Desperate Times

Description: Newspaper clipping USA, Woodrow Wilson signs creation of the Federal Reserve. Source: Date: 24 December 1913 (Photo credit: Wikipedia)

Paul Craig Roberts was Assistant Secretary of the Treasury for Economic Policy and associate editor of the Wall Street Journal.  In one of his articles after the recent “April Plunge” in the price of gold, he wrote:

 

“I was the first to point out that the Federal Reserve was rigging all markets, not merely bond prices and interest rates, and that the Fed is rigging the bullion market in order to protect the US dollar’s exchange value, which is threatened by the Fed’s quantitative easing.”

It’s one thing for people like the Gold Anti-Trust Action Committee (GATA) to claim that the gold and silver markets are rigged. It’s another thing entirely to have a former Assistant Secretary of the Treasury to make similar claims.  Mr. Roberts’ credentials add much credence to the market rigging claims.

 

“With the Fed adding to the supply of dollars faster than the demand for dollars is increasing, the price or exchange value of the dollar is set up to fall.”

 

Fractional-Reserve Banks are Inherently Risky

The expansion of $100 through fractional-reserve banking with varying reserve requirements. Each curve approaches a limit. This limit is the value that the money multiplier calculates. (Photo credit: Wikipedia)

A few of us have foreign bank accounts.  Many of us wish we had foreign bank accounts.  No one would want the inconvenience of a distant, foreign bank account unless they didn’t trust their domestic banks or government.

In virtually every case, the primary motive for seeking a foreign bank account is our distrust in domestic banks.  Because we fear the loss of our wealth to domestic inflation, high taxes or perhaps confiscation by our own government, we seek to deposit our funds in the “safety” of foreign banks.

However, the “Cyprus Crisis” has taught us that foreign banks may be even more dangerous than domestic bank accounts. As a result, we should rethink our desire to open or maintain an account in a foreign bank.

For example, TheEconomicCollapse.com published an article entitled “Words Of Warning: Get Your Money Out Of European Banks”:

“If you still have money in European banks, you need to get it out.  This is particularly true if you have money in southern European banks.  One thing has become abundantly clear: at least some Cyprus depositors are going to lose a substantial amount of money.  Personally, I never dreamed that they would go after private bank accounts in Europe, but now that this precedent has been set it should be apparent to everyone that no bank account will ever be 100% safe ever again.

“Without trust, a banking system simply cannot function, [however] trust in the European banking system has been shattered and that people need to get their money out of those banks as rapidly as they can.”

 

 

Federal Reserve

Not necessarily profound, but authoritative.  Seeing seemingly “mainstream” criticism of the Federal Reserve helps validate some of the ideas and attitudes concerning the Fed that are commonly held by “conspiracy theorists”.

video  00:04:42

 

A new Gold Standard is being born?

Campaign poster showing William McKinley holding U.S. flag and standing on gold coin “sound money”, held up by group of men, in front of ships “commerce” and factories “civilization”. (Photo credit: Wikipedia)

Ambrose Evans-Pritchard is an English journalist. (What else could he be with that name?)  He’s intelligent, well-educated and a fine writer.  More, he has so much courage that, during the G.W. Bush administration, his articles on Bush were so insightful and aggressive, that he was forced to leave the United States.  I respect that.

However, he recently published an article entitled “A new Gold Standard is being born?” that included one insight that that I found exciting, and a couple more that strike me as lame.

Mr. Evans-Pritchard observes,

 “The world is moving step by step towards a de facto Gold Standard, without any meetings of G20 leaders to announce the idea or bless the project. . . . My guess is that any new Gold Standard will be sui generis, and better for it.”

In other words, Evans-Pritchard believes that a new, “de facto Gold Standard” is already emerging as one nation after another begins to rely on gold rather than fiat dollars to purchase oil and settle international trade accounts.

No government, central bank, or G20 spokesman has (as yet) “officially” declared a new gold standard.  But Evans-Pritchard believes that a new gold standard is nevertheless evolving “naturally” from the wreckage of the world’s present fiat currency system.

Evans-Pritchard’s observation that the world may be “naturally” gravitating to gold—without official sanction or permission—strikes me as prescient.  I think he’s right, and if he is, that means:

 

Fiat Currency Sorcery

“There’s no subtler, no surer means of overturning the existing basis of society than to debauch [inflate] the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which only one man in a million can diagnose.”—The Economic Consequences of Peace by John Maynard Keynes (A.D. 1920).

Keynes’ quote may sound improbable to most Ameri­cans, but I think it’s one of the two or three most profound and concise statements of secular truth I’ve seen.

To illustrate the validity of Keynes’ observation consider Paul Moritz Warburg—the purported “chief architect” of the Federal Reserve Act.  Shortly before his death in A.D. 1932, he was quoted in The Nation maga­zine as saying:

 

“I have studied finance, and economics, and international trade all my life, and now, after these recent events, I have come to the conclusion that I know nothing about any of them.”

 

Business Cycles Forever . . . ?

