"The public will never, ever use the power of their numbers to change things so long as they’re being successfully propagandized not to."
~ Caitlin Johnstone

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.

September 22nd, 2019

      We've never linked to Caitlin Johnstone before because we haven't quite figured her out.  Does she write with a bias from the left of the polical spectrum or is she a grounded in a conservative bias? 

      Johnstone bills herself as a "rogue journalist"  and she operates a blog voicing her opinion on matters large and small.  (We believe strongly in the idea that the notion of free speech applies to Internet blogging.  We've been pushing the idea that sound money will be the nation's eventual salvation since the early 90s on this site.)
   She writes:  "You are infinitely more qualified to report the news than the propagandists of the mainstream media. Even a teenager making a sloppy, amateurish first-time Youtube video about current events is superior to an MSM talking head who’s paid to lie. Be the press."  

So many topics!  So many voices!  So much hate between the promoters of Socialism and the mob mourning the loss of old-fashioned Constitutional government in the United States.  And what of the confused masses in the middle?  Which way should they lean?  Toward bigger government and more handouts? 
   There's much to be learned about this Australian's core beliefs, but we're glad to have her spicing up the Internet conversation.  EDGE OF THE NARRATIVE.

      What?  Me worry?
    The Federal Reserve is presently demonstrating the ease with which it can meet cash illiquidity. It has been creating wagonloads of new currency to meet the demand of short term borrowers in the financial markets. Because of the lack of liquidity some lenders were forced to raise interest rates which is a strict no-no in the Fed playbook.  For several days the Fed has been pumping new money into the system in a $75 billion dollar daily range. To clrify the magnitude of this sum it's $1 million multiplied by 75,000 . . .EACH DAY! And just to make sure the market calms down the Fed says it will keep the money spigot wide open until October 10th - maybe beyond.

    Not much is being said about the negative reaction this causes the pitiful little band of SAVERS who are searching for interest levels at least a smidgeon above the price inflation rate. This is not happening. The aim is LOW interest rates, remember?  That's great for people and corporations which much borrow against their future earnings, but a kick in the teeth for people trying to save for the probable "rainy day."

     There are a lot of financial bubbles out there floating around in search of a pin!
    A few days ago we wondered aloud  if the 90th anniversary of a  shocking stock market crash portends   ominous financial/monetary activity next month.  Not necessrily, we doncluded, but  October history in Wall Street  is riddled with  troubling events. 

             Commentator Michael Snyder seems to agree:

    "Are we about to see U.S. financial markets go crazy?  That is what Goldman Sachs seems to think, and it certainly wouldn’t be the first time that great financial chaos has been unleashed during the month of October.  When the stock market crashed in October 1929, it started the worst economic depression that we have ever witnessed.  In October 1987, the largest single day percentage decline in U.S. stock market history rocked the entire planet.  And the nightmarish events of October 2008 set the stage for a “Great Recession” that we still haven’t fully recovered from.  So could it be possible that something similar may happen in October 2019?"

     As we said above, not neccessarily. So why bring it up?  Because negative signals are popping up all over the globe and some financial bubbles may pop soon if the best laid plans of the Federal Reserve and other central banks fall short.    
    Can't we trust bankers and political leadership to prevent a recession? 
            No.  At the insistence of the voting majority the system has run too far off the tracks to get back to anything resembling normalcy without a painful correction to clean out the deadwood. The only question is, WHEN?

The Social Security Conundrum
   Low interest rates are not only bad news for people who find comfort and security in bank savings, but Social Security recipients are also going to get disappointing news about their inflation-based increase in 2020.  The Treasury Department is about to set the inflation adjustment on the present annualized price inflation rate, which is very low.  Social security payments won't increase much next year.

    The old fasioned scheme called for customers with spare cash to lend it to a banker.  The banker loaned out as much as he dared at an interest rate higher than he paid the depositer for the use of the money.  In those days banks owned big vaults with sturdy doors or large safes.    People  liked the idea of their cash being safely locked up  in the bank.  They also enjoyed seeing  the deposits and interest  compound  as time rolled by.  Many savings deposits yielded as much as 3 percent per annum.  The bank would lend the money on mortgages and other instruments at 5 percent.  It could operate at a profit on the 2 percent spread between the interest collected by borrowers and the interest paid lenders (depositors).  This was more than a century ago when money was actual wealth and not today's promise of wealth.  (Fiat currency.)

     People then understood that money was metal and that the more convenient paper notes were not, although they could be redeemed in money whenever the holder wished.

Lower interest is great for borrowers, but a lousy deal for savers.
Trump is ticked off because the Fed cut the basic rate only 1/4 percent.

   The Federal Reserve hath acted. It announced Wednesday a quarter per cent cut in the basic interest rate making it cheaper to borrow money. Whether another cut will be necessary before the end of the year the Fed isn't saying. The cut means that prudent people who are trying to build up savings account are given a kick in the pants.  They'll be lucky to see their cash stash break even with price inflation.

   President Trump is unhappy with reports of an economic slowdown. He would prefer to ride to re-election on the wings of a booming economy and favors a loose money policy in which consumers are tempted to borrow from their future. He's on record as favoring a zero percent interest rate - or lower - if necessary. Theoretically, this means would-be savers would actually pay a bank to store their cash savings. This would turn the old-fashioned American habit of financial prudence upside down. But it's Modern Monetary Theory (MMT) and thought to be the wave of the future.

    Mr. Trump fails to note the danger of constantly pumping cheap debt-based currency into the economy. It's like continuing to transfuse blood into a body whose system is already full!

  The world is about whether or not the world is heading for a recessionary period.  Some say "the big one" - a fullblown depression - awaits us.  Many lean toward a recession of the 2008-9 variety heading this way.  Ever the optimists President Trump and his allies say the economy is performing swimmingly, knowing that any talk of a slump prior to the 2020 election will not boost his re-election campaign.

    Since we measure the economy in terms of dollars, how's it doing?

    Unfortunately, the dollar is not a reliable measuring tool.  It has fallen sharply in terms of the amount of precious metals it will buy.  An ounce of pure silver costs $18.58 today - far more costly than it was only a few weeks ago.  If it reaches $20.00  experts say  it could bounce much higher. 

    In terms of gold the weakness of the dollar is even greater.  One dollar today is worth only 1,534th of a troy ounce.  In days of yore, such as just prior to the great stock market crash of 1929, one dollar would buy 1/20th of a troy ounce of gold.  (The official Mint price was $20.67 until raised by the Roosevelt administration to $35.00 in 1934.)

    Against the euro the dollar is stronger.  A euro can be bought for a fraction under $1.10!  In the recent past it has taken as much as $1.14 to buy one euro. 

     When the commentators speak of the "stronger dollar" it depends on how it is measured.  At the moment  the U.S. dollar is quite strong against other fiat currencies, but quite weak in the knees when measured against precious metals.  There is no possibility that creating more dollars from thin air can improve its purchasing power over precious metals, although its parity may waffle considerably when measured against other fiat currencies. 

     Preserving one's wealth, consequently, is a challenge. 

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.