"It will be a deflationary collapse if the Fed doesn’t continue buying debt and creating new dollars. And a hyperinflation if they do.." 
~Doug Casey




Curmugeon's   Archive.

Cancel That Funeral
Who Supports Whom?
Gobbledygook
One Foot in the Grave
Magical Money  

Posterity's Debt To Me
The Battle for Honest Money
From Riches to Rags
Fiddler's Broken Wrist
Jack-lantern Wealth
Chance of Gold Confiscation

 1932
Poobahs of Positivism

IOU-nothing
Blood In the Streets
America Descending
Just Plain Stealing  ?
A thing to fear
Heavenly Sex
What Fools, We Mortals
Unvarnished Truth
Hucksterism Gone Wild
Religious Violence

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December 10, 2017

    Jerome  Powell will likely be confirmed Federal Reserve Chairman to replace Janet Yellen.  Almost everyone expects  Fed policy to remain  mostly as it  is,  despite  the  danger  of  inflation. 

     Commentator Doug Casey has been studying the money mess since the early 1970s.  He was hoping a "hawk" would get the job who would start liquidating the Fed's $4.5 trillion  balance sheet and raise interest rates.  All that super money has driven stock, bond, and real estate prices to insane levels.  And today's artificially low interest rates are discouraging saving.  It encourages people to live above their means.  The Fed Chairman

     
Mainstream economists will call him "Crazy Casey" and dismiss his concerns as foolish.  But we would not dismiss his predictions out of hand. 

       As for his wild suggestion that the U.S. default on its unpayable public debt because it will make "serfs" of posterity, compare that to the present set-up - - letting the debt pile up as a serious drag on the future economy,  guarantreeing a lower lliving standard for future generations.  
      
 

ITEM "LONDON/HEW YORK  (Reuters) - Bitcoin lost almost a fifth of its value in 10 hours on Friday, having surged more than 40 percent in the preceding 48 hours, sparking fears the market may be hearding for a price collapse."
              
       The bitcoin craze reminds us of the DOT.COM bubble in the late 20th century. People were certain it would lead to great wealth, but it collapsed.

        Some bitcoin fans predict the share price could go to a half-million dollars, or even a million. But it seems to us that folks buying bitcoin at $1,000 would be wanting to sell now that the share price has risen some 15 percent. They would make a bundle and could buy back in after the price  skidded to a more rational level.

        History books are filled with stories of burst bubbles and bitcoin appears destined to join the parade. 

        One of the selling points  of bitcoin is it functions outside the management of the federal government. It permits anonymous exchanges. But so do paper dollars and coins. When someone buys something with Federal Reserve notes or U.S. coins the transaction is recorded as a cash sale. The computerized cash register does not require the name or other information about the anonymous customer. This is one of the reasons several liberal economists are calling for a "cashless society."  Eliminating the anonymity of cash would make it easier for the governing class to monitor our spending habits.  

         We're not denouncing bitcoin. But, like the U.S. dollar, it has no substance to it.  Its future
as purchasing media is very sketchy.  When we see prices quoted in both dollars and bitcoin we'll take cryptocurrency more seriously.           
  


  An important measuring tool that has no  fixed dimension.
Everybody uses it but cannot describe exactly what it is.
  We mean, of course, the U.S. dollar. Bankers will explain it's the nation's unit of account by which goods and services are measured.  By law it is a legal tender and may consist of 100 cents, 20 nickels, ten dimes, 4 quarter-dollar coins, two half-dollar coins, or even one of the several 1 dollar coins which have been struck in various sizes and metals over the years. Legal tender dollars also exist as paper notes (IOUs). However, most dollars do not exist in a physical form at all.  They reside only as electronic digits in computers.

    The purchasing power of the dollar has sunk from $1.00 to less than 5¢ over the last century.  The wizards of Washington and Wall Street seem not to notice.  The Federal Reserve thinks continuing money inflation at some 2 percent per year is a good thing, but it will eventually drive the dollar to zero - as it has to hundreds of currencies through the years. 

     Steve Forbes recently put it this way: 
     "Everyone understands the basic need for fixed weights and measures in daily life: the amount of liquid in a gallon, the number of ounces in a pound, the number of minutes in an hour. None of these amounts fluctuate; they are unchanging.

     "Just as we use a scale to measure something's weight, we use money to measure the value of products and services. If the measuring rod itself becomes unstable, the smooth functioning of an economy is disrupted, just as our lives would be if the number of minutes in an hour constantly fluctuated."

      
Forbes was promoting a book, GOLD, THE fINAL STANDARD, by Nathan K. Lewis.

       "What's the best way to achieve a stable currency?" asks Forbes.  "By linking the currency to gold. Obviously, with gold we're not going to get a precise measurement, but gold has maintained its intrinsic monetary value better than anything else for 5,000 years. Silver did the same until the mid-1800s, but for several reasons it then drifted decisively away from paralleling the value of gold, which is why most of the major countries of the world moved solely to a gold standard."

