Tag Archives: Fiat debt instruments

Why The Cantillon Effect Creates Communism, by Mark E. Jeftovic

Posted on May 30, 2022 | Leave a comment

With fiat debt instruments, those who are the front of the receiving line for the government or central bank do much better than those at the rear. The resentment of the latter is a fertile breeding ground for communism or other collectivist “isms.” From Mark E. Jeftovic at bombthrower.com:

Turns out Keynes was a Commie

Awareness of the centuries old concept of The Cantillion Effect has been experiencing a revival of late, particularly since the extraordinary acceleration of monetary injections that occurred under COVID. Named for the French-Irish economist who died in 1734 (he was murdered), the Cantillon Effect is when you create a bunch of new money and inject it into an economy. What happens is the people at the front of the line who receive the new money first become wealthier, while the people at the end of the line who receive it last are further impoverished.

The Cantillon Effect

This is not peculiar to the post-Covid era. For more than a decade I’ve been describing how rampant money creation and credit expansion skews formerly free markets into a kind of economic vampirism, without actually knowing there was a term like this to describe it.

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Are We Really Crazy Enough to Believe This Is Going to Work? By Charles Hugh Smith

Posted on October 15, 2021 | Leave a comment

Crazy is believing a house of cards built on a foundation of sand will stand. From Charles Hugh Smith at oftwominds.com:

Unbeknownst to the giddy participants, they’re not just betting on the omnipotence of the Fed Politburo, they’re also making a max-leverage bet that “the madness of crowds” will never end.

Imagine an economy so dominated by its central bank that all markets hang on every word of its priesthood as life or death. You know, like the Federal Reserve and the American economy.

Now imagine this central bank issues enormous sums of new money which supercharges speculative activity such as hundreds of billions of dollars in stock buybacks, special purpose acquisition casinos, oops, I mean companies, and so on. You know, like the Federal Reserve’s trillions in nearly free money for financiers.

Next, imagine that the central bank makes barely concealed promises that should any big gambler lose money in the casino, the bank will flood the financial system with even more nearly free money for financiers and bail out the loser.

Since flooding the system with nearly free money for financiers keeps the speculative frenzy going, the bank has implicitly promised that assets driven higher by speculative frenzy will never be allowed to drop. This promise naturally incentivizes even more speculative borrowing, leverage and risk, generating a titanic Everything Bubble in which risky assets skyrocket from pennies into dollars and dollars into fortunes.

Now imagine that this speculative frenzy spreads into every nook and cranny of the economy such that everyone is drawn into one casino or another, and previously sober, cautious people are seized by a quasi-religious fervor in which they become convinced that their gambling chips on NFTs, SPACs, meme-stocks, obscure alt-coins, homes, collectables and pretty much anything within the manic swirl of speculative frenzy is now a can’t lose path to carefree permanent wealth because the central bank guarantees it and anyone who questions this is in league with the Devil (or worse).

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Will Gold Reach Unthinkable Heights? by Egon Von Greyerz

Posted on October 11, 2021 | Leave a comment

If the world’s governments and central banks continue to create unthinkable amounts of fiat debt instruments, gold’s price as measured against those instruments could well reach unthinkable heights. From Egon Von Greyerz at goldswitzerland.com:

It serves no purpose to hold gold.

Why should anyone hold gold when it has lost value against most other assets since 2009. At the end of this article, I will tell you when you must not hold gold and why I think gold will reach new highs shortly.

Making money is a cinch in today’s stock markets so why do I need gold?

For the investors who have managed to combine a good portion of luck with modest investment skills, they could have made 2,000X their money since 1997 on Apple or 2,170X on Amazon, also since 1997.

So $10,000 invested in both Apple and Amazon in 1997 would today be worth a neat $40 million.

BITCOIN IS UP 470,000X

And what about Bitcoin? If you spent $10,000 on Bitcoin in 2010 at 10 cents, you would today have 100,000 BTCs worth $4.7 billion. If you did, you hopefully haven’t lost your key.

