Blog

Charles Krupa

Sorry Losers!

How the Fed has screwed the many to benefit the few
Friday, September 2, 2016, 3:48 PM

By its actions, the Federal Reserve has selected a precious few winners and many, many losers.  Sadly, you are highly likely to be one of the losers.

Sorry!

I'm one, too, if that helps soften the blow.

But we have a lot of company. Other losers include:

  • Savers
  • Anyone with money in a checking account
  • Anyone with money in a savings account
  • Anyone with money in a CD
  • Anyone depending on bond income
  • All pensions
  • Endowments
  • First time homebuyers
  • Renters
  • Those who invest based on fundamentals
  • Everybody alive in the future, when the bills come due

Anyone on this list has been intentionally pre-selected by the Fed for losing. The Fed has done this deliberately, with full pre-knowledge that it was going to diminish the prospects of the majority in favor of the benefit of an elite few. And to make matters worse, it has no plans to -- and no clue how to -- reverse the damage it has wrought.

Everyone on the list above has been dinged by the Federal Reserve -- on purpose and by design, I will repeat -- in order to transfer wealth and purchasing power to:

  • Big banks
  • The government
  • Entities with large stock (equity) holdings
  • The wealthiest 0.1%
  • Speculators
  • Borrowers (the heavier the better)
  • Well-connected insiders whom the Fed tipped off in advance

This has, of course, not been lost on the 99.9% relegated to the loser camp. They are angry and growing more pissed off by the day.  We see this anger playing out politically, in street protests, and in growing tensions with the police. All of this is connected, of course.

Soon, more and more folks will figure out the source of the growing inequity causing this anger, and the hot new trend of the future will be Fed bashing. So you might as well get in on the ground floor...

Righteous Anger

As primates, we’re all hard-wired to expect fairness.  It’s part of being a social creature.  When we experience unfairness, we react the same way this Capuchin monkey does, although we might try to convince ourselves we do so in a more civilized manner:


But really, we're just as emotionally-driven as that poor, deprived monkey when confronted with our own circumstances of injustice.

While it's true that the world will never be completely fair, the conditions today are extremely ripe for provoking a lot of righteous populist anger.

Watching big banks commit huge felonies time and again, then get away with only paying fines that are mere blips on their earnings statements, has been difficult for me to swallow -- as it was for a large number of other people.  The recent movie The Big Short does a good job of making your blood boil on this point.

Or noting all the instances where the wealthy and powerful skate by without any real charges or penalties for their crimes, while 'regular people' have the book thrown at them by the legal system.

In fact, the rule of law in America today might as well be restated as the ‘sliding scale rule’, where the number and consequences of possible penalties that apply are inversely proportional to your net worth. Poor = more. Rich = less. 

But of all the injustices being inflicted upon us, few are more pernicious than those being committed via the Federal Reserve's monetary policy.

The Fed is playing God, picking winners and losers. And as I outlined above, nearly all of us are losers.

Housing Losers

In the aftermath of the credit crisis, the Fed has been loudly telling us that if house prices go up then the owners of those houses will feel wealthier and spend more, boosting the economy.  Or something like that.

In truth, the Fed has been acting to protect both the mortgage holders (banks, mortgage companies, Fannie, Freddie) and also its own portfolio of mortgage bonds.  Few people realize this, but the Fed is the largest landlord in America. It owns more real estate, by far, than any other entity:

(Source)

Now, would you not agree that if a private entity had been entrusted with the capability of printing money out of thin air and then using it to purchase $1.78 trillion dollars’ worth of mortgage backed securities, thereby becoming the largest landlord in America, that there should have been a robust and spirited national conversation over whether or not this is a good idea? One that came with a truckload of debate, oversight and enforcement?

But there was no conversation. The Fed decided all on its own that driving up the cost of homes was the right thing to do, and they've succeeded wildly in that regard.  Winners = current homeowners who sell at these current bubble prices and then downsize.  Losers = everyone else.

Even many current homeowners who've benefited from recent price increases will lose over time. Why?  Because of higher insurance and property tax costs. 

The housing bubble that preceded 2007 has been restored by the Fed nation-wide, In dozens of cities., prices are now at or near all-time highs:

(Source)

The impact of these insanely-high house prices is that ordinary people are being priced out.  Here's the extreme case of San Francisco:

The “Housing Crisis” in San Francisco Strangles Demand

Aug 16, 2016

In San Francisco, the median house price – half sell for more, half sell for less – is $1.37 million. According to Paragon Real Estate, if condos were included, the median price would drop to $1.2 million.

The median household income in San Francisco is $84,160, including households with more than one earner. So a household of two teachers with $130,000 in household income is doing pretty well, comparatively speaking.

The monthly mortgage payment for the median house in San Francisco, after a 20% down payment and at the prevailing rock-bottom mortgage rates, is $6,740 per month, or $80,900 per year!

