"fraud. why the great recession" (official documentary)

Free markets are not to be blamed for the Great Recession. On the contrary, its origins rest upon the deep government and central bank intervention in the economy. Through fraudulent mechanisms, this causes recurrent boom and bust cycles: bad policies create phases of irrational exuberance, which are then followed by economic recessions, a result that every citizen ends up suffering from.

The Fiscal Cliff Is a Diversion: The Derivatives Tsunami and the Dollar Bubble

The “fiscal cliff” is another hoax designed to shift the attention of policymakers, the media, and the attentive public, if any, from huge problems to small ones.
The fiscal cliff is automatic spending cuts and tax increases in order to reduce the deficit by an insignificant amount over ten years if Congress takes no action itself to cut spending and to raise taxes. In other words, the “fiscal cliff” is going to happen either way.
The problem from the standpoint of conventional economics with the fiscal cliff is that it amounts to a double-barrel dose of austerity delivered to a faltering and recessionary economy. Ever since John Maynard Keynes, most economists have understood that austerity is not the answer to recession or depression.
Regardless, the fiscal cliff is about small numbers compared to the Derivatives Tsunami or to bond market and dollar market bubbles.
The fiscal cliff requires that the federal government cut spending by $1.3 trillion over ten years. The Guardian reports that means the federal deficit has to be reduced about $109 billion per year or 3 percent of the current budget.

Why are (Smart) Investors Buying 50 Times More Physical Silver than Gold?

By: Eric Sprott

As long-time students of precious metals investing, there are certain things we understand. One is that, historically, the availability ratio of silver to gold has had a direct influence on the price of the metals. The current availability ratio of physical silver to gold for investment purposes is approximately 3:1. So, why is it that investors are allocating their dollars to silver at a much higher ratio? What is it that these “smart” investors understand? Let’s have a look at the numbers and see if it’s time for investors to do as a wise man once said and “follow the money.”
Average annual gold mine production is approximately 80 million ounces, which together with an estimated average 50 million ounces of annual recycled gold, totals around 130 million ounces available per year. In comparison, annual mined silver production has averaged around 750 million ounces, while recycled silver is estimated at 250 million ounces per year, which adds up to approximately 1 billion ounces. Using this data, there is roughly 8 times more silver available to buy than there is gold. However, not all gold and silver is available for investment purposes, due to their use in industrial applications. It is estimated that for investment purposes (jewelry, bars and coins), the annual availability of gold is roughly 120 million ounces, and of silver it is 350 million ounces. Therefore, the ratio of physical silver availability to gold availability is 350/120, or ~3:1.¹

The Fed Doubles The Dosage

On December 12th, the Federal Reserve announced the most aggressive program of monetary stimulus ever undertaken in peacetime. Beginning in January, the Fed will more than double the amount of fiat money it creates each month from $40 billion to $85 billion. On an annualized basis that amounts to more than $1 trillion a year. This week we will consider 1) What they did; 2) Why they did it; and, 3) What impact it will have on asset prices over the short-term.
What They Did:
In a nutshell, the Fed announced it will more than double the amount of fiat money it creates each month and that it will use that money to buy government bonds and mortgage-backed securities until the unemployment rate drops substantially or until the inflation rate accelerates. The press release stated:
 “…the Committee will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. The Committee also will purchase longer-term Treasury securities … initially at a pace of $45 billion per month.”

The Historic Inversion In Shadow Banking Is Now Complete

Back in June, we wrote an article titled "On The Verge Of A Historic Inversion In Shadow Banking" in which we showed that for the first time since December 1995, the total "shadow liabilities" in the United States - the deposit-free funding instruments that serve as credit to those unregulated institutions that are financial banks in all but name (i.e., they perform maturity, credit and liquidity transformations) - were on the verge of being once more eclipsed by traditional bank funding liabilities. As of Thursday, this inversion is now a fact, with Shadow Bank liabilities representing less in notional than traditional liabilities.
In other words, in Q3 total shadow liabilities, using the Zoltan Poszar definition, and excluding hedge fund repo-funded, collateral-chain explicit leverage, declined to $14.8 trillion, a drop of $104 billion in the quarter. When one considers that this is a decline of $6.2 trillion since the all time peak of $21 trillion in Q1 2008, it becomes immediately obvious what the true source of deleveraging in the modern financial system is, and why the Fed continues to have no choice but to offset the shadow deleveraging by injecting new Flow via traditional pathways, i.e. engaging in virtually endless QE.
What is more important, the ongoing deleveraging in shadow banking, now in its 18th consecutive quarter, dwarfs any deleveraging that may have happened in the financial non-corporate sector, or even in the household sector (credit cards, net of the surge in student and car loans of course) and is the biggest flow drain in the fungible credit market system in which the only real source of new credit continues to be either the Fed (via QE following repo transformations courtesy of the custodial banks), or the Treasury of course,via direct government-guaranteed loans.

What is wrong about the euro, and what is not

By Detlev Schlichter

Every Monday morning the readers of the UK’s Daily Telegraph are treated to a sermon on the benefits of Keynesian stimulus economics, the dangers of belt-tightening and the unnecessary cruelty of ‘austerity’ imposed on Europe by the evil Hun. To this effect, the newspaper gives a whole page in its ‘Business’ section to Roger Bootle and Ambrose Evans-Pritchard, who explain that growth comes from government deficits and from the central bank printing money, and why can’t those stupid Europeans get it? The reader is left with the impression that, if only the European states could each have their little currencies back and merrily devalue and run some proper deficits again, Greece could be the economic powerhouse it was before the Germans took over.

Ambrose Evans-Pritchard (AEP) increasingly faces the risk of running out of hyperbolic war-analogies sooner than the euro collapses. For months he has been numbing his readership with references to the Second World War or the First World War, or to ‘1930s-style policies’ so that not even the most casual reader on his way to the sports pages can be left in any doubt as to how bad this whole thing in Europe is, and how bad it will get, and importantly, who is responsible. From declining car sales in France to high youth-unemployment in Spain, everything is, according to AEP, the fault of Germany, a ‘foolish’ Germany. Apparently these nations had previously well-managed and dynamic economies but have now sadly fallen under the spell of Angela Merkel’s Thatcherite belief in balancing the books and her particularly Teutonic brand of fiscal sadism.