The Great Depression. (Photo credit: Wikipedia)

In the 1930s, the US was in the midst of its Great Depression.  The Soviet Union cheered.  Communists viewed our Depression as evidence that the capitalist system was dying and communism would soon rule the world.

Russian economist Nikolai Kondratiev (A.D. 1892 –1938) disagreed.  He advanced the theory that Western economies have long-term, 40-to-60-year business cycles. These business cycles look like sine waves.  In broad strokes, these waves generally include about 25 “good” years when the economy is expanding a little or a lot (economic “boom”), followed by 25 “bad” years when the economy is contracting a little (recession) or a lot (depression).

According to Kondratiev, the Great Depression was merely a predictable—and temporary—low in the US economy’s business cycle.  As such, the Great Depression did not signal the end of capitalism nor the triumph of communism.  The Soviet government rewarded Mr. Kondratiev for his politically-incorrect research by executing him.

(Apparently, Kondratiev’s execution served as a valuable lesson to all subsequent economists.  Those who want to stay healthy, also stay politically-correct.  Those who dare to tell the truth do so only with such a convoluted use of language, graphs and mathematics that no one can understand what they’re saying.  Better to be a live economist than a dead teller of truth.)

In any case, the former Soviet Union has also been “executed” and joined Mr. Kondratiev in death–but Kondratiev’s view of business cycles has survived.

 

Gold’s Return

Usually not a good sign to receive a letter from the FDIC (Photo credit: swanksalot)

Economics is alleged to be a “science,” but if it is, it’s a very obscure science.  Much of whatever knowledge economics provides is almost incomprehensible.  Much of what can be understood is government propaganda (lies).

Nevertheless, if we can’t learn “the truth, the whole truth and nothing but the truth” from economics, we can still learn some truth.

One means of discerning truth is by observing “coincidences”.  Some people deny the existence of innocent “coincidences”. I don’t.  Sometimes one person or group just happens to do something that another group or person also does at virtually the same time.  There might seem to be a correlation or even a conspiracy between the two groups–but, in fact, there’s merely an innocent “coincidence”.

However, I also don’t deny that sometimes two seemingly disparate persons or groups perform virtually identical acts at virtually the same time based on a mutual agreement to do so.  Their similar acts might seem “coincidental,” but they are actually evidence of the two persons/groups working in concert.

When we see two powerful but seemingly separate groups or entities performing the same act simultaneously, we can suspect that something major is about to happen.

 

To QE3 or Not to QE3? That is the Question!

Quantitative Easing (Photo credit: The Lakelander)

Matthew Bishop, the US Editor of The Economist was recently interviewed by the Wall Street Journal TV.  During that interview, Mr. Bishop predicted that governments will soon debase currencies such as the “paper dollar and “paper euro” “in a big way.”   He said that the weaker than expected March unemployment report is leading to further Wall Street demands for more stimulus plans and that Wall Street’s addiction to debt is leading to the continuing debasement of the dollar. Further Quantitative Easing (QE3)—which, incidentally, will support the price of gold—is virtually inevitable.

The slogan “QE3 to infinity” has caught on among gold gurus.  They argue that QE3 must start soon and essentially continue until the US economy crashes.

Richard Duncan, author of The New Depression: The Breakdown of the Paper Money Economy argues that Federal Reserve Chairman Ben Bernanke will continue to “stimulate” the currently listless economy with massive infusions of fiat currency.  Therefore, “For the year 2012—Expect QE3.”

However, while I don’t doubt that there’s a QE3 in our future, I’m unconvinced that we’ll see QE3 this year.  But before I explain why, let’s explore the meaning of QE (Quantitative Easing).

 

Max Keiser has a Problem

The gov-co’s first problem with Max Keiser is that he’s intelligent.  Intelligence won’t necessarily get you into trouble, but it certainly can–especially in conjunction with Keiser’s second problem:

Keiser is honest.  The combination of intelligence and honesty necessarily means that a person cannot be “politically correct”.  Those who are both intelligent and honest pose a special threat to the “system” since such people are capable of seeing and understanding the “system’s” criminal acts.

Third, he’s knowledgeable.  He worked in the stock markets from a number or years and has an insider’s understanding of how markets and financial systems actually work.

 

Them That’s Got Shall Get

Image via Wikipedia

Some of you may remember the lyrics of the Billie Holiday blues song, God Bless the Child:

 “Them that’s got shall get,

“Them that’s not shall lose,

“So the Bible says and it still is news.”

Those lyrics refer to Proverbs 22:7 which warns that, “The rich rule over the poor, and the borrower is servant to the lender.”  Them that’s got (the rich) shall get (rule); them that’s not (the poor) shall be ruled, even oppressed—and/or act as “servants” (even slaves) to the rich (those able to lend money).

Given that Proverbs was written almost 3,000 years ago, you can’t argue that the debtor’s dangerous relationship as “servant” or “slave” to the lender is really “news”.

The “news,” if any, is humanity’s persistent addiction to the “high” we call credit and aversion to the subsequent “depression” we call debt.

We know that debt can be dangerous and even self-destructive.  Nevertheless, if you want to catch a man or a nation, bait your trap with credit.