Category Archives: Money

Fed’s Lowest Lowball Inflation Measure Hits 30-Year High, by Wolf Richter

Don’t worry, though, because today’s inflation is “transitory.” From Wolf Richter at wolfstreet.com:

“Transitory” is the new Spandex.  

For its measurement of its inflation target – the “symmetrical” 2% – the Fed uses the “core PCE” inflation measure because it is the lowest lowball inflation measure the government publishes, and it understates actual inflation even more than other indices. “Core PCE” excludes food and energy, which can be volatile but make up a big part of what people on the lower half of the income scale spend their money on.

And today, this lowball core PCE measure of inflation rose by 3.62% compared to a year ago, the hottest inflation reading since May 1991:

The month-to-month increase of 0.331% was roughly the same red-hot as the month-to-month increase as in July (0.338%), according to the Bureau of Economic Analysis today. This works out to be an annualized pace of 3.9% (12 x 0.331%), which is higher than the current 12-month core PCE of 3.62%.

The PCE price index with food and energy included jumped by 0.4% for the month (4.8% annualized), and by 4.3% from a year ago. This is the hottest PCE inflation reading since January 1991:

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The No-coiners don’t get it: It’s not up to the government, by Mark Jeftovic

Cryptocurrencies don’t need governments’ permission. From Mark Jeftovic at bombthrower.com:

Prometheus Donation of Fire to Mankind – Wilhelm Luksch 1925-1927

My last couple of posts, the first on why a China-style Bitcoin ban can’t happen in Westernized liberal democracies  and the second on how cryptos are a beneficial counterforce to the coming CBDCs seem to have a hit a nerve.

More people than usual made the trip all the way over here to my blog to be sure to tell me how clueless I am and there was a lot of defeatism  in the comments on Zerohedge that all converged around a theme that governments will simply not permit the use of cryptocurrencies once their existence ceases to suit them.

I’ve been involved in cryptos since 2013, and for a long time I too was strategizing out the game theory around why would governments permit cryptos to gain traction.

It wasn’t until relatively recently, that I started to fully grasp something I read a long time ago, before all this crypto business ever started. It was in a rather obscure book by one W R Clement called Quantum Jump: A survival guide for the new Renaissance and it helped me understand the key point of today’s post.

I started alluding to it in A Network State Primer that described how what we understand as “the nation state” is in the process of losing relevance to ascendent network states and crypto-claves. You can chart out the structural differences between those three different governance models based on what the architecture of the monetary layer is:

When it comes to technological leaps like the internet and then public key cryptography and decentralized, non-state, sound money; those who eschew the new paradigms generally do so because they have difficulty fitting the new model into their worldview.

People like Alvin Toffler called this “Future Shock” and he ascribed it mostly to an accelerating rate of change. He wasn’t wrong about that, but what Clement layered atop of that was the ascending level of abstraction.

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Afghanistan: Where’s The Cash? by Eric Margolis

What happened to all the money the US government shipped into Afghanistan? What happened to all the money that was made from the opium trade, which flourished during the US occupation? From Eric Margolis at lewrockwell.com:

Afghanistan’s US-run government was the world’s largest producer and exporter of opium, morphine, and the end-product, heroin.

As it did after first seizing power in the mid-1990’s, Taliban, the Islamic anti-drug and anti-communist movement, is shutting down the Afghan drug trade. Billions worth of heroin, opium and morphine that had been flowing into Central Asia, Russia, Iran, Turkey, Pakistan and Southeast Asia will be sharply reduced. Afghanistan’s drug-based economy is now in dire jeopardy.

But you would not know this if you follow the biased western press, notably the big US TV networks, social media and the BBC which thinks it’s Britain’s old colonial office. Western media has focused almost exclusively on the supposed plight of well-off westernized Afghan women in Kabul. That’s all you see on TV.

That these pampered ladies can’t easily get their nails done is not Afghanistan’s biggest problem. Nor is the closing of dance studios or fashion boutiques.

What really matters is that Afghan wedding parties and villages are no longer being savaged by US warplanes or B-1 and B-52 heavy bombers, or that wide scale torture by the Communist-run secret police, whose head, Amrullah Saleh, was a key US ally and the nation’s real strongmen, has been ended by Taliban.

