Category Archives: Money

Beware of What You Wish For, by James Howard Kunstler

The US government may end up paying reparations to blacks, and if they do, it may be with dollars that have little remaining value. From James Howard Kunstler at kunstler.com:

Apart from the 150 people shot (25 killed) in Chicago, the week after Father’s Day had the quality of a time-out from widespread anarchic violence that the Democratic Party has unleashed upon the nation to distract the public from the party’s lack of a viable election candidate or any credible platform of ideas for managing epic economic contraction. The contraction was already underway before Covid-19 greatly accelerated the damage.

Whipping up a moral frenzy over alleged “systemic racism” adds a nice overlay of psychological damage to a population reeling from economic loss, keeping them enthralled to phantoms, figments, and apparitions while all their familiar arrangements unravel around them. Last week’s pause in the action only portends a resumption of hostilities culminating in July Fourth, when the nation traditionally throws a birthday party for itself. No celebration will be allowed this year. But there may be plenty of marching, moiling, and mayhem.

Wokester Central has already established the story-line that the USA was a criminal enterprise from the start and that it must be smashed to set free the genius energies of Wakanda — currently misdirected in the suicidal gunplay seen in Chicago and other places of concentrated urban poverty. It’s pretty obvious that the uproars of Black Lives Matter (BLM) and its Antifa allies are to some degree centrally organized. They have access to plenty of cash, thanks to funding from George Soros’s Open Society Foundation, the Ford Foundation, and an array of showbiz-oriented corporate supporters. You can be sure that there will never be any accounting for it, since that would be labeled “racist.” The news media has shown zero curiosity about how exactly the money is being used — or merely distributed among those in the upper echelons of the hustle.

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Cash4Covid – How hospitals are making money off the coronavirus, by Kit Knightly

Hospitals are paid for Covid-19 diagnoses and for putting patients on ventilators. The payments for diagnoses may inflate case totals, and the ventilators may kill the patients. From Kit Knightly at off-guardian.org:

We’ve known for weeks that hospitals get payments for diagnosing Covid19, and even using ventilators. That should worry everyone.

Hospitals in the US are getting money for diagnosing Covid19. They get more money if those patients are then put on ventilators. It’s time we really started thinking about what that means.

Early on in the launch of the Sars-Cov-2/Covid19 “pandemic”, it was revealed by Dr Scott Jensen that hospitals in the US were getting paid bonuses for diagnosing Covid19 in their patients, and then larger bonuses again if those patients were put on ventilators.

We’re not fact-checking that. We don’t need to. It’s already been done.

As soon as his words were aired, the “independent fact checkers” descended upon them in an effort to prove him wrong. They could not. Resorting instead to weasel words and obfuscations.

Snopes found his assertions “plausible”, Politifact called it “half true”, and FactCheck said it was true, writing:

Recent legislation pays hospitals higher Medicare rates for COVID-19 patients and treatment…

Before adding:

…but there is no evidence of fraudulent reporting.”

Which is funny because, to that point, nobody had suggested anything fraudulent. Jensen himself went out of his way to say he didn’t think there was any fraud, but there was an “avenue” for it.

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The Rise, Fall, and Renaissance of Classical Liberalism, by Ralph Raico

This article was written in 1992 and the tone is probably more hopeful than if it were written now. From Ralph Raico at lewrockwell.com:

[This article appeared in the Future of Freedom Foundation’s Freedom Daily, August 1992]

Classical liberalism—or simply liberalism, as it was called until around the turn of the century—is the signature political philosophy of Western civilization. Hints and suggestions of the liberal idea can be found in other great cultures. But it was the distinctive society produced in Europe—and in the outposts of Europe, and above all America—that served as the seedbed of liberalism. In turn, that society was decisively shaped by the liberal movement.

Decentralization and the division of power have been the hallmarks of the history of Europe. After the fall of Rome, no empire was ever able to dominate the continent. Instead, Europe became a complex mosaic of competing nations, principalities, and city-states. The various rulers found themselves in competition with each other. If one of them indulged in predatory taxation or arbitrary confiscations of property, he might well lose his most productive citizens, who could “exit,” together with their capital. The kings also found powerful rivals in ambitious barons and in religious authorities that were backed by an international Church. Parliaments emerged that limited the taxing power of kings, and free cities arose with special charters that put the merchant elite in charge.

