Ambrose Evans-Pritchard is getting warmer. In June, he wrote a commentary with the provocative title: "Time to shut down the US Federal Reserve?" I thought he finally got it, the FED is the problem and not the solution. It turns out he was only upset because some employee at the FED wrote that economics should only be discussed by those who have trained at an acceptable school. I wrote about it here:
http://bionicmosquito.blogspot.com/2010/06/ambrose-you-almost-fooled-me.html
Well, he is getting closer to the truth now. "Shut Down the Fed (Part II)" he calls it. His commentary is here:
http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100007777/shut-down-the-fed-part-ii/
"I apologise to readers around the world for having defended the emergency stimulus policies of the US Federal Reserve, and for arguing like an imbecile naif that the Fed would not succumb to drug addiction, political abuse, and mad intoxicated debauchery, once it began taking its first shots of quantitative easing."
He doesn't cut himself any slack after this opening paragraph, for example:
"So all those hillsmen in Idaho, with their Colt 45s and boxes of krugerrands, who sent furious emails to the Telegraph accusing me of defending a hyperinflating establishment cabal were right all along. The Fed is indeed out of control."
Ambrose is now getting much closer. He sees that the FED can only inflate, it can do nothing else. A simple look at the track record since 1913 makes this quite clear. In this time the dollar has lost over 95% of its value. For the 100 years prior to that, there was virtually no net change in the purchasing power of the dollar.
He is not yet all the way there however. Ambrose is still trying to makes sense of this madness within a worldview that believes the FED is there to keep inflation low and to maintain employment and economic growth. Yes, that is the stated mission. However it certainly is not the real mission.
The confusion clears up quite easily when one considers that the real purpose of the FED is to protect the big banks. Full stop. Keep them liquid. To the extent possible, keep them solvent. The FED does this by trading treasuries for junk, providing a backstop for every and any investment, keeping interest rates low, etc. Mostly it does it by inflating the currency. The FED is the backbone of a cartel.
With this understanding, the actions are quite consistent. The banks like inflation, they want inflation, they need inflation. Since 1913, they have received plenty of it. They need it in 2010 more than ever. Monetary control in a fiat environment is the greatest wealth transfer scheme ever invented, and the mothership of this scam is the FED.
The FED wants you to keep your eye on the CPI, while the scam is ongoing in the assets -- as assets are where the wealth is transferred. This is part of the game. As long as CPI is benign, the theft through asset inflation can go on uninhibited. Thus, all the productivity improvements over the last 100 years have been offset 20-fold by the devaluation of the dollar. This productivity has gone to the banks and those who collect interest on the fictitious money created by the FED and the fractional reserve banking the FED makes possible. What a tremendous transfer of wealth.
Ambrose, this is the next step you must take - the final step in the journey. The FED's purpose is not the one stated; the purpose is to protect the banks. It is a cartel. It inflates because this is good for the banks, it protects the banks, and it transfers wealth to the banks. It allows capital to be multiplied 10- 20- or 30-fold, with interest collected on multiples of the actual savings. All of this interest is taken from the masses, where real wealth is actually produced. Yet the masses get to enjoy only a fraction of the beneft, and over the last 40 years, maybe none of the benefit.
You are too smart not too see this and not to understand it. I suspect in a couple of months, you will write "Shut Down the FED (Part III), The Final Act". In this, you will state with no hesitation that the power over money cannot be trusted to a handful of men meeting in secret. The market can and must determine "money" as it is quite capable of doing - after all, the market resolves far more complex needs than a means to transfer and store wealth.
Historically the market has entrusted gold and silver to do this job. You will finally say it.
Then, I can finally say, welcome - you now get it.
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Monday, September 27, 2010
Friday, August 6, 2010
Why the Wars?
It is interesting to consider what it is the PE are after via these wars. The other day in the comments at the Daily Bell, Bill Ross suggested that the objective of the PE might be a thinning of the population in order to conserve resources. I consider Bill Ross to be well-thought out in his posts, and I do not dismiss his views lightly – I don’t dismiss them at all, and consider them carefully. I have also considered this view as possible, but am swayed toward another possibility – drawing upon comments from both The Daily Bell and Dr. Gary North. No one can ever accuse me of having an original thought!