No Way Out

by Peter Schiff - Europac   By upping the ante once again in its gamble to revive the lethargic economy through monetary action, the Federal Reserve's Open Market Committee is now compelling the rest of us to buy into a game that we may not be able to afford. At his press conference this week, Fed Chairman Bernanke explained how the easiest policy stance in Fed history has just gotten that much easier. First it gave us zero interest rates, then QEs I and II, Operation Twist, and finally "unlimited" QE3. Now that those moves have failed to deliver economic health, the Fed has doubled the size of its open-ended money printing and has announced a program of data flexibility that virtually insures that they will never bump into limitations, until it's too late. Although their new policies will create numerous long-term challenges for the economy, the biggest near-term challenge for the Fed will be how to keep the momentum going by upping the ante even higher their next meeting.

QE 4: Folks, This Ain't Normal

by Chris Martenson

 
Okay, the Fed's recent decision to boost its monetary stimulus (a.k.a. "money printing," "quantitative easing," or simply "QE") by another $45 billion a month to a combined $85 billion per month demonstrates an almost complete departure from what a normal person might consider sensible.
To borrow a phrase from Joel Salatin: Folks, this ain't normal. To this I will add ...and it will end badly.
If you had stopped me on the street a few years ago and asked me what I thought would have happened in the stock, bond, foreign currency, and commodity markets on the day the Fed announced an $85 billion per month thin-air money printing program directed at government bonds, I never would have predicted what has actually come to pass.
I would have predicted soaring stock prices on the expectation that all this money would have to end up in the stock market eventually. I would have predicted the dollar to fall because who in their right mind would want to hold the currency of a country that is borrowing 46 cents (!) out of every dollar that it is spending while its central bank monetizes 100% of that craziness?
Further, I would have expected additional strength in the government bond market, because $85 billion pretty much covers all of the expected new issuance going forward, plus many entities still need to buy U.S. bonds for a variety of fiduciary reasons. With little product for sale and lots of bids by various players, one of which – the Fed – has a magic printing press and is not just price insensitive but actually seeking to drive prices higher (and yields lower), that's a recipe for rising prices.

Paul Krugman's Dangerous Misconceptions

by zerohedge.com

How to Deal with Economic History

 

In a recent article at the NYT entitled 'Incredible Credibility', Paul Krugman once again takes aim at those who believe it may not be a good idea to let the government's debt rise without limit. In order to understand the backdrop to this, Krugman is a Keynesian who thinks that recessions should be fought by increasing the government deficit spending and printing gobs of money. Moreover, he is a past master at presenting whatever evidence appears to support his case, while ignoring or disparaging evidence that seems to contradict his beliefs.

Among the evidence he ignores we find e.g. the 'stagflation' of the 1970's, or the inability of Japan to revive its economy in spite of having embarked on the biggest government deficit spending spree ever in a modern industrialized economy. Evidence he likes to frequently disparage is the evident success of austerity policies in the Baltic nations (evident to all but Krugman, one might say).

As readers of this blog know, we are generally of the opinion that it is in any case impossible to decide or prove points of economic theory with the help of economic history – the method Krugman seems to regularly employ. This is why we listed the evidence he ignores or disparages: the fact that there exists both plenty of evidence that contradicts his views and a much smaller body of evidence that seems to support them at an unreflected first glance, already shows that the positivist approach to economic theory must be flawed.

An economist must in fact approach things exactly the other way around, but then again it is a well-known flaw of Keynesian thinking in general that it tends to put the cart before the horse (examples for this would be the idea that one can consume oneself to economic wealth instead of saving and investing toward that goal, or that employment creates growth; it is exactly the other way around in both cases).

How the Rich Rule

By Sheldon Richman

ERNEST HEMINGWAY: I am getting to know the rich.
MARY COLUM: I think you’ll find the only difference between the rich and other people is that the rich have more money.

Irish literary critic Mary Colum was mistaken. Greater net worth is not the only way the rich differ from the rest of us—at least not in a corporatist economy. More important is influence and access to power, the ability to subordinate regular people to larger-than-human-scale organizations, political and corporate, beyond their control.
To be sure, money can buy that access, but only in certain institutional settings. In a society where state and economy were separate (assuming that’s even conceptually possible), or better yet in a stateless society, wealth would not pose the sort of threat it poses in our corporatist (as opposed to a decentralized free-market) system.
Adam Smith famously wrote in The Wealth of Nations that “[p]eople of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” Much less famously, he continued: “It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty or justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.”
The fact is, in the corporate state government indeed facilitates “conspiracies” against the public that could not otherwise take place. What’s more, because of this facilitation, it is reasonable to think the disparity in incomes that naturally arises by virtue of differences among human beings is dramatically exaggerated. We can identify several sources of this unnatural wealth accumulation.
A primary source is America’s financial system, which since 1914 has revolved around the government-sponsored central banking cartel, the Federal Reserve. To understand this, it must first be noted that in an advanced market economy with a well-developed division of labor, the capital market becomes the “locus for entrepreneurial decision-making,” as Walter E. Grinder and John Hagel III, writing within the perspective of the Austrian school of economics, put it in their 1977 paper, “Toward a Theory of State Capitalism: Ultimate Decision-Making and Class Structure.”

