Category Archives: Money

The Fox Guarding The Hen House Is Stealing Your Nest Egg, by Dennis Miller

Bank regulation is a joke; the banks essentially regulate themselves. From Dennis Miller at theburningplatform.com:

 

 

Fox and Hen House Concept: The system is designed to allow the fox, (also known as the Federal Reserve) to enable the banks to make risky bets.I recently interviewed Chuck Butler about JP Morgan’s recent admission to five felony counts and $1 billion fine. I asked, “When Is It Going To End?”

Right after finishing the interview, ZeroHedge reported:

“Goldman Sachs is reportedly on the cusp of settling one of the biggest criminal cases involving a Wall Street bank since the financial crisis: According to a Bloomberg News report…the Vampire Squid has reached a tentative agreement with the DoJ to pay more than $2 billion in penalties…– and – here’s the key bit – allows the bank to avoid all criminal penalties.

…. Tim Leissner, formerly the bank’s top man in Southeast Asia…reportedly told authorities about the endemic “culture of corruption” at play within the bank.”

Wall Street on Parade (WSOP) confirmed, adding:

“The U.S. Department of Justice is being played like a fiddle at a tractor meet. …. Twice, in a period of just three weeks…the Justice Department (announced) settlements of landmark criminal cases against two of the largest banks on Wall Street….

To prevent the possibility that a reporter…might ask the Justice Department why it was giving JPMorgan Chase a Deferred Prosecution Agreement when these were the fourth and fifth criminal counts it has brought against JPMorgan Chase in the past six years, (it has admitted guilt to all of the charges) the Justice Department simply skipped its usual procedure and did not hold a press conference announcing the charges.”

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Digital Money Is Coming to America, by Bill Bonner

Inflationary regimes have often swapped the old, depreciated-to-next-to-nothing currency for a brand new, nominally revalued and reset currency that soon sinks to next to nothing. Right now the world’s inflationary regimes are scheming to replace currencies, especially that hard to track paper money, with digital, easy to monitor, currencies. From Bill Bonner at rogueeconomics.com:

Week 28 of the Quarantine

SAN MARTIN, ARGENTINA – For half a century, America’s greatest export has been the dollar. So much so that there are now more physical dollars outside the U.S. than in it.

Overseas, people use dollars as an alternative to their own money. Foreigners are more familiar with Ben Franklin than Americans. In many places, people cling to U.S. dollars like a drowning man to driftwood.

Here in Argentina, for example, inflation is already running at about 50% per year. People think it will get a lot worse. So they prepare by trading their pesos for dollars – now at a rate of 150-to-1.

Sinking Dollar

But what happens when the dollar sinks?

The question is premature. Almost naïve.

For the present, the dollar is as buoyant as an empty plastic bottle. The velocity of money – a key component of consumer price inflation – is actually going down.

Americans are happy to get dollars from the government. And foreigners are happy to get them any way they can.

But soon, everyone will see that the U.S. feds are acting like the people who run sh*thole countries. They stifle the economy with laws and regulations – shutdowns, moratoria on evictions, $1,200 checks for everyone – and try to finance it with printing-press money.

We have no superpowers here at the Diary. We cannot climb walls, fly through the air, or see through concrete walls. So we cannot tell you when or how the dollar fails.

But today, we will explore the question of what you should do about it.

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Who Got the $33 Billion in Farm Subsidies for the US-China Trade-War and Coronavirus Payments? by Wolf Richter

As is often the case, government subsidies have ended up in the pockets of those who don’t need them. From Wolf Richter at wolfstreet.com:

Individual recipients don’t even have to work on a farm; people getting these payments can be “city slickers.”

Unlike food stamps and other welfare programs that are strictly controlled and limited by income, farm subsidies place few such obstacles on the folks that receive them. “Many recipients never have to set foot on the farm or ride in a tractor to get paid,” according to an analysis by EWG of Department of Agriculture records that it had obtained under the Freedom of Information Act.

The analysis covers the $33 billion spread across two farm subsidy programs: The Market Facilitation Program (MFP) created to offset the effects of the trade war against China, and the Coronavirus Food Assistance Program (CFAP).

