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Category Archives: Central Banks

Monetary Madness Part II—Perpetual Bonds


The Cure of Economic Calamity: Looney Tune Economics [courtesy Google Images]

The Cure for Economic Calamity:
Looney Tune Economics
[courtesy Google Images]

As seen in the previous article, the total value of negative-interest rate bonds has jumped from nothing to $13 trillion in just two years.

Although governments issuing negative interest rates bonds don’t have to pay interest on those bonds, they still have to repay most of the principal.

What a bummer. Wouldn’t it be great if someone invented a government bond that not only didn’t have to pay interest (as with negative interest rate bonds) but also didn’t even have to repay the principal?

Well, folks, they appear to have done just that. They’re called “perpetual bonds”. They’re hot off the press, and the concept seems straight out of Looney Tunes.

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Last month, Gold-Eagle.com published an article entitled “Gold and the Perpetual Bonds Era”. The subject was “perpetual bonds”–a concept I’d heard of for the first time only about a week earlier.

Judging from what I’d already heard and the Gold-Eagle article, it’s apparent that “perpetual bonds” are—like “consumerism,” debt-based currency, sub-prime loans, fractional reserve banking, deficit financing, negative interest rates, market manipulation, and “helicopter money”—just another manifestation of the madness that’s inherent in the concept of fiat, debt-based currency—and of government’s desperation to do something, try anything, that might work to avoid or postpone a coming economic collapse.

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Teeter-Totter Relationship Between U.S.$ and Foreign Currencies


USDX [courtesy Google Images]

USDX
[courtesy Google Images]

The “Group of 20” (G20) includes the world’s 20 biggest industrial and emerging economies. G20 finance ministers and central bank chiefs met in China on Saturday and Sunday (July 23-24, A.D. 2016).

According to the AFP (“US Warns Against Devaluation Ahead of G20 Finance Meeting”), on the Thursday before this G20 meeting:

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US Treasury Secretary Jacob Lew said that top economies should refrain from competitive currency devaluations–a message likely directed at China.

According to Secretary Lew, “The global outlook . . . underscores our focus on the commitment made at the last G20 in Shanghai to consult closely with one another on [currency] exchange rate policy, and to refrain from competitive devaluation.”

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First, the term “competitive currency devaluations” is misleading insofar as “competitive” signals something civil like a genteel, after-dinner game of Whist in the parlor. In fact, these “competitive currency devaluations” are almost as potentially serious and lethal as nuclear war.

(More, it’s conceivable that China’s “competitive currency devaluations” just might be enough to trigger naval conflict between China and the U.S. or even Japan in the South China Sea.)

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An English Politician’s View of Central Banks


Is criticism of central banking an idea whose time has come?

video      00:01:55

 

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Venezuela: Leftists are Too Broke To Print More Cash


Venezuela's Central Bank-- Too Broke to Print More Monopoly Money [courtesy Google Images]

Venezuela’s Central Bank–
Too Broke to Print More Monopoly Money
[courtesy Google Images]

Zero Hedge recently wrote:

Back in February, we commented on the unprecedented hyperinflation about to be unleashed in the Venezuela whose president had just announced that he would expand the “weekend” for public workers to 5 days.

“About the same time, the WSJ announced that, ‘millions of pounds of provisions, stuffed into three-dozen 747 cargo planes, arrived in Venezuela from countries around the world to service Venezuela’s crippled economy. But, instead of food and medicine, the planes carried another resource that often runs scarce there: bills of Venezuela’s currency, the bolivar.’”

“The 747 cargo shipments were part of the import of at least five billion bank notes as the government boosts the supply of the country’s increasingly worthless currency.”

“More planes were coming: in December, the Venezuelan central bank began secret negotiations to order 10 billion more bills which would effectively double the amount of cash in circulation [and thereby also reduce the real value (purchasing power) of Venezuela’s national debt by 50%]. That order alone is well above the eight billion notes the U.S. Federal Reserve and the European Central Bank each print annually—dollars and euros that, unlike bolivars, are used world-wide.

Yes, it’s true that the U.S. dollar and the EU’s euro are different from the Venezuelan bolivar in that dollars and euros are “world reserve currencies” that are recognized and “used world-wide”. The bolivar, on the other hand, is primarily a “local” currency used and recognized almost exclusively within Venezuela.

However, it’s also true that dollars and euros are also virtually identical to Venezuela’s bolivar in that all three currencies are fiat, debt-based and intrinsically worthless. That equivalence is nothing to sneer at.

Why? Because dollars and euros might do better than bolivars today, but that won’t always be so. Venezuela is giving the world yet another lesson on the inevitable fate of fiat currencies: hyperinflation and national ruin.

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Michael Pento on Bonds


Another brilliant interview by Greg Hunter of Michael Pento.  Great insight.  You can learn a lot.

Video      00:22:52

 

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They Pretend to Pay Us; We Pretend to Work


Central Planning = Communism "From each according to his bank balance; to each according to his political connections." [courtesy Google Images]

Central Planning = Communism
“From each according to his bank balance; to each according to his political connections.”
[courtesy Google Images]

During the Soviet Union’s final 15 or 20 years, there was a “joke” that was both cynical and popular among Communist workers:  “They pretend to pay us; we pretend to work.”

I believe the attitude expressed in that “joke” was a fundamental cause for the “evil empire’s” demise.  The government wasn’t really paying the people for their work.  The people weren’t really working for their “pay”. 

Everyone was lying.  The Communist government lied about paying people.  The people lied about working.

The resultant breakdown in the relationship between the government-employer and the worker-employees destroyed what was once the second most powerful nation the earth had ever seen.

There’s a lesson in the USSR’s demise about the need to really “pay” people for their work and stop all the lying.  

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The Trouble with NIRP


ZIRP (Zero Interest Rate Policy) gives way to NIRP (Negative Interest Rate Policy) [courtesy Google Images]

ZIRP (Zero Interest Rate Policy) gives way to NIRP (Negative Interest Rate Policy)
[courtesy Google Images]

Speaking of NIRP (Negative Interest Rate Policy) Andy Hoffman recently wrote,

 

“I now believe negative interest rates for the entire world is inevitable; and with them, the imposition of increasingly draconian capital controls—from FATCA and FBAR-like reporting requirements; to limitations on withdrawals and capital exportation; and ultimately, “cashless societies” in which investors are forced to hold savings as digital deposits at insolvent banks—In which, arbitrary government decrees like negative interest rates—will be used to not only confiscate wealth, but destroy all remaining remnants of capitalism.”

 

A dire warning, indeed—but what, exactly, is “NIRP”?

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