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The path to monetary collapse, by Alasdair Macleod

A couple of months before anyone had heard of the coronavirus the world financial system was undergoing a liquidity crisis. Don’t look for a V-shaped recovery. From Alasdair Macleod at goldmoney.com:

Few mainstream commentators understand the seriousness of the economic and monetary situation. from a V-shaped rapid return to normality towards a more prolonged recovery phase.

The fact that a liquidity crisis developed in US money markets five months before the virus hit America has been forgotten. Only a rising gold price stands testament to a deeper crisis, comprised of contracting bank credit while central banks are trying to rescue the economy, fund government deficits and keep the market bubble inflated.

The next problem is a crisis in the banks, wholly unexpected by investors and depositors. At a time when lending risk is soaring off the charts, their financial condition is more fragile than before the Lehman crisis. Failures in European G-SIBs in the next month or two are almost impossible to avoid, leading to a full-blown monetary and credit crisis which promises to undermine asset values, government financing and fiat currencies themselves.

We can now discern the path leading to the destruction of fiat currencies and take reasonably guesses as to timing.

How central banks view the current situation.

The financial world is bemused: what is it to make of the economic effects of the coronavirus? The official answer, it seems, is on the lines of don’t panic. The earliest fears of millions of deaths have subsided and in the light of experience, a more rational approach of easing lockdown rules is now being implemented in a number of badly hit jurisdictions. Whether this evolving policy is right will be proved in due course. But the motivation is moving from saving lives to restricting the economic damage.

While I am a critic of the inflationist policies of central banks, it is always valuable to look at monetary policy from a central banker’s point of view. Last Friday, Andrew Bailey, the new Governor of the Bank of England, gave an interview to Chris Giles of the Financial Times, where he spoke frankly and reasonably freely about the challenges the Bank faced in common with other major central banks.[i]

Regarding inflation, from his comments it is clear Bailey defines it as changes in the general level of prices, which is hardly surprising, since central banks are mandated to target it. He believes that the rate of price inflation will fall towards zero, citing recent moves in the oil price as a major factor, though the oil price has since recovered. This gives him room to use monetary policy to its greatest extent.

His view was that monetary policy would minimise what he called “scarring”. This is the new buzzword for economists who generally dismiss the economic effects of the current crisis as being temporary, as in when it heals the only evidence left will be a scar. In other words, some overindebted businesses will fail and others would be victims to changes in consumer patterns once normality returns. Therefore, the working assumption is that once the coronavirus crisis is behind us the economy would broadly return to normal, and while he didn’t specifically say it, he expectats is a V-shaped recovery, possibly with a moderate time element to it.

The bank is undertaking a £200bn programme of quantitative easing, which amounts to two-thirds of Britain’s expected funding requirement relating to the coronavirus, in order to satisfy the following policy objectives:

    • To stabilise financial markets, buying £50-60bn of gilts every month, in common with actions of other central banks in their markets. This suggests the economy is expected to be on the way to recovery by late-July.

 

    • To reassure the market that extra government debt would be absorbed and to smooth the profile of overall government borrowing. This will enable the bank to keep gilt yields low, and those of corporate bonds as well.

 

    • To meet economic objectives. In other words, pursue a Keynesian policy to return to full employment.

 

    • To address counterfactual issues that can be expected to arise if the Bank did not do QE. Presumably, other than disrupted markets Bailey was referring to fears of deflation in the absence of monetary stimulus.

 

If Bailey is right and QE of £200bn will see the British economy through the crisis, then that £200bn will be an addition of a little more than 10% to the national debt. The addition to February’s M3 money supply is 6.8%, which is hardly a problem. But there will be trouble if he is wrong, glitches that could arise from one or more of three sources. If other central banks, principally the Fed, dilute their currencies by a larger amount proportionately, the effect on commodity prices, particularly agricultural products, could be to drive them up in sterling terms, helping to undermine sterling’s purchasing power for life’s essentials. Secondly, 28% of gilts in issue are owned by foreigners, who, needing the money in their own currencies, are likely to turn sellers. The third threat is of systemic failure, requiring extra expenditure to rescue one or more major banks and to manage the fall-out.

There is little doubt that Bailey’s thinking is shared by his counterparts in the other major central banks. Besides the threats listed above, the mistake is to simply assume the economy is an entity that does not change materially over time. While seeming an innocuous mistake, it leads to the belief that there is a normality to which to return. Bailey dismisses the problem by saying some businesses won’t survive, and others might have to change. But he is clearly banking on a return to normal, when there is no such thing. It is the proper function of economic, monetary and credit analysis to divine the benefits and threats that make the future different from the present.

