The world is so poised on the edge. The jitters are sweeping through tonight.
Just suppose you have $100m in assets that you are nervous about. You cannot stick that amount in a bank, because government guarantees only cover the first $1m or whatever, and banks are all risky now. So you buy into the biggest, most liquid market in the world — US Treasury bonds, that is, the debt of the US Government. Sure, you risk losing a few percent as bond prices jostle up in the panic, but at least you preserve your wealth. So you sell your assets, convert the proceeds to US dollars, and buy US Treasuries.
So much money had run to US Treasury bonds that the yield — which was at a record low yesterday — just got a lot lower. People are happy to give their money to the US government for an historically low yield.
Yesterday things were more scary than any time since WWII:
On Thursday, benchmark 10-year Treasuries yields fell to a historic low of 1.5326 percent, according to Tradeweb. The previous low was in November 1945 when yields ended that month at 1.55 percent.
Tonight, things are [...]
The game is up when everyone knows the only way out is printing money, because then everyone knows inflation is coming, and the bun-fight begins. Everyone wants the wage rise, the payment now, and to buy the commodities that they won’t be able to afford tomorrow. Price tags begin that rising spiral. I don’t think we are on the verge just yet, but it can’t be that far when someone like Murdoch is broadcasting it.
Rupert Murdoch tweets:
Governments worldwide have borrowed 100 trillion last ten years. Defaults inevitable sometime soon. Means crash, hurting rich and poor.
@rupertmurdoch Of course markets stay high with central banks printing huge sums, inflating everything except jobs.
The only question that matters then, is are they “printing”, and how long have we got?
US Money Base Figures
This is the US money base, starting in 1918.
You can see the moment Lehman Brothers went under. It’s that “bend”.
That graph again, logarithmically, so we can put the last 90 years in perspective. Remember the oil crisis, the Vietnam War, the 1987 crash, LTCM, and the dot com burst? They don’t rate.
A gold bar that should have weighed 1,000 grams, weighed 2 grams too little. The owner had it cut in half to reveal that the certified, stamped bar with serial numbers had tungsten rods inserted all the way through it. Tungsten, has a density of 19.35 g/cm3, so is a near-perfect match for gold (19.32 g/cm3) and it sells for just one ten thousandth of the price.
The gold bar was cut in half to reveal the tungsten rods.
The problem of fake gold bars By Felix Salmon March 25, 2012
You don’t need to be a conspiracy theorist to find this worrying: a 1kg gold bar, certified as 99.98% pure by XRF (X-ray fluorescence) tests, turns out to have been drilled out and largely replaced with tungsten. This bar was discovered only because it was 2 grams lighter than it ought to have been: the forgers failed to add quite enough gold to the outside of the bar to make up for the weight lost when they replaced gold with tungsten. But if they’d gotten the weight right, it would probably still be circulating today.
Is this a big issue? Who knows? Gold bars are rarely audited. [...]
The meme is spreading. Rapidly, day after day, I’m meeting more Skeptical-Austrians, and Austrian-Skeptics. I don’t mean the country, but the economics.
James Delingpole-the-brilliant enjoyed my post: The Ground Zero of Global Corruption: it starts with The Currency. He’s had his awakening a few months back. Just yesterday I was talking to Redmond, a skeptic in Canada who turned out to be founder and director on Mises.ca (you can’t get much more Austrian than that). Martin Durkin (the infamous director of Great Global Warming Swindle) is an Austrian too. Back in Bali 07, even then, that Monckton, Archibald, and Balle were discussing gold and currencies (nearly half of all the skeptics there). I’m guessing Chiefio might be. I hear Ray Evans of the Lavoisier Group is too.
…skeptics of government science are also skeptics of government money…
It’s no surprise, really, that skeptics of government science would also be skeptics of government money. My message to all the sleeping skeptics out there is: get with the game. When I said climate science is the second biggest scam in history, I wasn’t joking.
So James, yes, welcome to the club! Absolutely, I’m an Austrian and so, of course, is [...]
The scale of the rot is something to behold. Something is grossly, wantonly wrong with Western Civilization, and lots of people know it, but they don’t know why (and for the next blind rebellion, see, “Occupy”).
But a head of the hydra popped into view last week. First a high profile whistleblower from Goldman Sachs wrote Why I am leaving in the New York Times. Then today (possibly, it’s unconfirmed), an insider from JP Morgan came forward to reveal something far worse, and dark to the core. It’s posted on the CFTC site (that’s The US Commodity Futures Trading Commission – the market watchdog, or rather watch-puppy). [UPDATE: The CFTC have removed the page after 48 hours, a copy of the text is here, screenshot here.]
