"Here's the way our 'money' system works: banks borrow trillions of dollars into existence and loan it to debt serfs at high rates of interest. Central banks create 'money' out of thin air and distribute it to the very top of the wealth-power pyramid: banks, financiers and corporations.
~Charkes Hugh Smith

A curmudgeonly survey of these  preposterous  times. 

(Caveat Emptor)

News and opinion from all over the political universe. 

Much of it to be taken with several grains of salt.

October 18th, 2019

   Email:  Wrisley.com

Canadian Central Bank Exploring Digital Currency To Better "Track People's Spending Habits"

"...one of the benefits ...would be the ability to collect more information 0n citizens than is possible when people use cash."

   We snatched the item above from the Internet today as a reminder of the lengths a government may consider going to nose around in one's spending habits. Stories like this are increasing as the promotion of "cashless societies" schemes increases. 

   At the moment the use of pocket cash is an anonymous transaction, UNLESS you use a store "bonus" card.  For example, it is rare for a Walgreens clerk at the checkout counter to fail to ask "Do you have a Walgreens card?"  If you have one you present it to collect more bonus points. And your cash transaction is no longer anonymous. Your purchases are lodged in a computer under your name.

    Let's say it's your habit to drop in at a liquor store every Friday to buy a fifth of whiskey. You pay cash instead of using your credit card. The cash register logs the transaction but it doesn't know your name. The government has no record of your booze habit.

    It's easy to imagine that a propaganda campaign can imply that there's something wrong with the anonymity of a cash transaction. There will be much talk of cash being used for unlawful transactions. "Stamp out crime. Use digital currency!" (The anonymity of BitCoin and other digital currencies should not be confused with a government sanctioned digital money system.)
    It's also easy to imagine citizens going along with the cashless society. "I don't care who knows how I spend my money. I have nothing to hide!"

    Heads up!  Times they are a-changing.

    "The only way to change th[e]  corrupt, exploitive system that generates inequality as its only possible output is to eliminate central banks and fractional reserve banking, and ban the aggregation of 'too big to fail' entities: a system of 1,000 small banks is structurally far less vulnerable than five mega-banks that are tightly bound to virtually every risk-on asset."

      Charles Hugh Smith is the author of the sentence above.  We quite agree with him because we've been observing the consequences of currency inflation since the 1960s when we became conscious of the dramatic changes being made in our money system.  Paper notes lost their printed official redeemability promise  in "lawful money" in late 1963.  Silver coins were eliminated in 1965, etc.  There is no historic evidence that indicates consistent debauching of the money unit  can lead anywhere but catastrophe.  ECONOMIC DECAY

      NOTE> In the past 105 years the Federal Reserve. under pressure from Congress, has driven the purchasing power of the U.S. dollar down more thgan 95 percent.  The question today is "How long before it reaches zero?"

       Not enough consumin' goin' on!
          Many years ago when the economy was running on inflationary overdrive the late S.C. US senator Ernest Hollings said in his Charleston brogue, "There's too much consumin' goin' on."

         The reverse is true today.  The Gross Domestic Product was popping along at 3.1 percent annual rate in the 1st quarter of 2019.  In the 2nd quarter it dipped to 2 percent, and in the 3rd quarter it was limping along at the annualized rate of 1.4 percent.  This does not mean we are on the cusp of a recession but the trend may mean the Federal Reserve will be inspired to lower interest rates a bit more later this month.  (How low can rates go?)
          The armchair economist knows that Donald Trump needs a strong economy in 2020 to bolster his re-election, but at the moment the forecast is a bit wobbly.  Traditionally the consumer must support some 70 percent of the U.S. GDP but the same consumer is struggling with a heavy credit card debt and teetering on life on a paycheck-to-paycheck basis. 

           On its October 15th front page the Wall Street Journal announced the sad news that lenders are charging record margins on credit cards even as borrowers take on more debt. The average percentage rate on interest-charging credit cards is 17 percent. U.S. households with card balances owed an average of $8,602.00 in the the 2nd quarter - up 8 percent from 2015 adjusted for inflation.

          There's nothing wrong with using a credit card if the entire tab is paid when the bill comes in.  It's the INTEREST that is paid on unpaid balances that play havoc with household budgets.  

           Ben Franklin is credited with the addage, "Pay what you owe and you'll know what you own." That advice seems to mean very little any more. Living beyond one's means has become the average living standard. It invariably leads to trouble.

 "When the U.S. Government adds $814 billion of new debt in a little more than two months, the public yawns as this is no big deal."  ~SRSrocco Report

         J. Howard Kunstler is quite right when he says "
We’re no longer the nation we pretend to be and we don’t know it. Jokers are wild and the joke’s on us." He notes the Federasl Reserve's report that it has taken on $814 billion of new U.S. debt in only two months.  (That's $1 million times 814,000!)

          The enormity of the accumulated public debt is nearly $23 trillion and the number cannot avoid having a negative impact upon the future.  As an old adage has it, "All debt must be paid...either by the debtor or the creditor."  Imagine the screams of holders of U.S. securities (notes and bonds) when they realize they are left holding the bag! 

