Wrisley.com
Seeking Answers in an Upside Down World.

Established - 1994

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(Caveat Emptor)

News and opinion from all over the political universe. 

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

    

May 9th, 2021
MAIL:  The Editor   
                                    

"An episode of one-time price increases as the economy reopens is not the same thing as — and is not likely to lead to — persistently higher year-over-year inflation into the future," Fed Chair Jerome Powell told reporters late last month. "Indeed, it is the Fed's job to make sure that that does not happen."
Inflation is transitory, huh?  Don't be too sure of that.
   CNN'S's Julia Horowits examines the sharp uptick in headlines questioning the Fed's assurance that the present increase in price inflation is just a brief passing event. Common sense economics holds that the injection of trillions of newly created dollars into the general economy will fuel sharply rising prices.  Some observers worry about hyper-inflation, which Fed fans believe is impossible because the Federal Reserve system has the means (policy tools) to put a stop to it - such as a big boost in interest rateS. THE INFLATION THREAT.
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Retail Price of American 1 oz. Gold Eagle Coin reaches $2,016.95.
      Gold bugs were atwitter this morning over the latest rise in the price of gold. The daily news quotes the futures price which was about $1,833 at 11 o'clock this morning. Retailers must respond to actual market demands and tend to price gold at a couple of hundred dollars a troy ounce higher than the futures gamblers.

      Retail profits must pay for overhead, including - in many case - "free shipping."

      Is this price blip heralding an inflation prompted run? Possibly. But don't count on it.  It may trigger a selloff people who bought gold at a lower price bail out and take their profits. The true gold bug, however, is expecting to see the precious metal fetching $3,000 per troy ounce.
      

(Bloomberg News) - - "While the Office of the  Chief Actuary at [Social Security] said it is still too early to assess the impact from Covid-19, the year-over-year change appears to reflect excess deaths. About 447,000 people who died from the virus were 65 or older, according to data from the Centers for Disease Control and Prevention, or about 80% of total deaths."




   Some wag will surely write an article claiming the virus spread was mismanaged among 65 and older seniors so as to relieve the drain on Social Security payouts. At present Social Security is expected to run out of money by 2034 or earlier. 

   Notice the sharp uptick in claims just prior to 2010. That's when Baby Boomers began to apply.

    We are often told that Social Security's Trust Fund will save the day. However,the Trust Fund is mostly government bonds (IOUs). If you expect government bonds to hold value through thick and thin, you'll rest easy. If you have doubts you may encounter some sleepless nights.        ~JW


CENTRAL BANK PROGRAMMABLE CURRENCY (CBPC)
it's being examined by the Fed and other central banks. 


    "FedCoin" has surfaced as a monicker for a Federal Reserve version of digital currency. Whether it will materialize or not we cannot know, but it could eventually lead to the elimination of paper pocket currency and pesky base metal coins.

   . The adoption of a FedCoin card could certainly be useful for government tracking of citizen financial affairs and save the IRS no end of time and humanpower in collecting taxes. Calculation of taxes due could be done by computer and the amount due removed from one's FedCoin account.

     But what about the underground [blackmarket] economy?  Wouldn't FedCoin drive them out of business?

      No. Racketeers would switch to something valuable and not nearly as traceable as digital fiat currency. 
Maybe even gold or silver or palladium or diamonds. As the old saying has it, "Where there is a will there's a way." Anything that is scarce  can be used for money. 

      "What if the government declares such things illegal and confiscates them?"   

       It's highly doubtful even today's political majority would agree to outright confiscation of people's personal valuables. If you owned a South African krugerrand  what right would the U.S. Treasury have to take it from you? For that matter, under present law, how could the U.S. government confiscate the U.S. gold and silver bullion coins it has been selling to the public since the 1980s? 

       Stay tuned for more on this divisive topic.



"Visit the Bullion Dealer Locator to locate a dealer – bullion coins are not sold directly by the U.S. Mint."
     We copied the above from the web pages of the United States Mint.The mint does advertise gold bullion coins but doesn't have any for sale except speciality items and high priced proof gold bullion sets. We don't know what the hell is going on at the mint these days but an editor needs to comb though their web site and coordinate statements. 