EWG’s analysis found that the “largest and wealthiest U.S. farm businesses received the biggest share of that $33 billion in payments.” And in earlier analyses of the data, it revealed that “thousands of people who live in cities, and some who live on golf courses” have received MFP payments.

The Market Facilitation Program (MFP).

The purpose of the MFP is to compensate farmers for the effects of the US-China trade war during which China reduced its purchases of US agricultural commodities. Under this program, the US government paid farmers $23 billion from 2018 through June 30, 2020, not including crop insurance premium subsidies.

The administration set the maximum a person could receive under the MFP for 2018 at $125,000. But for 2019, this per-person limit was doubled to $250,000, which, according to EWG, “sent an extra $519 million to the largest farms.”

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Sound Money Is Key to Defending Our Liberties, by Thorsten Polleit

If humanity is ever to be free, money must be private, with government having no role in it at all. From Thorsten Polleit at mises.org:

The title of this article epitomizes what the Austrian economist Ludwig von Mises (1881–1973) called the “sound money principle.” As Mises put it:

The sound-money principle has two aspects. It is affirmative in approving the market’s choice of a commonly used medium of exchange. It is negative in obstructing the government’s propensity to meddle with the currency system.1

And further:

It is impossible to grasp the meaning of the idea of sound money if one does not realise that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments. Ideologically it belongs in the same class with political constitutions and bills of right.2

Mises tells us that sound money is an indispensable line of defense of people’s liberties against the encroachment on the part of the state and that sound money is a kind of money that is not dictated by the state but is chosen by the people in the free marketplace. The world we find ourselves in is a rather different place. Our monies—be it the US dollar, the euro, the Chinese renminbi, the yen, or the Swiss franc—represent fiat currencies, monopolized by the state.

Fiat money is economically and socially destructive—with far-reaching and seriously harmful economic and societal consequences, effects that extend beyond what most people would imagine. Fiat money is inflationary; it benefits a few at the expense of many others; it causes boom-and-bust cycles; it leads to overindebtedness; it corrupts society’s morals; and it paves the way toward the almighty, all-powerful state, toward tyranny.

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Here’s Why Warren Buffett Bailed On Banks & Bought Gold In One Simple Chart, by Tyler Durden

Stocks are more expensive by many valuation measures than they’ve ever been, buoyed by Fed fiat debt. Gold, unlike Fed fiat debt, is nobody’s debt. From Tyler Durden at zerohedge.com:

The headlines surrounding Berkshire Hathaway’s decision to bail on their banking exposure and buy Barrick Gold quickly faded from the mainstream media but the question of “why?” – after years of denigration for the barbarous relic – remains.

Was Buffett betting against America with a levered position on precious metals? Or was there another driver?

Perhaps, it was ‘both‘ sides of the equation – an unsustainable fiscal and monetary feudalism that can only end badly (and is building towards the endgame) – AND, as Bloomberg’s currency and rates strategist Ven Ram details below, it was the fact that – according to Buffett’s-own favorite stock market indicator – U.S. stocks are more highly valued now relative to economic output than they were even during the dotcom bubble, raising questions about the sustainability of the recent rally.

The combined market capitalization of the universe of U.S. stocks as captured by the Wilshire 5000 Index totaled $36.8 trillion as of Wednesday’s close. That amounts to 190% of the $19.4 trillion value of U.S. gross domestic product as of the second quarter.

Source: Bloomberg

The ratio eclipses the previous high reached in March 2000. After ups and downs in subsequent years, the ratio surpassed 100% in the first quarter of 2012 and pushed through successively higher levels in the following years

Applying this analysis to other U.S. indexes shows the current stock rally is lopsided and lacking in breadth. The Nasdaq 100’s market cap of about $13.5 trillion is more than two-thirds of GDP. Meanwhile, the S&P 500 Index’s aggregate market cap of $28.8 trillion comfortably eclipses the size of the economy.

Warren Buffett captured the significance of the ratio in a 2001 Fortune article, saying,

“If the percentage relationship falls to the 70% or 80% area, buying stocks is likely to work very well for you. If the ratio approaches 200% — as it did in 1999 and a part of 2000 — you are playing with fire.