So what kind of minimum qualifying household income would be required for the mortgage of a median house, plus taxes and insurance? For the US on average, $47,200 per year. In San Francisco, $269,600 per year. It would require a household of four teacher salaries!

Only the top-earning 13% of households in San Francisco can afford to buy that median house!

(Source)

To recap: if you put down a 20% down payment of $250,000  (good luck saving that up, ordinary people!) for a median $1.37M house in San Francisco then the yearly mortgage cost alone would still be $80,900.

This affordability problem is so severe that regular people are moving out in droves. As a result, San Francisco is dealing with all sorts of worker shortages, including the lack of teachers mentioned in the above article.

These insanely high house prices are not some miracle of God, and it doesn't require a PhD in particle physics to understand what's causing them: the Fed specifically created the conditions to boost house prices to these levels, and has been printing up as much money as needed to accomplish this.

If you enjoy irony with your tragedy, consider the case of the planning commissioner for Palo Alto who had to move out of the area because she and her husband could no longer afford to live there:

Housing official in Silicon Valley resigns because she can't afford to live there

Aug 11, 2016

Once Kate Downing and her husband Steve did the math, it was obvious that if they wanted to raise a family, staying in Palo Alto, California, was not an option.

Although Steve, 33, works as a software engineer at a nearby Silicon Valley technology company and Kate, 31, is a product attorney at another tech firm, the cost of owning a home near their jobs has simply become too steep for them.

If they wanted to purchase their current house – which they rent with another couple for $6,200 a month total – it would cost $2.7m plus monthly mortgage and tax payments of $12,177, adding up to more than $146,000 a year.

The Downings’ housing struggle in the northern California region that is home to many of the world’s wealthiest tech companies carries a special irony due to Kate’s second job: up until this week, she served as a planning and transportation commissioner for Palo Alto – a position in which she pushed city officials to build more housing and pass pro-development policies that could help solve the growing affordability crisis.

(Source)

When two upper middle class successful professionals cannot even remotely begin to make ends meet, you have a raging housing bubble on your hands.

I’m going to keep repeating this point: this is no accident.  It is not an act of God.  This is the desired outcome of a specific and targeted Federal Reserve policy that is getting exactly what it intends: Higher home prices.

As a consequence of these high prices, home ownership rates in the US have plunged to levels not seen since 1965:

(Source)

Generations of homeownership have been undone in less than ten years by an activist Fed that has decided it knows who should be the winners and who should be the losers in the home buying game.

Of course, all of this is not real, long-lasting wealth. The Fed has merely blown another bubble; one that will eventually burst, creating far more pain on the downside than the pleasure enjoyed on the way up.

That’s just the nature of bubbles, as we laid out in detail in our recent report The Marginal Buyer Holds The Pin That Pops Every Asset Bubble (it's worth a read if you haven't done so yet)

It’s too bad the Fed did not learn from its prior recent bad mistakes that blew up in 2000 and 2008. I’ve taken the liberty of expressing this in chart form:

I hope that clears thing up.

There's no other way to put this, the Federal Reserve is a serial bubble blower. And sadly, the Fed is the alpha central bank in the world. It sets both the tone and the direction that the others follow. Which is why the bubbles in stocks, bonds and real estate span the globe today.  

The Fed somehow lost the institutional memory that Paul Volker embodied back in the 1970’s and 1980’s.   Volker's bitter medicine approach was replaced with a spiked punchbowl. Greenspan began the process, Bernanke cemented it, and now Yellen is busy keeping the party going long after the lights should have been turned off.

The Fed may never recover from the injustice it is creating. And good riddance.  When institutions fail so horribly they need to be disbanded and discredited so that new ideas and practices can emerge.

And interestingly, we are (finally!) beginning to see some rotten tomatoes get thrown the Fed's way. 

Is a ‘Fed discrediting cycle’ underway?  Surprisingly, the answer may be: Yes.

The Worm Turns

The reason we need to track the ‘intangibles’ like Fed credibility is precisely because the entire system of fiat money is faith-based, when you get right down to it.  We all know that on some level, but it becomes a conscious awareness once you understand how money is created in the fractional reserve banking system.

It's created when a loan is made at the bank level, as well as whenever the Fed ‘buys an asset’ which is really a fancy way of saying ‘created money out of thin air and exchanged it for debt.

Well, if the Fed has the power to create money out of thin air, that’s really an extraordinary power, right? How can we have confidence it's putting that power to the right use?

Because all fiat currency (I hesitate to call it ‘money’ as it lacks the essential ‘store of value’ feature) is nothing more than an agreement between ourselves, it’s vital that trust and transparency be part of that arrangement.

But the current system goes out of its way to keep the public in the dark about how it works.

Even though money (er, currency) creation is a rather simple thing to explain, as I’ve done in the Crash course (Chapter 7: Money creation in Banks and Chapter 8: The Fed), it is not taught in schoolsAt any level.

