| " Only those
who transfer their currency into durable stores of value before a collapse conserve their savings/ purchasing power.
" ~Charles Hugh Smith
February 19, 2018
bolivar collapsed very quickly.
Charles Hugh Smith has written an instructive piece that describes the desperation of Venezuela's present economy. Winter of Discontent
implosions, such as that taking place in Venezuela, don't interest
mainstream U.S. news media very much. Challenging President
Trump's incessant tweets is thought to be more important.
History is filled with hyperinflationary events. The sad story of Venezuela is so routine it doesn't qualify as "news".
'We pledge allegience to the flag....and the republic for which it stands.'
It's probably time to overhaul the old Flag
The pledge began, innocently enough, in the late 19th century as "I
pledge allegiance to my flag and the republic for which it stands; one
nation, indivisible, with liberty and justice for all."
Not content with the simplicity of the pledge, and sure that school children would not understand which nation's flag they were honoring, Congress began to amend the pledge in the early 20th century.
distinctly recall being taught as a tot that the great United States
was a republic which
must be preserved for all time for our posterity. Politicians said so
every July 4th and on other patriotic occasions.
Somehow, the republic morphed into a democracy. This may partially account for the sorry confusion among adherents to the Replican and Democrat political parties. They both pursue expansionist central government and out-of-control spending.
Did the Founders let us down by choosing a republican form of governance rather than a democracy? Did we-the-people make a mistake by abandoning the tenets of the U.S.Constitution in our long-running quest for the "safety" of more socialist society?
Surely a one-hour primetime TV debate on the subject would draw an
"[The bill] also extends the U.S. government’s borrowing authority until March 2019, sparing Washington politicians difficult votes on debt and deficits until after mid-term congressional elections in November."
Congress pulled another fast one by delaying the public debt ceiling problem until well after the mid-term elections in November. Not that the average Joe and Jane Twelvepack care very much. Peggy Noonan points out in her February 10th Wall Street Journal column, "There is no congressional appetite for spending control because there is no public appetite for it."
Ms. Noonan's well trained ear serves her well. The specter of unpayable debt does not raise any alarm among the general public. The fact that the once mighty American dollar has lost some 97 percent of its purchasing power in the last 100 years raises not so much as an eyebrow. Debauching currencies is the traditional method mighty nations take to destroy themselves.
Back to the budget drama - now in it's 5th month!
The [budget]deal, the fifth temporary government funding measure for the fiscal year that began Oct. 1, replenishes federal coffers until March 23, giving lawmakers more time to write a full-year budget.
This is so-o-o embarrassing! Five times Congress has chosen to fiddle around on approving a fiscal year budget that was supposed to take effect October 1st, 2017. Five times it has failed to do anything more than approve short term temporary budet extensions. We must go through another partisan clash on this matter by March 23rd.
A casual observer might conclude a serious case of inefficient nitwittery has infected the halls of Congress as high paid politicians waste the people's time and money. It's nothing new, really. The late Will Rogers was on to the mischief in the early years of the nation's drive to adopt socialism in the 1930s and put the federal government in charge - running everything and everybody.
Generations have been taught that it a good thing for the United States government to take care of people from cradle to grave. They vote for politicians who promise it. They are also taught that anyone working hard to provide goods and services consumers want, and makes a profit doing so, is hurting society and ought to be punished by having a large measure of his wealth taken away and distributed to "the less fortunate."
It's nearly impossible for a politician to win election to Washington without making promises he/she cannot fulfill, as we will undoubtedly hear in the ads prior to the mid-term elections in November.
Analyst Michael Snyder adds....."I don’t know if I even have the words to describe how foolish our leaders are being. If interest rates on government debt were to return to their long-term averages, the game would already be over. We should be desperately attempting to get our financial house in order, but instead we are spending money as if tomorrow will never come. Nat'l Debt going upppp!
Harry Dent's gloom-and-doom forecast.
We recall several cordial conversations with the late Harry Dent, Sr., but we would probably lock horns often with his economist son. It's not so much that young Harry's predictions are wrong - but his timing is frequently out of sync.
He writes, “Once the next crash hits, trillions of dollars in debt is going to be defaulted on. We’ve reached the point where trying to inflate our way out of debt is no longer possible.
“We HAVE to go through a painful deleveraging period… and that’s why we’re going to see deflation, not inflation.”
We disagree...sort of.
First of all, it's true that no period of monetary inflation in all of history has not stopped. But the governing class will always try to re-ignite it in the hope a collapse can be avoided. So, trying to inflate our way out of debt is the default program. A painful correction (deflation) may be in the cards but currency creation is easier now than ever before. Printing presses don't have to work 24 hours a day. "Money" can be created with a few taps of computer keys.
The last century has nibbled away at the purchasing power of the U.S. dollar. In fact, the dollar of the early 20th century is now about about 4¢. That's clear testimony on the effect of a century's worth of monetary inflation.
With history as a guide, Harry's prediction of a deflationary depression will someday come true. But a frantic Congress will try to wring another burst of inflation out of the economy.
Professor Mike Rozeff is worried about economic depression, too.
"Whenever the next depression arrives, it will be severe," writes retired professor Michael Rozeff. "The FED has kept rates way too low for far too long. The critical result in the economy is malinvestment. The critical financial result is that leverage is too high, with mispriced securities and loans of lower quality, susceptible to default. Corporate leverage is elevated. Reminiscent of the 1920s’ boom in closed-end funds, often leveraged, a broad array of leveraged ETFs lnvested in stocks. The first such was in 2006 and now there are 200 of them. Margin debt is at a peak.
"The federal government is leveraged to the hilt and beyond. Overall consumer debt is stable, but some sectors are over-extended, like subprime auto loans. The odds are that loan quality has deteriorated under the surface. The cryptocurrency explosion is a sign of excessive risk-taking. Another sign is junk bonds. The tax cut, the excess liquidity, the ever-rising stock market, the crash in real estate followed by a resurgence, and the likelihood of more tariffs all remind us that the 1920s looked great in 1928 before ending badly in 1929. The 1920s, as now, also was an era in which the price level seemed tranquil but was hiding the Fed’s inflation."
Perhaps Professor Rozeff is
talking through his hat. On
the other hand he may be accurately describing the nerve-wracking
economic scene into which the newly appointed head of the Federal
Reserve, Jerome Powell, is stepping.
Powell replaces Janet Yellen in February - which promises to be an
exciting month. Will he continue the uptick in the Federal Funds Rate
or will he be forced to slam on the interest rate brakes in order to
extinguish a flareup in price inflation?
This is pretty dull stuff when compared to the juicy political gossip
that passes for news coverage these days, but if Rozeff and other
Nervous Nellies are correct in their expectation that an economic
depression may be in the making we aim to keep an eye on it. Our
own youthful recollection of the Great Depression of the 1930s makes us
wary of suffering another such episode.
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 there’s 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 — but anyone implementing them will have good chance to stay ahead of the rising cost curve, and have a real shot at financial prosperity."