- The level of perceived entitlement by those interviewed was incredible. They work 12 hrs a day as if they are the only ones doing this. My laughter comes because I personally work 12+ hrs/day and often 14 or more. The reason I am not crying like them is because I don't work in a mindless service job like they do. The engineering I do at work is the same stuff I would do at home if I were unemployed. I like my work and look forward to doing it. I also know that many people in the world toil at $hitwork endlessly with no chance of ever retiring, much less retiring in their early 60s. The guy who was interviewed said "I am so tired...I don't know that I'll ever be able to retire.". Sir, you do not know what tired is. You are spoiled beyond compare.
- The business owners fail to understand that their problem is completely related to the collapse of the global debt Ponzi. They just don't understand why "life" is so hard on them. Poor babies!! The one lady whose quote was used as the title for the article seems to believe that "the economy" is a living, breathing entity that is capable of theft. What an idiot! Lady, the economy didn't steal anything. GREENSPAN and BERNANKE stole it with their pump and dump fractional reserve banking con. YOU stole your own retirement by not seeing through it, fool! The longer it takes her to figure it out, the more she is going to get screwed by the con.
- [/RP RANT MODE ON/] I can pretty much guarantee you that nobody interviewed in the article voted for Ron Paul or even understands his message. Otherwise they would understand what is going on instead of wondering aloud how this could be happening to them. I'm sorry, I have zero sympathy for sheeple like them because they think they are so damned smart in voting for the Clintons and the Bushes and the Obamneys of the world while at the same time laughing at Ron Paul and making fun of his appearance and marginal speaking ability. Instead of focusing on his ideas, his logic, his understanding of money and economics and of course his study of history, they want to laugh about how his suit doesn't fit and how he doesn't "inspire them" or look presidential. PATSIES!! You made your bed, now go lie in it. [/RP RANT MODE OFF/]
Friday, August 31, 2012
"The economy stole my retirement"...
Today I read a WSJ puff piece on how small business owners are "suffering" as a result of the economy. It was entitled "The economy stole my retirement" and it contained a few stories about how small business owners can't unload their marginal businesses on other suckers. The whole thing made me laugh for several reasons:
Thursday, August 23, 2012
Why do you think they call it a Debt Trap?
Mish again points out the obvious but today he is still preaching to a mostly sleeping herd. What am I talking about? Simply that a US currency crisis is as much a given as is the collapse of Greece, the whole EU, Japan and the rest of the global economy. While Mish has been correctly predicting that deflation will be the first stage of the breakdown, he has also said many times that eventually we will have a so called "currency crisis". Wiki defines a currency crisis as "a sudden devaluation of a currency caused by chronic balance-of-payments deficits... It occurs when the value of a currency changes quickly, undermining its ability to serve as a medium of exchange or a store of value."
"Changes quickly" is a fancy way of saying "plummets". Long time recipients of my emails and readers of my blog know that I predicted this years ago. I used the term "supernova economy" to describe first a rapid contraction (deflationary crash) followed by a massively inflationary (perhaps hyperinflationary) eventual outcome. Here is a 01-29-2011 link from my blog referring to it but it showed up in my emails several years before that.
Despite the massive expansion of government debt w
e are well into the deflationary stages and the interest rate chart reflects this. Yes, Bernanke has been buying up bonds in order to drive rates lower than they would otherwise be. But make no mistake: Bernanke is just adding energy to the existing trend, he is not overcoming the will of the market. The reason Bernanke is finding it relatively easy to keep rates low is that so many others are willing to run into US debt as a safe haven when the rest of the world is falling apart. If this were not the case then Bernanke would need unlimited amounts of money in order to buy up all the US debt being floated. If Bernanke does this, gold will go screaming at the top of its lungs "FRAUD!!!". Gold and only gold has the power to do this.
e are well into the deflationary stages and the interest rate chart reflects this. Yes, Bernanke has been buying up bonds in order to drive rates lower than they would otherwise be. But make no mistake: Bernanke is just adding energy to the existing trend, he is not overcoming the will of the market. The reason Bernanke is finding it relatively easy to keep rates low is that so many others are willing to run into US debt as a safe haven when the rest of the world is falling apart. If this were not the case then Bernanke would need unlimited amounts of money in order to buy up all the US debt being floated. If Bernanke does this, gold will go screaming at the top of its lungs "FRAUD!!!". Gold and only gold has the power to do this.