Meanwhile, western media simply ignores the plight of women in the Gulf and Saudi Arabia. I well recall being twice arrested in Jeddah, Saudi Arabia by religious police for walking with an attractive lady (an Estee Lauder beauty consultant).

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How we know that Bitcoin is a force for good, by Mark Jeftovic

Private cryptocurrencies like Bitcoin are the antidote to Central Bank Digital Currencies. From Mark Jeftovic at bombthrower.com:

Cryptos are the antidote to repressive Central Bank Digital Currencies

Yesterday I wrote up why I don’t think any kind of China-style ban on Bitcoin and cryptos would be tenable in (so-called) liberal democracies here in the West. It referenced an earlier piece that described the threefold governance structure I see competing for relevance over the coming decades.

Somebody linked to those in the comments from a Tom Luongo piece (which I rather enjoyed enough to subscribe to his newsletter) but when I read through some of the other comments around Bitcoin, how it’s a globalist Trojan horse for surveillance capitalism and social credit I realized I needed to get a piece out to speak specifically to this aspect of future governance.

I cover this a lot in The Crypto Capitalist Letter, in fact it’s a pillar of our macro economic thesis (which you can download free here). It all comes down to the differences between real crypto currencies like Bitcoin, Ethereum, Dash, Monero, et al and coming Central Bank Digital Currencies (CBDCs), like China’s Digital Yuan, like the coming FedCoin, and anything else that will be issued by central banks, directly from governments or even in conjunction with Big Tech platforms.

There are the two main types of digital money that will co-exist in the future.

Each type of digital money corresponds to a governance mode of the future. Which type of this money you make your own or your business’ financial centre of gravity will have an outsized impact on whether you live in the future as a neo-Feudal serf or as a sovereign individual.

Each one has its own fundamental architecture, and the governance and economics that result from those architectures reflect the governance models of the mode that is built on them. This is critical and builds on what I’ve been writing about for  years now, drawing on the work of relatively obscure commentators like Vincent Locascio and Steven Zarlenga. The latter who wrote in his Lost Science of Money, whoever controls the monetary system, controls society.

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Central Bank Digital Currencies: A Future of Surveillance And Control, by Ronan Manly

The only thing scarier than vaccine passports are Central Bank Digital Currencies. Undoubtedly the two will merge. From Ronan Manly at bullionstar.com via zerohedge.com:

One of the most potentially far-reaching trends in the financial landscape right now is the imminent roll-out of Central Bank Digital Currencies (CBDCs), and the parallel attacks which central bankers are waging on private digital currencies and tokens as they tee up the launch of their CBDCs.

First some clarifications. While the majority of central bank issued currencies (fiat currencies) in existence around the world are already in digital form, a fiat currency held in digital form is not the same as a Central Bank Digital Currency (CBDC).

What is a CBDC?

A CBDC generally refers to electronic or virtual central bank (fiat) money that is created in the form of digital tokens or account balances which are digital claims on the central bank. CBDCs will be issued by central banks and will be legal tender.

Many CBDCs that are being researched and developed employ Distributed Ledger Technology (DLT), with the recording of transactions on a blockchain.

However unlike private cryptocurrencies which use a permissionless and open design, CBDCs that use DLT will use permissioned variants (deciding who has access to the network and who can view and update records in the ledger). See here for a discussion of permissionless vs permissioned blockchains.

CBDCs – The antithesis to decentralized private cryptocurrencies and tokens

Critically, as the name suggests, CBDCs will be centralized and governed by the issuing authority (i.e. a central bank). So, in their design and structure, CBDCs can be viewed as the very antithesis to decentralized private cryptocurrencies and tokens.

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Perpetrators of Horrors, by Wanjiru Njoya

If you are white and British, you were born guilty. From Wanjiru Njoya at lewrockwell.com:

It has been announced that the good British people are the world’s leading perpetrators of horrors and will need to start paying out their slavery reparations right away. This is good news for all those on the receiving end of the payouts. It’s almost like winning the lottery. Everyone loves receiving free money from the government so it’s good to see reparations being promised. This might seem a bit unfair to any British taxpayer who has never personally perpetrated any horrors, but that’s too bad. They should have thought of that before choosing to be descended from horrid slavers and colonisers. Most people would agree that it’s only fair and just to make recompense for doing something bad even if you didn’t do it. The fact is that you live in a world where horrors occur, and that makes you a joint perpetrator of horrors. The balance of the world must now be restored. Time to pay up!

