Category Archives: Money

Money—How to Get It and Keep It, by Doug Casey

Doug Casey on a topic most everybody’s interested in: money. From Casey at internationalman.com:

Even if you are already wealthy, some thought on this topic is worthwhile. What would you do if some act of God or of government, a catastrophic lawsuit, or a really serious misjudgment took you back to square one? One thing about a real depression is that everybody loses. As Richard Russell has quipped, the winners are those who lose the least. As far as I’m concerned, the Greater Depression is looming, not just another cyclical downturn. You may find that although you’re far ahead of your neighbors (you own precious metals, you’ve diversified internationally, and you don’t believe much of what you hear from official sources), you’re still not as prepared as you’d like.
I think a good plan would be to approach the problem in four steps: Liquidate, Consolidate, Create, and Speculate.

Step 1: Liquidate

Chances are high that you have too much “stuff.” Your garage, basement, and attic are so full of possessions that you may be renting a storage unit for the overflow. That stuff is costing you money in storage fees, in depreciation, and in the weight of psychological baggage. It’s limiting your options… It’s weighing you down. Get rid of it.

Right now, it has a market value. Perhaps to a friend you can call. Or to a neighbor who might buy it if you have a yard sale. Or to some of the millions of people on eBay. A year from now, when we’re out of the eye of the financial hurricane and back into the storm, it will likely have much less value. But right now, there’s a market. Even if most people are no longer wearing those “He who dies with the most toys, wins” T-shirts that were popular at the height of the boom, there are still buyers. But the general standard of living is dropping, and mass psychology is changing. In a year or two, you may find there aren’t any bids and the psychology of the country has changed radically. People will be desperate for cash, and they’ll all be cleaning out their storage units (partly because they can’t afford the rent on them).

To continue reading: Money—How to Get It and Keep It

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Federal Deficits Are Worse than You Think, by Mark Brandly

Here’s a surprise. The federal government and its media henchpeople tend to put the deficit in its absolute best light. From Mark Brandly at mises.org:

Voters tend to be rationally ignorant. Since a single vote does not matter, for most potential voters the cost of being politically well-informed is greater than the benefit of being knowledgeable about political affairs. Therefore it’s rational for most voters to be ignorant regarding political issues.

A main reason for the high cost of being well-informed is that government officials may not want the public to be well-informed. They purposefully conceal their schemes to reduce the opposition to their policies. A well-informed body politic would be a threat to the welfare and warfare state.

This obscurantism is on full display regarding the government budget.

Let’s start with the annual deficit. You may have noticed that the stated annual deficit is less than the increase in government debt. In order to explain this, consider a small scale example. Assume that you were $20,000 in debt at the beginning of 2017 and you earned $3,000 and spent $4,000 during the year. You borrowed $1,000 to cover this spending so your total debt increased to $21,000. A sensible reading of this situation would be that you had a $1,000 deficit in 2017 (multiply these numbers by a billion dollars to roughly approximate what is generally asserted to be the federal budget).

However, if you followed the federal government’s method, you would claim a deficit of, say, $600. According to the feds, the official deficit is less than the increase in total debt. How do they do this? Well, some of the borrowed money is simply not included in the deficit. For example, in fiscal year 2016, they claimed a deficit of $587 billion even though the total debt increased $1,422 billion and the debt held by the public (the total debt less the intragovernmental debt) increased $1,049 billion. They hide some of the deficit by simply declaring that some of the increased debt is not part of the deficit.

But this deception is of little consequence compared to the government’s claims about their spending habits.

According to the “Economic Report of the President,” government spending (outlays) over the twenty year period from Fiscal Year 1998 to FY 2017 more than doubled from $1,652.5 billion to $3,981.6 billion. In real terms, using the implicit price deflator as our measure of inflation, this was a 67% increase in spending.

To continue reading: Federal Deficits Are Worse than You Think 

Why the Boomers Are Going Broke, by Bill Bonner

It’s hard to accumulate wealth when the value of the supposed store of value is whatever central bankers and politicians say it is. From Bill Bonner at bonnerandpartners.com:

POITOU, FRANCE – We were taken aback on Friday by the ferocity of our dear readers’ comments. [Read more in today’s Mailbag.]

What were they so sore about? we wondered.

Son of Satan

Of course, we are frequently wrong about a great number of things. When connecting the dots, we are bound to draw a few stray lines. And we will no doubt be proven wrong in many of our opinions and predictions.

Will The Donald’s trade war pay off for Americans? We don’t think so.

Will the tax cut really boost the U.S. economy and reduce the deficit? There is no sign of it.

Will Mr. Trump really make America great again? The odds, based on what we’ve seen so far, seem very, very slim.

But what do we know? And we’d be happy to be proven wrong.