Anatomy of the End Game

by Martin Sibileau

About a month ago, in the third-quarter report of a Canadian global macro fund, its strategist made the interesting observation that “…Four ideas in particular have caught the fancy of economic policy makers and have been successfully sold to the public…” One of these ideas “…that has taken root, at least among the political and intellectual classes, is that one need not fear fiscal deficits and debt provided one has monetary sovereignty…”. This idea is currently growing, particularly after Obama’s re-election. But it was only after writing our last letter, on the revival of the Chicago Plan (as proposed in an IMF’ working paper), that we realized that the idea is morphing into another one among Keynesians: That because there cannot be a gold-to-US dollar arbitrage like in 1933, governments do indeed have the monetary sovereignty.
Is this true? Today’s letter will seek to show why it is not, and in the process, it will also describe the endgame for the current crisis. Without further ado…
After the fall of the KreditAnstalt in 1931, with the world living under the gold-exchange standard, depositors first in central Europe, and later in France and England, began to withdraw their deposits and buy gold, challenging the reserves of their respective central banks. The leverage that linked the balance sheet of each central bank had been provided by currency swaps, a novelty at the time, which had openly been denounced by Jacques Rueff. One by one, central banks were forced to leave the gold standard (i.e. devalue) until in 1933, it was the Fed’s turn. The story is well known and the reason this process was called an “arbitrage” is simply that there can never be one asset with two prices. In this case, gold had an “official”, government guaranteed price and a market price, in terms of fiat money (i.e. schillings, pounds, francs, US dollars). The consolidated balance sheets of the central bank, financial institutions and non-financial sector looked like this before the run:

Relevance of the Austrian School of Economics in the 21st Century

The Austrian School of Economics has prevailed through time given the relevance it has gained in understanding the way markets really work. Peter Boettke has a conversation with Luis Figueroa regarding the importance of the philosophy of economics and explains the value of its premises. They discuss the process of thinking and understanding life through an economics point of view, as a result of dynamic laws present in everyday situations. Finally, Boettke comments on the role of ethics in the Austrian School of Economics and portrays common misconceptions about these sciences.

Peter Boettke professor of economics at George Mason University, where he also serves as vice president for research, BB&T Professor for the Study of Capitalism, and research director for the Global Prosperity Initiative at the Mercatus Center. Furthermore, he is deputy director of the James M. Buchanan Center for Political Economy. He is author and coauthor of various books on economics and politics, such as: Challenging Institutional Analysis and Development: The Bloomington School, The Economic Way of Thinking, The Political Economy of Soviet Socialism: The Formative Years, among others. Boettke received his BA in economics from Grove City College, MA and PhD in economics from George Mason University.

original video source:http://newmedia.ufm.edu/boettkerelevance

Where to from here?

By Gerardo Coco

We face one of the deepest crises in history. A prognosis for the economic future requires a deepening of the concepts of inflation and deflation. Without understanding their dynamic relationship and their implications is difficult to predict how things might unfold. The economic future depends on the interplay of both these forces. From the point of view of their final effects, inflation and deflation are, respectively, the devaluation and revaluation of the currency unit. The quantity theory of money developed in 1912 by the American economist Irving Fisher asserts that an increase in the money supply, all other things been equal, results in a proportional increase in the price level [1]. If the circulation of money signifies the aggregate amount of its transfers against goods, its increase must result in a price increase of all the goods. The theory must be viewed through the lens of the law of supply and demand: if money is abundant and goods are scarce, their prices increase and currency depreciates. Inflation rises when the monetary aggregate expands faster than goods. Conversely, if money is scarce, prices fall and the opposite, deflation, occurs. In this case the monetary aggregate shrinks faster than goods and as prices decrease money appreciates.

Jim Rogers - US Headed For A Financial Crisis

A History of Central Banking In the United States

Human Nature and the "Perfect" Society

by Frank Chodorov

Anyone who speculates on man's ability to put his social life in perfect order must take into account the biological fact of longevity. Man seeks to satisfy his desires while he lives, not when death has cut short his appetites, and actuarial figures tell him just about how long he may expect to live.

His pattern of behavior is necessarily determined by his expectancy. Which is to say that in the nature of things his is a short-run view, although his perspective may be lengthened by a concern for the welfare of his immediate posterity, his children and grandchildren in being. Beyond that there is the "future of his country," a speculative interest that can have little bearing on his day-to-day chores.

The banker knows full well that the State's bonds in his vaults do not represent goods produced but are merely claims on production; the "interest" they yield is taxes, draughts on the marketplace, and he is in fact a tax collector once removed. Nor is he unaware of the inflationary character of these pieces of paper: that in the long run they depreciate the value of all his assets as well as those of his depositors, that the marketplace is indeed impoverished by his holdings.

What's more, if he stops to think about it, he must know that the more of these bonds he holds the more he must support the fiscal activities of the State, for depreciation of the value of these bonds could put him out of business. Prudence compels him to disregard such considerations; he cooperates with the State's financing schemes, even if he suspects that in doing so he will gradually be downgraded to a secretarial position. In his need for showing a profit this year he puts aside whatever scruples he may have about buying the State's bonds. The future must take care of itself.

What the Road to Hell is Paved With....

by Bill Bonner

Improving the world costs money. When you have it, your efforts either bear fruit. Or they don’t. But when you don’t have it, when you have to change the world on credit, then what?

John Maynard Keynes revolutionized the economics profession in the early 20th century. It was he more than anyone who changed it from a being a refuge for observers and willowy philosophers into a hard-charging phalanx for men of action. But Keynes’ big insight, like all the useful insights of economics, was based on a story with a moral.

In the Book of Genesis, Pharaoh had a dream. In it, he was standing by the river. Out came 7 fat cattle. Then, 7 lean cattle came up out of the river and ate the fat cattle. A similar dream involved ears of corn, with the good ones devoured by the thin ears.

Pharaoh was troubled. His dream interpreters were stumped. So, they sent for the Hebrew man who was said to be good at this sort of thing — Joseph. Pharaoh described what had happened in his dreams. Without missing a beat, Joseph told him what they meant. The 7 fat cattle and 7 fat ears of corn represented years of plenty with bountiful harvests. The 7 lean cattle and thin ears of corn represented years of famine. Joseph wasn’t asked his opinion, but he gave his advice anyway: Pharaoh should put into place an activist, counter-cyclical economic policy. He should tax 20% of the output during the fat years and then he would be ready with some grain to sell when the famine came. Genesis reports what happened next:

Central bank policies and the Ireland and Iceland 2008-12 financial crises

By Dr Frank Shostak.