But to rely solely on electronic entries on a computer or memory stick is clearly a very inferior form of wealth preservation.

Also, hindsight is a wonderful investment method and the most exact of all sciences.

Yet, you didn’t need to be an expert stock picker to make money in recent decades.

If you for example spent $10,000 on the Nasdaq in 2009, you would today have over $140,000 and that without selecting one single stock.

But by using 2009 as starting point, you will have conveniently forgotten that you had before that lost 80% on the Nasdaq since 2000.

So we can always prove the ultimate performance by choosing the right starting point.

GOLD – WORST ASSET CLASS SINCE 2011 AND BEST SINCE 1999

When gold antagonists want to disprove gold’s virtues, they choose the 1980 top as $850 as starting point. They then deride gold investors that it took 28 years before that level was reached again. They conveniently forgot to mention that gold reached new highs between1971 and 1980, going up 24X.

Stock investors could also point out that they have outperformed gold by 200% since 2011. But they forget to mention that since 1999 the Dow has lost 60% against gold (excluding dividends).

Again, this shows is that you can always prove the investment performance by picking a suitable starting point.

Still, it is an undeniable fact that gold has been the best asset class in this century.

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Four Unreported Signs Paper Money is Dying, by Matthew Piepenburg

Posted on September 6, 2021 | Leave a comment

Any so-called asset whose value, based on historical precedent, is destined for zero is therefore destined to die. From Matthew Piepenburg at goldswitzerland.com:

Below, we look at four deliberately ignored reasons why extreme liquidity is drowning paper money.

Reason 1: The Taper Debate May Not be a Debate at All

Here, we look past the taper headlines and ask a simple question: Would a Fed “tapering” of QE really matter?

As we’ve written elsewhere, the Great Taper Debate is less of a debate than it is a pundit circus, forever fueling now classic yet complimentary debates on inflation vs. deflation, gold vs. the dollar and Fed-speak vs. honesty.

Of course, such topics, including the great “taper,” are all critical issues worthy of opposing views and somber discussions.

The world needs open, transparent and respectful (as opposed to tyrannical) debate, now more than ever.

If the Fed, for example, were to taper money printing, it’s logical to assume (and argue) that this would mean falling bonds, rising rates, deflationary forces, a stronger dollar and massive headwinds for risk assets like stocks and real estate.

But for many who are not otherwise deeply ensconced into the weeds of Wall Street (i.e., normal, smart and conscientious investors), what they may not know is this: The Fed has other tricks up its liquidity sleeve than just “QE.”

Stated otherwise, the taper fears as well as taper debate may not be as central to the central bank debate as one might think.

Why?

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It Got Serious In A Hurry, by Robert Gore

Posted on April 1, 2021 | 38 comments

He’s a joke, but nobody’s laughing.

Trump’s five years were fun. He said things that provoked outrage among all the right people, often because they were true. You could laugh at their hypocritical idiocies, hysterical posturing, and sputtering anger. To paraphrase Oscar Wilde, anyone who can watch Keith Olbermann or Rachel Maddow without laughing has a heart of stone. Frothing anger fueled effort after effort to depose Trump until success was realized with overblown pandemic panic, riots, and a clearly rigged election. If nothing else, Trump exposed the mendacity, arrogance, incompetence, venality, and criminality of the Corruptocracy.

Reality doesn’t invert. A corollary is that the severity of consequences from an inversion is the square of the distance between the inversion and reality. Consider the US military. It has disregarded the realities of the wars it has fought—the relative difficulty of invasion versus defense, the deadly effectiveness of guerrilla warfare and insurgency, the corruption, tyranny, and lack of domestic support for our puppets, and so on—losing every conflict since WWII, often after lengthy and in some cases ongoing engagements.

The current crop of corruptocrats have introduced yet another inversion in the military, the woke inversion. The military will now be graded on its commitment to combat-irrelevant factors: the racial, ethnic, gender, sexual preferences and political creeds of its forces, and their professed fealty to regnant political dogma. In other words, “diversity” in everything but thought.

