factions of the Democratic party are bracing themselves for a
potentially bruising month of negotiations over the two massive
economic and social packages that have reached an impasse in Congress
threatening to derail Joe Biden’s first term in office."
~The Guardian (UK)
YESTERDAY MORNING BITCOIN HIT A RECORD PRICE OF $66,045.
This morning it had dropped to $61,369.
A bitcoin frenzy
is sweeping the land as people search for a means of protecting their
accumulated wealth from the maw of inflation.
We hear that Walmart is installing cryptocurrency ATMs to make it
convenient for customers to exchange dollar cash for bitcoin.
Will they be able to convert their bitcoin back into cash as
Bitcoin reached $64,000 some months ago and abruptly
tumbled to half its dollar value. Not a stellar performance for a
medium hoping for acceptance as the new purchasing medium. King
Dollar is still the world's premiere currency for international trade,
although its lofty position is threatened by the battering it takes
Bitcoin could go to $100,000 by year's end, " experts say. Possibly. A burst of hyperinflation could do that. But quite unlikely to happen in only two months!
And what if the government declares all paper
and coin tokens null and void? (It has never done that since
1792.) We will draw a poster and take to the public thoroughfare
in protest! In the meantime, we'll continue to warn family and
friends against gambling in digital currencies. It may be
adventuresome and there will be some winners. But the best means
of supporting oneself is advice that's old as the hills. FIND AN
ECONOMIC NEED FOR GOODS OR SERVICES AND GO TO WORK!
Inflation ahead? Sure.
Deflation ahead. Absolutely.
Some of us have
been around long enough to recall the Great Depression of the
1930s. Despite the massive growth of federal government the
recovering economy sank back into depression in the winter of 1937-38
and didn't get into high gear again until war came along. We
vowed to lend assistance to Great Britain, obliged to fend off Adolph
Hitler's ambitions, which made the U.S. factories begin to hum.
By the time we declared ourselves
knee-deep in World War II the War Department was drafting America's
young men for duty and civilians wrestled with goods rationing,
including everything from gasoline to foodstuffs. (Some folks now
in retirement may remember lining up to buy a lard looking material
called oleomargerine. It came with a packet of yellow powder
which one had to laboriously knead into the softened margerine.
Voila! Butter! At least it LOOKED like it.)
has played a nearly constant role in our economic calculations for
generations. It was particularly evident in the 1970s -
reaching double digits on an annual basis. New Fed Chairman Paul
Volcker put a stop to it by raising interest rates to as high as
18 percent. That brought inflation down to a "comfortable" level
but never got rid of it.
The Fed is doing
us no favors. Price inflation is already surging, thanks to its
excessive credit creation, and if not halted can easily accelerate into
hyperinflation. We have not suffered such an episode since the
18th century. The U.S. Constition mandated a non-inflationary
currency but the document has long since been abandoned on that matter.
Professor Ludwig von Mises, in the quotation below, explains what
happens. The stage is set - we either stop inflating and
live within our means - surely a painful scenario - or we
let inflation run until the dollar reaches its
intrinsic value, zero. The deflationary collapse will be even
Will bitcoin save the day? No. It's denominated in
dollars. If dollars lose value altogether how will we measure the
value of bitcoin? Declaring cryptocurrency legal tender is a
possibility, but at this point of economic confusion who's to say what
the citizenry will or will not accept?
The path ahead.
the late Austrian School economist, taught that the job of the
economist was to observe human action and explain, in clear terms, the
consequences of various activities. His study of history showed
that there is ALWAYS an economic collapse when a "boom" was been
created by borrowing money and
paying it back in currency of less
purchasing power than that which was borrowed. Money inflation
has always led to a calamitous end of booms.