There were a lot of commentaries regarding the Ireland and Iceland 2008-12 financial crises. Most of the commentaries were confined to the description of the events without addressing the essential causes of the crises. We suggest that providing a detailed description of events cannot be a substitute for economic analysis, which should be based on the essential causes behind a crisis. The essential cause is the primary driving force that gives rise to various events such as reckless bank lending (blamed by most commentators as the key cause behind the crisis) and a so called overheated economy.

Now in terms of real GDP both Ireland and Iceland displayed strong performance prior to the onset of the crisis in 2008. During 2000 to 2007 the average growth in Ireland stood at 5.9% versus 4.6% in Iceland. So what triggered the sudden collapse of these economies?

Central bank policy the key trigger for economic boom



What set in motion the economic boom (i.e. a strong real GDP rate of growth) in both Ireland and Iceland was an aggressive lowering of interest rates by the respective central banks of Ireland and Iceland. In Ireland the policy rate was lowered from 13.75% in November 1992 to 2% by November 2005. In Iceland the policy rate was lowered from 10.8% in November 2000 to 5.2% by April 2004.

Contra Richard Koo and the Keynesians: It is not about ‘aggregate demand’ but about real prices

by Detlev Schlichter


I do not want to waste your time and my energy with shooting down misguided Keynesian schemes all the time, schemes that have been refuted long ago and should by now be instantly laughed out of town whenever put forward. But arch-Keynesian Richard Koo’s latest attempt in the commentary section of the Financial Times to justify out-of-control deficit spending in the United States as a smartly designed and necessary policy that will keep ‘aggregate demand’ up and lead to recovery, is making the rounds on the internet. Koo’s article is a mechanical and naïve exposition of the 101 of Keynesian stimulus doctrine, clearly aimed at those who still perceive the economy as a simple equation with Y, C, I and lots of G in it. If private demand falls out from under the bottom of the economy, it can be replaced with the government’s demand. Simple.

And wrong, of course.

But the piece is not without some educational value. I promise this will be shorter than my attack on the new money mysticism at the IMF.

Fiscal suicide as recovery strategy

I am not sure if even in Washington there is anybody left who still seriously claims that $1trillion-plus deficits year-in and year-out are anything but a sure-fire sign of a public sector out of control – a public sector that despite generous and growing staffing levels is simply running out of fingers to put into the many holes from which the money is leaking. Yet Richard Koo wants us to believe there is a method to the recklessness, that this is a finely calibrated strategy to save the economy.

"We're Flying Blind," Admits Federal Reserve President

Eric S. Rosengren, the president of the Boston Federal Reserve Bank, recently gave a speech at Babson College on November 1. That was a good place to give it. Founder Roger Babson in September, 1929, warned of a stock market crash. Wikipedia reports: "On September 5, 1929, he gave a speech saying, "Sooner or later a crash is coming, and it may be terrific." Later that day the stock market declined by about 3%. This became known as the "Babson Break". The Wall Street Crash of 1929 and the Great Depression soon followed."

Dr. Rosengren began:

Today I plan to highlight three main points about the economic outlook. I always like to emphasize that my remarks represent my views, not necessarily those of my colleagues on the Federal Open Market Committee or at the Board of Governors.

A first point is this: while it is still early to gauge the full impact of the Federal Reserve's September monetary policy committee decision to begin an open-ended mortgage-backed security purchase program, the program has so far worked as expected. The initial response in financial markets was larger than many expected. Given that our conventional monetary tool, the fed funds rate, has hit its lower bound of zero, we have turned to unconventional monetary policy. By that I mean policy that attempts to affect long-term interest rates directly, via asset purchases, rather than indirectly by setting the short-term interest rate, as in conventional policy.

The Downside of Debt

by Bill Bonner


Cristina Fernandez de Kirchner, president of Argentina, will never be remembered as a great economist. Nor will she win any awards for ‘accuracy in government reporting.’ Au contraire, under her leadership, the numbers used by government economists in Argentina have parted company with the facts completely. They are not even on speaking terms. Still, Ms. Fernandez deserves credit. At least she is honest about it.

The Argentine president visited the US in the autumn of 2012. She was invited to speak at Harvard and Georgetown universities. Students took advantage of the opportunity to ask her some questions, notably about the funny numbers Argentina uses to report its inflation. Her bureaucrats put the consumer price index — the rate at which prices increase — at less than 10%. Independent analysts and housewives know it is a lie. Prices are rising at about 25% per year.

At a press conference, Cristina turned the tables on her accusers:

“Really, do you think consumer prices are only going up at a 2% rate in the US?”

This Is A Moment In Time That’s Never Been Seen Before

by kingworldnews.com

“Greece is a serial bailout, restructuring, can-kick, and I guess this is going to continue as long as the riots don’t get worse. Maybe eventually Greece will get ejected from the euro. The question (in Europe) is, is Draghi going to get serious about the OMT or not?”

“My suspicion is he is going to. They are going to use the central bank there to make sure the euro doesn’t fracture, in the same way Greenspan and Bernanke have used the printing press to make sure that the United States financial markets don’t collapse.

I suspect Europe will muddle through as long as Draghi is willing to keep buying the government debt and keep the whole process moving.
“The (US) fiscal cliff, near as I can tell, is mostly just a boatload of tax hikes and some proposed spending cuts. But at the end of the day, there is a mood of class warfare in the country which is being fomented by the Democratic Party.
Part of the reason for the disparity of wealth in the country is because the policies of the Federal Reserve have helped eviscerate the middle class, both through losing money in bubbles and inflation, and the misallocation of capital and the ensuing destruction of jobs. So the Fed’s policies have hammered the middle class.

Carlo Ponzi, Alias Uncle Sam

by  Gary North

Carlo "Charles" Ponzi was a con man who was the Bernie Madoff of his era. For two years, 1918 to 1920, he sold an impossible dream: a scheme to earn investors 50% profit in 45 days. He paid off old investors with money generated from new investors. The scheme has been imitated ever since.