For those that still don't get it, no government is big enough to thwart the will of the global market! The con men posture and pose and want everyone to think that they are Wizards of Oz with unlimited power but L. Frank Baum had it right: they are just little men hiding behind a curtain putting on a big show. There is no real wizard of Oz. The master of "oz" is the Troy oz of gold, period. Always was, always will be no matter what other foolishness people have allowed themselves to believe in. If the US did not supposedly have 8000+ tonnes of gold in hand then nobody would be running into US debt as a safe haven.
The fact that the interest rate curve is starting to slow its decline tells me a bottom is near - probably within 6 months. After that, the trend will reverse. People will greatly slow their buying US debt because of the fear of Bernanke and/or Congress causing massive inflation. Those currently hiding in US debt will attempt to save themselves from the inflation monster by storing wealth in something, anything except paper money (or instruments like bonds that amount to paper money). In other words, they will begin to buy physical things not because they desire them but rather because they are worried that the value of the funny money they hold will collapse while they are holding it. This is the essence of Ludwig von Mises' so called "crack up boom".
When people stop buying the debt, the buy side demand will collapse. Since there will be little demand for the new debt offerings, Bernanke will have to increase the interest rate in order to foist any of the worthless crap off onto suckers. Remember it is the buyer, not the seller who sets the market price for anything. The seller can suggest prices all day long but if the market disagrees then there is no sale. The dearth of buyers will result in a skyrocketing interest rate. When the market sees this and does the math associated with paying the debt service at the sky high interest rate, it will panic. Why? Because the US will not be able to make up the difference via taxation. No way, no how.
So it will only have 2 choices: print up more money from thin air or default on the debt. Unfortunately, both ways will lead to the collapse of the dollar.
If they default on the debt then nobody will loan us money at any price because we will have proven ourselves bad credit risks at any rate of interest. This means that government spending will collapse which will in turn collapse the economy since federal, state and local government spend is 45% of GDP. That makes our GDP an artificially inflated one which is driven by debt. When the ability to take on more debt collapses, so will the GDP. The resulting debt:GDP ratio will be just as bad as Japan's currently is today: > 200%. In that type of unstable economy there will be great capital flight as government gets heavy handed with anyone who looks like they might have a little something to shake down for. We are already seeing the tip of this iceberg in Obama's now infamous "you didn't build that" speech. What's he's really saying is you didn't build it so you didn't earn it and thus when government decides to come in and take it you better not put up any fight. This is certainly not an environment that attracts capital investment. In all of this, banks will go insolvent. Without the government's ability to borrow the only recourse will be to print and print and print. Period.
If government doesn't default in response to higher interest rates then it will have to print starting right away just to make the increased debt service payments. There is no way the con men will be able to increase taxes to make up the difference. The debt is just too high these days. The only way to pay it off would be for every productive person in the country to work approximately a full year without pay. Most people don't have enough of a buffer to go 2 months without pay and many are living at their current rate of consumption completely hand to mouth. Thus, the debt is unpayable and so only a fool will expect that it will ever be repaid.
Many people will just ride it in like Slim Pickens's Major Kong did in Dr. Strangelove. They won't see it coming or they will trust government to the very end simply because government has been getting away with its scam for so long. But they will have missed the important age old lesson about not being able to fool all the people all the time. Debt based Keynesian government which operates on a fraudulent money system consisting of fiat currency and fractional reserve banking is doomed to fail badly. Nobody can say exactly when so there is no use in speculating about it. But there is 100% certainty that it will someday end and there is no reason to speculate about that either. All I can say is that in every case the people who own and possess physical gold will do much better than those who trusted in the paper fraud being perpetrated by all governments of the world today with their funny money system.
Wednesday, August 22, 2012
Gold and Silver might be breaking out.
Today's WSJ headline says "Fed Minutes Suggest Action Likely". Why so likely? Simply because the global economy is rolling over. The data to support this is abundant at the global and US level. Major exporters like Germany and China are seeing rapid declines in growth. In the US, we keep hearing about the "fiscal cliff" from normally verbally reserved organizations like the CBO. Any reduction in spending is only going to make a bad situation worse. Any continuation in spending will only throw good money after bad because it is all debt based spending.
The basic issue is that the Debt Ponzi has peaked. People are not taking on new debt fast enough to keep the debt Ponzi growing anymore. The reasons are varied but it comes down to 4 main areas:
Government has two basic choices during the collapse phase of the debt Ponzi : let it collapse under its own corrupt Madoffian weight or try to pump it up more.