       
Politicians detest the idea of a Constitutional gold standard  because it limits their ability to spend money they don't have.  Gold is scarce and difficult to mine  which makes it very nearly  inflation proof.  But it would also  tie the hands  of a spendthrift  Congress.

        The U.S. Constitution defined the dollar as a specific weight of precious metal.  An amendment was never passed to change it. 
      ** ** ** ** ** ** ** ** ** ** ** **  ** ** **

Socialism, Capitalism Seen in New Light by Younger Americans

Surveys show a leftward tilt, and pessimism about the future, among millennials  (WSJ)

     Anyone concerned about the future of the USA is surely aware of the political leftist ideology that pervades a large number of college lecture halls.  It has apparently inspired the Millennial Generation to forsake capitalism in favor of socialist notions.  It's absurd to believe that Socialism will restore United States dominance in the world economy, because history is clear that Socialism invariably runs to ruin.

    Mainstream media lean strongly to the left, too, so it's doubtful they will devote much time and space to the sharp contrast between Socialism and Capitalism. 

     There's plenty of reason for young people to be leery about what the future holds for them - not the least of which is a towering public debt being piled on their shoulders.   But they are making a serious mistake embracing the siren song of Bernie Sanders, Elizabeth Warren, et al.

      Free market capitalism is a hard sell these days.  Maybe a third political party will erect a platform based on the limited government agreed to in 1789 with the adoption of the U.S. Constitution and hire some skilled writers to explain why freedom and liberty work better than expansive federal governance. (Yes, we know there's already a Constituion Party but it has not gained much traction.)

Will Supreme Court open a ‘dam burst’ of legalized sports betting?

   This Washington Post headline reminded us the Supreme Court of the United States has a lot on its judicial plate at the moment beyond the fascinating question of whether a cake baker can refuse to create a wedding cake for a marriage party for homosexuals.

  Another question is - can the federal government dictate to the several states whether or not they can allow (and tax) sports betting within their borders. Bear in mind  billions of dollars are spent annually in off-the-books wagers on sports...including those office football and basketball pools. 

   The Constitution does not provide the federal government such power, indicating that only powers drawn in the document apply to the federal government while all others belong, by default, the states or the people.

    Thomas Jefferson called gambling "taxation for the willing." As long as people are not forced to make bets on sports, lotteries and what not, where does government get the power to interfere with their wagers?

     LEGALIZED SPORTS BETTING

ITEM:  "A recent study from the Victims of Communism Memorial Foundation, a D.C.-based nonprofit, found that half of the Millennials it surveyed would rather live in a socialist or communist country than a capitalist society."  (Millennials, or Generation Y, born approximately 1982-2004.)

     Hmmm...we wondered about recent reports that Millennials admired Socialism in greater numbers.  This likely accounts for the strong support they've given Senator Bernie Sanders in his run for the Democratic nomination for U.S. President.  Moreover, VCMF's survey reveals that  22% of those surveyed had favorable views of Karl Marx… while 13% viewed Joseph Stalin and Kim Jong-un as “heroes."

      This has prompted veteran economics commentator Doug Casey to remark, "
The economy and the markets are the least of our problems. The very foundation of civilization itself is under attack. The acceptance of destructive ideas is getting to be as serious as what we saw in Russia under the Soviets, in Germany under the Nazis, or China under Mao. More serious, since civilization is under serious attack in the U.S., which has been the bulwark for the last century."

       
Casey sees the growing acceptance of destructive ideas, such as Socialism, as a negative turn of events.  No experiment with Socialism and Communism has ever panned out well in the long run, but Capitalism gets a bad rap because it leads to a society that appears to "unfairly" result in an imbalance of wealth.  ie; The "haves" and the "have-nots." 

         Mainstream media generally report unfavorably on Capitalism in favor of the growing Socialist trend.  Little wonder younger generations, who get their world impressions through popular media, have grown to accept big government and shrinking individual liberty. 

          Perhaps when journalists tire of digging up sexual harassment scandals they can give some attention  to the issue of Socialism v. Capitalism.  Which ideology offers the most promise for general society?
 
* * * * * * * * * * * * * * * * *
     Anyone remember the tax cuts achieved by the Reagan administration? It is rarely noted that the federal public debt topped $1 trillion for the first time in 1982. Today that trillion looks like a drop in the bucket. The public debt now exceeds $20 trillion and there's no plan (nor will) to stop the borrowing. Economics experts calmly assure us that it doesn't really matter as long as the Gross Domestic Product (GDP) expands rapidly enough to absorb the cost of the interest payments.

   We applaud the concept of lighter taxes, absolutely. When the tax tab - including all taxes, hidden and visible - is calculated it runs far higher than most of us realize. Yet government at all levels complains of shortfalls in revenue and issues bonds (borrows money) to meet constant "needs".