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Gold Pressures Empire by Steve Brown

How do you maintain an empire when the world loses faith in your fiat-debt currency (aka scrip)? From Steve Brown at lewrockwell.com:

Ian Fleming wrote Goldfinger for good reason. The most important market in the world is gold. Not US stocks. Not shares in Amazon. Not bitcoin. Not Facebook. Sovereigns use gold – real gold – as the foundation for their most important deals.

Now consider that 40% of the world’s physical gold trade passes through bin Zayed’s United Arab Emirates. The same United Arab Emirates that blundered Bush into the Dubai Ports World scandal. The same UAE that hosts one of the largest US airbases in the Middle East… and the very same al Nahayan plutocracy that touts Israel as its closest friend and ally, beside the former United States.

But first, consider that the United States began weaponizing the US dollar as a matter of policy long before alleged criminal Treasury Secretary Mnuchin announced it. Weaponization of the dollar is isolating the US in world trade, but as regime star Kushner noted, “you cannot turn a battleship around overnight.”

The ‘battleship’ has been turning for fifty years since the disaster of the Nixon Shock, when the United States ‘temporarily’ abandoned the international gold standard thus heralding the ‘permanent’ era of central bank by-decree currency. Fifty years hence, a new perfect storm of events may prove that the consequence of August 15th, 1971 must now be confronted.

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What You Will Find When You Follow the Money, by MN Gordon

Funny money delays but will not prevent a grand reckoning of the debt that’s been piling up for decades. From MN Gordon at economicprism.com:

It has been a rough go for California Governor Gavin Newsom.  Late last week it was revealed that the state Department of Public Health had tickled the poodle on its COVID-19 record keeping.  Somehow the bureaucrats in Sacramento undercounted new coronavirus cases by as many as 300,000.

Perhaps this oversight prompted Newsom to imbibe in a little meditation and reflection.  At his Wednesday coronavirus news conference, shortly after quoting Voltaire, Newsom offered the following epiphany:

“Businesses can’t thrive in a world that’s failing.”

Often the simplest insights into reality are the most essential.  We’ll give Newsom that.  Yet, this is hardly an insight.  Rather, it’s readily obvious…even to a numskull.

The world that’s failing, where businesses can’t thrive, is a direct consequence of government lockdown orders.  And Newsom, more than any other public official, has his fingerprints all over the offense.  If you recall, California, under Newsom’s command, was the first state to order lockdowns.  It’s a shame he didn’t pause for meditation before committing the state to ruin.

The dynamics of what would follow Newsom’s lockdown orders were predictable.  When government decrees froze the economy, bills were still due.  Yet many people’s incomes, in the form of paychecks, disappeared.

For businesses, outstanding accounts payable were still due.  Though accounts receivable quickly became overdue.  In short, the flow of cash, as delivered by an open economy of give and take, broke down.

Certainly, Newsom thought he was doing the right thing.  He had to keep everyone in the Golden State safe by locking them down.  Many governors followed Newsom’s lead, having the same disastrous results.

But that was just the beginning.  Soon the uplifters in Washington swung into action…

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Why Fed Bugs Really, Really Hate Gold, by Jeff Deist

With an honest to goodness private gold standard, nobody controls money, not even the government. That alone is enough to recommend it. From Jeff Deist at mises.org:

udy Shelton, a Trump nominee to the Fed Board of Governors, may not have coined the excellent term “Fed bug,” but she used it to delicious effect in this 2019 Financial Times interview:

“People call me a goldbug, and I think, well, what does that make them? A Fed bug,” she says.

Can anyone the ​New York Times attacks this dishonestly be all bad?

For our purposes, Fed bugs are people with a faith-based belief in the power of central banks (and central bankers) to engineer economic growth using “monetary policy,”despite decades of history and current evidence to the contrary. They believe tinkering with inputs and rates and velocity and flows somehow makes us richer in terms of productivity, goods, and services. They believe in financial alchemy, as economist Nomi Prins puts it, rather than precious metals. They believe paper has value so long as government issues it and legislates its use. Most of all, they believe in technocratic control over money in the economy.

