Tag Archives: Fiat debt

Addictus Stimulitus, by David Stockman

Sooner or later more fiat debt isn’t going to work. From David Stockman at davidstockmanscontracorner.com via lewrockwell.com:

It’s hard to say who is loonier – the guy in the White House East Wing hopped up on steroids or the Wall Street robo-machines and Robin Hooders who slobber incontinently upon the slightest hint of another “stimulus” injection.

Either way, exactly seven hours after he implanted a tiny quotient of sanity into Washington’s fiscal madhouse yesterday afternoon by terminating talks on Everything Bailout 5.0, the Donald proved once again that he is a clear and present danger to the nation’s solvency and that Wall Street is flat-out disease-ridden with addictus stimulitis.

The fact is, the airlines don’t deserve nor need a bailout, while the idea of handing out another $135 billion of walking around money to small businesses who might otherwise lay-off redundant employees is just plain ludicrous.

Of course, the Donald doesn’t have a clue about the fact that the future taxpayers, who would bear the burden of servicing another $160 billion of public debt incurred for these two illicit purposes, are not mules to be drafted in behalf of his re-election campaign. That’s perhaps why 30 minutes latter he upped the ante by another $300 billion, promising to instantly mail a check for $1,200 (adorned by his signature) from Uncle Sam’s depleted treasury to 160 million Americans (plus a $500 tip for their kids), the overwhelming share of whom didn’t lose their jobs and don’t need the money.

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The 21st Century Is Marked By Crisis and Political Division, by Bill Bonner

We’re twenty percent into the 21st century and it hasn’t been a great start. From Bill Bonner at rogueeconomics.com:

Week 26 of the Quarantine

In this bright future, you can’t forget your past.

– Bob Marley

SAN MARTIN, ARGENTINA – What a colossal flop!

We’re talking about the 21st century. A failure in almost every way.

We now have 30 million people on unemployment – nearly 20% of the labor force.

We have a budget deficit of nearly 20% of GDP.

And, despite already spending $2 for every $1 they collect in taxes, the feds are planning to spend more.

We have phony “conservatives” waving the flag… and real radicals trying to tear it down. On both sides are more and more loonies, locked and loaded…

Even many of our own dear readers are ready to go to war with each other. This is from yesterday’s mailbag:

Hey Dude, we are at WAR! Trump leads the Win-the-War Party! The Neo Repubs are the “What? Me, worry?” Party. And you are like the pet dog nipping at the heels of the soldiers marching past!

No matter the cost, we must win the war against socialism and the Ds. There is time enough to purify ourselves after we win! If we lose, it will be a “thousand years” before our experiment is tried again… Meanwhile it is your obligation to support those who are fighting, regardless of technique and strategy… TRUMP!

Nasty Themes

It is hard to figure out how an administration that declares a moratorium on rent collection, stifles free trade, and runs a deficit of 20% of GDP could save us from socialism… But in this great 21st-century future, wonders never cease.

This week, in this “new normal,” we’ve been trying to remember what the “old normal” was like. And was it really better? Or is it just us?

We recalled what it must have been like when we were born. Of course, it was a very different world back then.

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Dear Jerry and James: You’re Both Wrong About New York, by Charles Hugh Smith

The merchants of debt took over New York and other cities after President Nixon cut the dollars link to anything real back in 1971. From Charles Hugh Smith at oftwominds.com:

The “system” known as a city, now bloated and overgrown by decades of mal-investment, will be forced to become self-supporting.

So let’s look at the urban exodus that’s exciting so much commentary. Two essays pin each end of the urban exodus spectrum: James Altucher’s NYC Is Dead Forever, Here’s Why focuses on the technological improvements in bandwidth that enable digital-economy types to work from anywhere, and the destabilizing threat of rising crime. In his telling, both will drive a long-term, accelerating urban exodus.

Jerry Seinfeld’s sharp rebuttal, So You Think New York Is ‘Dead’, focuses on the inherent greatness of NYC and other global metropolises based on their unique concentration of wealth, arts, creativity, entertainment, business, diversity, culture, signature neighborhoods, etc.

Today I’m publishing a guest essay on the topic by correspondent R.J.:

Dear Jerry and James: You’re Both Wrong About New York, And I doubt you’ll ever be able to see why.

Fifty years ago, cartoons of New York Mayor John Lindsay were splashed across the editorial pages of American media. Pockets emptied and with a comical expression, he was depicted as a pathetic beggar, hoping somebody, anybody would loan his city the money it desperately needed to continue paying its bills.

His challenge was reflected in just about every other major city, where commercial flight, infrastructure rot, and population loss was on-going and devastating to already corrupt civic finances.

Turned out cities weren’t selling what people wanted to buy. People wanted space, property, and autonomy—the supplies of which cities are specifically designed to restrict for their leader’s own personal aggrandizement. The unprecedented prosperity of the postwar years created a large American middle class with options.