The Daily Bell has consistently stated the purpose is control. Control via establishment of a western style regulatory democracy. Dr. North has written many articles recently on the general theme of the power elite. In one, he made a stunningly simple yet powerful point – the power elite want wealth. Wealth is represented by the owning of productive assets – and these are only productive to the extent that there are customers willing and able to pay for the goods and services that are produced via these assets.
So, for the PE to want a drastic reduction in population, they must willingly want to reduce their wealth – fewer customers to sell to and fewer hosts to leach from equals less wealth. There may be valid reasons for the PE to purposely want to become poorer (relatively). It certainly could be true if a) the world’s natural resources are limited (may or may not be true), and b) if true, there would be no wealth to be generated by developing alternatives to the diminishing resources. I believe this second possibility is on its face not true (especially for those who have their hands on the levers of the regulatory mechanisms. If alternatives to today’s resources are one day required, there are untold trillions to be made by those who develop the alternatives…but only if there are customers! Killing half the population also reduces half the wealth earning opportunity for the elite.
So, I am further swayed to the view that the purpose of the wars is control – to bring more customers into the fold and to bring more hosts for the leaches. The purpose is to bring more people under the tent in order to become victims of central banking, taxation, and other control tools that stealthily or not so stealthily transfer wealth from the masses to the few. Western style regulatory democracy is a system that allows for many ways for the cream to be skimmed off the top by those on the top.
Via money printing / inflation – a few pennies per year out of every dollar is skimmed. Via taxation – at least 40% or more of every dollar earned is transferred. Through just these two tools, trillions are transferred annually from the producers to the elite and the minions that knowingly or unknowingly do the elite’s dirty work of propaganda and indoctrination.
I don’t think the purpose is to drastically cut the population. This would result in wealth destruction of the elite. Wealth destruction is completely counter to the purpose of being “elite”. The purpose is to add to the size and number of hosts, therefore adding to the wealth of the leaches.
At least this is as far as I have progressed on this at the moment. I am certainly open to alternatives.
The Daily Bell has consistently stated the purpose is control. Control via establishment of a western style regulatory democracy. Dr. North has written many articles recently on the general theme of the power elite. In one, he made a stunningly simple yet powerful point – the power elite want wealth. Wealth is represented by the owning of productive assets – and these are only productive to the extent that there are customers willing and able to pay for the goods and services that are produced via these assets.
So, for the PE to want a drastic reduction in population, they must willingly want to reduce their wealth – fewer customers to sell to and fewer hosts to leach from equals less wealth. There may be valid reasons for the PE to purposely want to become poorer (relatively). It certainly could be true if a) the world’s natural resources are limited (may or may not be true), and b) if true, there would be no wealth to be generated by developing alternatives to the diminishing resources. I believe this second possibility is on its face not true (especially for those who have their hands on the levers of the regulatory mechanisms. If alternatives to today’s resources are one day required, there are untold trillions to be made by those who develop the alternatives…but only if there are customers! Killing half the population also reduces half the wealth earning opportunity for the elite.
So, I am further swayed to the view that the purpose of the wars is control – to bring more customers into the fold and to bring more hosts for the leaches. The purpose is to bring more people under the tent in order to become victims of central banking, taxation, and other control tools that stealthily or not so stealthily transfer wealth from the masses to the few. Western style regulatory democracy is a system that allows for many ways for the cream to be skimmed off the top by those on the top.
Via money printing / inflation – a few pennies per year out of every dollar is skimmed. Via taxation – at least 40% or more of every dollar earned is transferred. Through just these two tools, trillions are transferred annually from the producers to the elite and the minions that knowingly or unknowingly do the elite’s dirty work of propaganda and indoctrination.
I don’t think the purpose is to drastically cut the population. This would result in wealth destruction of the elite. Wealth destruction is completely counter to the purpose of being “elite”. The purpose is to add to the size and number of hosts, therefore adding to the wealth of the leaches.
At least this is as far as I have progressed on this at the moment. I am certainly open to alternatives.