Central bankers almost by definition are Fed bugs, but so are most monetary economists, financial journalists, and politicians. And they all hate gold with a passion. The reasons why are multifarious, but ultimately flow from their fundamental resentment of any money they do not control and cannot design. Central planning requires central money, and gold stands apart by its very decentralized nature. It is indifferent to human conceptions, and can be discovered and summoned from the earth only with tremendous risk and effort. It cannot easily be manipulated or destroyed, and its value cannot be decreed (though they try mightily). It is unchanging, unyielding, and stubbornly at odds with the political visions of Fed bugs.

And so they hate it.

They hate gold because it never goes away and never goes to zero. It holds monetary value intrinsically, without the imprimatur of a sovereign or government. Gold does not need the state or its bankers to operate as money, because individuals choose it as money on the market century after century.

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The Fed is Determined to Prove the QTM Right, by Tom Luongo

Sooner or later we will get inflation commensurate with the quantity of money that has been created. From Tom Luongo at tomluongo.me:

gold-dollar-trap

Milton Friedman famously said, “Inflation was always and everywhere a monetary phenomenon.” But Friedman didn’t live through the QE years here in the U.S. and blatantly ignored the twenty plus years of Japanese deflation despite QE and insane levels of money printing during the latter years of his life.

Because Friedman, like a lot of modern economists, adhered strictly to the Quantity Theory of Money (QTM).

And as an Austrian economics kinda guy I somewhat agree with the QTM. I agree with Ludwig von Mises on this, as you would expect. So, how do we square the QTM with the evidence that QE in all of its guises has resulted in deflation, as expressed by the general price level, where ever it has been tried?

Martin Armstrong ask this question all the time and is openly hostile to the QTM. And his arguments have some merit, because, as he rightly points out the QTM only looks at the supply side of the money equation.

It cares not about the demand side. He’s right about that. What he’s wrong about is that the Austrians, like von Mises, haven’t considered this either.

Demand for money is just as important as the supply of it. And during a crisis, the demand side of the equation for any particular currency may, in fact, be more important.

This is what the Fed has struggled with for the past twelve years. The demand for the U.S. dollar has far outstripped the increase in supply, causing a far lower aggregate price rise than anticipated by the QTM.

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Do This Before Politicians Make You Pay Your “Fair Share”, by Jeff Thomas

How to move your assets, and possibly yourself, to higher ground before the financial tsunami arrives. From Jeff Thomas at internationalman.com:

Fair share

Bloated governments around the world are faced with worsening fiscal conditions. Strapped for cash, they continue to squeeze every drop of wealth that’s within their reach through money printing and higher taxes. Today, we ask Jeff Thomas to weigh in on how to ensure you don’t become collateral damage in the next crisis.

International Man: We see this trend playing out around the world in the US, across Europe and in third world countries. Desperate governments are always in need of more capital. What does that mean for people who earn money and want to keep it?

Jeff Thomas: The most direct answer is that, if they’re going to survive the situation with their skin on, they’re going to have to rethink the way they hold on to wealth. But more broadly, they’re going to need to understand that the crisis that’s headed their way is not going to look the same as the mini-crashes that occurred in 2000 and 2008. This one is going to be far more devastating for some jurisdictions such as the EU, US and Canada. In those jurisdictions, this will be an endgame situation.

Historically, whenever this occurs, the big players – governments included – tend to scrape all the chips off the table, ignoring any previous rules of the game. At such a time, no government, no banking institution, no investment fund is to be trusted.

This will mean that any monetary exposure the individual has with regard to these entities, should be regarded as sacrificial. By this, I mean that any exposed wealth is not necessarily certain to be lost entirely, but it’s quite possible. So any wealth that’s subject to the control of these institutions should be assumed to be wealth that may, suddenly and without warning, be confiscated or otherwise lost.

The greatest difficulty in this is that traditional investments and stores of wealth may no longer be viable, and the individual will have to prepare for this eventuality now, before this occurs.

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