Can't inflation be stopped? Sure. But it would entail
putting the federal government on a strict diet of immediately
balancing the budget. This, of course, would cause the economy to
lapse into a distressing economic depression. Living within their
means would cause great discomfort to citizens and government alike, so
we can be sure Congress will not choose that path. Just the
opposite. It will continue to dump as much debt on the backs of
posterity as it dares. So, if Mises is correct - and history is
clearly on his side - we must continue the downhill economic slide
the dollar reaches worthlessness. We must all pay the penalty of
nearly a century of mis-managed currency. And then we can start
to build all over again!
cost-of-living adjustment highest since 1983. It increases next
year 5.9 percent."
Price inflation is likely
to hit double-digits in 2022. Can you see a bumpy economy ahead?.?
about the ebb and flow (and quality) of money runs high these days.
Senior citizens see their cash assets losing purchasing power at a
rapid rate because price inflation is commencing to look more menacing
than officials claim.
Middle income elderly are
fearful of "outliving their resources" and being kicked out of their
retirement facilities. Fear in one's senior years can be devastating.
The young can take a punch in the pocketbook and hope for good luck in
It is said Eskimos solved their problem of
supporting the elderly by setting adrift the frail, unproductive
elderly on ice floes when their care became more than a tribe could
handle. A practical solution to an uncomfortable problem. Unthinkable
today, of course.
Or is it?
Today we live under a central government
that can't support its operations even by spending trillions of dollars
it does not have. By issuing IOUs (bonds and other securities) which it
promises posterity will pay back, Congress buys more time. In the
present debt ceiling case it has bought a two month breather. And then?
It's a mess, to be sure. The
Federal Reserve System will be called upon to create new dollars, most
of which will flow to the accounts of ultra rich while the the middle
class suffers the cost of the resulting price inflation. The dependent
poor tend to trust Uncle Sam to raise their stipend (free lunches) as
inflation continues to assault purchasing power.
So, what's a bloke to do about it? We think
holding one's accumulated wealth in assets capable of retaining value
over time makes sense. In generations past the U.S. dollar tucked away
at interest in a savings account used to fill that choice. It doesn't
anymore, and hasn't for years
"History may record last weekend as the turning point
against the Biden
Administration’s Covid tyranny. From nurses to pilots to truckers to
even Amtrak workers, it appears that America is standing up and saying
'enough!' Every one of our fellow citizens standing up on principle to
oppose tyranny – facing the loss of their jobs and security – is owed a
debt of gratitude by all who love liberty. Let’s hope that the peaceful
rebellion continues to grow!"
GREAT SOUTHWEST REBELLION.
Dr. Ron Paul recently
turned 86 and is still near the top of his game.
In the winter of 1937-38 the New Deal lost its
momentum and it looked like a return to the depths of the Great
Depression. Fear and apprehension returned to distract the citizenry.
Even the threat of political aggression in Europe added fuel to the
general nervousness among the people of North America.
We personally recall the excitement of the New
York World's Fair the following year and wondered why Germany had not
finished building its exhibit pavillion. An adult explained that
Germany was "at odds" with the United States.
Adolph Hitler's misadventures and a Japanese
sneak attack on Pearl Harbor put us on a war footing
in the 1940s for the second time in the 20th century. The
military draft helped clear up the unemployment problem and government
took over management of the economy right down to price controls and
rationing of certain foodstuffs.
Following the war inflation boosted prices.
Between 1938 and 1948 the price of gasoline had
more than DOUBLED. Strangely, the price of a 1st class postage stamp
changed not at all.
"These are the times that
try men's souls." ~Thos. Paine
Were he writing today
instead of the 18th cntury Mr. Paine would probably have chosen the
politically correct "These are the times that try human souls."
we look these days are signs of worry. Even fear, confusion,
apprehension, and divisiveness. Despite rapid-fire reports of out of
control political machinery and untrustworthy money, bewildering
ideology pours forth from our radios and TV sets.
"We report the truth as we know it," asserts the liberal Judy
Woodruff of the PBS News Hour. "We report the truth as it is," sayS conservative Sean
Hannity of FOX NEWS. Whose version of "truth" shall we accept?
When a Novel Economics Laureate suggests Congress stamp a
platium slug with the words "1 trillion dollars" and deposit it in the
U.S. Treasury to spend as it wishes, can we take him seriously? He
(Paul Krugman) is surely pulling our leg.