Saturday, July 17, 2010
Scott Brown and the Tea Party
This is in response to today's commentary at The Daily Bell
http://www.thedailybell.com/1219/Senator-Scott-Browns-Disturbing-Story.html
"While the perspective of American punditry is that the Tea Party movement has been co-opted by the Republican party, we would humbly submit that this is not a true reading of the situation. The inchoate Tea Party movement may have been formalized and reconfigured to make it palatable, but the underlying frustrations remain the same and cannot be palliated by political formulations and rhetoric."
The Tea Party as a structure, an entity, is being co-opted -- to the extent that an entity that is yet to take any significant unifying form can be co-opted. I agree that the underlying frustrations have not (and cannot) be co-opted, but the political outlet for these is at risk.
Also, I do not yet accept the idea that the frustrations of the Tea Party are focused around smaller government and less intrusion. I think there is a segment of that -- those that came to the movement from the Ron Paul 2008 candidacy -- but many seem to be of the view that the new programs are putting at risk the old program...so stop the new programs and don't mess with my old program.
"Government, keep your hands off my medicare."
When students agree to give up subsidized schools, and seniors agree to give up medicare and social security, we may be on to something. When the Tea Party as a smaller / shrinking government movement lasts for at least ten years and effects local and national elections with better candidates than Scott Brown, we might have something.
The best we have going for us is that the promises will be broken. Then people will look to local solutions vs. national (or international) ones. That the promises will be broken is certain.
http://www.thedailybell.com/1219/Senator-Scott-Browns-Disturbing-Story.html
"While the perspective of American punditry is that the Tea Party movement has been co-opted by the Republican party, we would humbly submit that this is not a true reading of the situation. The inchoate Tea Party movement may have been formalized and reconfigured to make it palatable, but the underlying frustrations remain the same and cannot be palliated by political formulations and rhetoric."
The Tea Party as a structure, an entity, is being co-opted -- to the extent that an entity that is yet to take any significant unifying form can be co-opted. I agree that the underlying frustrations have not (and cannot) be co-opted, but the political outlet for these is at risk.
Also, I do not yet accept the idea that the frustrations of the Tea Party are focused around smaller government and less intrusion. I think there is a segment of that -- those that came to the movement from the Ron Paul 2008 candidacy -- but many seem to be of the view that the new programs are putting at risk the old program...so stop the new programs and don't mess with my old program.
"Government, keep your hands off my medicare."
When students agree to give up subsidized schools, and seniors agree to give up medicare and social security, we may be on to something. When the Tea Party as a smaller / shrinking government movement lasts for at least ten years and effects local and national elections with better candidates than Scott Brown, we might have something.
The best we have going for us is that the promises will be broken. Then people will look to local solutions vs. national (or international) ones. That the promises will be broken is certain.
Wednesday, July 7, 2010
China on the Brink? at the Daily Bell
In reply to the Daily Bell article:
http://www.thedailybell.com/1194/China-on-the-Brink.html
The validity of the Austrian Theory of the Business Cycle (do we really have to call it a "theory" anymore?) does not only apply to the west. China will bust because it has to.
The Chinese leadership is faced with a few options, all bad. They can certainly continue to do what they are doing (no, I don't believe there is such a thing as a soft landing when you have pumped as much as they have pumped).
They also aren't sitting around waiting for the G8 or G20 or any other "helpful" organization of the west to solve the world's (China's) problems.
They are locking up resources around the world. These contracts are likely priced in dollars -- something the Chinese have plenty of and don't want to hold. At some point, China can declare the Yuan partially backed by gold -- even 15% - 25% would be sufficient. This strengthens the Yuan and makes it easier to buy those resources now priced in cheaper dollars. Yes a) their reserves lose value (this will happen no matter what), however if these reserves still buy resources, do they care? and b) this will send China into a recession/depression (this will also happen no matter what).
What comes out the other side is a stable internal economy with a strong currency that allows the Chinese to buy commodities at favourable prices...helping to keep internal price inflation down and keeping the masses somewhat settled.
They could do this in conjunction with Russia (though not mandatory) as Russia brings additional muscle and significant natural resources. The US won't go to war over this (the DB has done a good job of pointing out the minimal chances of nuclear war in our future by nation-states).
Not a great solution, not even a good solution, but maybe the best of many bad solutions and a solution that gives the Chinese a chance post the trauma.