 

Issues of credit

By definition, central bankers do not fully understand credit cycles, otherwise they would have done something to fix their disruptive nature long ago. Instead, they believe in business cycles, which central bankers view as disrupting monetary policy, thereby muddling cause with effect. Conveniently for state organisations, central banks place the blame for irrational behaviour on the private sector. The banks, so obviously the cause of credit cycles, are seen to be merely responding to changing business conditions and must be discouraged, in their own interests, from making the situation worse at a time of periodic crisis.

But central bankers play their part in credit instability by encouraging banks to extend credit to stimulate the economy in the first place. That fact alone makes it nearly impossible for them to accept the consequences of their monetary policies. Central bankers like Andrew Bailey not only look at bank credit through the wrong end of the telescope, but they do not see a credit crisis in the making. This amounts to an ignorance that explains why they believe that the coronavirus is simply a one-off hit, and after a short period of time, everything can return to normal, so long as the recovery is properly managed.

Their simplistic approach does not explain the liquidity stresses in the US banking system that surfaced last September, long before the virus had infected anyone. It does not explain why the Fed was forced to abandon its attempt to reduce its balance sheet, over five months before the first virus casualty occurred in the US. It ignores the consequences of the tariff war between America and China, which collapsed international trade by the beginning of 2019. Central bankers have been blind to evidence that the world was already tipping into a recession, and that commercial banks were, and still are, dangerously leveraged in the face of escalating loan risk.

The bureaucrats in central banks and banking regulatory bodies believe they have insulated commercial banks from the extreme risks of over-lending. Since the Lehman crisis, rules and compliance measures have been put in place designed to reduce these systemic risks, and periodic stress tests have been run from time to time to establish the level of existing risk. Unfortunately, stress testing appears to be designed not to expose systemic weakness but to confirm it no longer exists.

A new paper by Dean Buckner and Kevin Dowd has examined the current position of UK banks, which is instructive in the wider sense about the relationship between central banks, regulators and commercial banks.[ii] It concludes that “the core metrics of the Big Five UK banks have deteriorated sharply since the New Year, and even more since the end of 2006, i.e., the eve of the Global Financial Crisis.” It goes on to say,

“The BoE’s ‘Great Capital Rebuild’ narrative about a strongly recapitalised UK banking system is little more than an elaborate, and occasionally shambolic, window dressing exercise. The BoE focused most of its efforts on making the banking system appear strong by boosting banks’ regulatory capital ratios instead of ensuring that the banking system became strong through a sufficiently large increase in actual capital meaningfully measured. The result is that the UK banking system enters the downturn in a worryingly fragile state and avoidably so.”

The authors did not spring this on Britain’s central bankers and regulators all of a sudden. For almost a decade, Professor Dowd has written and co-authored papers warning of the inadequacy of official attempts to strengthen the resilience of the banking system to systemic shocks. And now, a weaker banking system is tasked with supporting the non-financial economy, where lending risk is soaring off the charts.

It is not just the UK banking system that’s in trouble. While the Buckner & Dowd paper confines itself to UK banks and there are differences in the detail, we know that banking regulation is standardised across borders, and the motivation for stress tests to see no evil is common to other major central banks. A central point, missed by most observers, is that the markets are telling us there is a banking crisis already, with bank share prices significantly lower than book values.

The authors go further, pointing out that the relationship that matters most is between total assets and market capitalisation, the true forward-looking value independently placed on a bank in the markets instead of a static accounting figure for shareholders’ capital in the balance sheet. In the case of Barclays Bank its assets relative to market capitalisation gives a leverage for shareholders of 62 times at a time of increasing lending risk. Put another way, additional loss provisions of only 1.6% of the balance sheet asset total wipes out the bank’s market capitalisation. Major Eurozone banks are in a similar or worse condition, as shown in Table 1, of all UK and European designated and listed global systemically important banks (G-SIBs). The G-SIBs are meant to have extra capital buffers to lessen the likelihood of a repeat of the Lehman crisis.

[iii]

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Clearly, it is virtually impossible to see some of these highly leveraged banks surviving today’s deteriorating loan conditions, nor is it possible to imagine that if one or more of them fail how they will not take down other banks.