And they opted to move out.

So the city’s economic model fell apart.

Yet twenty years later after John Lindsay went begging, most large cities were experiencing a civic renaissance–with investments in world-class infrastructure, an influx of youth and talent, and rates of population growth that would rival previous heydays.

Budgets were even being balanced.

What happened?

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Financial System – A Hubristic Swindle, by Egon von Greyerz

Egon von Greyerz is almost certain to be proved right when he says that what we have now amounts to the biggest financial swindle in history. From von Greyerz at goldswitzerland.com:

Zeus punished the hubristic King Sisyphus to roll a huge boulder up a very steep hill in Hades. Before Sisyphus reached the top, the stone rolled down and he had to start all over again.

Hubris is serious sin that seldom goes unpunished. The arrogance and uber-confidence which TPTB (the powers that be) have displayed in leading the world to ruin will clearly be severely punished. But sadly the punishment will affect the whole world and not just the Elite that caused it.

BANKERS AND GOVERNMENTS HAVE INFLICTED INCREDIBLE DAMAGE

It could be argued that blaming one group for the coming global collapse might be unfair. The world economy has always oscillated between boom and bust and is thus a natural phenomenon like the seasons. But the main difference this time is the incredible damage that governments, central bankers and bankers have inflicted on the world.

In 2006 when the Great Financial Crisis started, US Federal debt was $8.5 trillion and today it is $26.5t. In 14 years debt has more than trebled. GDP in 2006 was $14t and is now $21.5t. So debt to GDP has gone from 60% to 123%.

This is what is called running on empty. US debt creation has nothing to do with investing in productive assets. With the debt to GDP ratio doubling in 14 years it is clear evidence that all the printed money is not going into the real economy but is supporting a bankrupt financial system which has kept the money to prop up their own insolvent balance sheets and to remunerate the top executives with fantasy money.

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The Global Forest Fire Is Here, by Egon von Greyerz

Virtually all of what is now considered wealth is a debt-induced delusion, and the world will look radically different by the end of the Greater Depression. If you’re only going to read one SLL post tonight, this is the one. From Egon von Greyerz at goldswitzerland.com:

It drives you absolutely mad to see a whole world living a lie. How can anyone believe that the fake world the Fed and their fellow central bankers have created has anything to do with reality. We have fake money, fake markets, fake companies, fake banks, fake interest rates, fake income, fake pensions, fake social security, fake wealth, fake bail outs, fake buildings, fake holidays, fake cars etc which create false lives for most of us especially in the West. All these fake material values have also created false moral and ethical values.

IT IS ALL AN ILLUSION

So you might ask how can it all be fake when we can touch it, use it, or experience it. For people who don’t understand that it is all fake, let me say that we will all soon realise how fake it was. Because many of these things that we perceived as real were all an illusion.

An illusion is defined as “an act of deception” or “something that produces a false or misleading idea of reality. And that is exactly what we have been exposed to. The world had been deceived but we have all believed that it was real.

DEEP STATE WILL LOSE CONTROL

There is a perception in the world that things will continue as they are and that the Deep State is going to control us all in a totalitarian world. What few realise is that the Deep State or Powers That Be are going to lose control totally. They are totally dependent on the world in which they can control everything through debt and the fake monetary system they have created. But let me make it clear that this fake system is about to implode.

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Governments Will Use The Coronavirus Card To Downgrade Estimates And Increase Interventionism, by Daniel Lacalle

Governments will use the coronavirus to do what they always do: increase their power and screw things up. From Daniel Lacalle at dlacalle.com:

The John Hopkins University Coronavirus Global Cases Monitor shows that the mortality rate of the epidemic is very low. At the close of this article, 83,774 cases, 2,867 deaths and 36,654 recovered. It is normal for the media to focus on the first two figures, but I think it is important to remember the last one. The recovered figure is more than ten times the deceased one. This should not make the reader ignore the epidemic, but it is also worth reading the scientific study that shows that the death rate in citizens under 60 is less than 1.3%, 0.2% in young population, and on average it is a maximum of 4% (“The Epidemiological Characteristics of an Outbreak of 2019 Novel Coronavirus Diseases”, February 2020).

I have attended several debates in international media where scientists repeat these important factors to prevent panic reactions from the population. History shows us that these epidemics have diminishing mortality rates and are contained relatively quickly.

We must remember the victims and their families and pray for a quick response from the scientific community, a solution that will surely arrive… Although not in the time that market participants and media would desire.

The economic impact is completely different. There is more logic in the negative reaction of markets because the coronavirus impact adds to an already weak and bloated global economy that was showing poor growth, high debt and an evidently disappointing earnings season before any epidemic was included in estimates.