     Popular bullion retailer APMEX is presently pricing U.S. $50 face gold coins at $1,965.00.  Each contains 480 grains of goldand is more expensive than the daily spot price of the precious metal.  But if you wish to actually possess the gold you buy  you must pay the retail price.  Shipping is often "free."  When you sell it  back to the dealer you  receive a  wholesale price


TRASHING THE CONSTITUTION
     "That members of both major political parties favor an unbridled borrowing and spending approach to government is unconstitutional and destructive but not surprising. Giving away cash and pushing the cost onto nonvoters — generations as yet unborn — can make members of Congress popular. It can also turn the public treasury into a public trough. Thomas Jefferson warned of the dangers of this as it would become habit-forming for politicians, and voters would grow to expect it."  ~Andrew Napolitano

   We never voted to toss the U.S. Constitution into the trash.  Have you? 

       Actually, we all have.  We're been doing it since 1936 when the U.S. Supreme Court declared that Congress could  borrow and spend all the money it wanted to as long as long as it was for the common good.  Judge Napolitano understands what happened and writes about it in a clear way, although  not many of the voting majority will comprehend his criticism of the runaway federal borrowing scheme.  Perhaps former governor Lamm of Colorado said it best when he pointed out that our ever-increasing federal debt is based on the idea of "Christmas in reverse."  We get all  the things we want and send the bills  to our children, and the unborn for it is they who must eventually clear the debt.                         UNCONSTITUTIONAL DEBT.




   Upon spying a large jug filled with 1-cent coins the boy asked, "Hey, Dad. Why are we saving all these pennies?"

    "Well, first of all they are one cent coins, not pennies. That nickname comes down to us from Colonial days when English and other foriegn coins jingled in our pockets. The English penny got its name from the old Roman denarius, often called 'dennies.'  Eventually "pennies" fell into use, but the U.S. system has never minted coins bearing the name "penny."

     "Now, the coins in that jar were minted before October, 1982, and most of them are 95 percent copper which is valued at nearly three times the face value of the cent.  Today it is $0.291033.  That's just the value of the METAL, not the cost of mint production."

      "But didn't Ben Franklin say 'A penny saved is a penny earned'?"

      "Yes, he did. But that was prior to the establishment of the present U.S. coinage system. At the time English pennies widely circulated in American pockets."


Saving copper cents with the present price of copper per pre-1982 cent nearly 3 cents is a logical thing to do.  Don't bother hoarding post-1982 U.S. cents.  The are made of cheap zinc coated with a thin veneer of copper.

          Are any 1982 one cents coins worth saving?

           Sure!  A cent minted from January through September 1982 is mostly copper.  But from October of that year to the present the main metal in the one cent coin is zinc.  There is a small movvement afoot to cease minting the pesky cent   However, the zinc industry is happy with the present system.


James Bovard complains about a crackdown by the U.S. government on libertarian thought.    The Feds Are Coming

      We were personally attracted to libertarian ideology in the 1960s when the U.S. government yanked silver coins from our pockets and replaced them with cupro-nickel facsimiles.  Private ownership of GOLD was made unlawful in the early 1930s but we always felt secure at the sound of silver coins ringing on a counter top.  The silver completely disappeared from general circulation in 1965 despite Lyndon Johnson's promise that the old silver dimes, quarter-dollars, and half-dollars would circulate with the new base-metal coins and represent equal purchasing power.  With the public hoarding the silver coins and the government pulliing them out of circulation as fast as it could, there was rarely a common silver coin in circulation by the end of 1965.

     For a time the public could redeem silver certificates but the government abandoned the practice in July of 1968.  Today anyone holding silver certificates in the belief they will be redeemed will be disappointed to discover such is not the case. 

    Murray Rothbard and other libertarian economists explained the money questions very clearly and we found ourselves falling in with their contention that doing business with fiat currency would one day lead to heavey inflation.  By the 1970s the inflation rate reached double digits!  A new Federal Reserve chairman, Paul Volcker, applied the brakes by raising interest rates sky high. 

     Today, the Fed is doing the opposite...it is holding interest rates to near zero in an attempt to flood the economy with cash and - it is widely believed - the policy should lead to revival of the economy.  Libertarians point out why the policy will fail and the federal government tends to clamp down on their messages.