As well as believing their own wise monkeys, Andrew Bailey and Christine Lagarde should be praying on their knees that the recovery will be V-shaped and rapid, because the banking system might not even survive that, let alone anything worse. But the outlook is significantly worse because of the pre-existing slide into global recession. The G-SIB bankers’ problem is managing the risk they already have to contend with and not the additional risk the central banks now wish them to bear.

Looking ahead, with increasing certainty we can expect a European and British banking crisis. There is no material reason for it not to happen. The Keynesian debt machine has ploughed on regardless since the Lehman crisis and roughly doubled the debt problems that led to it. The evidence from the Bucknall & Dowd paper is that the banking system, in the UK at least and by extrapolation in Europe and almost certainly elsewhere, is less fit to deal with a crisis on the Lehman scale, let alone the larger one ahead of us. And on top of all that the coronavirus has shut down the global economy. The best possible outcome is that governments and non-financial private sectors emerge with substantially more debt.

Given these factors, it is nearly impossible to argue convincingly that a banking crisis will not emerge very soon, perhaps in as little as a month or two. A banking and systemic crisis will raise the costs for central banks and their governments considerably, not just because they will have to fund bail-outs, but they will also have to cover the associated fallout, such as the inevitable evaporation of interbank credit in the financial sector and of bank credit from non-financial borrowers.

We now know with the greatest certainty what the policy response will be: a further acceleration of base money inflation. In the UK’s case, the estimated cost of £300bn to the exchequer of the coronavirus will turn out to be an appetiser not just for a main course but for the full-blown banquet. And what applies to the UK will apply to the other major advanced nations which lack the genuine savers to fund it all.

 

The golden canary

At the time of writing few if any headline-writers in the media have pointed out the dangers to the global banking system from the coronavirus shutdown and the contraction of bank credit. Equity markets have rallied strongly in recent weeks and bond yields have remained low. As forward indicators, these financial markets communicate an ethereal stability. The only sign that black swans, a common sight nowadays, are peddling furiously while appearing calm above the surface is in the gold price. Measured in US dollars, while it is yet to conquer the highs seen at the time of the last Eurozone banking crisis, it appears to be on its way to doing so. The chart below shows how the gold price has over the last twenty months.

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In August 2018, it first became clear that America’s tariff war against China was disrupting international trade, which coincided with the gold price setting off on its current bullish run. More recently, gold markets and their derivatives faced unprecedented stresses as bullion banks running short positions have been wrongfooted by changes in monetary policy responding to the coronavirus. So far, gold has been doing what one would expect: discounting increasing rates of future monetary expansion.

But it also acts as a warning of troubles to come. The shock it has yet to discount is the rising systemic risk from bank failures. Barring successful intervention to suppress it, a sharply rising gold price must be the logical outcome from an increasingly certain banking crisis, as people flee bank deposits in favour of physical bullion held outside the banking system.

In previous fiat currency inflations, there has always been a cash alternative to bank deposits. A bank run created increased preferences for cash. At the least, prices of goods did not rise as a direct consequence of systemic crises, and it is worth noting that increased cash hoarding tends, if anything, to lead to falling prices. That can no longer be the case. Retail banks everywhere have been instructed to discourage the disbursement of even relatively small amounts of cash, making it virtually impossible for a depositor to encash all but the smallest deposits. Unless a depositor already has an account with a bank he is confident is safe, he has no alternative but to spend the deposit and give someone else the headache of being a creditor in a failing banking system.

Financial assets are also likely to be unsafe beyond the very short term, and the restriction of bank and mortgage credit in these conditions makes residential and commercial property a bad bet as well. Our frightened depositor is left scrabbling for alternatives to money in the bank, and therefore as a measure of how the crisis unfolds, the gold price is likely to be the most reliable indicator.

For this reason, a gold price rising sharply will not be welcomed by the major central banks, who will rightly fear it is an indicator of declining confidence in the monetary system. Central banks in emerging economies have a different problem, seeing the dollar upon which they depend failing. Undoubtedly, this has encouraged many central banks in this category to build gold reserves as a dollar substitute, at least until the way to a new currency regime can be seen.

 

The path to fiat obscurity

With the knowledge that the situation is considerably more serious than just a temporary COVID-19 interruption, we can be certain of a lethal combination of mounting bad debts and bankers desperate to contain escalating lending risks. The situation invokes the ghost of Irving Fisher, who was credited with describing the destructive workings of a debt-deflationary spiral driving the economy inexorably into a depression. Central banks will do everything they can to avoid a debt-driven depression, but it is likely to prove an insurmountable task. With a high degree of certainty, the result will be bank failures and bank rescues. And with commercial bankers fearful of their own bankruptcies, they will be poor transmitters of raw base money into the non-financial economy.