Yesterday the DB asked if the Chinese elite are married to the west. I think not. I think when the Chinese elite were courted, they did the "winkie-winkie," but didn't make any promises. The west, having no alternative, decided they would take the chance and hope the flirting would lead to marriage. The Chinese feel no obligation to this johnny-come-lately anglo elite -- they have been around 6000 years compared to a few hundred. They will be around long after, they figure.
My guess is China has figured out they have gained everything they are going to gain from the US, it is time to move on. No need to buy the cow, so to speak. Yes, the flirtation came at some cost -- but none long term -- and oh by the way brought a few benefits.
http://www.thedailybell.com/1194/China-on-the-Brink.html
The validity of the Austrian Theory of the Business Cycle (do we really have to call it a "theory" anymore?) does not only apply to the west. China will bust because it has to.
The Chinese leadership is faced with a few options, all bad. They can certainly continue to do what they are doing (no, I don't believe there is such a thing as a soft landing when you have pumped as much as they have pumped).
They also aren't sitting around waiting for the G8 or G20 or any other "helpful" organization of the west to solve the world's (China's) problems.
They are locking up resources around the world. These contracts are likely priced in dollars -- something the Chinese have plenty of and don't want to hold. At some point, China can declare the Yuan partially backed by gold -- even 15% - 25% would be sufficient. This strengthens the Yuan and makes it easier to buy those resources now priced in cheaper dollars. Yes a) their reserves lose value (this will happen no matter what), however if these reserves still buy resources, do they care? and b) this will send China into a recession/depression (this will also happen no matter what).
What comes out the other side is a stable internal economy with a strong currency that allows the Chinese to buy commodities at favourable prices...helping to keep internal price inflation down and keeping the masses somewhat settled.
They could do this in conjunction with Russia (though not mandatory) as Russia brings additional muscle and significant natural resources. The US won't go to war over this (the DB has done a good job of pointing out the minimal chances of nuclear war in our future by nation-states).
Not a great solution, not even a good solution, but maybe the best of many bad solutions and a solution that gives the Chinese a chance post the trauma.
Yesterday the DB asked if the Chinese elite are married to the west. I think not. I think when the Chinese elite were courted, they did the "winkie-winkie," but didn't make any promises. The west, having no alternative, decided they would take the chance and hope the flirting would lead to marriage. The Chinese feel no obligation to this johnny-come-lately anglo elite -- they have been around 6000 years compared to a few hundred. They will be around long after, they figure.
My guess is China has figured out they have gained everything they are going to gain from the US, it is time to move on. No need to buy the cow, so to speak. Yes, the flirtation came at some cost -- but none long term -- and oh by the way brought a few benefits.
Tuesday, July 6, 2010
Dr. Fekete, I agree on this one
Again, unable to post at the Daily Bell...so here it is:
http://www.thedailybell.com/1193/Antal-Fekete-Floating-Exchange-Rates-Scheme-to-Embezzle-the-Dollar-Balances-of-Surplus-Countries.html
I have strongly disagreed with Dr. Fekete's commentary here at the Daily Bell in the past, and have commented accordingly. This time, I agree. Morally and philosophically he is correct - by what "right" does the US have to dictate to its largest creditor that the creditor destroy the value of the debt owed?
None, of course, in a moral world.
However, I will posit that eventually, China will have no choice but to act and in fact will take actions that offer the least of several bad alternatives.
China will eventually back its currency with gold, silver, and/or other assets. China is currently securing these assets via contracts around the world. These are likely priced in USD. When they go to a gold backed Yuan, the Yuan will rise and the dollar will sink, making these commodities much cheaper for China to pay for.
They may bring Russia along for the ride, as Russia has plenty of resources for which they will want some currency besides the dollar in exchange, and Russia has a military that, when added to China's (although China could also somewhat go it alone) would deter any possible threat from the US. So Russia will trade protection for pricing in a (relatively) hard currency.
To China, the Anglo American power elite is a short term blip on a 6,000 year radar.
I believe I read it at the DB first, perhaps Mr. Suess - we are very likely in the midst of the real WWIII, and the battle will be played out financially, as the Bell has pointed out the world cannot afford to play this out militarily.
http://www.thedailybell.com/1193/Antal-Fekete-Floating-Exchange-Rates-Scheme-to-Embezzle-the-Dollar-Balances-of-Surplus-Countries.html
I have strongly disagreed with Dr. Fekete's commentary here at the Daily Bell in the past, and have commented accordingly. This time, I agree. Morally and philosophically he is correct - by what "right" does the US have to dictate to its largest creditor that the creditor destroy the value of the debt owed?