What was surprising – to us – was that readers did not write to correct us or help us get the lines in the right place.

Instead, they seemed to suggest that we were a son of Satan, sent to destroy all that the good patriots of the United States of America hold most dear.

In other words, the discussion seems to have hit a religious nerve… like setting fire to a cathedral; the faithful fear their most sacred relics will be incinerated.

We have no remedy for this condition, so we will cheerfully ignore it. Besides, cross readers may be right. And those who have a better idea of how the dots connect are invited to send their thoughts by clicking right here.

Goldilocks Report

So, what do we see today?

What we see is an economy staggering under the weight of phony wars and phony finances.

It took more than 200 years for the country to reach its first $1 trillion in debt; now, it adds that much every 12 months. In addition, the Fed increased the base money supply by roughly 400% over the past decade.

What do you get for that kind of money? The feds got the weakest recovery in history… with no real gains in per-hour wages… and GDP growth rates only half those of the 1950s and ‘60s.

In 1821, John Quincy Adams described American foreign policy: “She goes not abroad in search of monsters to destroy…”

Here we are, nearly 200 years later, and U.S. troops are looking for monsters in every godforsaken sh*thole in the world. And where none can be found… they create one.

To continue reading: Why the Boomers Are Going Broke

When the Freaks Run Wild, by MN Gordon

You can get used to almost anything that’s freakish, bizarre, or ridiculous, so much so that it becomes almost normal. From MN Gordon at economicprism.com:

The unpleasant sight of a physical absurdity is both grotesque and interesting.  Only the most disciplined individual can resist an extra peek at a three-legged hunch back with face tattoos.  The disfigurement has the odd effect of turning the stomach and twisting the mind in unison.

After repeated exposure, however, the shock of an absurdity is reduced to that of vanilla ice cream.  Somehow, even the extremely preposterous becomes commonplace after a while.  For example, a panhandling Batman doesn’t get a second look in Hollywood.  That persona comes a dime a dozen.

Yet just because an absurdity’s been watered down to the seemingly ordinary, doesn’t mean it has become any less ridiculous.  Rather, the viewer has become conditioned to the absurdity.  The abnormal has been calibrated to a feigning normal.

Extreme market intervention by central planners has been going on for so long that the distorted conditions it produces are considered normal.  The Cyclically Adjusted Price Earnings Ratio (CAPE Ratio) of the S&P 500 is currently more than double its historic average.  But no one, save a few grumpy old farts, are alarmed by this.  Like a freak at a freak show, it all seems perfectly normal.

Diapers, soda pop, beer, chocolate, and chicken, are all rising in price.  At the same time, the federal government is aiming for a $1 trillion deficit.  Still, U.S. consumers haven’t been this fired up about the economy since February 2001.  You see, in the year 2018, spending more and getting less is perfectly normal.

Cancer and Crackpots

The destructive absurdity of modern fiscal and monetary policy is only matched in nature by the insidious replication of cancer cells.  As these cancerous cells are replicated and divided, and then replicated and divided again and again, their uncontrollable growth flows into lumps and tumors.  Sometimes these cancerous growths go undetected for years, as if the body is perfectly normal.

To continue reading: When the Freaks Run Wild

How Inflation Destroys Civilization, by Nick Giambruno

Nick Giambruno connects the dots between inflation and the desire for socialism. From Giambruno at internationalman.com:

Yesterday I told you about the unstoppable trend towards more socialism in the US.

I think inflation is the primary factor driving this trend. Americans feel squeezed because the cost of rent, medical insurance, and tuition, as well as other basic living expenses, is rising much faster than their wages.

This creates very real problems for ordinary people. In response, more and more turn to Santa Claus politicians that promise supposed freebies, like a $15 minimum wage or universal basic income.

Why the Cost of Living Has Exploded

This is all a predictable consequence of the US abandoning sound money.

By every measure—including stagnating wages and rising costs—things have been going downhill for the American middle class since the early 1970s.

August 15, 1971, to be exact. This is the date President Nixon killed the last remnants of the gold standard.

Since then, the dollar has been a pure fiat currency. This allows the Fed to print as many dollars as it pleases. And—without the discipline imposed by some form of a gold standard—it does precisely that. The US money supply has exploded 2,106% higher since 1971.

The rejection of sound money is the primary reason inflation has eaten up wage growth since the early 1970s—and the primary reason the cost of living has exploded.

The next chart illustrates this dynamic. It measures US hourly wages priced in gold grams (the number of gold grams the average person’s hourly income could buy).

Measured in gold, wages in the US have fallen over 84% since 1971. That’s an astounding drop.

The next chart measures the federal minimum wage in terms of gold grams. Priced in gold, the minimum wage has fallen 87% since 1968.