Every Ponzi scheme involves five elements:
1. A promise of statistically impossible high returns
2. An investment story that makes no sense economically
3. Greedy investors who want something for nothing
4. A willing suspension of disbelief by investors
5. Investors' angry rejection of exposures by investigators

Strangely, most Ponzi schemes involve a sixth element: the unwillingness of the con man to quit and flee when he still can. Bernie Madoff is the supreme example. But Ponzi himself established the tradition.

The Die Is Cast And Only One Question Remains

by kingworldnews.com

“The Rubicon is a river in Italy that played a major role in the history of Rome and Western Civilization. Prior to Julius Caesar, it was considered an inviolable boundary for a general commanding an army. To cross it with your army was considered an act of treason against the State.

Caesar did just that in 49 B.C. Caesar left Rome to be come the governor of Cisalpine Gaul (northern Italy), Illyricum (southeastern Europe) and Transalpine Gaul (southern France) in 58 B.C.. Actually, he unsuccessfully fled Rome to avoid his mounting debts (he liked to gamble and was a bon vivant). He was only allowed to continue to Gaul after his wealthy friend Crassus paid and guaranteed the debts for him. His conquest of all of Gaul and the details of his military genius are well known, particularly since he wrote it all down in the form of a partial autobiography.

Ambitious men were not welcome to the old Roman order. The Romans had an unpleasant experience with a dictator that led to their founding, and it was in their DNA to despise such men. Caesar was a major threat....

Jim Rogers Economic Collapse Martial Law Alex Jones

How Central Bank Policy Impacts Asset Prices Part 5: How Far Can They Go?

by Tyler Durden  source : www.zerohedge.com
With the unlimited asset purchase announcements by the Fed and ECB recently, the limits of balance sheet expansion will be put to the test. The current levels would have been seen as inconceivable a mere few years ago and now it seems business-as-usual as investors have become heuristically biased away from the remarkable growth. The problem is - central banks are missing inflation targets and credit growth is still declining - need moar easing, forget the consequences.

Via SocGen:

Balance sheet expansion resumes in advanced countries
Following the unlimited asset purchases announcements by the ECB and the Fed, the limits of balance sheet expansion will be put to the test once again.

Let the Markets Clear!

by Ron Paul - Daily Paul

French businessman and economist Jean-Baptiste Say is credited with identifying the fundamental economic principle that aggregate demand for goods in an economy will equal the aggregate supply of goods when markets are permitted to operate. Or in Say’s words, “products are paid for with products.”

English classical economist David Ricardo, among others, more fully developed this principle into what has become known as “Say’s Law.” Say’s Law, according to Ricardo, leads us to understand that market equilibrium for goods is constant. This simply means that markets, when left alone by government planners or other fraudulent actors, inexorably tend toward an “equilibrium price” which eventually balances supply and demand for any particular good. Thus markets will clearthemselves of any surpluses or shortages in the form of excess supply and demand.

The Broken Window Fallacy

This short video explains one of the most persistent economic fallacies of our day.

Made by Sam Selikoff and Luke Bessey.
See Luke's page: http://www.youtube.com/lukebessey
See Sam's blog: http://lonelyliberal.tumblr.com/

Against the Hurri-Keynesians

by Mark Thornton

It seems that we may never rid ourselves of the broken-window fallacy.
Hurricane Katrina certainly did not stop economists from proclaiming the silver lining of natural disasters. On September 9, 2005, Labor Secretary Elaine Chao told USA Today that demand could create a labor shortage that could push up wage rates and that "We're going to see a tremendous boom in construction." On December 3rd, 2005, Nigel Gault, chief domestic economist at Global Insight, said, "We are now at the point where Hurricane Katrina's effects are adding to job creation rather than detracting from it."
And it's not only that disasters just have a silver lining: economists have long believed that natural disasters and wars are actually good for the economy! Until recently they have not made any attempt to empirically test their views. However, in 2002 Mark Skidmore and Hideki Toya published a paper where they found a positive correlation between disasters and human capital, productivity, and GDP growth.

How Central Bank Policy Impacts Asset Prices Part 2: Bonds

by Tyler Durden

The Fed sees the need to reduce interest rates as it takes over the US Treasury and MBS markets; but the ECB's actions are more aimed at reducing divergences between peripheral nations and the core. As SocGen notes, it remains unclear how and when the Fed would exit this situation and in Europe, bond market volatility remains notably elevated relative to the US and Japan as policy action absent a political, fiscal, and banking union remains considerably less potent.

Via SocGen:

Fed action pushes rates to record lows

The Fed bought around $2tn of securities since November 2008, pushing rates to historical lows (US treasuries becoming popular safe havens also contributed to lowering rates).



It remains unclear how and when the Fed would exit this situation. Operation Twist expires at year-end and any extension seems to be put on hold until after the presidential elections.

A potential Romney victory could bring an end to low QE rates in 2014 (when Mr Bernanke’s term expires).

As a result of the very low rate environment, the US equity risk premium is currently extremely high (6.3% in October 2012).

Hurdles in transmission of ECB monetary policy

Praxeology and Liberalism

[ Human Action (1949)]

Liberalism, in its 19th-century sense, is a political doctrine. It is not a theory, but an application of the theories developed by praxeology and especially by economics to definite problems of human action within society.
As a political doctrine liberalism is not neutral with regard to values and the ultimate ends sought by action. It assumes that all men or at least the majority of people are intent upon attaining certain goals. It gives them information about the means suitable to the realization of their plans. The champions of liberal doctrines are fully aware of the fact that their teachings are valid only for people who are committed to these valuational principles.
While praxeology, and therefore economics too, uses the terms happiness and removal of uneasiness in a purely formal sense, liberalism attaches to them a concrete meaning. It presupposes that people prefer life to death, health to sickness, nourishment to starvation, abundance to poverty. It teaches man how to act in accordance with these valuations.
It is customary to call these concerns materialistic and to charge liberalism with an alleged crude materialism and a neglect of the "higher" and "nobler" pursuits of mankind. Man does not live by bread alone, say the critics, and they disparage the meanness and despicable baseness of the utilitarian philosophy. However, these passionate diatribes are wrong because they badly distort the teachings of liberalism.