    The Trump-Hoover comparison.
    Several weeks ago we suggested there may be a comparison of the current president with Herbert Hoover, who was elected president in late 1928 and took office in March, 1929.  The Roaring Twenties were beginning to slump and the famous stock market crash followed in October.

     Some other commentators have wondered if the present economy is poised to turn sour and perform a serious hiccup in the coming months, spoiling Donald Truimp's chances of re-election as it did Mr. Hoover's  in 1932.

    William Engdahl sees a similarity:  "
.At this point the parallels between one-time Republican President Herbert Hoover who presided over the great stock crash and economic depression that was created then by the Fed policies, and Trump in 2019 are looking ominously similar. It underscores that the real power lies with those who control our money, not elected politicians."Trump-Hoover

     Before we become swept up in the notion that history can repeat itself exactly we should remember that the money of 1932 was based on a gold standard.  Mr. Engdahl may be of the opinion the Federal Reserve could have softened the crush of the depression by printing up more currency, as it did in 2008-9 to prevent a hard recession becoming something worse.  But the Fed's toolkit was different in the early '30s and it didn't have the power of creating huge amounts of currency from thin air that it has now.  There is no need to even PRINT additional currency now because most of the "money supply" exists only in the form of computer digits.  Cash demand is much less today, per capita, because most financial transactions are electronic.   (!)

    The government tried to solve the money crisis of the early 1930's by removing money (gold) from private hands - paying $20.67 per troy ounce - in irredeemable Federal Reserve Notes. 
After tucking the gold away in Fort Knox it was revalued to $35.00 per troy ounce thereby enriching the U.S. Treasury.  It eventually changed the price to $42.22 per troy ounce before cutting any tie to gold in the summer of 1971. 

    So, the currency of 2019 is in no way related to the currency held by the public in Hoover's day.  Therefore any economic correction that's waiting in the wings may not play out as it did at the beginning of the Great Depression. 

     Conclusion:  It's doubtful there is a political will to officially  return to any form of sound money.  Consequently,  The bankers must continue to flood the system with fiat currency.  This, however, has never been known to work for long periods of time without brutally colliding with economics fundamentals.

Social Security benefit to rise 1.6 percent in 2020
Last week we predicted 1.5 perecent.

   So, our guess was off by a smidge.  The raise will amount to an average of less than $1.00 a day.  Wow!  

WASHINGTON (AP) — Millions of retirees will get a modest 1.6% cost-of-living increase from Social Security in 2020, an uptick with potential political consequences in an election year when Democrats are pushing more generous inflation protection.

The increase amounts to $24 a month for the average retired worker, according to estimates released Thursday by the Social Security Administration. Following a significant boost this year, the cost-of-living adjustment, or COLA, for 2020 reverts to its pattern of moderate gains.

   Note the line about Democrats "pushing for more generous inflation protection."  They haven't noticed that indexing for inflation never works in the long run.  The only ratonal move is to quit inflating the money supply so the purchasing power of the dollar will cease its constant decline. 

      Politicians won't do it, but restoring the dollar to its Constitutional mandate  would be a giant step in restoring monetary stability.  Wouldn't it be great to set aside some money for a baby's education knowing, roughly, what the cost would be eighteen years from now? 


     Having weathered so many periods of recession we have come to appreciate the "feel"  when a recession is on the doorstep.  We have that feel now and fully expect to experience our 12th recession before Father Time calls upon us to cash in our chips.

      Notice that unemployment climbs sharply DURING recession, but plunges steeply as the economy recovers.  Unfortunately, the gain in employment following the 2008-9 recession was mostly at the cost of taking on a phenomenal level of debt...both the government and private sector.  We have searched the historical record and can find no instance of a policy of persistent debt leading to anything but a steep and painful economic correction.  The unemployment chart above clearly indicates that a ten year economic expansion - heavily financed by debt - has set us up for a stemwinder recession. 

     It's past time, we think, to quit electing politicans and seek out old-fshioned statesmen/women who have the wisdom and fortutude to correct the destructive fiat money system and force the government and the citizenry to live within their means.  Otherwise there will one day come a revolution of the young upon whom we have heaped an unpayable debt load. 

                                      Big Government = Weak Dependent People
                                      Small Government = Strong Free People. 

  The bigger the government the more dependent upon it is the general population.  The problem is the inability of the government to keep subsidies flowing to the people without taxing as much as it dares and borrowing the rest.  This pushes a formidable debt load upon future generations.  It assures them a lower standard of living than would have been the case if the voting majority had not chosen spendthrift politicians to run things. 

    Customarily, individuals cannot pass indebtedness on to their descendants.  Upon death one's assets (estate) are used to pay to pay debts and the remainder, if any,  goes to persons described in the deceased's will. If assets cannot meet debt too bad for the lender.  Bills demanding payment cannot be sent to descendants.  

    With modern government, however, the reverse is true.  The government may borrow trillions of dollars and the debt rolled over and over until paid by future taxpayers who have not even been born yet. 

