| ďAnything with the word 'crypt' in it is a turn-off for meĒ
~T. Boone Pickens, 89. (On cryptocurrencies.)
January 18, 2018
At one minute after midnight Friday night the federal government will run out of operating funds and be forced to shut down many of its operations. Unless, of course, Congress pulls its act together at the last moment and passes a continuing resolution to keep things running. If a shutdown occurs Republicans will get the blame and Democrats will beat them over the head with it in the November mid-term elections.* * * * * *
In the meantime, the Dow Jones Industrial Average soared above the 26,000 point mark yesterday and stayed there. Analysts are remarking today that the DOW rose a thousand points in only eight trading days. A few are worried about a fearful fall, but the general mood is buoyant.
The bitcoin bubble seems to have had a slight implosion. Some cryptocurrency owners apparently wanted to switch back to dollars faster than dollar holders wanted to buy cryptos.
This is purported to be a small portion of Russia's gold stash. Russia and China are said to have been buying physical gold in large quantities and rumors abound they are going to spring a gold-backed currency on the world.RICH BY YESTERDAY'S STANDARD.
It's curious to learn several nations, and the International Monetary Fund, have been hoarding gold, which is widely believed to be useless and out of fashion. Why hold heavy bars of gold when all the world is rushing into cryptocurrency, such as bitcoin?
The United States is said to be holding the world's biggest hoard of gold, mostly at Fort Knox and the Federal Reserve Bank of New York. Among the top ten gold holding countries, Russia was ranked #7 in 2015. Updated data indicate it could now be #5 in ranking.
If gold is the ancient "barbaric relic" economists have long claimed, why are so many nations buying and storing it? We think it's a question worthy of further investigation.
Not so well off by today's.
Those of us from the Silent Generation who did not make it into today's 1 percent of the very rich may feel a bit cheated. Our net worth may be awesome by the measures of seventy or more years ago, but it seems like a drop in the bucket compared to the super-rich.
The measuring device. . .the once mighty dollar. . .has sunk to only a fraction of its former purchasing power. We former Depression Era youth remember when bread set us back ten cents a loaf and one could buy 20 twelve-ounce bottles of Pepsi Cola for $1.00. As the years rolled by prices rose. So did incomes, but not nearly at the rate of price rises. Classic evidence of monetary inflation.
The elite 1 percent, into whose pockets most new dollars flow, are fine. But what can the rest of us in the 99% do?
A lost cause? Must we sink to the bottom of the money river, smothered by its high prices and low returns on our savings?
"No," says Adam Taggart. "The good news here is that thereís a clear set of strategies for keeping yourself afloat while the system continues to pursue pernicious and deeply unfair policies. They take focus, effort and discipline ó but anyone implementing them will have good chance to stay ahead of the rising cost curve, and have a real shot at financial prosperity."
Well, this certainly catches one's attention. Drowning in a River of Money.
$2 quadrillion debt!The Swiss gold bug, Egon von Greyertz, writes: "Precious metals should not be held for the potential major gains but as insurance against risk which is unprecedented in world history."
He's right.We bought a South African Krugerrand several years ago for a little more than $400.00. It contains one troy ounce of gold. Today that coin retails for nearly $1,400.00.
Have we made nearly a thousand dollars on our investment? Not at all. The purchasing power of the U.S. dollar has sunk through the years so that $1,400.00 buys roughly the equivalent of what $400.00+ would have bought when we acquired the coin. We haven't actually "made" any money on the purchase, but but it has held its purchasing power against goods and services much better than the U.S. dollar.
That's the point von Greyerz makes in the sentence in the green box, above.
Another point; World debt, when unfunded liabilities are calculated, totals about $2 quadrillion. Anyone who thinks that volume of debt can ever be paid is just not paying attention.
"We have seen a century of debt buildup from virtually zero to $240 trillion. Global debt has doubled since the beginning of the Great Financial Crisis in 2006. This has led to asset bubbles and overvaluations never seen before in history. If unfunded liabilities and derivatives are included, the total burden amounts to $2 Quadrillion." VON GREYERZ
People who hawk gold and silver as a means to huge profits are leading their customers astray. If the price of a troy ounce of gold soars to $5,000.00 it will reflect a sharp drop in the purchasing power of the dollar.
We often bore our friends and family by pointing out that one dollar, when we were born, was worth 1/20th of an ounce of gold. Today it is worth only about 1/1,340th of an ounce. To think the dollar will one day trade for 1/5,000th of an ounce, or even 1/10,000th of an ounce reflects very poorly on the worth of the U.S. dollar.