None, of course, in a moral world.
However, I will posit that eventually, China will have no choice but to act and in fact will take actions that offer the least of several bad alternatives.
China will eventually back its currency with gold, silver, and/or other assets. China is currently securing these assets via contracts around the world. These are likely priced in USD. When they go to a gold backed Yuan, the Yuan will rise and the dollar will sink, making these commodities much cheaper for China to pay for.
They may bring Russia along for the ride, as Russia has plenty of resources for which they will want some currency besides the dollar in exchange, and Russia has a military that, when added to China's (although China could also somewhat go it alone) would deter any possible threat from the US. So Russia will trade protection for pricing in a (relatively) hard currency.
To China, the Anglo American power elite is a short term blip on a 6,000 year radar.
I believe I read it at the DB first, perhaps Mr. Suess - we are very likely in the midst of the real WWIII, and the battle will be played out financially, as the Bell has pointed out the world cannot afford to play this out militarily.
Dr. Ebeling at The Daily Bell
The original editorial appears at the Daily Bell. Once again, I could not post.
http://www.thedailybell.com/1192/Richard-Ebeling-The-Hubris-of-Central-Bankers-and-the-Ghosts-of-Deflation-Past.html
I have two comments regarding Dr. Ebeling's commentary:
1) While I can appreciate his differentiation of different types of deflation, I will paraphrase (and modify) Milton Friedman, "Deflation is always and everywhere a monetary phenomenon." Just follow the money (supply), don't worry about the other stuff.
Deflation would be the natural state absent manipulation and with sound currency. With increases in productivity, all would share the benefits. In our system, the benefits of productivity have all been siphoned off the top, witness that disposable income and other various measures of productivity benefits have been at best unchanged in 40 years. Where has all the productivity gone? We know, of course.
2) I don't believe the big banks are holding excess reserves for the benefit of 0.25% interest income. They could lend risk free for a year or two to the US for a much better rate than that (I don't want to elaborate or debate on the concept of "risk free" sovereign debt at the moment, I know the risks of this).
They don't lend because they are scared. By "they" I mean the cartel that includes the FED and the large NYC banks. They want liquidity because they know the mess they are in. They might trust the US government to pay them back in a year or two, but they don't trust that they will remain liquid in the meantime.
In this light, I would rephrase my answer to a question posed to me by the Daily Bell a couple of days ago (paraphrased): is it too late for the FED to reign in price inflation? Technically, no, if they eventually suck up the excess reserves. Of course, this won't happen because the banks (while by definition are always insolvent) are even more insolvent today. They (the FED and the banks) KNOW this liquidity is necessary.
It will eventually leak out, and it will unleash a good bout of price inflation.
http://www.thedailybell.com/1192/Richard-Ebeling-The-Hubris-of-Central-Bankers-and-the-Ghosts-of-Deflation-Past.html
I have two comments regarding Dr. Ebeling's commentary:
1) While I can appreciate his differentiation of different types of deflation, I will paraphrase (and modify) Milton Friedman, "Deflation is always and everywhere a monetary phenomenon." Just follow the money (supply), don't worry about the other stuff.
Deflation would be the natural state absent manipulation and with sound currency. With increases in productivity, all would share the benefits. In our system, the benefits of productivity have all been siphoned off the top, witness that disposable income and other various measures of productivity benefits have been at best unchanged in 40 years. Where has all the productivity gone? We know, of course.
2) I don't believe the big banks are holding excess reserves for the benefit of 0.25% interest income. They could lend risk free for a year or two to the US for a much better rate than that (I don't want to elaborate or debate on the concept of "risk free" sovereign debt at the moment, I know the risks of this).
They don't lend because they are scared. By "they" I mean the cartel that includes the FED and the large NYC banks. They want liquidity because they know the mess they are in. They might trust the US government to pay them back in a year or two, but they don't trust that they will remain liquid in the meantime.