Yes, the fed will grit its teeth and inflate because it knows that it's the only politically viable choice anymore. If Bernanke were to dig in his heels and suddenly turn honest, Congress would strip him of his power and either replace him with a puppet or simply change the rules so that he would be irrelevant. Think this is impossible? It's already happening to the German equivalent of Bernanke. For those not keeping up, Mario Draghi is the sitting European Central Bank president. He is the unelected chief moneyman of the European Union. Draghi is publicly ridiculing Germany's central bank (AKA Bundesbank) president (Weidmann) for opposing EU requests that Germany guarantee more EU debt to bail out the PIIGS. Weidmann is under great pressure not to be labeled "the guy that killed the EU" when in fact the EU in current form is already dead.
Is it any wonder that gold is now smashing up against resistance again? The blue circles in the chart below show the upper resistance line is again being tested. If the breakout happens at this point then it will be considered a classic flag or pennant chart pattern. This pattern, should the chart break up and out through resistance, would be recognized by every trading computer on the planet. Note from the link that the target price for a flag breakout is the length of the flagpole. In this case, that length is about $80. In other words, a breakout would suggest a typical price target of $150+$80=$230 for the GLD ETF. In other words, $2300 per troy oz.
It's also quite possible that the test will fail one more time, go re-test support and then break out. This "5 bumper" a-b-c-d-e formation would be a textbook example of the so called "horizontal triangle" as defined by the Elliott wave principle. For Elliott wave followers, 4th waves are always penultimate waves in a series. It would mean that the chart would likely have one more large multiyear wave up that has the same magnitude as wave 1. Wave 1 looks like it went from $45->$100 for a run of about $65. Since GLD is for 1/10th of a troy oz., that translates into an additional $650 being tacked onto today's one troy oz. gold price. So, whether flag formation or horizontal triangle, a breakout from here will point to a gold price of well over $2200. That means gold coins will probably be $2300 to $2350.
The basic issue is that the Debt Ponzi has peaked. People are not taking on new debt fast enough to keep the debt Ponzi growing anymore. The reasons are varied but it comes down to 4 main areas:
- Job loss or fear of job loss has people acting more conservatively, saving more for a rainy day, spending only what is needed when needed.
- Boomers are retiring or thinking of retiring. This is pretty much the same as permanent job loss or knowledge of impending permanent job loss. Thus it has the same result: less spending overall and much less debt based spending. Debit cards instead of credit cards.
- Too much existing debt. People have partied hard with debt based consumption and now they are loaded to the gills with existing debt. They have no room left on their credit accounts to buy more.
- All the debt based consumption has left people with lots of stuff. So much, in fact, that there is hardly room to store it. In fact, they want to downsize their house leaving even less storage room. It will take more than a little bling to get people to buy more. You can not just offer them more of what they bought last year and get them to bite. You have to innovate and do something new and that takes time. In the meantime, people will hunker down and pull in their horns.
Government has two basic choices during the collapse phase of the debt Ponzi : let it collapse under its own corrupt Madoffian weight or try to pump it up more.
- If they let it collapse, their precious banks will collapse. People who thought they had savings and pensions will find out during the associated bank runs that their money evaporated. More to the point, that their money never existed in the first place except as accounting entries in the books of fraudulent criminals. I wish to heck that this was an emotional overstatement but I'm afraid that it is perfectly factual.
- If they pump it up more, it keeps hope alive that more debt might be able to be used to grow its way out of the existing debt. Of course, this is mathematically flawed Keynesian thinking that is best left to simpletons and charlatans. More debt is not the solution to too much debt! But the only way to provide more stimulus is to take on more debt because we do not have the cash to spend. As that happens the value of the currency falls meaning that your savings account and monthly paychecks lose buying power.
- Note that in both sudden collapse and pump until eventual collapse scenarios, the required outcome is the loss of savings of the people. This is because much of the savings are simply book entries and the people have already lost their money but simply have not been told about it yet. In other words, no different from any other Ponzi. Sure, if they take the money out right now before everyone else gets wise and goes running for the door then the money will indeed be there but much of the savings is locked up in the 401k trap from which there is no easy escape. Besides, people always leave their trust and their money in the banks far beyond the point where it is obvious that collapse will happen. Some people simply cannot handle the truth and so they go into "head in sand" mode or they let others intimidate them into not recognizing the obvious using words like "conspiracy theorist", etc. It's herding behavior 101. The result is that there is always lots of money lost when the bank runs eventually arrive. A bank run is when all the people suddenly realize that all the other people are figuring out the truth and so everyone panics in unison.
Yes, the fed will grit its teeth and inflate because it knows that it's the only politically viable choice anymore. If Bernanke were to dig in his heels and suddenly turn honest, Congress would strip him of his power and either replace him with a puppet or simply change the rules so that he would be irrelevant. Think this is impossible? It's already happening to the German equivalent of Bernanke. For those not keeping up, Mario Draghi is the sitting European Central Bank president. He is the unelected chief moneyman of the European Union. Draghi is publicly ridiculing Germany's central bank (AKA Bundesbank) president (Weidmann) for opposing EU requests that Germany guarantee more EU debt to bail out the PIIGS. Weidmann is under great pressure not to be labeled "the guy that killed the EU" when in fact the EU in current form is already dead.