     It's unfairly greedy is it not?

  2020 Social Security Benefit increase?  We'll find out in less than a week.
  Since 1975 Congress has reviewed the rate of inflation each September and announced in October a cost-of-living adjustment to take place in January of the following year.

   We should get the word on the 2020 increase next Thursday.

   Sometimes the increase is zero. That happened in 2016. 
The guessing is the 2020 increase will probably be around 1.5 percent. Less than 2019. 
   More than 65 million people receive Social Security benefits each month.  The COLA was established in 1975 while the nation was in the middle of a run of double-digit price inflation.  However, it does not provide for a CUT in the monthly check in case of an episode of price DEFLATION. In such a case the payment would remain the same until the price level rises to inflation again. (Assuming that Congress and the Federal Reserve recover the tools to inflate the money supply.) 

   Recent data indicate that wealthier Americans have cut back on their consumerism and spending, which could be a signal that a recession is right around the corner.  A popular theory is the economy can't keep churning forward unless consumers support it by spending more money on things they may not need.  Since consumers are said to provide 70 percent of the Gross Domestic Product, we are all caught between a rock and a hard place.  Putting the brakes on spending in order to trim our heavy debt loads becomes downright unpatriotic.  On the other hand, if we all - rich and poor - cut back  on spending we could cause the economy to lapse into a recessionary  tailspin.

    What to do? 

    Ninety years ago Wall Street was flashing signs of trouble.  Everybody had piled into the stock market "on margin" and were certain they'd soon be rolling in wealth.  One could buy stocks with just a little down and the hope their shares would rise to the rafters in value and they could sell at a handsome profit.  Bootblacks and taxi drivers were swapping stock tips in the street.  It was a heady time, but the Roaring Twenties were about to come to a screeching halt in late October, 1929. 

     Next month marks the 90th anniversary of the great Wall Street crash.  History may not repeat itself, of course, and the present financial system is now different than it was in 1929.  But there's an eerie feeling of apprehension afoot in the global economy and much uncertainty about where it's leading. 

      A yellow caution flag is certainly waving and the alleged cutback in consumer spending by the well-to-do may be a cue for the rest of us  to rein in our outlays.  The old adage "Live within your means" will cushion economic distress.   ~JW

The Democratic promises of the 1932 campaign were not kept.

An honest look at the Democrat political campaign of 1932 clearly shows the Democrats may have deliberately misled the voters.  Here are the first three planks of the Democratic Party platform of 1932:

    "We advocate:
     1. An immediate and drastic reduction of governmental expenditures by abolishing useless commissions and offices, consolidating departments and bureaus and eliminating extravgance, to accomplish a saving of not less than 25 percent of the cost of Federal government.
     2. Maintenance of the national credit by a Federal budget annually balanced.
     3. A sound currency to be maintained at all hazards."
      Upon taking office in 1933 President Roosevelt threw the campaign promises overboard and steered the Ship of State sharply to the political left. To this day there is a general impression that the New Deal was the best thing that ever happened to the USA. Whereas the people were once responsible for the government under which they lived we saw the government assume responsibility for the people. The world's largest welfare state was born.

Recession Reality.

Trump is no dumbell when it comes to understanding the whims of people with their money.

   President Trump has caught a whiff of economic recession in the air and is tweeting his head off about it, assuring everyone within earshot that the present economy is in pretty good shape, thank you, and privately hoping that a recession will not hit until after the November, 2020, elections. 

      He understands perfectly well that consumer activity accounts for about 70 perent of the Gross Domestic Product (GDP) and that consumer willingness to take on debt accounts for large measure of  the bottom line. 

      Michael Lebowitz and Jack Scott have tried to untangle general understanding of the signals that portend recessions, but the general public is most likely to take its cue from the daily media coverage. 

     "We can follow all the economic data and trends diligently, but consumption accounts for over 70% of U.S. economic growth. Therefore, recessions ultimately tend to be the effect of changes in consumer behavior. If the narrative du jour is enough to trouble even a small percentage of consumers, the likelihood of a recession increases. The evidence of such a change will eventually turn up in sentiment surveys, and when it does, the problem has already taken root. This is not a dire warning of recession but rather offers consideration of a legitimate second-order effect that potentially threatens this record-long economic expansion. 

   "While the media focuses on the inversion narrative, alerting the public to recession warnings and driving consumers to re-think their planned purchases, we care more about when the yield curve will steepen. The steepening curve caused by aggressive Fed action after a curve inversion is the tried and true recession warning. For more, please read Yesterday’s Perfect Recession Warning May Be Failing You."                   ~Michael Lebowitz & Jack Scott

    Bottom line:  The more talk you hear of lowering interest rates, cutting payroll taxes, capital gains taxes, the more sure you can be  sure political leaders are trying to keep  recession at bay.  They understand perfectly that when consumers feel more dollars will come into their pockets the more willing they will be to spend it.  It's when they sense that money is in short supply they tend to lay out less of it.  When that happens the recession bells go off.