In this light, I would rephrase my answer to a question posed to me by the Daily Bell a couple of days ago (paraphrased): is it too late for the FED to reign in price inflation? Technically, no, if they eventually suck up the excess reserves. Of course, this won't happen because the banks (while by definition are always insolvent) are even more insolvent today. They (the FED and the banks) KNOW this liquidity is necessary.
It will eventually leak out, and it will unleash a good bout of price inflation.
Sunday, July 4, 2010
Rick Rule at The Daily Bell
This post is in response to the interview with Rick Rule at The Daily Bell. I attempted to post it on the site, but again had difficulty.
The original Daily Bell article can be found here:
http://www.thedailybell.com/1184/Rick-Rule-on-Bail-Outs-Business-Cycles-and-10-More-Years-of-a-Golden-Bull.html
In deference to Weeble, I will keep my post short. I also will second (or third, or fourth) Weeble's comment that the Daily Bell writes wonderfully well. I myself have nitpicked one or two items that seemed flawed philosophically, however after the hundreds of articles I have read, to nitpick one or two makes clear the exemplery quality of the work.
Inflation or deflation -- as the Daily Bell makes clear -- define the terms. In the only true (Austrian) sense, it is defined via the money supply. In this case, we have inflation, and will only have inflation. The central banks will create more money and as long as CPI doesn't grow they won't slow down. The worst (best), they eventually slow down when the CPI takes off. They will not stop or certainly not reverse.
If defined via the CPI or some such, again we have only had inflation and will only have inflation. Even Japan (the darling of the deflationist camp) has never had more than a percent or two of price deflation in a year or two over the last 20 years...statistically insignificant.
Where I believe there is merit in the deflation camp is in asset prices and certain other areas wherever fiat has ruled: housing prices, college tuition, various financial assets, etc. I don't believe gold will be affected in this, or if so to a relatively minor degree.
Now, if one really believes in deflation (any of the above definitions) why would you own gold? By definition, with deflation your dollar (or swissie or euro) will buy more (of whatever) tomorrow than today. What reason would I have to own gold -- subject to various tax and control issues, when I can hold currency that will increase in value at no cost, no tax ramifications, no political risks?
There is no reason if you believe in deflation. Deflation does not destroy the currency. If you believe it will destroy the currency, then by definition you believe we are headed for inflation, not deflation. A destroyed currency cannot buy what it used to buy (if it can even buy anything at all). This is inflation in any definition you want to choose.
The original Daily Bell article can be found here:
http://www.thedailybell.com/1184/Rick-Rule-on-Bail-Outs-Business-Cycles-and-10-More-Years-of-a-Golden-Bull.html
In deference to Weeble, I will keep my post short. I also will second (or third, or fourth) Weeble's comment that the Daily Bell writes wonderfully well. I myself have nitpicked one or two items that seemed flawed philosophically, however after the hundreds of articles I have read, to nitpick one or two makes clear the exemplery quality of the work.
Inflation or deflation -- as the Daily Bell makes clear -- define the terms. In the only true (Austrian) sense, it is defined via the money supply. In this case, we have inflation, and will only have inflation. The central banks will create more money and as long as CPI doesn't grow they won't slow down. The worst (best), they eventually slow down when the CPI takes off. They will not stop or certainly not reverse.
If defined via the CPI or some such, again we have only had inflation and will only have inflation. Even Japan (the darling of the deflationist camp) has never had more than a percent or two of price deflation in a year or two over the last 20 years...statistically insignificant.
Where I believe there is merit in the deflation camp is in asset prices and certain other areas wherever fiat has ruled: housing prices, college tuition, various financial assets, etc. I don't believe gold will be affected in this, or if so to a relatively minor degree.
Now, if one really believes in deflation (any of the above definitions) why would you own gold? By definition, with deflation your dollar (or swissie or euro) will buy more (of whatever) tomorrow than today. What reason would I have to own gold -- subject to various tax and control issues, when I can hold currency that will increase in value at no cost, no tax ramifications, no political risks?
There is no reason if you believe in deflation. Deflation does not destroy the currency. If you believe it will destroy the currency, then by definition you believe we are headed for inflation, not deflation. A destroyed currency cannot buy what it used to buy (if it can even buy anything at all). This is inflation in any definition you want to choose.
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