, in the event of an attack.

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“Green” Socialism is Still Socialism, by Thomas DiLorenzo

Green socialism often combines bad science with bad economics. From Thomas DiLorenzo at lewrockwell.com:

Upon taking control of the U.S. House of Representatives the first thing America’s Marxist Party did was to propose a Soviet-style, communistic destruction of American capitalism labeled a “Green New Deal.”  The Party chose as its spokesperson for this totalitarian venture a young woman named Sandy Ocasio who grew up in one of the wealthiest enclaves in America, Westchester County, New York, but who decided to lie about this to get into politics by calling herself “Alex from the Bronx.”  Sandy sounds like a poorly-educated-but-well-indoctrinated young communist with a ninth-grade mentality.  She proudly labels herself a “democratic socialist” but as Ludwig von Mises explained, there really is no difference between communism and socialism: they are both attacks on private property and economic freedom.  She seems clueless about just about everything she talks about in public, whether it is the Constitution, especially the economy, the structure of government, history, etc.  This is the person the American Marxist Party has chosen as its front person in its proposal to destroy American capitalism, prosperity, and the American dream forever—and to give itself totalitarian control over virtually all aspects of American life.

The first thing to understand about the proposed “Green New Deal” is that the first New Deal not only failed to end the Great Depression but made it more severe and longer-lasting.  Its only “success” was in creating endless patronage opportunities and levers of political bribery and extortion for the Democratic Party, opportunities that the Republican Party happily embraced whenever it could to expand its own power and wealth in the succeeding decades.  The proposed Green New Deal would do the same, only many orders of magnitude worse.

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These 8 Red Flags Warn Us We’re Speeding Toward an Economic Collapse RIGHT NOW, by Daisy Luther

We’ve been speeding toward economic collapse for a long now, but maybe the capitalized RIGHT NOW means it’s just around the corner. From Daisy Luther at theorganicprepper.com:

This isn’t exactly an article loaded with Christmas cheer, but there’s a very good reason that my family has strictly limited our holiday splurges this year. It’s because all the signs right now seem to indicate the US is hurtling toward an economic collapse.

It’s inevitable, of course. Our economy has been artificially propped up for decades, since abandoning the gold standard. We’re $21 trillion dollars in debt, an unfathomable number. The fact that other countries still lend us money boggles the mind. If the United States was a person with such a high ratio of debt that we aren’t paying off, we wouldn’t even be able to buy a car with one of those 25% interest loans, that’s how bad our credit would be.

Not only that, but there are some parties who seem to want to see the economy go belly up for their own greedy and nefarious purposes.

Here are the red flags that have me concerned about an imminent economic collapse.

The stock market is crashing.

Right now, the market is on track for a month that is equivalent to the crash of 1929, when the Great Depression began.  Both the Dow Jones Industrial Average and the S&P 500 are down by 8% during a month that is usually really good. Michael Snyder reported:

The ferocity of this stock market crash is stunning many of the experts, and many investors are beginning to panic.  Back in early October, the Dow hit an all-time high of 26,951.81, but on Monday it closed at just 23,592.98.  That means that the Dow has now plunged more than 3,300 points from the peak of the market, and many believe that this stock crash is just getting started. (source)

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