The Revd Dr Michael Banner said that Britons were the “leading perpetrators of the horrors” of slavery and that the “question of making recompense for them has to be faced”.

Britain should pay reparations for slavery, says Cambridge Dean

It’s not yet clear how this will work. A few questions need to be answered. For example, what is meant by ‘Britons’? Do Britons have to be white to be guilty of perpetrating horrors? Will there be an exemption for black Britons? Do Britons have to be rich in order to incur liability for the perpetration of horrors? Or will poor Britons also have to pay up for any ancestral horrors that they didn’t commit?

Most likely, to make it more fair, it will be funded from taxes and become a national institution that could be called Our Reparations. The Royal Family could go out on their doorsteps every week, with all their children standing in a row, to clap for Our Reparations. HMRC could volunteer to collect our contributions through payroll taxes. It would not cost very much. Taxes would only have to go up the slightest little bit, you wouldn’t even notice. And anyway if you’re a Briton then paying higher taxes is the least you could do to account for your horrors. It’s a tax designed to heal all Our Wounds so you should be proud to help with the national healing effort. It’s a matter of national pride finally to wash away the stain of colonialism and make us all whole again. Think of it more like paying the Wages of Sin and earning your redemption.

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Biden’s Total Financial Surveillance, by Matt Welch

Coming soon: the government will know every noncash cent you receive or spend. From Matt Welch at reason.com:

What if every one of your noncash financial transactions was automatically reported to a beefed-up, audit-hungry IRS?

Imagine living in a world where every one of your noncash financial transactions—a restaurant meal, a Venmo transfer to a friend, maybe some bitcoin bought on the dips—was automatically reported to a beefed-up, audit-hungry IRS.

That dystopia will become a reality if President Joe Biden gets his way. Biden, Treasury Secretary Janet Yellen, and key Capitol Hill allies such as Sen. Elizabeth Warren (D–Mass.) are pushing a vast, intrusive financial surveillance system in the name of closing the “tax gap.”

But don’t worry: There’s no need to fear if you’ve got nothing to hide.

“For already compliant taxpayers, the only effect of this regime is to provide easy access to summary information on financial accounts and to decrease the likelihood of costly ‘no fault’ examinations,” the Treasury Department said this May in a nakedly authoritarian document called “The American Families Plan Tax Compliance Agenda.” But “for noncompliant taxpayers,” the department continues, “this regime would encourage voluntary compliance as evaders realize that the risk of evasion being detected has risen noticeably.”

The administration’s proposed “comprehensive financial account reporting regime” would dramatically increase the types of financial institutions and transactions exposed to the feds’ prying eyes. “All business and personal accounts from financial institutions, including bank, loan, and investment accounts,” would be forced to “report gross inflows and outflows” to the IRS. And not just bank accounts: The dragnet would now include PayPal, settlement companies, and “crypto asset exchanges,” for starters.

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How Nixon and the Rockefellers Teamed Up to Destroy the Dollar, by Patrick Newman

Nixon had a choice: save the international monetary system or win the 1972 election. He chose the latter and through the former down the drain. In this, he was supported by the Rockefellers. From Patrick Newman at mises.org:

August 15 marks a special date in American history: it commemorates the fiftieth anniversary of President Richard Nixon’s suspension of Bretton Woods. With this decision, the United States stopped redeeming foreign governments’ and banks’ dollars for gold. Consequently, the world economy transitioned to unconstrained central bank discretionary monetary policy, an unprecedented era in monetary affairs.