This inversion is huge and given the distance squared corollary, it will soon render the armed forces incapable of fighting even a war for the protection of the United States proper. Given its ineptitude fighting offensive wars, the military will be completely useless. The defense budget, however, will grow ever more bloated.

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Joe Biden aspired to mediocrity in his prime and it’s been downhill ever since. As for Kamala Harris: some are born hacks, some achieve hackness, and some have hackness thrust upon them. She’s all three. They and their string-pullers have taken things from fun to serious—deadly serious—in a little over two months.

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Posted in Banking, Business, Collapse, Cronyism, Currencies, Debt, Economics, Economy, Energy, Environment, Eurasian Axis, Financial markets, Foreign Policy, Geopolitics, Governments, History, Media, Politics, Propaganda, Taxes, War

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How We Stumbled to the Edge of the Cliff, by Charles Hugh Smith

Posted on March 20, 2021 | Leave a comment

Like Butch and Sundance (I know I’m dating myself, I don’t care) at the edge of the cliff, the economy’s got nowhere to go but down. From Charles Hugh Smith at oftwominds.com:

Oops. Looks like the Fed’s magic (and our luck) have finally run out.

Now that we’re teetering on the edge of the cliff, it might be a good idea to retrace how we stumbled down to this crumbling, precarious ledge. As I’ve discussed for the past 15 years, there are a handful of systemic forces that have taken us to the point of no return.

1. Demographics have reversed from tailwinds to headwinds. All sorts of extravagant promises could be made back when there were 10 workers paying taxes to support each retiree/state dependent. Now that we’re down to less than 2 full-time workers for each retiree/state dependent, the promises are impossible to keep, with the one exception of printing the trillions of dollars that were anticipated to be paid in taxes–that is, creating near-infinite sums of funny-money out of thin air and hoping the rest of the world will continue to accept it. History doesn’t have any examples of that working, but hey, we’re special and this time it’s different. Oh, right…

The Narrative Of Inflation Amid Depopulation

Just Charts of Demographics (Econimica)

2. The fuel of postwar prosperity, oil, is no longer cheap enough or abundant enough. A great many people are delighted to put their faith in renewables (actually replaceables, as Nate Hagens has described) but as Tim Morgan has explained, the era’s secular stagnation that so puzzled conventional economists can be traced back to the decline in cheap energy available per capita: Mapping the economy:

“The cost element is known here as ECoE (the Energy Cost of Energy), which has been rising relentlessly over an extended period. Whilst ECoE remained low, its omission mattered much less than it does now. This is why conventional, money-based economic modelling appeared to work pretty well, until ECoE became big enough to introduce progressive invalidation into economic models. This process can be traced to the 1990s, when conventional interpretation noticed — but could not explain — a phenomenon then labelled ‘secular stagnation’.”

I addressed the relationship between hydrocarbons and stagnation in Oil and Debt: Why Our Financial System Is Unsustainable. (2/25/21)

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Calling the Holdings of Central Banks “Assets” Is a Travesty, by Egon von Greyerz

Posted on February 22, 2021 | Leave a comment

Central Banks are holding trillions of dollars in fiat debt instruments issued by governments that will never be repaid. From Egon von Greyerz at goldswitzerland.com:

Akhlys, the Greek goddess of Misery and Poison, is exerting a major influence on the world currently. And sadly the dosage of misery and poison will increase in coming months and years.

What is now crystal clear is that this excess dose of fake assets and fake liabilities will totally poison the financial system and the world economy.

As Paracelsus, the renowned 16th century Swiss physician said; “all things are poison, it is the dosage that makes it either a poison or a remedy.”

When a world already in trouble was hit by a severe financial crisis in September 2019, the dose of debt was already excessive. But as the Fed and the ECB opened the money spigots fully, they filled the world with poisoned or fake money. The BY team (Biden & Yellen) will now be certain to finish this process with their profligate spending plans.

MAJOR CENTRAL BANKS BALANCE SHEETS UP 6X SINCE 2006

The financial system has been poisoned for decades by governments’ excess spending and central banks’ prodigal printing of toxic and worthless money.