Wolff's book got plenty of rave reviews, but not from Mr. Black
"Having encountered Michael Wolff and having had an acidulous public exchange with him, I attest that he is an utterly odious man. He canít write properly, has no professional integrity, and is a sociophobic mud-slinger and myth-maker." New York SunAuthor Michael Wolff made clear in a television interview we witnessed that he believed his new book would lead to Donald Trump's removal from the U.S. presidency. We have not bought "Fire and Fury" nor do we intend to read it. Had he been more convincing in his interview(s) we might have acquired a copy.
What attracted us to Conrad Black's review was his use of the world "acidulous" in the first sentence. Mr. Black contends Wolff is "an utterly odious man," and our personal impression so far is that Black is correct.
Warren Buffet has been in the news lately for negative comments about cryptocurrencies. He says they will come to "a bad end." We quite agree. Of course, we think circulating fiat currencies will come to a bad end, as well. Not many people agree this is the case.
It appears we share other opinions with Mr. Buffet. He still likes his old-flip phone in lieu of the newest iPhones. We do, too. Not only do we steer clear of iPhones but we seldom use the flip phone, although we carry it in case we have to make an emergency call.
Mr. Buffet enjoys playing a soprano ukulele. We do, too. We've heard him rip off a commendable version of "I've Been Workin' on the Railroad."
Mr. Buffet is an octogenerian. We are, too - although a bit older than the Sage of Omaha.
Mr. Buffet is extremely wealthy. Ooops! He's got us there. We never got the hang of creating much wealth, although we are very accomplished at running through our modest accumulation.
Kudos to Warren Buffet for his mastery of wealth accumulation.
China is reportedly thinking of halting US Treasury purchases.A CNN report notes that Chinese officials think U.S. debt is becoming less attractive compared with other assets.
Trade tensions between the two countries could provide a reason to slow down or halt the purchases, according to the report.
Treasurys and the dollar fell on the report. Gold rose. Stocks also fell.
China is the biggest buyer of U.S. sovereign debt.
That CNN headline should read; "China is reportedly thinking of stopping loans to the US." That's bad enough, but if China also chose to unload a mass of its US treasury debt holdings it would really upset the financial applecart.
If the report is true the timing is terrible. The U.S. government aims to increase its debt liabilities in 2018 and without China to soak up the debt the IOUs must offer a much higher interest rate to attract other lenders.
We usually forget that when a government entity, be it federal, state, or local, "issues bonds" it merely means money is borrowed - at interest - with a promise to pay it back at some future date. Historical experience shows that when the bond borrowing gets out of hand it usually leads to a burst of heavy inflation. Governments learned long ago that borrowed money can be paid back with depreciated dollars. such as those war bonds we bought during WW2. One could buy a bond for $18.75 confident that it would be redeemed at a later time at $25.00.
It was. But by the time the $25.00 was paid it would not buy what $18.75 would when the bond was acquired.
With debt on the rise it's a safe bet that a hefty round of price inflation awaits us.
Massive 7.6 magnitude earthquake strikes in the Caribbean: Islands escape major damage after one of the most powerful tremors ever to hit the region.
Gotta admit this headline caught our eye. Happened Tuesday night after 9PM. A 7.6 on the Richter scale is impressive. Caribbean Earthquake.
And there have been some minor tremors recently not far from our home in the Midlands of South Carolina. This part of the country is not famous for earthquakes, although they have occcurred in the Palmetto State in the past.
Plus this, from California:
California braced for the BIG ONE as series of earthquakes RAVAGE San Andreas fault.
Unsurprisingly, nerves appear to be a-jitter in parts of California, particulatly along the San Andreas fault-line. Read the story HERE. Note particularly the comments by readers.
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Gary North is still arguing in favor of sound money.
Not many people are paying attention.
Economist Gary North, now in his seventies, has long favored free market economics and sound money. Mainstream media don't appear to understand the concept. One rarely encounters North's views even in conservative publications.
Every now and then he confronts the notions of opposition writers such as Ellen Brown, who defends the notion of the "greenback" dollar issued to help finance the federal military against the armies of the American South. She has suggested the Federal Reserve be done away with and Congress be placed directly in charge of the currency printing press. People favoring a return to the sound money called for in the U.S. Constituion consider this an absurd idea.
"I devote an entire department to the fiat money Greenback lawyer Ellen Brown. She doesn't understand economics. She also doesn't understand historical documentation.