In over 10 years of presenting this material publicly, I've not yet once run into a single person who has claimed to have learned about money creation in a public school or major college as part of the ordinary curriculum.  Not one.  Homeschoolers? Yes, all the time.  Self-taught? Sure, them too.

Now ask yourself why something so important and yet simple to explain is not taught at practically any ‘place of learning’ throughout the land?  The only reason I can think of is that it is considered too dangerous by those in charge.

After all, how can you keep a workforce chained to a paycheck model once they find out that the Fed simply prints up dollars by the trillions and hands them out to their closest friends, relatives, and revolving door colleagues?

Kinda makes me recall the bank scene from this old SNL skit with Eddie Murphy titled White Like Me:

Or perhaps we can understand why currency creation is not taught through this old quote from Henry Ford:

It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.

(Source)

I think old Henry also nailed it. The privilege and advantages enjoyed by those running our banking and monetary systems functions are deeply unfair. If those in charge of them want to keep their heads, its best to keep the public in the dark as much as possible.

Well, I think the cat’s out of the bag, and I base that on two exceptional recent events.  The first was the ill-fated launching of a Fed Facebook page, by the Fed, and the second was a real turnabout article penned in the WSJ by none other than perennial Fed insider/toady John Hilsenrath.

In Part 2: This Is How Sentiment Shifts And Markets Crash, we look at how the previously-bulletproof faith in the Federal Reserve is quickly eroding. As with all belief systems, once sentiment shifts below a critical threshold, everything gets called into question. Suddenly, it's obvious to all the emperor was naked.

The demise of faith in the Fed is an essential milestone on the way to the long-overdue market correction. Once the markets no longer trust the Fed can keep the party going, the stampede for the exit will one for the history books. 

Click here to read Part 2 of this report (free executive summary, enrollment required for full access)

Endorsed Financial Adviser Endorsed Financial Adviser

Looking for a financial adviser who sees the world through a similar lens as we do? Free consultation available.

Learn More »
Read Our New Book "Prosper!"Read Our New Book

Prosper! is a "how to" guide for living well no matter what the future brings.

Learn More »

 

Related content

39 Comments

AKGrannyWGrit's picture
AKGrannyWGrit
Status: Gold Member (Offline)
Joined: Feb 6 2011
Posts: 433
Explanation

This video explains why.  One of the most informative videos you will ever watch.

sand_puppy's picture
sand_puppy
Status: Diamond Member (Offline)
Joined: Apr 13 2011
Posts: 1763
AKGranny's "Big Oil Took Over The World" Transcript

For those of us who prefer to read (skim) than listen to the video, here is the transcript of How Big Oil Conquered The World from the Corbettreport.

Awesome recap of the history of the rise of the oil barons.

Wow.

LesPhelps's picture
LesPhelps
Status: Platinum Member (Offline)
Joined: Apr 30 2009
Posts: 728
Teaching money creation
Chris wrote:

In over 10 years of presenting this material publicly, I've not yet once run into a single person who has claimed to have learned about money creation in a public school or major college as part of the ordinary curriculum.

Sorry Chris.  I learned about money creation, almost the same way you present it, in two separate buisness economic courses, whilst working on a BA in Accounting in the early 1970s.  It was taught in conjunction with the formula on how to calculate the US money supply, M1, etc.

What was not taught, to my recollection, was the inherent flaw built into money creation, that you teach so well.  Simply put, the money supply has to grow every year by the annual total amount of interest payments in order for the economy to simply remain flat.

The dilemma that did hit home for me in the 1970s was that companies typically strived for perpetual growth such as 5% per year indefinitely.  I remember sitting in class thinking, if a single company achieved perpetual 5% growth without interruption, then they would eventually own and become the entire economy.

That is when I recognized my Malthusian disposition, although I knew nothing of Thomas Robert Malthus at the time.  I also intuited somehow that my thinking was not being shared by the rest of the class or the instructor.

This simple fact was not alluded to a single time in either BA or MBA classes.  During 37 years working in the private sector, it was mentioned in a speech once by an executive and then immediately dismissed as irrelevant to the companies budget for 3% cost reductions year after year after year after year.

If you wonder why products you buy these days are so cheap, it's because companies have perpetual cost reduction goals built into their budgets.  Companies put less emphasis in product quality than in achieving budgeted cost reduction goals.

Hotrod's picture
Hotrod
Status: Silver Member (Offline)
Joined: Apr 20 2009
Posts: 177
Federal Crop Insurance

Similar to the fact that maintaining housing values benefits the banking sector and not the homeowner, federal crop insurance is designed to protect bankers and agribusiness, not farmers.  Payouts are just enough to pay off crop inputs for another year and leave nothing to live on.