Your Vote Still Doesn’t Matter

By Douglas French

I hit a nerve whenever I write about voting and democracy.

Point out the sheer lunacy of the civic religion and a certain group of readers will blow their stacks, sending back long emails stuffed with long words, calling me things like “intellectually vacuous” and insisting I’m full of “self-aggrandizement.”

Such is the case with an email from Laissez Faire Today reader B.R., who says he doesn’t normally like to start his criticisms with name-calling but believes the idea of not voting is “so astounding” that it “requires an equally strong tactic to stop its momentum in its tracks.”

I hate to break it to B.R., but the nonvoting train left the station a long time ago. For the last 50 years, 40-50% of eligible voters have chosen to stay home on presidential Election Days. President Obama’s campaign in 2008 actually pumped life into the election process.

Simplicity: Part 2

Presentation to the Cambridge House California Investment Conference
Indian Wells, CA

Simplicity: Part 1

Presentation to the Cambridge House California Investment Conference
Indian Wells, CA

The Tragedy of the European Union and How to Resolve It

 

 by George Soros New York Review of Books

Preface: In a fast-moving situation, significant changes have occurred since this article went to press. On August 1, as I write below, Bundesbank President Jens Weidmann objected to the assertion by Mario Draghi, the president of the European Central Bank, that the ECB will “do whatever it takes to preserve the euro as a stable currency.” Weidmann emphasized the statutory limitation on the powers of the ECB. Since this article was published, however, it has become clear that Chancellor Merkel has sided with Draghi, leaving Weidmann isolated on the board of the ECB.
This was a game-changing event. It committed Germany to the preservation of the euro. President Draghi has taken full advantage of this opportunity. He promised unlimited purchases of the government bonds of debtor countries up to three years in maturity provided they reached an agreement with the European Financial Stability Facility and put themselves under the supervision of the Troika—the executive committee of the European Union, the European Central Bank, and the International Monetary Fund.
The euro crisis has entered a new phase. The continued survival of the euro is assured but the future shape of the European Union will be determined by the political decisions the member states will have to take during the next year or so. The alternatives are extensively analyzed in the article that follows.

I have been a fervent supporter of the European Union as the embodiment of an open society – a voluntary association of equal states that surrendered part of their sovereignty for the common good. The euro crisis is now turning the European Union into something fundamentally different. The member countries are divided into two classes – creditors and debtors – with the creditors in charge, Germany foremost among them. Under current policies debtor countries pay substantial risk premiums for financing their government debt and this is reflected in their cost of financing in general. This has pushed the debtor countries into depression and put them at a substantial competitive disadvantage that threatens to become permanent.

Extraordinary Popular Delusions And The Madness Of Markets

Whether its new-fangled Japanese stocks, hi-tech internet company valuations, multi-colored flowers, or mansions made affordable by criminally lax lending standards, Grant Williams notes that a bubble is a bubble is a bubble; and citing Stein's Law: "If something cannot go on forever; it will stop." In this excellent summary of all things currently (and historically) bubblicious - whether greed-driven or fear-driven - Williams concludes it is never different this time as he addresses the four phases of the classic bubble-wave: smart-money, awareness, mania, blow-off (or crash) and explains how government bonds are set to burst and gold is only just about to enter its mania phase. This far-reaching and entirely accessible presentation is stunning in its clarity and as he notes, while bubbles are always easy to spot ex-ante, understanding how they come about and why they are popped gives the few an opportunity to profit at the expense of the madness of crowds. From tulips to tech-wrecks, and from inflation to insatiable stimulus, the bubble in 'safe-haven flows' that currently exists has all the characteristics of a popular delusion.

by www.zerohedge.com

Currency Wars Simulation

This short video presents a variety of hypothetical scenarios which would have significant effects on currencies and commodities. See how a geopolitical or black-swan event could give real asset investors a tremendous advantage

Is Financial Crime A Systemic Risk?

By Ron Hera - Hera Research

Famed Austrian economist Ludwig von Mises wrote in his seminal work, Human Action (originally published by the Yale University Press in 1949), that “There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” The collapse of a historic credit bubble occurred in 2008. However, despite years of further credit expansion, “a final and total catastrophe” of the U.S. dollar system has yet to occur.


While an inflationary U.S. monetary policy has serious consequences, Hyperinflation is not an immediate result. There are three general ways in which the U.S. dollar system could break down: (1) rejection of the U.S. dollar as the world reserve currency, or (2) as an eventual consequence of U.S. federal government insolvency and (3) a domestic failure of confidence. Of the three, U.S. federal government insolvency is the most serious because it would result in both the loss of the U.S. dollar’s world reserve currency status and also in a failure of domestic confidence. However, a new threat to the U.S. dollar has emerged which could trigger a hyperinflationary collapse before the U.S. federal government’s finances become unworkable, e.g., when debt service begins to crowd out military and Social Security spending. Specifically, the perceived legitimacy of the U.S. financial system has not merely been tarnished by recent scandals but is in danger of collapsing. The consequences of a domestic breakdown of confidence and trust in the U.S. financial system cannot be overstated.

World Reserve Currency Status

The most commonly cited challenge to the U.S. dollar system relates to its waning status as the world reserve currency. The BRIC countries (Brazil, Russia, India and China), along with South Africa, no longer use the U.S. dollar for trade settlement amongst one another. The Chinese have internationalized the renminbi (RMB), which is now used in trade settlement with the other BRIC countries, as well as with Australia, Japan, the United Arab Emirates (UAE), Iran and various South American and African countries under bilateral agreements. Iran, which is the world’s 4th largest oil exporter, has refused to accept U.S. dollars in exchange for crude oil since 2009.