From these obstacles to monetary planning, we can tentatively sketch a path towards future events, some of which that are likely to run concurrently, including the following:

    • The first G-SIB failure will initially trigger widespread liquidations of bank-issued bonds and flights of large uninsured deposits from the riskier banks. Capital flight creates funding difficulties for vulnerable banks, and wholesale money markets will seize up. Attempts to proceed with bail-ins, which have been enacted into law by most if not all G20 nations will only make the situation worse. Bail-ins were designed to shift the cost of bank rescues to the private sector instead of governments, which is the case with bail-outs. Therefore, as banks fail there will be added penalties for bond holders and large depositors.
    • Market capitalisations of listed banks will take another lurch downwards, pushing price to book ratios substantially lower. Governments, sovereign wealth funds and central banks are likely to mount emergency support operations for the shares of the G-SIBs and all other listed banks at risk in an attempt to calm markets.
    • After an initial panic, the determination of the authorities to support the banks may buy a brief period of stability. As lockdown restrictions are abandoned, we can expect a partial recovery in the wider economy, fuelled by essential maintenance and catch-up activities that have been put on hold by lockdowns. At this point, everyone heaves sighs of relief in the hope that the worst is over.
    • Following a temporary period of relief, high levels of unemployment and consumer caution are likely to restrict further economic recovery. Real assets held as bank collateral will continue to fall in value, renewing pressure on lending banks. It will become increasingly obvious that global and local economies are not returning to normal with the ending of the virus. Following an anaemic recovery from the easing of lockdowns, it will be apparent that central bank attempts to use a broken banking system to funnel credit to the non-financial economy is failing. Small and medium size enterprises, which typically contribute a Pareto 80% of all economic activity is unlikely to obtain the financial support more easily accessed by big business.

 

    • Residential property prices will fall, in many cases heavily, as a consequence of lack of demand, risk aversion among buyers and lack of affordable mortgage finance upon which prices are marginally based. Commercial property values will also decline, driven by falling retail and office demand. Both sectors are important loan collateral for the banks, adding to systemic woes.

 

    • Seeing deteriorating economic conditions, central bankers with an eye to the immediate effects on the consumer price index will be encouraged to double down on monetary inflation, principally to support financial markets. They will see it as the only way to keep their governments out of a trap comprised of a combination of rapidly rising debt and the cost of financing it.

 

    • Inevitably, government bond prices will begin to reflect the heightened levels of government deficits and the consequences of inflationary funding. Central banks will find they are the only significant buyers of government and corporate debt. Their resistance to raising interest rates will then be undermined by market reality.

 

    • The general public will be more concerned with rising food prices, energy, and others of life’s essentials, a process which has already started. Throughout history, it has been the economic and social destruction wreaked by the rising prices of these basics that has led to price controls and loss of public confidence in government money. At this point, the public is likely to finally realise that it is the currency that is losing its utility, and that it must be discarded as quickly as it is obtained.

 

Timing

Following a banking crisis, deteriorating economic and monetary conditions are likely to evolve more rapidly than circumstances might suggest. Information, global communications and the interconnectedness of markets all suggest it. The evolution of cryptocurrencies, such as bitcoin, has made millennial generations more aware of monetary debasement than their parents. But most importantly, by cutting off holding cash as an escape from bank deposits, an attempt by a population to move deposits out of banks will result in the immediate purchase of non-monetary goods. Cash has been regulated out of this function and the reservoir effect of it delaying the price consequences of a crisis no longer exists.

Governments and central banks can be expected to cooperate with each other to stop their currencies collapsing, but ultimately it is a matter for the general public. While inflations have persisted for considerable periods, the final collapse, when the public realises what is happening to money, in the past has typically taken between six months and a year. The German inflation 97 years ago started before the First World War, but its catastrophic phase can be identified as starting in May 1923 and ending the following November. John Law’s monetary collapse, the closest parallel to that of today, ran from approximately February 1720 to the following September.

In the run up to its collapse, Law’s Mississippi experiment depended increasingly on money-printing to support financial asset values. The same inflationary policies apply today. The end point of Law’s inflationary stimulation is lining up to be identical with our neo-Keynesian experiment, and on that basis alone is increasingly likely to come to a rapid conclusion.