Tycer's picture
Tycer
Status: Platinum Member (Offline)
Joined: Apr 26 2009
Posts: 602
Thanks. That puts a few

Thanks. That puts a few elements that I have bits and pieces of into a larger context.

aggrivated's picture
aggrivated
Status: Platinum Member (Offline)
Joined: Sep 22 2010
Posts: 527
Neg interest rates "true" meaning to this simpleton

When we have positive interest rates this reflects the big banks' have confidence that they will get money out of an economy. When the rates go negative the bankers know they can no longer trust the economy to give them money, so they have to start vacuuming up hard assets to replace income.

New_Life's picture
New_Life
Status: Silver Member (Offline)
Joined: Apr 18 2011
Posts: 196
Losers highlighted by Steve Keen with Max Keiser & Ross Ashcroft

21mins in...

 

https://www.rt.com/shows/keiser-report/334369-episode-max-keiser-883/

climber99's picture
climber99
Status: Silver Member (Offline)
Joined: Mar 12 2013
Posts: 176
Interest...ing

One of my pet hates I'm afraid.  Interest money is created in advance by banks when they pay for goods and services, bonuses, wages, asset purchases and any other costs associated with running a bank. If you disagree with me then please tell me how banks pay for all their costs and asset purchases.

climber99's picture
climber99
Status: Silver Member (Offline)
Joined: Mar 12 2013
Posts: 176
Income inflation to the rescue.

Home prices are out of whack with incomes for sure.  Either prices crash or incomes explode to bring them back into line.  I'm trying to imagine how the latter scenario could prevail. 

Here does.  Economy tanks, debts become unsupportable for the people holding the debts (students, homeowners without jobs etc) and because the richest 1% are hoarding most of the money in circulation. The Fed prints money and bails out everyone (the famous Benanke helicopter money put).  You get massive inflation because this is debt free money given to everyone.  Not only do debt levels get reduced but wages will track inflation to some degree.

Hence wage inflation brings incomes in line with home prices.

Obviously the losers will be the richest 1% which will see the purchasing power of their hoarded money get reduced. Hence this will be the very last resort for the Fed.  Interest rates would rise significantly I should imagine.

Unacknowledged's picture
Unacknowledged
Status: Member (Offline)
Joined: Oct 16 2011
Posts: 10
There are solutions

Everyone will be greatly enriched by reading this candidates proposals. 

Http://andy2016.net

http://Progect Pegasus.net

 

Wendy S. Delmater's picture
Wendy S. Delmater
Status: Diamond Member (Offline)
Joined: Dec 13 2009
Posts: 1982
Sidelines

Winners = current homeowners who sell at these current bubble prices and then downsize.  Losers = everyone else.

One the Sidelines: people who've paid off cheaper small homes they bought as a place to live rather than an investment.

Wendy S. Delmater's picture
Wendy S. Delmater
Status: Diamond Member (Offline)
Joined: Dec 13 2009
Posts: 1982
Time2help's picture
Time2help
Status: Diamond Member (Offline)
Joined: Jun 9 2011
Posts: 2769
Re: And what will burst the bubble?
Wendy S. Delmater wrote:

Snydeman's picture
Snydeman
Status: Gold Member (Offline)
Joined: Feb 6 2013
Posts: 451
Well, there's one...

Chris, there is at least ONE teacher instructing students on the true nature of money creation. Granted, it's a private school elective on "economics," but i use the Crash Course videos and I teach them the true nature of the Fed's actions. It may be too little too late, but your message has reached some teachers, and I'm doing my damn best to bring other teachers the message. We're not all following "the script" given us by the higher-ups.

TechGuy's picture
TechGuy
Status: Gold Member (Offline)
Joined: Oct 13 2008
Posts: 367
One Way airfare to poverty

I think this chart says it all.

Rising Tide of Negative Interest Rates

Rates will continue to go negative as more of the world debt becomes unservicable.

In my opinion, its no longer worth investing capital as the return is nearly nothing and the risks of losing principal, is enormous. FWIW: This is the yeat I stopped saving and investing and started spending. I am converting my capital into assets that enable me to be self-reliant: rural farm land, farming equipment, tools, consumables. Once the Fed returns to QE the value of money and capital will contiue to lose valve and the cost of assets will begin rising again.

I don't think a dip in Real estate will last long as the Fed will just step in and start buying. Those with Real estate will be reluctant to sell and so will the banks (knowning the Fed is going return to QE). So if your thinking of waiting to buy during the next dip, good luck!

Of the one items that is likely to decline would be the US dollar once it returns to QE.

gemel's picture
gemel
Status: Bronze Member (Offline)
Joined: Jan 12 2010
Posts: 53
History Rhymes

Reading this article, helps me think about the guys discussing politics in a cafe in Rome, during the downfall of Rome. They had pretty much these conversations, corruption, war plunder, currency debasement. etc...

Their discussions where fascinating and entertaining, however no amount of discussion will save the system, we are too far down the rabbit hole.

