SLL agrees with Charles Hugh Smith that no amount of free money and central bank machinations will save the global financial and economic systems once they start to fail. From Smith at oftwominds.com:
Once the contagion starts spreading, loose money won’t put the fires out.
As the nation’s political and economic leaders struggled to contain the 2008 financial meltdown, President George W. Bush famously summed the situation up: “If money doesn’t loosen up, this sucker will go down.”
Eleven years into the loose money recovery, this sucker is finally going downfor reasons that have little to do with tight money and everything to do with the inconvenient fact that none of the structural problems have been addressed, much less actually fixed.
We live in a bizarre world dominated by magical-thinking, a world in which the Federal Reserve creating more dollars out of thin air is supposedly the solution to everything, while all the knotty structural problems–unsupportable pensions and entitlements, unsustainable dependence on debt to fund everything from infrastructure to a new iPhone, a sickcare system that is bankrupting the nation, a higher education system that is looting an entire generation for diplomas with marginal market value, a runaway National Security State that burns trillions on unwinnable wars and lies about it–are left untouched because they’re, well, difficult, and it’s so much easier to say that looser money will solve everything.
Take interest rates to zero or negative, and you’ve rendered time worthless, at least in a monetary sense. That threatens one of the foundations of civilization. From Claudio Grass at lewrockewell.com:
When I was asked to write an article about the impact of negative interest rates and negative yielding bonds, I thought this is a chance to look at the topic from a broader perspective. There have been lots of articles speculating about the possible implications and focusing on their impact in the short run, but it’s not very often that an analysis looks a bit further into the future, trying to connect money and its effect on society itself.
Let us begin with a basic question, that lies at the heart of this issue: Who profits from a loan that is guaranteed to pay back less than the amount borrowed? Obviously, it is the borrower and not the lender, which in our case is the government and those closely connected to it. Negative rates and negative yielding bonds, by definition favor the debtors and punish the savers. In addition, these policies are an affront to basic economic principles and to common sense too. They contradict all logical ideas about how money works and they have no basis and no precedent in any organic economic system. Thus, now, in addition to the hidden tax that is inflation, we also have another mechanism that redistributes wealth from the average citizen to those at the top of the pyramid.
Posted in banking, Capitalism, Civil Liberties, Collapse, Debt, Economics, Economy, Governments, Money
Tagged central bank policies, Negative interest rates, Time value
You can have market-driven financial markets or you can have central bank-driven financial markets, but you can’t have both. From Raúl Ilargi Meijer at theautomaticearth.com:
It wasn’t really the plan to make this a series, but it seems to have turned into one. Part 1 is here: The Fed Detests Free Markets. Part 3 will follow soon. And yeah, I did think perhaps I should have called this one “End The Fed” Is No Longer Enough. Because that’s the idea here. But what’s in a name?
Okay, let’s talk a bit more about finance again. Though I still think this requires caution, because the meaning of the terminology used in such conversations appears to have acquired ever more diverse meanings for different groups of people. Up to the point where you must ask: are we really still talking about the same thing here?I’ve said multiple times before that there are no more markets really, or investors, because central banks have killed off the markets. There are still “contraptions” that look like them, like the real thing, but they’re fake. You can see this every time a Fed chief opens their mouth and every single person involved in the fake markets hangs on their lips.
They do that because that Fed head actually determines what anything will be worth tomorrow, not the markets, since the Fed buys everything up, and puts interest rates down so more people can buy grossly overpriced property and assets, and allows companies to buy their own shares so nobody knows what they’re worth anymore.
Posted in banking, Business, Capitalism, Collapse, Debt, Economy, Financial markets, Governments, Pensions
Tagged central bank policies, Low interest rates, Savings
The price of goods and services tends to go to their marginal costs of production, which in the case of fiat currencies is virtually zero. From Doug Casey at internationalman.com:
“Inflation” occurs when the creation of currency outruns the creation of real wealth it can bid for… It isn’t caused by price increases; rather, it causes price increases.
Inflation is not caused by the butcher, the baker, or the auto maker, although they usually get blamed. On the contrary, by producing real wealth, they fight the effects of inflation. Inflation is the work of government alone, since government alone controls the creation of currency.
In a true free-market society, the only way a person or organization can legitimately obtain wealth is through production. “Making money” is no different from “creating wealth,” and money is nothing but a certificate of production. In our world, however, the government can create currency at trivial cost, and spend it at full value in the marketplace. If taxation is the expropriation of wealth by force, then inflation is its expropriation by fraud.
The Federal Reserve is the government’s main monetary super-planner. Whatever such an arrangement is called, it is not capitalism. From Jacob G. Hornberger at fff.org:
The Federal Reserve is the federal entity charged with determining the quantity of money in the American economy. To boost the economy, it expands the money supply. If the economy gets too “overheated,” it slows the rate of increase.
In other words, the Fed is the government’s monetary central planner. It plans the monetary affairs of hundreds of millions of people through monetary manipulation.
Central planning is a core principle of socialism. Central planning rejects the concept of economic liberty and free markets, which rely on the absence of government interference. Instead, it relies on a board of government officials who make economic decisions for hundreds of thousands or millions of people in a top-down, command-and-control manner.
The old fiat-debt black magic isn’t working too well anymore. From Charles Hugh Smith at oftwominds.com:
All the status quo “fixes” only hasten the collapse of the status quo.
That economic, social and political conflict is accelerating is self-evident.What’s open to debate are the core drivers of conflict / disorder /unraveling.
Here’s the core self-reinforcing dynamic in my view:
1. The status quo elites can no longer mask soaring costs of essentials nor soaring wealth / income inequality between the top .01% (Oligarchs), the top 9.99% who enrich the Oligarchs with their discretionary spending and technocratic/managerial labor, and the bottom 90% who are rapidly losing ground on all fronts: economic, social and political.
2. The elites’ “fixes” to the social / political conflicts unleashed by the rigged financial system and winner take most economic order are politically expedient, meaning they don’t actually address the sources of conflict, they merely paper them over with PR as a means of preserving the elites’ wealth and power.
Posted in banking, Collapse, Cronyism, Currencies, Debt, Financial markets, Governments, Insurrection, Money, Politics
Tagged central bank policies, Elites, Globalism
Many of the currently homeless were once members of the middle class who ran into hard times during the 2008-2009 financial crisis or its aftermath. From Doug Casey at internationalman.com:
International Man: There is a growing homeless crisis in liberal West Coast cities, including San Francisco, Portland, Seattle, and many others. People living on the street are overrunning these cities.
Residents must deal with human feces, syringes, disease, and filth every day. In some areas, it’s worse than the dirtiest slums of Brazil, Kenya, and India.
How did this happen?
Doug Casey: Well, taking a long-term view, I see it as part of the continuing decline of Western civilization.
The West has always been distinguished relative to the rest of the world by its order, its cleanliness, its respect for property rights. These things are all going by the wayside. We were a middle class society with “bourgeois” values, essentially Boy Scout virtues. But these things are now held in contempt, even while the middle class is being squeezed. “Ground between the millstones of taxation and inflation,” as the phrase attributed to Lenin puts it.