Japanese Government Demands BOJ Do QE 9 One Month After Failed QE 8

by Tyler Durden

 Almost exactly a month ago, the BOJ surprised most analysts with an unexpected increase in its asset purchase agreement by JPY10 trillion bringing the total to JPY80 trillion. There was one small problem though: the entire impact of the additional easing fizzled in under half a day, or 9 hours to be precise. This was, as Art Cashin summarized the following day, Japan's failed QE 8. It is now a month later, and with nothing changed in the global race to debase status quo, the time has come for the BOJ to attempt QE 9. Or that's the case at least according to the toothless Japanese government, which has formally demanded that Shirakawa do a nine-peat of what has been a flawed policy response for over 30 years now, this time with another JPY 20 trillion, or double the last month's intervention. Because according to Japanese Senkei, it is now Japan's turn to pull a Chuck Schumer and demand even mor-er eternity-er QE out of monetary authority of the endlessly deflating country. In reverting to the Moore's law of failed monetarism, we expect that a QE 9 out of Japan will have the same halflife as QE 8, if indeed the program size is double the last. At which point it will again fizzle.
From Senkei via Bloomberg:

• Govt. is asking Bank of Japan to increase its asset-purchase program by 20t yen, Sankei reports, citing an unnamed government official.
• Program would be increased to 100t yen from current 80t yen: Sankei
• Increased fund likely to be used to purchase long-term JGBs, ETFs and J-Reits: Sankei
• BOJ is expected to lower economic growth, inflation forecasts in an economic report due Oct. 30: Sankei

In other words, "Get to work, Shirakawa-san." One of these days the trillions and trillions in new fiat injected will actually "work"- at that point Japan will look back at its days of deflation as a fond memory when living through the alternative.
But at least nobody pretends anywhere, anymore that the central bank of a country is apolitical: neither the ECB, which is openly using its various monetary programs to finance insolvent countries, nor the Fed, which is buying up all gross Treasury issuance longer than 10 Years, and now the BOJ, which is openly taking requests from politicians who are totally helpless to do anything to the Japanese economy on their own.
The good news is that the Keynesian singularity, where QE XYZ+1 has to take place every nanosecond just to keep the world in one place (courtesy of the magic of a closed fiat loop in which devaluation is always relative to everyone else, and is limited only by the speed of the central printer and toner inventory), is getting ever closer and closer...

U.S. to Get Downgraded Amid Fiscal ‘Theater,’ Pimco Says

 By Tracy Withers
source : bloomberg.com

 The sovereign credit rating of the U.S. will be cut as “fiscal theater” plays out in the world’s biggest economy, according to Pacific Investment Management Co., which runs the world’s largest bond fund. 

“The U.S. will get downgraded, it’s a question of when,” Scott Mather, Pimco’s head of global portfolio management, said today in Wellington. “It depends on what the end of the year looks like, but it could be fairly soon after that.”
The Congressional Budget Office has warned the U.S. economy will fall into recession if $600 billion of government spending cuts and tax increases take place at the start of 2013. Financial markets are complacent about whether the White House and Congress will reach agreement on deferring the so-called fiscal drag on the economy until later next year, Mather said.
In a “base case” of President Barack Obama being re- elected and Congress becoming more Republican, there is a high likelihood an agreement “doesn’t happen in a nice way, and we have disruption in the marketplace,” he said.
Policy makers probably will agree on cutbacks that would lower economic growth by about 1.5 percentage points next year, Mather said. They may roil markets by discussing scenarios that would lead to a 4.5 percentage-point fiscal drag, he said.

‘Budgetary Meth’

Bill Gross, manager of Pimco’s $278 billion Total Return Fund, this month said that the U.S. will no longer be the first destination of global capital in search of safe returns unless fiscal spending and debt growth slows, saying the nation “frequently pleasures itself with budgetary crystal meth.” He reduced his holdings of Treasuries for a third consecutive month to the lowest level since last October.
S&P last week cut Spain’s debt rating to BBB-, the lowest investment grade, and placed it on negative outlook.
“Almost all sovereigns with poor debt dynamics are going to get downgraded, we’re just talking about the pace,” Mather said. Credit rating companies “have been slow in downgrading some sovereigns, but we think the pace probably picks up in the year ahead.”
Bond investors needn’t worry that a rating cut will hurt returns. About half the time, government bond yields move in the opposite direction suggested by new ratings, according to data compiled by Bloomberg on 314 upgrades, downgrades and outlook changes going back to 1974.

Can Government Create Opportunity?

by James E. Miller

 Last year, the Boston branch of the Federal Reserve put out a working paper which contained detailed data on the declining trend of economic mobility in the United States.  According to the paper, the percentage of Americans who reside in the lowest income quintile and move up either to the middle quintile or higher has been in decline over the past three decades.  This statistic should be alarming as it is indicative of stagnation within an economy that supposedly fosters the entrepreneurial spirit.  Without the opportunity to create and deliver things which enhance the lives of others, society as a whole ends up being denied the work of the most constructive members. To some, it has meant that government at all levels is doing an inadequate job in addressing what appears to be a growing divide between the haves and have-nots.  Calls for higher taxes to pay for programs and schemes of redistribution which would enable the less-fortunate in following their ambitions usually follow.
It is standard fare for pro-government advocates to defend the notion that the state exists to create opportunities for the people.  In first presidential debate between U.S. President Barack Obama and challenger Mitt Romney, Obama articulated his belief that the federal government should “create ladders of opportunity” as well as “create frameworks where the American people can succeed.”  The president is not alone as economist and leading voice of progressivism Paul Krugman expressed his dismay in his New York Times column over Washington’s failure to create “equal opportunity.”
Conventional examples of government-created opportunities include cheap college loans, public education, small business loans, land grants for universities, housing for those on low-income, and an array of infrastructure projects meant to facilitate transportation.  Proponents of these measures see them as a necessary springboard for social mobility; that without these resources, the downtrodden would forever remain in a state of destitution.