Just like Rome was during the 1000 year decline. Nothing could pull it from the crash landing. The ingredients for the crash where baked in.

Empires fall, others and born and re-born.

Staying within the kingdom hoping to wing it through, was the death sentence of many....

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5570
Thank Yo for teaching about money
Snydeman wrote:

Chris, there is at least ONE teacher instructing students on the true nature of money creation. Granted, it's a private school elective on "economics," but i use the Crash Course videos and I teach them the true nature of the Fed's actions. It may be too little too late, but your message has reached some teachers, and I'm doing my damn best to bring other teachers the message. We're not all following "the script" given us by the higher-ups.

Well, bless you for teaching that.  And Les, it's good to know you were taught the mechanics of money creation.  

I've asked a lot of audiences over time, after going through money creation, how many recall being taught that in school and I've yet to have a hand go up. 

Here in our very elite, self-selected community I am encouraged to find a few examples...but the larger framing here is that it is very, very uncommon to encounter someone who knows how the simple, but wildly important process of money creation works.

A simple oversight on the part of the educational system?

If it is, then I believe the explanation for that must be written on the other side of the purchase & sales agreement I have for the Brooklyn Bridge I acquired on my last trip to the Big Apple...let me see if I can find it...

Thanks again Snydeman!

Michael_Rudmin's picture
Michael_Rudmin
Status: Platinum Member (Offline)
Joined: Jun 25 2014
Posts: 772
That bubble burst is really neat.

Stop and look at the bubble gif. First thing I notice is that the wave starts perpendicular to the projectile, but is actually faster than the projectile and overtakes it.

Second thing I notice is that the associated bubbles do NOT burst. They are shaken, but have their own self-contained structure. However, both associated bubbles are given some velocity by the wavefront; the larger is badly contorted by the main burst, but still survives.

Third thing I notice is that the bursting bubble erupts into a spray of little droplets.

Next, I notice that the wavefront is faster on top than below, so that the line of action sweeps in a convex-up arc.

Then, too, some of the droplets follow the projectile; most just fall out.

I'm not going to assume that this all has parallels in economic bubble bursts, but some of it may.

LesPhelps's picture
LesPhelps
Status: Platinum Member (Offline)
Joined: Apr 30 2009
Posts: 728
cmartenson wrote:Well, bless
cmartenson wrote:

Well, bless you for teaching that.  And Les, it's good to know you were taught the mechanics of money creation.  

Actually, I don't see how you could teach the formula for calculating the money supply without explaining monetary expansion.  The formula requires the reserve rate in order to calculate M1.

That means that a fair number of students who took economics should have been exposed to it.

This brings to mind a Father Guido Sarduchi's "Five Minute University" skit, where, for a small fee, he teaches you in five minutes, everything you will remember about your college classes, five years after you graduate accompanied by a college degree.

I may be showing my age.  I think the skit aired on "Rowan and Martin's Laugh In."

Snydeman's picture
Snydeman
Status: Gold Member (Offline)
Joined: Feb 6 2013
Posts: 451
You're correct, Chris!
cmartenson wrote:

Well, bless you for teaching that.  And Les, it's good to know you were taught the mechanics of money creation.  

Here in our very elite, self-selected community I am encouraged to find a few examples...but the larger framing here is that it is very, very uncommon to encounter someone who knows how the simple, but wildly important process of money creation works.

Oh, absolutely. My comment wasn't meant to imply your overall point was incorrect, but to give a little ray of light that there are some of us out here teaching "outside the economics textbook." I also often rail against Fed policy and explain how distorted the markets are, as well as why they are so distorted, on a regular basis in person and on social media. This explains why I am a bit of a social pariah at my school (I'm known as the negative nellie and doom prophet by some) and most of my 'friends' on Facebook have quietly unfollowed most of my posts. I've paid some costs for my preaching, and I still have to moderate some of what I do in the classroom so as to walk the line between "rebel" and "keeping my job." It should be noted that I wish to keep my job primarily so that I can accumulate more fiat and convert it to things that will aid my family and community after the fall, as much as to teach the youth of tomorrow.

 

Before I accept too much praise for doing all of this, I need to come clean: I do it in the hopes of changing some minds and hearts - though I know I'm battling against forces I'm not likely to change in time - and also because, when the collapse comes, I can look back with self-respect and know I did everything I felt I could do to stave it off.

 

At least I won't be part of the problem.

 

One thing that shocks me isn't the number of people living in complete denial, though, but rather the number of people I talk to who agree with me on all the problems, and reasons for those problems! Many more people than we may realize are dimly aware of the crisis and can glean where the causes come from (I socialize mostly with college educated people, though, so keep that in mind). However I take little solace in this because almost every time I am having conversations with these people, they stop short of actually taking the final few steps and putting all of the disparate pieces together into a whole picture of where we are and what's likely coming if we don't undertake massive change soon. I can understand why they don't; it's a scary picture, and massive change is hard, so why not settle back into the safe, dry paradigm you were brought up in and ignore the actual warning signs (What Daniel Quinn might call the "soothing voice and embrace of Mother Culture")?