      The chances of libertarianism "catching on" with the general public are nearly nil.  The Welfare State has long been following a socialist scheme and a voting majority have long held that the founding era in which the people supported the government (and wrote a Constitution to reflect it) the present notion is that the federal government must support the people, borrowiing trillions of dollars to pay the bill. 


 A $1.5 QUADRILLION TIMEBOMB
    In all the current talk of multi-trillion-dollar public debt you will rarely find a headline quoting a quadrillion dollar figure.

       Writing from Switzerland Egon von Greyerz examines the fall of Archegos, the gfinancial firm whose decline has made headlines lately. This article may help readers understand the certain danger that playing in the derivatives market can produce. Von Greyerz reminds us that derivatives are not the ASSET. They merely derive their value from the asset.
TIP OF THE ICEBERG.

"Trillion Here. . .a Trillion There."

      "During 2020, the federal government provided a total of $3.2 trillion of Covid relief, starting with a mere $8.3 billion, then adding $104 billion, then adding $2.2 trillion, and finishing off the year with another $900 billion.

     "We’re now three months into 2021, and the federal government has provided yet another $1.9 trillion in Covid relief; and, the Biden administration has just asked for $2 trillion for infrastructure." 

      Clifford Theis, economist with the American Institute of Economic Research is reminded of the late Sen. Everett Dirkson, a long-serving Minority Leader of the Republicans in the U.S. Senate,  famously quoted as saying a billion here, a billion there, and soon we’re talking real money. That was back in 1969. At the time, a billion dollars was about one-tenth of 1 percent of GDP.  And, to make it clear to the average reader, we add that $1 billion is 1,000 million dollars.  It takes 1,000 billion to equal $1 trillion. 

          Mr. Theis does a good job of explaining the immensity of the impact of continuous monetary inflation since Mr. Dirkson's "a billion here" remark of more more than a half century ago:   A TRILLION HERE...A TRILLION THERE



We worry about debt - -
...but most of us don't have the words to describe it.
J. Howard Kunstler has the words. 
    "Debt only works in the youthful growth phases of economic pulsation, when the prospect of being paid back is statistically favorable. Now in the elder de-growth phase, the prospect of paying back debts, or even servicing the interest, is statistically dismal. The amount of racked-up debt worldwide has entered the realm of the laughable. So, the roughly twenty-year experiment in Central Bank credit magic, as a replacement for true capital formation, has come to its grievous end."  DO YOU BELIEVE IN MAGIC?




                 Historical note: Prior to the Civil War the US got along with national debt of about $90 million (1862)  By 1867 the federal government was almost $3 billion in debt. It stayed under $2 billion from 1883 until 1917. By 1919 the debt had climbed to more than $25 billion! (War is costly.) These borrowed billions helped make the 192Os "roar." But the financial bubbles burst in the autumn of 1929 creating a wretched presidency for Herbert Hoover, who took office in March, 1929.

                        Franklin Roosevelt overwhelmed Hoover in the 1932 election, called in the people's gold in 1933 and promptly devalued the U.S. dollar in terms of gold - which Americans would not be allowed to possess again for more than forty years.  Borrowing continued to rise in the 1930s and the economic depression persisted. By the time the nation got into World War Two its annual deficit was nearly $50 billion.  But the borrowing went into overdrive when war dragged on. The federal debt had piled up to $259 billion by 1945...122.75 percent of GDP.

                        There were a few years in which the national government ran budget surpluses, but the debt pile grew until it reached $995 billion in 1981. Converted into millions that's 995 thousand million. Still quite a lot of money - - even today. 
        

                                  The debt pile began to be measured in trillions in 1982. By 1995 the accumulated debt was $4.9 trillion! 

      Politicians have chosen to ignore the debt accumlation. The Treasury Department says it is presently more than $28 trillion,  A Sword of Damocles swings over our heads and something ought to be done about it. But he main objective is to make voters happy....and voters have no wish to cough up the thousands of dollars per capita to pay down this towering national debt. The voting majority knows very well the politians will never ask them to pay back the debt. They'd be run out of office at the next election.

                         So - what happens? Can't the debt be declared null and void and just disappear? No - not without wrecking the lives of all those investors in the US and around the world who have invested in all those IOUs in the belief government will make good on its word to redeem them.