[i] Youtube.com/watch?v=jGb9TpmfxOO

[ii] Can the UK Banks Pass the COVID-19 Stress Test? See http://eumaeus.org/wordp/index.php/2020/05/06/can-uk-banks-pass-the-covid-19-stress-test/

[iii] Source: Yahoo! Finance (accessed 19 May)

Gold Is the Best Money, by Doug Casey

The reasons gold has been money for many centuries haven’t changed, and it’s still Real Money. From Doug Casey at caseyresearch.com:

Editor’s note: Regular readers know we see gold as the ultimate safe-haven asset. And during a crisis like today, it’s critical that you own some gold in your portfolio.

If you haven’t yet, you’ll want to pay close attention to today’s classic essay from our founder, Doug Casey. Below, Doug lays out why paper currencies are “essentially worthless”… and why gold is the only dependable form of money.

By Doug Casey, founder, Casey Research

Doug Casey

It’s an unfortunate historical anomaly that people think about the paper in their wallets as money. The dollar is, technically, a currency. A currency is a government substitute for money. But gold is money.

Now, why do I say that?

Historically, many things have been used as money. Cattle have been used as money in many societies, including Roman society. That’s where we get the word “pecuniary” from: the Latin word for a single head of cattle is pecus. Salt has been used as money, also in ancient Rome, and that’s where the word “salary” comes from; the Latin for salt is sal (or salis). The North American Indians used seashells. Cigarettes were used during WWII. So, money is simply a medium of exchange and a store of value.

By that definition, almost anything could be used as money, but obviously, some things work better than others; it’s hard to exchange things people don’t want, and some things don’t store value well. Over thousands of years, the precious metals have emerged as the best form of money. Gold and silver both, though primarily gold.

There’s nothing magical about gold. It’s just uniquely well-suited among the 92 naturally occurring elements for use as money… in the same way aluminum is good for airplanes or uranium is good for nuclear power.

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Coronavirus Stimulus Spans Government Departments, Sectors, by Bill Bonner

Why would anyone think that if the government is giving out money that it would go anyplace other than to the best connected people and companies? From Bill Bonner at bonnerandpartners.com:

SAN MARTIN, ARGENTINA – As we pointed out last week, the C-virus seems to have set off the feds’ tendency towards jackassery.

That is, they always want to boss people around… to find an enemy… make war… spend money… rally gullible voters behind a Great National Cause…

…and rip off the public.

From MSN:

“We’re going to need really big thoughtful policies to put together to make it so that people are optimistic again,” White House economic adviser Kevin Hassett told reporters, warning that the U.S. jobless rate would likely hit 16% or higher this month.

“We hope to be talking to the president about it … to start to come up with the top five, six ideas that we want to take up with Congress,” he added.

Joe Biden in Politico:

The former vice president said that the next round of coronavirus stimulus needs to be “a hell of a lot bigger” than last month’s $2 trillion CARES Act, that it needs to include massive aid to states and cities to prevent them from “laying off a hell of a lot of teachers and cops and firefighters,” and that the administration is already “wasting a hell of a lot of money.”

Meanwhile…

War Economy

“This is a war,” says U.S. Treasury Secretary Stephen Mnuchin, “and we need to win this war and we need to spend what it takes to win the war.”

Win the war?

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The Great Government Gold Heist Of 1933, by SchiffGold

People buying gold hand over fist might want consider a precedent that’s already been set for the government taking that gold: Franklin Delano Roosevelt’s Executive Order 6102. From schiffgold.com:

Yesterday marked the anniversary of the great government gold heist of 1933 ordered by President Franklin D. Roosevelt.

On April 5, 1933, the president signed Executive Order 6102. It was touted as a measure to stop gold hoarding, but it was in reality, a massive gold confiscation scheme. The order required private citizens, partnerships, associations and corporations to turn in all but small amounts of gold to the Federal Reserve in exchange for $20.67 per ounce.

The executive order was one of several steps Roosevelt took toward ending the gold standard in the US.

With the dollar tied to gold, the Federal Reserve found it difficult to increase the money supply during the Great Depression. It couldn’t simply fire up the printing press as it can today. The Federal Reserve Act required all notes have 40% gold backing. But the Fed was low on gold and up against the limit. By stealing gold from the public, the Fed was able to boost its gold holdings.