 

Either way, I do what I can, fully knowing that I am raging at the night sky, and also fully aware that I am doing it as much for myself as I am for the world. There is both selfishness and altruism in my motivations.

cmartenson wrote:

A simple oversight on the part of the educational system?

Oh, hell no. The modern educational system is still an industrialized system designed to knock free thought out of our youngsters as much as it is designed to instill discipline, obedience, and collective thought. Do you know that when I teach my unit on Columbus and the era of exploration and exploitation, my students can hardly ever answer one of the first "thought" questions I present them with:

I show them two maps. One of them shows all of the major tribal ethnic groups that existed in the Americas around the year 1400, as near as we historians know them. It shows strong and mighty native empires such as the Aztec and Incan empires, as well as hundreds of tribal ethnic names such as Apache, etc. Then I show them a map of the Americas circa 1700, which has the names of various European-controlled areas, with capital cities and such, but without any of the previous names of tribal groups anywhere to be found. And you know what? Almost all of them can't answer the question I ask them: "So, what changed? What's the story these two maps tell you?" Even when I point it out to them: These people on the first map are not here anymore, or at least not here in any official capacity, and often not here at all. As in, they are dead. Gone. Annihilated. To the tune of perhaps 80 million people.

 

I do this not to "guilt them" about past events, but so that they can see that the birth of the world they know and love came at enormous costs to other peoples, and also to give them some empathy for the plight of any remaining Native Americans who are forced by circumstance to live among the lands and cultures of their ancestors' destroyers. Daily. For some students it is still something they can't wrap their minds around because they've been taught that 'Murica is awesome and does no wrong since birth by parents and an educational system that does not look too deeply at things. We teach what industry wants and expects, not what Socrates or Plato might have wanted, and certainly not in a manner that Ben Franklin would have agreed with.

 

I do take heart that in every class there are always a few savvy students - often the ones who are considered "outsiders" or "trouble makers" by their peers - who see the picture long before I have to paint it for their less savvy peers, and who get a gleam in their eye when I teach things this way. It's as if they see, for the first time, a teacher telling it like it is and NOT brushing the more horrible aspects of the past under the carpet for the sake of making the house look better for the neighbors, so to speak.

 

But, again, I'm no hero or anything. I do it as much for my own self-respect and to stroke the vanity of my rebellious nature as much as I do it for them.

 

peakoilwelder's picture
peakoilwelder
Status: Member (Offline)
Joined: Mar 5 2011
Posts: 17
New age serfs?

It seems to me that the long term goal of those at the top is simply domination of this corner of the world. Some of my ancestors came from places where it impossible to own land if you weren't "ruling class". It was their dream to have their own property, and freedom from The Landlords. A dream which is being squeezed out of existence for many people now. 

I think we are witnessing nothing less than the establishment of a new royalty.  One which has most of us out-gamed and out-classed. They're doing it all with our wealth, but that's nothing new. Maybe I'm wrong, maybe I'm being melodramatic, but, long-term, these will be the new masters if they keep it together long enough.

New_Life's picture
New_Life
Status: Silver Member (Offline)
Joined: Apr 18 2011
Posts: 196
pgp's picture
pgp
Status: Silver Member (Offline)
Joined: Mar 2 2014
Posts: 196
Knowing too much is a curse.

Nail on the head as usual Mr Martenson.

The truly smart 'get it' sooner and then have to wait around in despair for years and decades until the rest of the population wake up from the sedative effects of intravenous propaganda and realize their world is fatally flawed - usually long after irreparable damage is done.

If democracy wasn't such a sham of course the truly intelligent (of the middle-class) would have more of a say in getting problems fixed.  As it is we have to wait for a damned pitch-fork and fire revolution from the masses to randomly act on what ever belief system is in fashion at the time.

 

dryam2000's picture
dryam2000
Status: Gold Member (Offline)
Joined: Sep 6 2009
Posts: 279
Unaware / Uneducated masses

I would propose that many times the unaware & uneducated masses are actively nudged in well crafted directions by TPTB so the masses rarely ever really get it.  Dan Ariely, a behaviorial economist who has been interviewed by Chris on PP in the past, wrote a book called "Nudge".  He talks about the fact it only takes a small nudge in a certain direction on groups of people to put them on the path you want them to be on.  TPTB have known this for a long time & this is how they maintain their power.

So, I'm doubtful the masses are never going to really "get it".  Instead, they will be redirected.  Various scapegoats will be crafted.  I wouldn't hold your breath for the damned pitch-fork and fire revolution moment from the masses.  