Is it any wonder that gold is now smashing up against resistance again? The blue circles in the chart below show the upper resistance line is again being tested. If the breakout happens at this point then it will be considered a classic flag or pennant chart pattern. This pattern, should the chart break up and out through resistance, would be recognized by every trading computer on the planet. Note from the link that the target price for a flag breakout is the length of the flagpole. In this case, that length is about $80. In other words, a breakout would suggest a typical price target of $150+$80=$230 for the GLD ETF. In other words, $2300 per troy oz.
It's also quite possible that the test will fail one more time, go re-test support and then break out. This "5 bumper" a-b-c-d-e formation would be a textbook example of the so called "horizontal triangle" as defined by the Elliott wave principle. For Elliott wave followers, 4th waves are always penultimate waves in a series. It would mean that the chart would likely have one more large multiyear wave up that has the same magnitude as wave 1. Wave 1 looks like it went from $45->$100 for a run of about $65. Since GLD is for 1/10th of a troy oz., that translates into an additional $650 being tacked onto today's one troy oz. gold price. So, whether flag formation or horizontal triangle, a breakout from here will point to a gold price of well over $2200. That means gold coins will probably be $2300 to $2350.
When dealing with charts, it's always a good thing to look for confirmation if possible. When dealing with gold as a monetary metal, silver is always the first thing to use for a confirmation source. As you can see from the chart below, Silver has been forming a flag of its own albeit with more volatility than gold. Additional volatility has always been typical for silver because it is both an industrial metal and a monetary metal. The silver chart has two resistance lines. The first one is the tips of all the closing peaks. The second one is the parallel line of interday highs. The chart broke out of the first resistance level at point 1 below and it did so with a gap up (what I like to call "with gusto"). It then broke through the second resistance level at point 2 below. Silver seems to be predicting a breakout for gold right now.
Of course, charting is simply trying to make educated guesses on which way the herd will turn and herd behavior is never completely deterministic. There is always a good degree of chance involved right up until the actual movement. But these models are used widely and they are now embedded into computer programs and so they are something of a self- fulfilling prophecy.
If silver breaks out it could treat the flagpole length as being $48-$9 or $39. Added to $26 would imply a target price of $65. This is just slightly shy of my long standing view that fair value for silver is in the $75 range pre 2015.
We've had a deflationary environment for years and deflation is still the watchword for now but history teaches the deflation never lasts forever and that government will at some point succeed in ruining the money supply. When that happens, you have to expect that cash will become trash. At least fiat currency will. Real money like gold and silver will never be trash because they never have been trash in the history of mankind. It is this long standing history that gives gold and silver their value in dire times such as are happening right now.
Sunday, August 19, 2012
The inevitable transfer of exorbitant privilege
The world needs a global currency of some sort in order to facilitate trade. Let's face it, if some Japanese person tried to buy goods from the average American using Yen they wouldn't get very far. Americans do not know how to value foreign currencies and, increasingly, foreigners are learning how foolish it is to value American currency. Yes, when the USA gets into economic trouble we just go to the printing presses. It seems (and is for a while) such an easy way out that it's hard to avoid. Besides, the bankers can say they are doing it for the good of the world, etc.
At this point we have gone back to the inflation well so often that other countries are tired of it. They are now working as hard as they can to get out of our fraudulent currency system (I wish I could call it money but it doesn't pass the test of being a reliable store of wealth/buying power). China is making deals with Brazil and with Iran and with Russia and even with their WW2 enemy Japan. They want to cut the USD out of the trade loop where it isn't needed. They realize that it was artificially crammed down their throats and they want out.
But how to do it without collapsing global trade? The answer is not that difficult. Just go slowly. Don't get angry, don't get goaded into a fight. Just do the right thing over time and before you know it the dollar scam will collapse in on itself. But what is the right thing? If China thinks it's going to replace the dollar with the Yuan then it is crazy. There are many technical reasons and some "people" reasons why not. First, there are not enough Yuan in existence. But perhaps more importantly, people do not want to jump out of the frying pan into the fire.
I like the cable company analogy here. You don't switch service providers for the heck of it. The new guy HAS to offer a better deal, especially if he's had a hazy past. It can't be just 5% better. 10% won't do it either. It has to be at least 25% better of a deal and if there is a shady past involved the cost premium needed to drive transition could be much higher.