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America Hasn’t Always Run Huge Deficits, by Bill Bonner

Once upon a time the US was not a profligate nation. In fact, its citizens saved and invested and didn’t borrow money. From Bill Bonner at bonnerandpartners.com:

BALTIMORE, MARYLAND – Round us swirls a blinding dust of accusations… slurs… mad dogs… lost thoughts… and screwball ideas…

“You dog-faced pony soldier,” says a rattled Joe Biden to a student protester.

Senator Romney is a “pompous ass,” says the President of the United States.

The Trump Team’s budget for 2021 came out yesterday. The press said it planned to “slash the safety net.” The Democrats said it was “dead on arrival.” The Wall Street Journal had this comment:

The $4.8 trillion budget for fiscal 2021, released Monday, assumes that economic growth will be stronger than most forecasters project. To hit its targets, the budget excludes tax cuts the administration may propose later and includes spending cuts that are vague, unlikely to advance in Congress, or both.

“A lot of specific policies are meaningful, but the overall numbers are largely phony,” said Marc Goldwein, senior vice president at the Committee for a Responsible Federal Budget, a group that favors deficit reduction.

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The U.S. Money Trail Leads to the Dark Death Ship of Debt, by Bill Bonner

Tell government officials and central bankers they can manufacture credit without negative consequences to the officials or central bankers and wonder of wonders, they’ll manufacture money. Such has been US economic policy since Nixon closed the gold window in 1971. The question is whether the negatives have been eliminated or merely delayed. SLL and Bill Bonner believe the latter. From Bonner at bonnerandpartners.com:

BALTIMORE, MARYLAND – When the money goes, everything goes. Last week brought more evidence.

America’s late, crony capitalist empire is sinking into corruption, incompetence, and debt.

But first, a bold prediction…

Zero-Sum Game

You’ll recall that we predicted that the Federal Reserve would never “normalize” interest rates. Well, the Fed never even came close. And now it’s once again doing all it can to inflate the nation’s money system.

Last week, we learned that it would add about half a trillion new dollars over the next four weeks. Funding the short-term lending markets with that kind of cash suggests to us that other lenders – big banks – don’t want to put their own money at risk. Clearly, the Fed is desperately trying to stop something from happening. What it is, exactly, we don’t know.

Meanwhile, another of our predictions was confirmed last week: the Trump team announced a major trade deal with the Chinese. In other words, it did not go “Full Retard” yesterday, as scheduled, with additional tariffs.

Trump has an election to win. The trade war may have brought smiles to his base of supporters a year ago. Now, it threatens to cost him votes. He had to settle… on almost any terms.

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The Federal Reserve is a Barbarous Relic, by MN Gordon

In the coming better era, there will be no central banks. From MN Gordon at economicprism.com:

We believe monetary policy is in a good place.” – Federal Reserve Chairman Jerome Powell, October 30, 2019.

The Sky is Falling

Ptolemy I Soter, in his history of the wars of Alexander the Great, related an episode from Alexander’s 334 BC compact with the Celts ‘who dwelt by the Ionian Gulf.’  According to Ptolemy’s account, which survives via quote by Arrian of Nicomedia some 450 years later, when Alexander asked the Celtic envoys what they feared most, they answered:

“We fear no man: there is but one thing that we fear, namely, that the sky should fall on us.”

Today, at the risk of being called Chicken Little, we tug on a thread that weaves back to the ancient Celts.  Our message is grave: The sky is falling.  Though the implications are still unclear.

The sky, for our purposes, is the debt based dollar reserve standard that’s been in place for the past 48 years.  If you recall, on August 15, 1971, President Nixon “temporarily” suspended convertibility of the dollar into gold.  The dollar  became wholly the fiat money of the Treasury.

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Fictitious Markets, False Economics, and the Reality of Fraud, by Gary D. Barnett

Fiat debt and central banking have created an artificial economy. The end result will be disastrous. From Gary D. Barnett at lewrockwell.com:

In the past, there was a belief in the logic of the market, but no science of reasoning concerning the stock market was ever fully legitimate, as logic requires a market free from outside interference. Fast forward to today, and the manipulation is so extreme that little if any honesty is evident, and only fraud remains.

This stark reality should alarm investors, but many if not most, continue to rely on black magic economics as espoused by the mainstream media, those like Paul Krugman and his ilk, and a cadre of other Keynesian followers. As a rule, Keynesian or not, when it comes to market conditions and predictions, economists are always wrong. This is so due to the manipulative and bogus aspects of the Federal Reserve driven market, but even those who have genuine knowledge and understanding of free market economics, best described as Catallactics, cannot forecast with certainty. In a corrupt and fabricated market system such as exists today, it is impossible to predict outcomes with any accuracy because no pure market economy actually exists.

Currently, most open discussions about economics are convoluted and rely on a mix of politics, managed and controlled trade, trade wars, Fed policies, and minute-by-minute tweets from a narcissistic president consumed by his false prowess as manipulator-in-chief. The entirety of the American financial system is simply asinine at this stage of the game.

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