"She still publishes articles on her website. Occasionally, they are picked up by Left-wing sites. The article I analyze here is an example.
"Incredibly, people who regard themselves as conservatives cite her as an authority. In the case of Max Kaiser, he actually brings her on his show. He has been doing this for a decade."
Ellen Brown:Still Leftist
We suggest that anyone trying to sort out the quirky questions of currency read the North vs. Brown debates.
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"We as a nation forget what we do right. We forget that it is the 50 states that make the nation and not just what happens in DC. There is not one factory in DC, nor a farm field, let alone an oil well, or a shipyard or anything else that makes America the great experiment that it is. The 50 states are what makes America great and that forgotten piece of paper we know as The Constitution. If DC were to fall off the earth I doubt 'we the people' would notice the loss of 'they, the politicians' because we would all be too busy making stuff.selling stuff, inventing stuff, fixing stuff. But we do need a failure of such to reaffirm what we do right." ~William Sullivan, in a review of The Forgotten Depression, by Jim Grant.
'TIL DEBT DO WE PART"Americans need to get honest about their spending. If youíre charging purchases that you cannot afford to pay off right away, or if you are living above your means, itís time to rein it in. Only then can you start to address your growing debt. " ~Brittany Jones-Cooper
We posted this Tuesday in the hope it may inspire someone to ignore the ads offering "quick loans" to people wanting to buy gifts for friends and loved ones for Christmas. Christmas-on-the-cuff can add to financial grief later in the New Year - - and beyond. Yes, we have a bit of Ebeneezer Scrooge in us, but long years of Christmasses taught us the folly of buying things with money one does not yet have.
This general rule ought to apply to the federal government, but it doesn't. We notice the budget deficit last month was greater than the deficit of November, 2016. We've been told for generations that the government will one day balance its budget. But Congress is so used to spending money it doesn't have that the prospects of ever balancing a budget are very dim. It will also have to haul in more money than it spends to begin the painful process of paying down the public debt. That's quite unlikely.
Where is the debt train headed? We don't know, but if history is a guide it may run off the trestle into a calamity. Erecting a tower of debt that must be paid by posterity strikes us as a mean-spirited thing to do, particulary since it promises a sharply lower standard of living for future generations. We pray they don't catch on to what's happening until we have passed from this world.
INFLATION CONTINUES TO NIBBLE AT THE DOLLAR.https://www.youtube.com/watch?v=xGSFgW3MjCM&feature=youtu.be More than fifty years ago we noticed prices were spiralling upward. Our modest income was not keeping up. What the hell was going on?
We did some serious homework and discovered that rising prices weren't "inflation." Pumping new currency into the economic system at a faster rate than the production of goods and services was the culprit. In other words, rising prices were mainly the result of inflating the money supply.
Price inflation soared in the 1970s. Federal Reserve chairman Arthur Burns was puzzled. We had the good fortune to interview several respected economists on the subjecct, including Dr. Henry Hazlitt, whose book "Economics in One Lesson" remains in print to this day.
Hazlitt explained very clearly why price inflation occurred due to the loose policies of Congress and the Federal Reserve. The light-bulb went off in our mind. Of course! When the Fed creates dollars out of thin air with which to monetize government debt, Congress gets to spend the money first. By the time the additional dollars trickle into the general economy their buying power diminishes. It resembles yet another tax on the "little guy."
Since 2008 the Fed has pumped an additional $4.5 trillion into the economy through its various stimulus programs, such as Quantatative Easing, and is cautiously trying to gently raise interest rates to thwart runaway inflation. The Fed has always seen a slow rate of inflation as a good thing. Two percent, annually, or so. Double-digit inflation, or higher, would be catastrophic.
Zero inflation would be the ideal. People could deposit funds in banks at modest interest rates and see their savings actually grow.
Now comes Jeff Thomas, writing on the International Man blog:
"In the 100-plus years since the creation of the Federal Reserve, the Fed has steadily inflated the US dollar. Over time, this has resulted in the dollar being devalued by over 97%.
"The dollar is now virtually played out in value and is due for disposal. In order to continue to 'tax' the American people through inflation, a reset is needed, with a new currency, which can then also be steadily devalued through inflation.
"Once the above process is understood, itís understandable if the individual feels that his government, along with the Fed, has been robbing him all his life. Heís rightóit has."
It has taken more than a century for the once mighty U.S. dollar to lose most of its buying power. It may be too late to throw it a lifeline before it reaches zero. But it's time to recognize what's happening and do something about it.
Hello-o-o-o. . .