And now government health officials are urging us to buy
our flu shots despite the fact that incidents of flu are almost
non-existent. They have been replaced by cases of COVID19 against which
we all dutifully go about our public business in surgical masks.
People are worried also about the winds of war.
China has made clear its claim on Taiwan and the Taiwanese president
has made clear her intention to NOT yield to Mainland China. Many a
mother of teenage boys may be silently hoping the U.S. military will
keep its nose, and its troops, out of the situation.
Oct 7 (Reuters) - U.S. Senate leaders have agreed to raise the Treasury
authority until early December, averting a potential debt default
later this month. The deal calls for a debt limit increase of $480
the current $28.4 trillion. If approved by the Senate and House of
Representatives, the U.S. debt limit would then be set at $28.9
you have it, folks. The public debt ceiling
will be increased by a mere 480,000 million dollars and we won't have
to deal with it again until December. Merry Christmas.
* * * * * * * * *
* * * * * * * * *
"Passing an increase
in the debt ceiling merely perpetuates the myth that there is any
ceiling or control or limit on the government's ability to waste
resources in the short run and its willingness to pass the burden of
this squander onto future generations." ~Ryan
McMaken (The Mises Institute)
McMaken points out that if Congress fails to pass a
temporary fix to the debt ceiling that it must default on a substantial
number of US bonds. The United States will be plunged into
So? The U.S. continually stubs its
economic toe and brings on periodic recessions. We and the Missus
have experienced ELEVEN official recessions since we were
married. The economy is usually revived by the creation of more
floods of funny money, which is exactly what the administration is
trying to do right now with it's urgent plea for greater borrowing
power. Without blinking an eye they wish to pile trillions of
more dollars of debt on today's youth and tomorrow's posterity.
(McMaken mentions "future generations" in his essay. Do
we-the-people give a rip about the generations who follow us?)
Debt can damage government entitities as well
as individuals. As Benj. Franklin said, "Pay what you owe and
you'll know what you own." Most goveernments of the world have
fallen into the bad habit of spending money they don't have and
to war when matters deteriorate.
wallowing in a flood of depreciating currency.
How, exactly, will it
No one can say, for
sure, but some pretty good guesses are being made. Investor Bill
Sardi has written an extensive article on the subject (see
and we recommend his ambitious essay. He outlines several
possibilities the mainstream news media have avoided - - including the
tenuous position the FDIC is in.
able to borrow
because we always pay what we owe." ~Pres.
Biden, Oct. 4, 2021
backstop is the Federal Deposit Insurance Corp. should a banking crisis
FDIC insures savings accounts up to $250,000. The FDIC holds about $120.5
billion as of the 2nd
quarter 2021 against $8.2
trillion in insured deposits
(1.7-cents on the dollar). Are American savers being set up to be
completely vanquished of all their money?"
Sardi asks a valid question,
although the FDIC has always maintained that it can draw on the U.S.
Treasury if a bank run occurs.
Which brings us to the
curious rumor of the $1 trillion platinum coin.
It has been rumored the U.S. Mint could create one and deposit it with
the U.S. Treasury. Overlooked is the fact the government cannot
create actual value by engraving a dollar amount on any coin. If
the rumor gains traction we'll explain why this is so.
Mr. Biden turns 79 next month and he is suffering from the mental
slow-down that is not at all uncommon among senior citizens.
That's why they retire by their mid-70s. They simply can't grasp
the fundamentals of a civilization that's rapidly going broke.
(Note Bill Sardi's comment in the upper left box.)
Mr. Biden's advisors are
short-sighted Keynesians who truly believe that if government requires
vast amounts of new cash it can print it endlessly, failing to see that
inflating the money supply eventually leads to price
In 1917, four years after
the Federal Reserve went into operation, Congress decided it would be
prudent to establish a cap (ceiling) on the amount of money it could
borrow on the "full faith and credit of the United States."
The costs of World War were paid by heavy government borrowing.