And now, with Covid, they have the perfect excuse to senselessly create trillions of dollars, euros, yuan or yen. The world doesn’t realise that this money, fabricated by pressing a button, is no different from the Monopoly board game money.

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Klaus Schwab’s “Magic Money Tree” Prediction is Coming True, by Joseph Jankowski

Posted on January 24, 2021 | Leave a comment

Fiat debt instruments, otherwise known as “magic money” are the cure for all our economic woes. From Joseph Jankowski at planetfreewill.news:

Klaus Schwab, Founder and Executive Chairman, World Economic Forum at Global Shapers Annual Summit of the World Economic Forum in Geneva, September 2019 | FWEC/Flickr

If you knew where the tree that grew money from its branches settled, wouldn’t you want to shake it? Of course you would. You’d in fact, want to shake it as often as you could.

Comparing central bank monetary policy to a money tree isn’t a perfect analogy but to someone with little knowledge of the consequences of printing too much currency and going too far into debt, the difference between “quantitative easing” and a magic tree is nil.

Reports are now surfacing showing that voters are becoming upset that their elected representatives may not send out the campaigned promise of a direct payment of $2,000.

When announcing his $1.9 trillion “stimulus” package, Biden skimped on his vowed $2k payment with a new promise of $1,400 which would “top off” the $600 sent to Americans under President Trump.

“If you send Jon and the reverend to Washington, those $2,000 checks will go out the door, restoring hope and decency for so many people who are struggling right now,” Biden said at a rally for Senators Raphael Warnock and Jon Ossoff.

Both Warnock and Ossoff made it a point to make the promise of $2,000 payments a part of their bid to obtain votes from the people of Georgia. Ossoff, in particular, often used his lip service to the payment to attack his opponent, David Perdue, in the run-off race.

Rogelio Linares, an Atlanta native and Democratic canvasser during the runoff elections, told Mediaite that he feels “like shit” over the fact that the next stimulus payment may not be as large as he was promised and called it “a betrayal of the working class.”

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The Sisyphean Folly of Printing Press Money, by MN Gordon

Posted on November 29, 2020 | Leave a comment

Central bankers believe that every economic ill can be cured with their fiat debt instruments, and if the ill isn’t cured, throw more fiat debt at it. From MN Gordon at economicprism.com:

Something remarkable happened on Tuesday.  The Dow Jones Industrial Average (DJIA) broke the 30,000 point barrier for the first time ever.  President Trump commemorated the feat by calling the number “sacred.”

Some Americans were especially grateful as they said their Thanksgiving Day grace.  These generally include wealthy owners of stocks and other financial assets.  Forty years of inflationary monetary policies have elevated their prosperity to holiness.

The remaining Americans, through no fault of their own, missed out on these sanctified blessings.  Perhaps they’ll get some leftover table scraps for Christmas.  These, indeed, are the questions being asked.

Will Washington make this a Merry Christmas for cash strapped Americans?  Will the Treasury send out a second round of $1,200 stimulus checks for the yuletide?  Will Congress be Ebenezer Scrooge or Mr. Fezziwig?

These are important questions as 2020 approaches its twilight.  And this is the season of giving.  After months of rolling lockdowns ordered by state and local governments Americans need relief.  Moreover, they must first receive from Uncle Sam so they can give to their fellow kindreds.

This was a recent finding of a Franklin Templeton-Gallup survey.  Specifically, the survey found that 16 percent of Americans plan to spend more on holiday gifts this year.  But with another $1,200 stimulus check, 22 percent of Americans say they will spend more this holiday season.

Somehow, Christmas spending has become dependent on government stimulus checks.  But, remember, government stimulus is dependent on printing press money.  And printing press money is dependent on the dollar retaining some semblance of value.

Thus, herein lies the sacred folly.  The more that printing press money’s emitted, the more value the dollar loses.  We’ll have more on what this means for you and your wealth in just a moment.  But first some context…

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