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Coronavirus: Ten Things to Think About, by Justin Pavoni

Any actual thinking, as opposed to feeling or reacting, about coronavirus is to be encouraged. From Justin Pavoni at ronpaulinstitute.org:

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1. All of this can be solved by following the voluntary principle: If you are worried then stay home. If you are willing to assume the risk then go to work. Going to work means you may interact with people and thus get sick. It’s a risk. The other people at work took on this risk of their own choosing too. Life is full of risks. Not going to work has its own obvious risks associated with it. Let people choose their own paths based on their own risk tolerance and voluntary choices. Don’t impose your view via government force on those of us that peacefully disagree with you.

2. There have been 23,000 US deaths so far this year due to flu, 3,000 from coronavirus. Worldwide stats are roughly in parallel. Legitimate population samples and common sense show that the virus has infected way more people than reported by the immoral news organizations that make money off this hysteria. It is highly likely that REAL death rates are closer to .05 percent rather than the oft-emphasized 3 percent.

3. Social Distancing makes people distrust one another. People that are afraid of each other are easier to control. We just had a house fire and while nobody will shake my hand because they’re afraid to death of coronavirus, they’ll happily walk around in the burned down home without a respirator. Of course the burned down house is far more likely to be an immediate and serious health threat. Anyone else see a problem here?

4. I have already seen certain local governments posting websites for all of us to tell on each other for congregating in groups. My wife has had skeptical posts removed from Facebook. Sounds a lot like the secret police to me.

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The journey to monetary gold and silver, by Alasdair Macleod

The coronavirus and the current financial crisis may not be all bad. They’ll probably be the death of fiat money. From Alasdair Macleod at goldmoney.com:

Markets are just beginning to latch on to the economic consequences of the coronavirus. Central banks are slashing interest rates and beginning to throw new money into the mix and governments are increasing deficit spending.

Few analysts have yet to understand the enormous consequences of the coronavirus for missed payments and accumulating current debt, which is and will rapidly drain liquidity from wholesale money markets. It is increasingly certain that the eurozone’s banking system will require rescuing from insolvency with knock-on consequences for the global monetary system. Concern over the consequences for the $640 trillion OTC notional derivative market, particularly for $26 trillion of fx swaps, is so far absent.

Continuing on our theme that the fates of the dollar and US Treasury values are closely bound, the extraordinary overvaluation of the bond market will translate into a collapse for both. This article charts how the collapse of the dollar and financial asset values is likely to progress and concludes that we are witnessing the end of the neo-Keynesian fiat currency fantasy, which will be done and dusted with surprising rapidity.

Only then will sound money, after varying time periods for different nations, return.

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A Year After The Second MAX Crashed Boeing Is Faced With Ruin, by Moon of Alabama

Bet you Boeing wishes it had back the $43.4 billion it has spent buying its own shares since 2013. From Moon of Alabama at moonofalabama.com:

On top of the damage that misguided shareholder value policy caused to Boeing’s will now come the effects of an unprecedented pandemic. Together they may well signal the end of a once great company.

On March 10 2019 Ethiopian Airlines Flight 302 crashed shortly after taking off in Addis Adaba. All 157 people on board died. It was the second crash of a Boeing 737 MAX airplane six month after Lion Air Flight 610 had crashed and killed all 189 people on board.

Exactly a year ago Moon of Alabama published its first piece about the MAX. At that time all MAX planes were grounded except in the United States. We described Boeing’s shoddy implementation of the plane’s maneuvering characteristics augmentation system (MCAS) and concluded:

Today Boeing’s share price dropped some 7.5%. I doubt that it is enough to reflect the liability issues at hand. Every airline that now had to ground its planes will ask for compensation. More than 330 people died and their families deserve redress. Orders for 737 MAX will be canceled as passengers will avoid that type.Boeing will fix the MCAS problem by using more sensors or by otherwise changing the procedures. But the bigger issue for the U.S. aircraft industry might be the damage done to the FAA’s reputation. If the FAA is internationally seen as a lobbying agency for the U.S. airline industry it will no longer be trusted and the industry will suffer from it. It will have to run future certification processes through a jungle of foreign agencies.

Congress should take up the FAA issue and ask why it failed.

The MAX was developed and built as cheap as possible and not as safe as possible. Boeing cut corners and deceived its customers and  regulators. Its management had only one thing in mind – the stock price of Boeing and its so called shareholder value.

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