Note that the federal minimum wage was $1.60 in 1968. It’s $7.25 today, or 353% higher in dollar terms.

But that $7.25 buys 87% less than $1.60 did back in 1968. That’s the story you won’t hear from the mainstream press.

This is why millennials and millions of others are gravitating toward socialism.

To continue reading: How Inflation Destroys Civilization

Gold Yuan Crypto, by Raúl Ilargi Meijer

How will the world’s monetary system realign when the world must face the consequences of fiat currency and debt expanding at a rate far in excess of actual production? From Raúl Ilargi Meijer at theautomaticearth.com:

It’s been a while since we last heard from Dr. D, but here he’s back explaining why neither gold nor the yuan nor cryptocurrencies can or will replace the dollar as the reserve currency, but together they just might:

Dr. D: “Some debts are fun when you are acquiring them, but none are fun when you set about retiring them.” –Ogden Nash

Over the last year or two there’s been discussion about the U.S. Federal spending moving beyond $4 TRILLION dollars, and whether a $1+ trillion dollar annual deficit, on top of a $20 Trillion national debt – Federal only – is sustainable. It isn’t.

“What can’t go on, doesn’t” is the famous quote of economist Herbert Stein. Since a spiraling deficit of $1 trillion deficit on a $20 trillion debt can’t go on, what will we replace it with when it very soon doesn’t? Historically gold. Whatever gold exists in the nation’s coffers, whether one coin or 8,000 tons, is used to as the national wealth, and fronted by paper to re-boot the currency. With some additions such as oil and real estate, this was the solution in Spain, France, Germany, and the Soviet Union among hundreds of fiat defaults. Why? Because at a time of broken promises — real goods, commodities that can be seen, touched, and used – are the tangible proof of wealth, requiring no trust, and from which the human trust system of paper and letters of credit can be rebuilt.

But in these complicated, digital times perhaps that’s too simplistic. Perhaps we have grown smarter than all our fathers and this time it will be different. Will it really be the same? Let’s look at how the system works now.

Before WWI, the world was on the gold standard. This had variations, exceptions, corruptions, but on the whole there was gold in the back that was fronted by paper promises issued by private banks. The paper moved, the promises were delivered by telegraph and telephone, and the gold remained in the vaults. It was only when men felt unsure of the truth of the promise they could and did demand delivery, called the bluff, and the bank did – or ominously didn’t – deliver the gold, and thereby keep the paper system in line with reality, with real wealth, and with the economy. This method kept men and nations honest, mostly.

The main part is that the gold didn’t move: it stayed in the same vaults and its ownership changed, just like today. It didn’t matter how much gold existed: it simply changed price, just like today.

To continue reading: Gold Yuan Crypto

 

The EU Backs Off its War on Cash. Here’s Why, by Don Quijones

It’s proving harder than its proponents thought to get rid of cash and herd people into the banking system. From Don Quijones at wolfstreet.com:

People view paying in cash “as a fundamental freedom, which should not be disproportionately restricted.”

The European Commission, in its official war on cash, admitted that physical cash is perhaps not quite the source of all evil that many EU institutions, including the Commission itself, had made it out to be. And it has abandoned its war on cash.

In a report to the European Parliament and Council on the viability of EU-wide cash payment restrictions, the Commission made three crucial observations.

1. Cash restrictions would have little effect on terrorist financing

Cash plays a major role in many terrorist activities, “offering anonymity and facilitating the ability to conceal not only illegal activities, but also ancillary legal transactions that could otherwise be tracked by law enforcement agencies,” the report points out. But according to the findings of a detailed analysis of recent terrorist attacks, restrictions on payments in cash would have had little impact on the capacity to prepare these attacks, especially given the “observed trend of the decreasing costs of terrorist attacks.”

The amounts of individual transactions are often even lower, and would therefore not have been impacted by restrictions. What’s more, many common transactions made in the preparation of recent terrorist attacks were done using traceable means (credit and debit cards, bank transfers, etc.) without raising any red flags.

2. Cash restrictions could be useful in combating money laundering but are of limited help against tax fraud.

The report notes that cash limits could be a useful tool in the fight against money laundering, of which cash transactions are normally the starting point. Despite the steady growth in non-cash payment methods and the changing face of criminality (i.e., the rise in cybercrime, online fraud and illicit online market places), criminal activities continue to generate profits in the form of large amounts of cash.

The fact that EU Member States have vastly different rules on cash limitations makes it easier for criminals to launder the proceeds of their operations as it allows them “to circumvent controls in their country of origin by investing in cash intensive businesses in another EU Member State with no or a lower control of cash expenditures.”

To continue reading: The EU Backs Off its War on Cash. Here’s Why