In the past, David and I have written about how money supply is rampantly expanding, and how this benefits the spenders and the speculators while punishing the producers and the savers (in a relative sense of course). We’ve been called conspiracy theorists for pointing out systematic problems with paper currencies.
Today in The Australian we find some more people who agree with us: Rupert Murdoch, Veteran Reserve Bank economist Peter Jonson, Warwick McKibbin (former Reserve Bank Board), and Bob Gregory (Professor of economics at ANU and another former Reserve Bank Board member). It’s good to see this issue make the front page. Shame it wasn’t there 15 years ago.
“Rupert Murdoch had warned G20 finance ministers that money printing by central banks had exacerbated inequality…”
“Mr Murdoch is saying what a lot of people including central bankers are saying in private and increasingly in public,” said Warwick McKibbin
Here’s the latest US money base* graph. The massive injections started in August 2008, the numbers ran right off the old graph scale. It was a temporary liquidity injection to tide us over difficult times. It took 90 years to grow the US base money to $800 billion. Now six years later [...]
How much is that company worth? You can look at its PE, debt, market spread, sovereign risk, and discounted cash flow, but in the end, it’s the Ben Factor (BF) which dominates all companies, metal prices, and sovereign currencies in the West.
The Ben hath spoken, and said that in future, if the economy is looking better, he might slow the printing of $85 billion US dollars a month, some indefinite non-specified day. All that was … obvious. But, world-wide investors and traders hang off the words, trying to second-guess what the BF banality implies. No one will say it, but everyone knows that it the rate of the flow of easy cash so much as slows, all hell will break loose. Balanced on this thin veneer of pretense, stocks, metals and whole national currencies change direction within minutes.
The Ben has spoken.
What hath changed since yesterday? Not much. But global paroxysm ensues.
Bernanke taper talk sends markets into a tailspin
Closing Bell: S&P 500 posts biggest fall since November 2011 on Fed’s stimulus plan
EMERGING MARKETS-Latin American stocks tumble to four-year low
China, Fed frenzy send Aust stocks tumbling [...]
There is an economic crisis out there, but it isn’t the Fiscal Cliff.
The best summary of the economics I’ve seen comes from Mark Steyn.
The bipartisan Super Committee of Super Friends was supposed to find $1.2 trillion dollars of deficit reduction by last Thanksgiving, or plucky little America would wind up trussed like a turkey and carved up by “automatic sequestration.”
Sequestration sounds like castration, only more so: It would chop off everything in sight. It would be so savage in its dismemberment of poor helpless America that the Congressional Budget Office estimates that over the course of a decade the sequestration cuts would reduce the federal debt by $153 billion. Sorry, I meant to put on my Dr. Evil voice for that: ONE HUNDRED AND FIFTY THREE BILLION DOLLARS!!! Which is about what the United States government currently borrows every month. No sane person could willingly countenance brutally saving a month’s worth of debt over the course of a decade.
I suppose it’s possible to take this recurring melodrama seriously, but there’s no reason to. The problem facing the United States government is that it spends over a trillion dollars a year that it doesn’t have.
I never [...]
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 [...]
Behind the scenes, large financial houses are moving in stealthily. In 2008, carbon trading worldwide reached $126 billion and is projected to grow to become a $2-$10 trillion dollar market, or “The largest commodity traded world wide”. The largest. That’s bigger than oil, coal, gas, or iron.
Banks want us to trade carbon
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