   What is really needed is a serious pruning of unnecessary expenses. Sheer waste at the federal level is officially calculated in the billions of dollars. Budget cutbacks are unlikely to happen, though.  As long as Congress has the power to  inflate  the currency supply, through its Federal Reserve System, it will do so in order to 1/ make constituents happy, and 2/ insure re-election.

   "Omg! Force government to live within its means?  What a crazy idea," comes a voice from the swamp.
   
    Isn't it unfair to take on enormous debt which one day must be paid by our posterity?
  POSTERITY'S DEBT.
 



  Her-ASS-ment?
      
         We are reminded of an old joke.  A horse named "Harass" was running in a 3rd race at Narragansett Park, but was scratched from the race at the last minute.  The track announcer's voice boomed over the loudspeaker system, "In the third race. . .scratch Her-ASS!" 

          At the time official radio announcer pronunciation guides recommended the preferred "Harris".

          
Also, we once were taught that words like MEDIA and DATA were plural.  They are now almost universally treated as singular.  ('The data shows that....'   'The media is reporting.....') 

            If these words are singular then what are we to do with the singular "medium" and "datum"?

            To its credit, the Wall Street Journal generally uses "data" correctly in the plural:  "The data are clear...."

             We are not surprised to hear that public schools no longer make a point of teaching well-settled pronunciation for fear of upending someone's cultural preferences. 



The gold confiscation possibility.
   We're well aware news media are so wrapped up in reporting past sexual harassement accusations against prominent males there's little time for mundane topics like the future of money and the deluge of debt that's hoisting warning signs all over the landscape.  Only today on NPR we heard a commentator suggest it was time to dig more deeply into allegations of rumored sex mischief by President Trump.  It's suprising the late Senator Strom Thurmond's name has escaped notice among the current outbreak of complaints. We recall one of his former staffers, a female, telling us that it was common practice to avoid going alone into the photo-copy room  for fear of attracting the assistance of their employer, said to be  a "hands on" boss.

   But noodling along in the background of today's National Enquirer-like headlines are the nagging questions of what's to become of the world's fiat currenciess, most of which seemed doomed to eventual death by infation. A few nervous souls hold some of their assets in the form of gold or silver on the grounds these precious metals will retain purchasing power over the long haul while the debt-based currencies purchasing power evaporate.

   "No, no!" say the sound money critics.  "The government will abscond with your gold!" They usually cite the U.S. 1933 law requiring people to turn in their gold bullion, coins, and gold certificates to the U.S. Treasury in exchange for $20.67 in cash or credit for each troy ounce.

    Today we discovered a rather well-done YouTube commentary on the subject.  Although the narrative refers often to "gold confiscation" it makes clear that the 1933 event was not a classical confiscation because owners were compensated for every ounce they turned in. 

    The video also accurately explains that it is unlikely the U.S. will call in private gold because it has the power to strip  people of wealth through a continuing program of money inflation.

    Here's the link to the video.  GOLD "CONFISCATION" 




Zimbabwe and Venezuela are classic cases of money gone sour.
<    "By holding assets outside of the system you can work to protect your wealth from such measures as those seen in Zimbabwe and Venezuela. Gold is one of the best examples. When held in a physical, allocated and segregated manner the owners cannot be prevented from accessing it whenever they so wish. Nor can it be devalued at will or suddenly made illegal to trade. It is a borderless currency that acts without the control of governments looking to further their own wealth or political beliefs. ZERO HEDGE

     Some readers may want to quibble with this statement on the grounds that Franklin Roosevelt pulled gold out of circulation in 1933.  Overlooked is the fact that the U.S. dollar was officially 1/20th of a troy ounce of gold in that long ago day.  Gold was money

            Today, President Trump and the U.S. Congress would be powerless to "call in the gold."  They have no legal right to order anybody to turn in their gold to the U.S. Treasury .  Moreover, the government cannot set the dollar price of gold. 

             Also overlooked is the fact the government in 1933 did not TAKE the people's gold.  It paid for every ounce at the mint rate of $20.67.  A few insisted in payment in silver coin, most settled for paper currency, or their bank accounts were credited with the face value of the gold deposit.  IT IS QUITE
UNLIKELY THAT THE GOVERNMENT WOULD OFFER GOLD OWNERS $1,275.00 PER OUNCE. . .today's approximate market price. 

             The government has no more claim to private gold than it does one's wrist watch. 




    Low interest rates are a boon to borrowers, but as many a senior citizen will agree they raise hell with savings.  Put a few bucks in a bank paying some fraction of 1 percent, or even a full percent or a bit more, and inflation washes the dollar value away.  Say the rate of inflation is a mere 2 percent and a depositor is getting 1 percent on his/her funds.  A dollar deposited loses 1 percent in a year's time. 
 
    No wonder the American personal savings rate is so low.