Gold to $10,000 - Never say never

 by  Lawrence Williams
source :  www.mineweb.co.za
 
A remark on another website by Mark O'Byrne caught my eye - "Longer term, respected analysts are calling for gold prices above $5,000/oz and much higher forecasted prices such as between $5,000 and $10,000 per ounce are not raising eyebrows as much as they have in the past." Indeed with even many of the ultra-conservative bank and fund analysts suggesting that gold will reach $2,000 or even higher within the next year, or even the next few months, certainly $5,000 or even $10,000 should not seem out of sight in some unspecified timeframe." www.goldcore.com
If one tracks the price of gold during its current bull run it has risen around 600 percent in 13 years - at the same pace of increase it could thus reach $12,250 in another 13 years - or by some time in 2025! Thus is it ridiculous to suggest that this huge valuation on an ounce of gold is achievable? Never say never! When I started managing and writing for Mineweb back in 2006 even $1,000 looked completely out of sight and people like Rob McEwen who then were predicting that level were perhaps considered at the extreme end of the spectrum. Yet within 3 years the $1,000 level was achieved and now it is a further 75% higher than that a further three years on. Nowadays, McEwen is predicting $5,000 gold - should that still be considered over extreme?

Is deflation a major threat to the eurozone?

By Dr Frank Shostak
source www.cobdencentre.org

In its October 2012 World Economic Outlook report the International Monetary Fund (IMF) said that the European Central Bank (ECB) should keep interest rates low for the foreseeable future and may need to cut them further given the risk of deflation.
Now, even if the IMF is correct and prices in the Euro-zone will start falling, why this is so bad?
The conventional wisdom holds that price deflation causes people to postpone their buying of goods and services at present on the belief that the prices of these goods and services will be much lower in the future.
Hence why buy today if one can buy the same good at a bargain price in the future? As a result a fall in consumer outlays via the famous multiplier will lead to a large decline in the economy’s rate of growth.
In fact deflation could set in motion a vicious downward spiral, which could plunge the economy in a severe economic slump similar to the one that took place during the Great Depression of the 1930’s, or so it is held by most experts.
It is for this reason that the IMF is of the view that the ECB should push the policy interest rate further down.
Now, if deflation leads to an economic slump then policies that reverse deflation should be good for the economy.

We're Headed For An Economic Black Hole

by Jhon Mauldin
source www.businessinsider.com
 

"Concern about politics and the processes of international co-operation is warranted but the best one can hope for from politics in any country is that it will drive rational responses to serious problems. If there is no consensus on the causes or solutions to serious problems, it is unreasonable to ask a political system to implement forceful actions in a sustained way. Unfortunately, this is to an important extent the case with respect to current economic difficulties, especially in the industrial world.

"While there is agreement on the need for more growth and job creation in the short run and on containing the accumulation of debt in the long run, there are deep differences of opinion both within and across countries as to how this can be accomplished.

What might be labelled the 'orthodox view' attributes much of our current difficulty to excess borrowing by the public and private sectors, emphasises the need to contain debt, puts a premium on credibly austere fiscal and monetary policies, and stresses the need for long-term structural measures rather than short-term demand-oriented steps to promote growth.

"The alternative 'demand support view' also recognises the need to contain debt accumulation and avoid high inflation, but it pushes for steps to increase demand in the short run as a means of jump-starting economic growth and setting off a virtuous circle in which income growth, job creation and financial strengthening are mutually reinforcing. International economic dialogue has vacillated between these two viewpoints in recent years."

– Lawrence Summers, The Financial Times, October 14, 2012

Two Reasons Why the Gold Market is Under Pressure

 by Michael Pento - Pento Portfolio Strategies

 

There are two reasons why the price of gold has been under pressure in the last few days. One of them is legitimate; while the other is completely without grounds.

1. The U.S. Labor Department announced on Thursday that Initial Jobless Claims fell 30k for the week ending October 6th. The plunge took first-time claims for unemployment insurance to a four-year low. Despite the fact that this drop was mainly produced by one large state not properly reporting additional quarterly claims, the gold market took the data as a sign interest rates may soon have to rise. So I thought it would be a good time to explain that rising interest rates would not negatively affect the price of gold, as long as it is a market-based reaction to inflation; rather than the work of the central bank pushing rates positive in real terms.
2.  

The price of gold increased from $100 an ounce in 1976, to $850 an ounce by 1980. During that same time period the Ten year note yield increased from 7% to 12.5%. The reason why gold increased, despite the fact that nominal interest rates were rising, is because real interest rates were falling throughout that time frame. Bureau of Labor statistics shows that inflation as measured by the Consumer Price Index jumped from 6% in 1976 to 14% by early 1980. In addition, the Fed, under Arthur Burns and G. William Miller, kept the Funds rate far below inflation throughout their tenure; increasing the interbank lending rate from 5% in 1976, to just 10.5% by late '79--just before Chairman Volcker took the helm.

If Romney Wins, Expect the End of Quantitative Easing

by Gary Dorsch - Sir Chart a lot

It’s been nearly eight years, since Fed chief Ben Bernanke told the Senate Banking Committee at his confirmation hearing, that “with respect to monetary policy, I will make continuity with the policies and policy strategies of the Greenspan Fed a top priority.” The former Princeton University professor who served as a Fed governor from August 2002 to June 2005 before accepting the post as President George W. Bush’s top economic adviser, also pledged, “I will be strictly independent of all political influences,” Bernanke said.

History will show that Bernanke did follow in the footsteps of his mentor for the first 3-½ years of his tenure. The infamous “Greenspan Put,” or the knee-jerk reaction by the Fed to rescue the stock market whenever risky bets went sour, - through massive injections of liquidity and reductions in interest rates, - was seamlessly replaced by the “Bernanke Put.” Since Bernanke gained control over the money spigots, the Fed continued to expand the MZM money supply by +65% to a record $11.3-trillion today. That’s an increase of about +9.4% per year, on average. The yellow metal never traded a nickel lower since Mr Bush tapped Bernanke to become the next Fed chief in Nov 2005, when the price of Gold was $468 /oz. Today, Gold is hovering around $1,735 /oz, up +370% for an annualized gain of +57%, - highlighting the most devastating blow to the purchasing power of the US-dollar of all-time.