War bond sales were a principal source of cash but redeeming the
bonds turned out to be a challenge for the Treasury and through the
years Congress has raised the debt ceiling to provide money to meet
We recall our personal
experience in World War II buying war bonds at $18.75 which would be
eventually redeemed at face value of $25.00. We were disappointed
to discover that when cashed for $25.00 the money would not buy what $18.75 did
when we loaned it to the government. (Inflation at work,
On Monday Mr.
Biden said failing to raise the
debt ceiling is "reckless and dangerous". He claimed, ithe rise
is necessary to "pay
what we already owe, what has already been acquired" and "not anything
new." Huh? What in thunder does THAT
mean? We have borrowed
trillions of dollars and in order to pay it back we borrow trillions
proposes was cleverly explained years ago by former Colorado Governor
Christmas in reverse. We get the presents and send the bills to
Woe to this top-heavy federal government when posterity catches on
really awaits them in the future.
poplar Britsh news service sums it up pretty well. If Washington
politics were a boxing match President Biden and his supporters would
be against the ropes wishing the bell would ring so they'd have a
between rounds respite. But the fight has lapsed into
October and the prospect for passing the monster spending bills
favored by Democrat liberals is clouded by such issues as what to do
about the debt ceiling.
Every now and then we are reminded to
consult Professor Alexander Tytler's famous "Cycle of Democracy".
It was extracted from his 1776 study of the Athenian Republic.
His conclusion was that the lesson of history demonstrate that a
democratic government framework is doomed. Here's why:
average age of the world's greatest civilizations has been 200
years. These nations have progressed through this sequence:
"From bondage to
spiritual faith to great courage;
courage to liberty;
liberty to abundance;
abundance to selfishness;
selfishness to apathy;
apathy to dependence;
dependency back again into bondage."
Tytler, a Scot professor, wrote a scholarly tome, from which this
comes, called "The Athenian Republic" which was published shortly
before the thirteen American
colonies gained independence from Britain. "Google" him to learn
We first posted the "Cycle
of Democracy" on this site in 1994.
The public debt at the time was $4.5 trillion. It is now above
that, Mr. Stockman. Amen!
effect s of the Fed's relentless interest rate repression
are many, but
among the worst has been the absolute savaging of bank
depositors. ~David Stockman
voting majority has supported debt augmented federal budgets for years.
may recall David Stockman as the youthful director of President Ronald
Reagan's Office of Budget Management. He's sharp of mind and
articulate, although today's "woke" liberals have no understanding of
the points at which he drives.
Our personal dilemma is a classic
case. After years of struggling we retired with more assets than
debts. A few years ago we deposited a sum of cash into a
prominent national bank which offered "High Yield Savings" at
2.10 percent annual interest. We knew that was above the
then "rate of inflation" (Consumer Price Index) and was duly insured
by the Federal Deposit Insurance Corporation. Therefore, although
we could put the money into higher risk investments, such as stocks,
bonds, etc., we chose the slow and steady assurance of a bank savings
Today that same account pays a piddling 0.40
percent - far, far below the rate of inflation and therefore each
dollar is losing purchasing power while we let it sit. The
villian is the Federal Reserve System which is hellbent to keep a
lethargic economy alive by holding interest rates below what a free
market rate would be.
Why not trade the money for
Bitcoin? That's trading fiat currency for an even fishier fiat
system. Digital purchasing power is popular, to be sure.
Many of our offspring brag about not carrying cash and using debit
cards for even small purchases. ( Debit cards are one
thing. CREDIT cards are quite another.)
We and the Missus are supposed
to be enjoying our Golden Years. How can we when the system is
slowly impoverishing us?
youth don't realize what an unfair burden they have been handed by
government’s new fiscal year began October 1st. It was the
Congress to pass a
funding measure, but that hasn't happened yet.
Common citizens have little choice but
to sit on the sidelines, with fingers crossed, watching this political
spectacle play out. Some may come to realize that even the mightiest
nations cannot constantly borrow their way to prosperity. But they will
try until an insoluble economic crunch occurs.