-Casey-'s picture
-Casey-
Status: Bronze Member (Offline)
Joined: Nov 12 2013
Posts: 64
Nope not me

I was in undergrad in the mid 80's.  My economics prof was Marty Feldstein, who had been Reagan's chief economic advisor.  My TA was Todd Buchholz who would later serve in a similar capacity with Bush the elder. Obviously we discussed M1, etc., but there was not a single word of explanation about things like the Mandrake mechanism (by any name) or the fact that a unit of currency conjured out of thin air is exchanged for debt that is a claim on my future labor, or even that the Fed is privately owned and not a governmental agency.  Had any of this been discussed in any form or fashion The Creature would not have induced the catatonic shock it did when I first read it a few years back.

 

Waterdog14's picture
Waterdog14
Status: Silver Member (Offline)
Joined: Jan 18 2014
Posts: 120
Nixing savings
TechGuy wrote:

In my opinion, its no longer worth investing capital as the return is nearly nothing and the risks of losing principal, is enormous. FWIW: This is the year I stopped saving and investing and started spending. I am converting my capital into assets that enable me to be self-reliant: rural farm land, farming equipment, tools, consumables. Once the Fed returns to QE the value of money and capital will continue to lose valve and the cost of assets will begin rising again.

I agree.  I finally gave up fighting the "war on savers".  I decreased my 401k contributions to a token 0.5% and am deliberately not saving any more cash (fiat currency) for retirement.  But instead of buying crap (such as techno-gadgets, jewelry, clothing, cars, and poorly made consumables) or inflated stocks, our household is investing in another chicken tractor, more hoop coops, a high tunnel, a used walk-behind tractor....on top of the root cellars & 44 hp tractor & cold-climate greenhouse & solar panels & upgraded wood stove we "invested in" last year. 

CM has advised that we have a list of things we should run out and purchase, once the helicopter money starts.  I'm not waiting.  At times I feel reckless for spending the money - I've always been a saver, and savings used to mean security, but not anymore.  At times I feel foolish for NOT following the rest of the herd and continuing with business-as-usual.  But I can feel the "sea change".  

louisdoran's picture
louisdoran
Status: Member (Offline)
Joined: Oct 2 2010
Posts: 5
2 questions.

Two questions? First, what is the title of the article in the WSJ Chris refers to? Second, i know the topic has been discussed elsewhere, but one thing Chris never seems to question are the motives of the Fed. He constantly suggests it is their incompetence which leads them to follow a dead-end policy. Could it be that they have other motives, intentions? I can't rap my head around the fact that amongst the best and the brightest among economists should be so clueless. Granted, they may live and breath in an ivory tower and have never had experience of the real world of running a business. Yet, we al know, in this community at least, that the  Fed is a PRIVATE institution with private  stockholders i.e. big banks. A company and its leaders usually answers to the wishes of its stockholders, its owners. Why should it be different with the Fed? Who are they really working for? What is their ultimate goal or objective? Without going into all sorts of conspiracy theories involving lizard extraterrestrials and what not, I would like to hear Chris and other members of the community on this. It seems clear to me that there is more in play here than just incompetence.

louisdoran's picture
louisdoran
Status: Member (Offline)
Joined: Oct 2 2010
Posts: 5
answer to myself

I hadn't read the second part of Chris' article before posting my comment. I see my questions are answered in it. Yet I would still appreciate to hear other people's take on what motivates the Fed. Chris?

 

Snydeman's picture
Snydeman
Status: Gold Member (Offline)
Joined: Feb 6 2013
Posts: 451
Waterdog14 wrote: I agree.  I
Waterdog14 wrote:

I agree.  I finally gave up fighting the "war on savers".  I decreased my 401k contributions to a token 0.5% and am deliberately not saving any more cash (fiat currency) for retirement.  But instead of buying crap (such as techno-gadgets, jewelry, clothing, cars, and poorly made consumables) or inflated stocks, our household is investing in another chicken tractor, more hoop coops, a high tunnel, a used walk-behind tractor....on top of the root cellars & 44 hp tractor & cold-climate greenhouse & solar panels & upgraded wood stove we "invested in" last year. 

CM has advised that we have a list of things we should run out and purchase, once the helicopter money starts.  I'm not waiting.  At times I feel reckless for spending the money - I've always been a saver, and savings used to mean security, but not anymore.  At times I feel foolish for NOT following the rest of the herd and continuing with business-as-usual.  But I can feel the "sea change".  