When it comes to the global reserve currency, all people really want to know is that its controller is not ripping them off. But if China just tried to convince everyone to use Yuan instead of dollars there would be fear that China would just rip them off instead of the US. Also, China has to be careful. The US military is a huge and fearful organization and US politicians can easily convince themselves that China trying to take over the money reins for the world is a destabilizing force (meaning US will lose power and control in the deal). They can easily decide that China is a threat to world security and start a war in order to "put them back in their place for the good of the world". Trust me, the con men running the show think exactly this way, no stretch of the imagination needed.
So China has to walk softly and China HAS to gain support of the world such that, if the US objects to a new Chinese-driven global reserve currency strategy, it cannot turn into war without that war being the USA against everyone else. China has to, in essence bribe the world somehow. But what could China offer as a better deal than the US when it comes to managing the global money supply? There is one thing, and one thing only that could possibly fill this need: China needs to drive toward a gold backed global exchange currency. You know, honest money like Ron Paul is always talking about. This would not be one that China owns, at least not at first. Remember, slow by slow, not all at once. Moving too quickly will start WW3.
As a first step it would be enough of a win for China simply for the US to have lost the exorbitant privilege of printing up money almost without consequence. If China were to create some sort of GlobalTradeCurrencyUnit (not, not, NOT the Yuan) and back it 100% with a massive, internationally audited gold supply then who in their right mind would not want to use that to pay for global trade? And if they used that then the people who are now using dollars would no longer need those dollars, would they? Why would they hang onto dollars that the USA gets to debase if there is a fair and honest alternative?
And so, this is what I would be doing if I were China. I would be amassing a monster gold reserve, one big enough to equal or eclipse the 8,000 tonnes that the USA supposedly has. And when I had all of that gold in hand I would launch the new GlobalTradeCurrencyUnit and invite everyone to participate. If China did that, the world would un-a$$ US dollars like there was no tomorrow in favor of this new, honest currency. It would collapse the debt Ponzi of the USA and eliminate its global power hegemony overnight.
The caveat here is that China will have to be well behaved while this is happening and they will have to keep up the good behavior until the new system takes root and is globally accepted. If they didn't then there would be too much fear about giving China the reins. China needs to show self-control in tense situations for several years (like the US did during WW2) in order to gain the trust of the world.
Given the above, is it any wonder that rumors are circulating around a massive Chinese gold purchase program? Add 6000 tonnes to what China already has and it will be pretty close to the US stockpile of 8000+ tonnes. With that on the table, consider the remarks that Romney has been making about China all along - that they are guilty of "currency manipulation" and that he will start trade wars with them in punishment. Since the US is the biggest currency manipulator in the history of man, Romney's hollow remarks must have some purpose other than achieving justice.
Everyone knows that economic attacks on countries are a political mechanism for attempting to overthrow the government of said countries. The hope is that the suffering of the people will cause revolt from within. If I were con man Romney and I saw China building a massive stockpile of gold then I would pick a fight with them in the name of justice. Of course, it would really be in the name of greed and dishonesty but these guys simply argue that the end justifies the means.
If Romney wins and if he picks a fight with China then know in advance that it has nothing to do with currency manipulation or justice. It will have to do with China trying to escape the money con that the USA has been running since Bretton Woods. It will be for the same reason that we invaded Iraq: to put down a regime which had rejected the almighty US dollar in favor of being able to keep the wealth created by their labor instead of letting Uncle Sam steal it "for the greater good". If Obama starts getting tough with China then it will be for the same reason. Obama and Romney are basically the same con game operators. They just have slightly different cover stories.
Of course, if China ever got the reins it would start cheating on the money supply eventually. The inflation game is too good of a something-for-nothing racket not to cheat. Humans do not possess the will power needed to keep the straight and narrow. Besides, every other group of con men who ran a global empire got benefit from doing it and in time China would follow suit. They would lie, cheat and steal with the best American con men because that's what governments do. They would never be happy with just having things be fair. They would want to make an economic weapon out of it just like all the other con men did before them.
Meet the new boss, same as the old boss.
At this point we have gone back to the inflation well so often that other countries are tired of it. They are now working as hard as they can to get out of our fraudulent currency system (I wish I could call it money but it doesn't pass the test of being a reliable store of wealth/buying power). China is making deals with Brazil and with Iran and with Russia and even with their WW2 enemy Japan. They want to cut the USD out of the trade loop where it isn't needed. They realize that it was artificially crammed down their throats and they want out.
But how to do it without collapsing global trade? The answer is not that difficult. Just go slowly. Don't get angry, don't get goaded into a fight. Just do the right thing over time and before you know it the dollar scam will collapse in on itself. But what is the right thing? If China thinks it's going to replace the dollar with the Yuan then it is crazy. There are many technical reasons and some "people" reasons why not. First, there are not enough Yuan in existence. But perhaps more importantly, people do not want to jump out of the frying pan into the fire.
I like the cable company analogy here. You don't switch service providers for the heck of it. The new guy HAS to offer a better deal, especially if he's had a hazy past. It can't be just 5% better. 10% won't do it either. It has to be at least 25% better of a deal and if there is a shady past involved the cost premium needed to drive transition could be much higher.
When it comes to the global reserve currency, all people really want to know is that its controller is not ripping them off. But if China just tried to convince everyone to use Yuan instead of dollars there would be fear that China would just rip them off instead of the US. Also, China has to be careful. The US military is a huge and fearful organization and US politicians can easily convince themselves that China trying to take over the money reins for the world is a destabilizing force (meaning US will lose power and control in the deal). They can easily decide that China is a threat to world security and start a war in order to "put them back in their place for the good of the world". Trust me, the con men running the show think exactly this way, no stretch of the imagination needed.
So China has to walk softly and China HAS to gain support of the world such that, if the US objects to a new Chinese-driven global reserve currency strategy, it cannot turn into war without that war being the USA against everyone else. China has to, in essence bribe the world somehow. But what could China offer as a better deal than the US when it comes to managing the global money supply? There is one thing, and one thing only that could possibly fill this need: China needs to drive toward a gold backed global exchange currency. You know, honest money like Ron Paul is always talking about. This would not be one that China owns, at least not at first. Remember, slow by slow, not all at once. Moving too quickly will start WW3.
As a first step it would be enough of a win for China simply for the US to have lost the exorbitant privilege of printing up money almost without consequence. If China were to create some sort of GlobalTradeCurrencyUnit (not, not, NOT the Yuan) and back it 100% with a massive, internationally audited gold supply then who in their right mind would not want to use that to pay for global trade? And if they used that then the people who are now using dollars would no longer need those dollars, would they? Why would they hang onto dollars that the USA gets to debase if there is a fair and honest alternative?
And so, this is what I would be doing if I were China. I would be amassing a monster gold reserve, one big enough to equal or eclipse the 8,000 tonnes that the USA supposedly has. And when I had all of that gold in hand I would launch the new GlobalTradeCurrencyUnit and invite everyone to participate. If China did that, the world would un-a$$ US dollars like there was no tomorrow in favor of this new, honest currency. It would collapse the debt Ponzi of the USA and eliminate its global power hegemony overnight.
The caveat here is that China will have to be well behaved while this is happening and they will have to keep up the good behavior until the new system takes root and is globally accepted. If they didn't then there would be too much fear about giving China the reins. China needs to show self-control in tense situations for several years (like the US did during WW2) in order to gain the trust of the world.
Given the above, is it any wonder that rumors are circulating around a massive Chinese gold purchase program? Add 6000 tonnes to what China already has and it will be pretty close to the US stockpile of 8000+ tonnes. With that on the table, consider the remarks that Romney has been making about China all along - that they are guilty of "currency manipulation" and that he will start trade wars with them in punishment. Since the US is the biggest currency manipulator in the history of man, Romney's hollow remarks must have some purpose other than achieving justice.
Everyone knows that economic attacks on countries are a political mechanism for attempting to overthrow the government of said countries. The hope is that the suffering of the people will cause revolt from within. If I were con man Romney and I saw China building a massive stockpile of gold then I would pick a fight with them in the name of justice. Of course, it would really be in the name of greed and dishonesty but these guys simply argue that the end justifies the means.
If Romney wins and if he picks a fight with China then know in advance that it has nothing to do with currency manipulation or justice. It will have to do with China trying to escape the money con that the USA has been running since Bretton Woods. It will be for the same reason that we invaded Iraq: to put down a regime which had rejected the almighty US dollar in favor of being able to keep the wealth created by their labor instead of letting Uncle Sam steal it "for the greater good". If Obama starts getting tough with China then it will be for the same reason. Obama and Romney are basically the same con game operators. They just have slightly different cover stories.
Of course, if China ever got the reins it would start cheating on the money supply eventually. The inflation game is too good of a something-for-nothing racket not to cheat. Humans do not possess the will power needed to keep the straight and narrow. Besides, every other group of con men who ran a global empire got benefit from doing it and in time China would follow suit. They would lie, cheat and steal with the best American con men because that's what governments do. They would never be happy with just having things be fair. They would want to make an economic weapon out of it just like all the other con men did before them.
Meet the new boss, same as the old boss.
Tuesday, August 14, 2012
S+P 500 looking ready to roll over
One of the most ominous chart formations I know of is the double top. The S+P 500 has to decide very soon whether it is going to break out into new inflation driven high or break down into a deflationary crash. The market is likely just waiting for Bernanke to make his next move before committing to one outcome or the other. If Bernanke decides not to throw more newly printed cash into the market place then look out below. Why? Because this declining double top will have formed waves 1 and 2 of an Elliott wave sequence which means the next move would be a 3rd wave. That means big time downward gaps that take everyone by surprise so that they say "we never saw it coming".
Personally, I think the odds favor a big time market sell off here. The news around the world isn't just "not good". No, the truth is more like "it sucks really bad". China exports are collapsing. France moved its top tax rate to 75 freaking percent! Yeah, that will spur their best and brightest into taking more risk, right? The EU is looking at Germany's trade surplus of 6% and telling them that punitive action will be taken if they don't "fix it" (i.e. buy more stuff from other countries in the euro-Ponzi).
So the only lesson that people are going to hear is that it is open season on the rich and the highly productive elements of society. Folks, that strategy never worked before and it won't work this time. Governments who play this game are using their power to remain in office for a few more months with promises that screwing the rich people will right their ships. Besides, "rich" business owners didn't really build those businesses anyway, right Obama? In fact nobody should get any credit for anything unless the government is right there with them taking the lion's share of the credit and the profits.
What the greedy bureaucrats are really doing is selling the people of the country down the river in the medium and long term. When the smart, productive people leave, who will provide for the fat, lazy, stupid people and the bureaucrats that remain? The whole purpose of one world government will be to ensure that there is no place to run when government gets desperate like this. But since we don't have the new world oder (sic) yet there are still plenty of places for the rich and intelligent people to flee to. Expect a lot of fleeing to happen from the EU over the next few years.
So the only lesson that people are going to hear is that it is open season on the rich and the highly productive elements of society. Folks, that strategy never worked before and it won't work this time. Governments who play this game are using their power to remain in office for a few more months with promises that screwing the rich people will right their ships. Besides, "rich" business owners didn't really build those businesses anyway, right Obama? In fact nobody should get any credit for anything unless the government is right there with them taking the lion's share of the credit and the profits.
What the greedy bureaucrats are really doing is selling the people of the country down the river in the medium and long term. When the smart, productive people leave, who will provide for the fat, lazy, stupid people and the bureaucrats that remain? The whole purpose of one world government will be to ensure that there is no place to run when government gets desperate like this. But since we don't have the new world oder (sic) yet there are still plenty of places for the rich and intelligent people to flee to. Expect a lot of fleeing to happen from the EU over the next few years.
Saturday, August 4, 2012
Filling in some important gaps regarding coverage of the ongoing Euro-collapse
Today Mish reports on the state of the Eurozone's continued progress towards collapse. He does a good job of bulletizing the problems in Italy and Spain. The whole Eurozone is done for when these two economies collapse simply because of the size of them. But Mish's bottom line comes off as so stark, unfeeling and even heartless that it bears explanation. He writes,
"Correct ApproachThe correct approach is to reduce taxes and make it easier for businesses to fire workers. Logic dictates that if it's difficult or impossible to fire workers, businesses will not hire them in the first place."
The first thing to note is that Mish is making these statements from the viewpoint of an social economist, not from a political perspective. Governments cannot do the right thing in these cases because it will necessitate admitting they have been running a Ponzi scheme all along. Mish is not a politician and is thus free to tell the simple truth and it is a truth that would lead to the quickest healing with the least amount of damage possible.
If your 747 jetliner is out of fuel and guaranteed to crash you can continue to delude yourself (and your passengers) that it is save-able. You can conjure up all manner of (impossible) strategies for soft landings and you can imagine airplane-sized safety nets all over the place in the form of soft water, soft pastures, etc. But none of these things are real. 747s do not glide well at all. When power is lost, they basically fall out of the sky. Your best bet is to put on whatever parachutes are available and then jump out. That there are not enough parachutes for everyone onboard is a given but those people were basically dead men walking the minute the fuel ran out. They were just in the wrong place at the wrong time. Avoiding the admission of this does not change the fact.
And so it is with the economy. Continuing to try to prop up the collapsing Ponzi is not going to save it. It will simply mean less people escape with their skins. Since government is running this Ponzi, all of Mish's proposals for damage reduction center around getting government out of the cockpit and away from the controls. After all, the pilots that got us into this mess should not be the ones we count on to get us out. They have already proven that they are either criminals or criminally incompetent.