A Goldman Sachs Executive Director — Greg Smith — resigned from the 143 year old firm explaining he felt ill with the callous culture where people would boast about how much they had ripped off clients, which they called “hunting elephants”, and calling their clients “muppets” and worse. He said that in 12 years the company had completely lost the culture that made him proud to join it. There was nothing left of integrity [...]
Ladies and gentlemen, it’s obvious (to anyone who knows there’s no free lunch) that one way or another this Festival of Funny Money was going to end in tears. And so it flows… but let’s not forget what lead us to this, the problem that lies under all others.
The government can print (base) money from nothing, and they can set interest rates artificially low so as to encourage private banks to create (bank) money from nothing. And governments keep doing it, because it’s so much easier to be elected handing out loaves and fishes, and grants and solar-rooftop-subsidies, in a froth of easy money and rising asset prices. Any fool can spend someone else’s money, especially when the sucker doesn’t even know it was their money.
Thus does inflation steal from all and sundry. Silently.
Watch them print money… say hello to inflation.
In the real world, we have to repay our debts. But the world of the ruling class never has to make ends meet. Alan Greenspan admitted that this weekend — effectively announcing that the US is the United States of Wonderland, where no matter how high the debt is they can never default — because [...]
Check these out. There’s been an ongoing war of ideas, Hayek vs Keynes, for eight decades and counting — and these videos sum it up consummately. This ongoing academic fight has shaped lives and countries for decades: booms, busts, unemployment, and possibly even wars.
Indeed it’s an ominous sign of the times that there is a resurgence of this debate. (The masses take no interest in monetary policy when times are booming.)
(If you are in a tearing hurry, skip the first minute).
I’m not a rap fan, but this is so good that, for the first time, I have to admit rap has its role.
There’s a second in the series and it’s even better.
* * *
There are parallels between climate and economics. Using global markets against “man made global warming” is a Keynesian solution to the weather.
The big left-right divide is not about conservative versus progressive. The “progressives” want us slow down, and give up cars, flights and air conditioners, and the “conservatives” fight to keep development rolling. Ultimately the left right dichotomy boils down to the individual versus the collective. Thus Keynes (the big government solution) [...]
Not many people realize just how utterly unprecedented the Global Financial Crisis was.
To see just how singularly anomalous those months were, let’s revisit an article I wrote for 321 Gold in November 2008.
The graphs below are extraordinary, jaw-dropping plots. At the time I was watching them grow week by week, and was amazed that they were not “everywhere”. I still remember the chill I got in mid October when I first saw the ballistic spike. We’re talking about the money supply of the worlds largest economy. The rescue package blew away the scale — the second graph below covers 90 years. It’s not often you see any graph which is a true hockey stick. This was originally published at 321Gold on Nov 25th 2008. Remember this money (your money if you hold US dollars) was “injected” as a temporary fix (in theory), the plan was to neutralize it, or sterilize it, or insert-your-favourite-euphemism-here-for-getting-it-back-to-normal.
So where does the Money Base graph stand now? It’s not back down to $900 billion (where it was in August 2008), it’s not even stable at $1500 billion, it’s $2000 billion. Our markets run on ever increasing injections of new money. The people [...]
Maybe you are already au fait with the deep flaws in our financial system, or maybe you are like I was ten years ago, too bored to read “economics”–knowing it was all human vagaries and surrounded with jargon. If your eyes glaze at the thought of bonds, yields, debt and GOFO’s–bear with me, I understand. But history books will be written about this year. No one can afford to be not interested in the science of money.
Economics is known as The Dismal Science, and the reason it’s dismal is the same reason that official climate science is — too many dollars at stake. (If we can treat psychology scientifically, why not economics too?)
Those who want to falsely alarm us benefit from confounding issues, confusing statements, argument from authority and bureaucratese
But the unscientific nature of some subjects is no accident. Clear thinking, transparency, and rigorous logic benefit the majority, just as jargon, elitism, gatekeepers and censorship do not. Those who want to falsely alarm us benefit from confounding issues, confusing statements, argument from authority and bureaucratese, and so too do the people who control our money — central bankers, the banking aristocracy, and some politicians. (Though instead of [...]
Just as the great bull run that could have no end, ended, another unthinkably big bubble quivers. Technical indicators are quietly being tripped that suggest the bull run in global temperatures may be toying with a reversal. Could another large human institution dependent on complex models be headed for it’s ‘Lehman Bros’ moment? [...]
Carbon credits are a form of fiat currency, yet as calls for carbon trading grow, ironically, another fiat currency collapses—destroying life savings, wiping out jobs, and taking down historic institutions overnight. [...]
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