The traditional justification for such a momentous decision utilizes highfalutin rhetoric and appeals to the public interest: the gold constraint restricted the ability of wise economic planners to fine-tune the economy. However, as I document in Cronyism: Liberty versus Power in Early America, 1607–1849 (forthcoming, Mises Institute, October 2021), the actual reasons for government policies are due to self-interested politicians rewarding themselves and favored business interests at the expense of the public. Bretton Woods is no exception: Nixon suspended gold convertibility to enhance his 1972 reelection chances and benefit the Rockefeller-dominated Chase Manhattan Bank and other expansionary banking interests at the cost of higher inflation. When it comes to government, privileged interests always come before the public.

Nixon is one of America’s most notorious presidents because of his resignation following the Watergate scandal. This infamous attempt to steal the 1972 election is not the only aberration in Nixon’s career; all his life he was paranoid about elections and wanted to win at all costs. The former vice president was convinced that Federal Reserve contractionary monetary policy denied him the 1960 presidential election against John F. Kennedy. Nixon also insisted that Fed restrictionism contributed to Republican setbacks in the 1970 midterms. He was so concerned about elections that after assuming office in 1969 he candidly told his White House advisers that “political considerations” will often override the “economic standpoint.”1 At the top of his priorities was ensuring victory in 1972. To accomplish this, Nixon wanted the Fed to provide “a rate of monetary expansion sufficient to move the economy up on the desired path.”2

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Nixon’s Gold Treachery Made Me a Cynic, by James Bovard

Closing the gold window—making the dollar a fiat currency—plumbs the absolute depths of cynicism. From James Bovard at aier.org:

Fifty years ago, on August 15, 1971, President Richard Nixon announced that the U.S. government would cease honoring its pledge to pay gold to redeem the dollars held by foreign central banks. Nixon declared he was taking “action necessary to defend the dollar against the speculators.” But there was no way to defend the dollar against politicians. Nixon touted his default as therapy for his tormented fellow citizens, promising it would “help us snap out of the self-doubt, the self-disparagement that saps our energy and erodes our confidence in ourselves.” Nixon wrapped his decree with lofty political rhetoric, appealing to the nation’s “greatest ideals” and promising a “new prosperity” that “befits a great people.”

The dollar thus became a fiat currency – something which possessed value solely because politicians said so. Nixon spurred the Federal Reserve to create an artificial boom to boost his reelection campaign. To suppress the damage from a flood of new money, he imposed wage and price controls, making it a crime to raise prices without government permission.

At that time, I was working in a peach orchard in rural Virginia for 10 hours a day, reaping $1.40 an hour and all the peach fuzz I could take home on my arms and neck. Nixon’s wage controls doomed any chance of getting that raise to $1.45 an hour. But no loss – I was leaving that job soon to go back to high school. I was 15 at that time and an avid coin collector. I soaked up the rage at the reckless federal policies that permeated Coin News and other numismatic publications.  “Government as scoundrel” was the theme of many editorials and articles I read in those periodicals in the following months and years. I had no savvy on economics but my gut sense told me something was profoundly amiss. Nixon’s decree spurred my reading and researching.

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Richard Nixon’s Dirty Deed – 50 Years Later, by David Stockman

Nixon closing the gold window may have sealed the death of the republic. From David Stockman at David Stockman’s Contra Corner via lewrockwell.com:

It is perhaps fitting that on the 50th anniversary of Richard Nixon’s dirty deed in August 1971, the US Senate saw fit to pass a budget resolution that will add $3.5 trillion of additional girth to the nation’s already bloated and unaffordable Welfare State. As Forbes properly noted,

The Senate on Wednesday set the stage for the biggest expansion of the federal social safety net since the advent of modern-day food stamps, Medicare and Medicaid in the 1960s, approving a blueprint for a massive $3.5 trillion budget bill aimed at “restoring the middle class” through a slew of government initiatives – including universal preschool, tuition-free community college and a new federal health program – while combating climate change and hiking taxes for the ultra-wealthy.

We make the connection between the Senate’s latest welfare bonanza and Tricky Dick’s severing of the dollar’s link to gold because on that fundamental matter, Alan Greenspan was actually correct. We are speaking, of course, of the Greenspan of 1966 before he fell off the wagon in pursuit of government power, position, praise and pelf.

In his seminal but now forgotten speech called “Gold and Economic Freedom”, the proto-Maestro observed,

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation There is no safe store of value……The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.

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