Mish's first suggestion of tax reduction needs more explanation since he was not explicit this time. Mish wants government to not only not raise taxes, he wants them reduced. But he does not want this to happen at the expense of expanding debt. The only other option is for government to downsize, and to do so rapidly. Of course, this is not a panecea and will initially result in a much weaker economy because the governement spends a lot of money into the economy. But over the long run it will make the economy much stronger because money spent by government is often wasted.
Why? Because money that is not earned by the sweat of your brow is easy to piss away through fraud, waste, abuse and corruption. If people are free to keep their money they will eventually spend it on things they think makes sense to themselves. People will spend their money eventually because we are all dying and you can't take it with you. This is why we do not need Keynesian intervention by government (e.g. the debt based spending of public money when the public itself has decided to save instead).
Mish's next suggestion is to let the free market determine wages and employment levels. If there is a need for labor then companies will hire not because they want to but because if they don't they will not produce enough output to be competitive. They will hire out of their own desire to grow and to prosper. But if there is no need for employees yet intrusive government madates that employees be kept on anyway, or it mandates what they must be paid, then companies will hunker down under the oppressive hand of government. They will take fewer risks because they will not want to be punished by government requirements not to lay people off or orders not to reduce their salaries should it turn out that the risk didn't pay off.
Mish's bottom line: governments should stay the heck out of the operation of the free market because when governments begin to control everything they do what's best for themselves, not for the people. This causes distortions, bubbles and problems which even more interference will only make worse. Of course, this is not just Mish's opinion; it is a basic tenet of Austrian School economics.
"Correct ApproachThe correct approach is to reduce taxes and make it easier for businesses to fire workers. Logic dictates that if it's difficult or impossible to fire workers, businesses will not hire them in the first place."
The first thing to note is that Mish is making these statements from the viewpoint of an social economist, not from a political perspective. Governments cannot do the right thing in these cases because it will necessitate admitting they have been running a Ponzi scheme all along. Mish is not a politician and is thus free to tell the simple truth and it is a truth that would lead to the quickest healing with the least amount of damage possible.
If your 747 jetliner is out of fuel and guaranteed to crash you can continue to delude yourself (and your passengers) that it is save-able. You can conjure up all manner of (impossible) strategies for soft landings and you can imagine airplane-sized safety nets all over the place in the form of soft water, soft pastures, etc. But none of these things are real. 747s do not glide well at all. When power is lost, they basically fall out of the sky. Your best bet is to put on whatever parachutes are available and then jump out. That there are not enough parachutes for everyone onboard is a given but those people were basically dead men walking the minute the fuel ran out. They were just in the wrong place at the wrong time. Avoiding the admission of this does not change the fact.
And so it is with the economy. Continuing to try to prop up the collapsing Ponzi is not going to save it. It will simply mean less people escape with their skins. Since government is running this Ponzi, all of Mish's proposals for damage reduction center around getting government out of the cockpit and away from the controls. After all, the pilots that got us into this mess should not be the ones we count on to get us out. They have already proven that they are either criminals or criminally incompetent.
Mish's first suggestion of tax reduction needs more explanation since he was not explicit this time. Mish wants government to not only not raise taxes, he wants them reduced. But he does not want this to happen at the expense of expanding debt. The only other option is for government to downsize, and to do so rapidly. Of course, this is not a panecea and will initially result in a much weaker economy because the governement spends a lot of money into the economy. But over the long run it will make the economy much stronger because money spent by government is often wasted.
Why? Because money that is not earned by the sweat of your brow is easy to piss away through fraud, waste, abuse and corruption. If people are free to keep their money they will eventually spend it on things they think makes sense to themselves. People will spend their money eventually because we are all dying and you can't take it with you. This is why we do not need Keynesian intervention by government (e.g. the debt based spending of public money when the public itself has decided to save instead).
Mish's next suggestion is to let the free market determine wages and employment levels. If there is a need for labor then companies will hire not because they want to but because if they don't they will not produce enough output to be competitive. They will hire out of their own desire to grow and to prosper. But if there is no need for employees yet intrusive government madates that employees be kept on anyway, or it mandates what they must be paid, then companies will hunker down under the oppressive hand of government. They will take fewer risks because they will not want to be punished by government requirements not to lay people off or orders not to reduce their salaries should it turn out that the risk didn't pay off.
Mish's bottom line: governments should stay the heck out of the operation of the free market because when governments begin to control everything they do what's best for themselves, not for the people. This causes distortions, bubbles and problems which even more interference will only make worse. Of course, this is not just Mish's opinion; it is a basic tenet of Austrian School economics.
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