 

I wish I had your land space! Can't put a lot on 1/4 acre. =(

sand_puppy's picture
sand_puppy
Status: Diamond Member (Offline)
Joined: Apr 13 2011
Posts: 1763
Total Debt Owned by The World's Central Banks

From ZH,  How Central Banks are LBOing the World in One Stunning Chart

But it was probably all an accident.

ejhr's picture
ejhr
Status: Bronze Member (Offline)
Joined: Jun 28 2014
Posts: 33
the Fed

The Fed doesn't do all the stuff on its own. The fed is hand in hand with Treasury which issues instructions to the Fed to buy stuff like bonds which are not part of its mandate to maintain chosen interest rates [and supposedly full employment]

All the treasury securities are investor deposits. The Fed stores them in savings accounts and pays interest [coupons]. The fed does not use this money. The Fed has no need for this money. The Fed never needs to save or borrow at all. The fed represents the government which is monetary sovereign.  So at maturity the bond money stored in the Fed is simply transferred back to the [check] accounts of the depositors. Problem solved. It all nets to zero even though the fed uses thin air money to pay interest.

All this flak about the fed is a bit displaced. The government is really to blame for most of the troubles.

Time2help's picture
Time2help
Status: Diamond Member (Offline)
Joined: Jun 9 2011
Posts: 2769
The Fed
ejhr wrote:

All this flak about the fed is a bit displaced. The government is really to blame for most of the troubles.

The Fed is a primary enabler, agent, facilitator and a lynch pin of totalitarianism.

pgp's picture
pgp
Status: Silver Member (Offline)
Joined: Mar 2 2014
Posts: 196
You can't nudge people out of hunger

I agree with you dryam2000 but clearly the establishment (TPTB) has limits.  You can't nudge people out of hunger.

Collapse and revolution don't have to look like the French revolution, they can also look like the collapse of the USSR which took half a century of social misery to weather.  For more recent examples of pitch forks and fire look at Ferguson, London, Greece, Ukraine, Egypt and so on. 

pgp's picture
pgp
Status: Silver Member (Offline)
Joined: Mar 2 2014
Posts: 196
The elephant in the room.

I think some of you have overlooked the elephant in the room.  Its not the government or the FED who is wrong.  It is the CONSTITUTION that has failed... in pretty much every country.  Wherever constitutions support 3 or 4 year rolling dictatorships.

Democracy is now a complete sham because elitism controls the message.  In other words there is no *real* accountability and no independent audit so governments and their arms are free to dictate and subsequently mismanage.  What is needed is a new constitution.  One that will allow participation or accountability by a rolling jury of qualified middle class people.  That is: people who aren't members of the establishment but represent instead the true majority - the man on the street.  That's not a pipe dream because working class participation in government has worked in the ancient past.

For that to happen we need revolution of some sort....and that will take a while admittedly .  But it will take even longer if everyone shoves their heads in the sand or hides under their flag out of some misguided religious belief in the forefathers, monarchy or nationalist pride.

AKGrannyWGrit's picture
AKGrannyWGrit
Status: Gold Member (Offline)
Joined: Feb 6 2011
Posts: 433
The Constitution is an

The Constitution is an amazing Document.  People fail not documents.

pgp's picture
pgp
Status: Silver Member (Offline)
Joined: Mar 2 2014
Posts: 196
Case in point

AKGrannyWGrit says:

The constitution is an amazing Document. People fail not documents.

I think you just proved my point... the elephant remains obscured by sand.

Michael_Rudmin's picture
Michael_Rudmin
Status: Platinum Member (Offline)
Joined: Jun 25 2014
Posts: 772
More than that, nudges are deft; war is clumsy.

I have yet to see anyone who was clumsy be deft, or anyone who was deft be clumsy.

It would take a huge conspiracy, in my book, to fake one or the other by our leadership.

Honestly, I think they are simply clumsy.

reflector's picture
reflector
Status: Gold Member (Offline)
Joined: Aug 20 2011
Posts: 267
pgp,

you say that the constitution has failed, but, the constitution was never valid as a binding contract, it was merely a set of guidelines.

the great 19th century american political philosopher lysander spooner had this to say about the constitution:

“But whether the Constitution really be one thing, or another, this much is certain - that it has either authorized such a government as we have had, or has been powerless to prevent it. In either case it is unfit to exist.”

― Lysander Spooner, No Treason: The Constitution of No Authority

as far as your suggestion that a new constitution is needed, i disagree - there is no magical formula that can be enshrined on parchment that can ensure a free, just, and open society, there is no substitute for constant vigilance and awareness.

true governance only comes when each of us governs ourselves, rather than abdicating this responsibility to others, who will surely be corrupted by whatever measure of power is granted them.

pinecarr's picture
pinecarr
Status: Diamond Member (Offline)
Joined: Apr 13 2008
Posts: 2237
What I have been afraid to blog about: THE ESF AND ITS HISTORY

http://www.marketskeptics.com/2011/06/the-esf-and-its-history.html

[June 3, 2011] After months of work, the video series on the Treasury's Exchange Stabilization Fund is finally finished!

Why you should watch these five videos:

It is impossible to understand the world today without knowing what the ESF is and what it has been doing. Officially in charge of defending the dollar, the ESF is the government agency which controls the New York Fed, runs the CIA's black budget, and is the architect of the world's monetary system (IMF, World Bank, etc).

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments