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    How The Federal Reserve Is Purposely Attacking Savers

    But bungling badly as it does
    by Chris Martenson

    Monday, October 20, 2014, 4:36 PM

There's something we 'regular' citizens wrestle with that the elites never seem to: a sense of moral duty.

For example, following the collapse of the housing bubble, many people struggled with mortgages they could no longer afford to pay, fearing the shame of default. Many believed defaulting was wrong somehow; that it was their moral obligation to pay their mortgages, no matter how dire their personal situation. And of course, the mortgages lenders did their utmost to reinforce this perception.

In a perfect world, we would honor our debts and obligations, every one of us. But the world is an imperfect place ,and moral obligation is something that almost never enters into the decision matrix of our society's richest. Or the banking industry.

For them, the number one (and two, and three…) rule is that whatever is expedient and makes the most money is the right thing to do.

For the bottom 99%, it’s like playing with a stricter set of rules than your opponent: you’re not allowed to hit below the belt, and they’ve brought a baseball bat into the ring.

Note how this guy had to fight through his middle class conditioning before coming to a sense of peace over his decision to enter into a short sale on his house:

How a short sale taught me rich people’s ethics

Sep 29, 2014

The closest I ever came to acting like a rich person was two years ago when I short-sold my primary residence. I might have been able to keep it but strategic default made life easier. I owed about $400,000 on a house that short-sold for $150K. The bank lost more than a quarter of a million dollars, and I lost at least $80K in down payment and property improvements.

I was taught growing up to “keep my word” and that your handshake “meant something.” Yet businessmen and individual wealthy people make decisions that are far less moral than a short sale. People “incorporate” so they can avoid legal responsibility for individual actions.

It works great. You can stiff creditors, declare bankruptcy, pollute daily and raid pensions to enrich individual executives. If it all goes wrong, like it has so often for Donald Trump, you can keep your mansions and individual fortunes.

I entered the shark-infested waters of high finance with a short sale. It was the worst ethical decision, but the finest, most profitable business moment, of my adult life. It was an informative, even transformative, experience.

(Source)

This poor guy has a very bad case of ‘middle class morality’. It's a very real phenomenon. All our lives, we are all taught (programmed?) to stay within the true and narrow groove of middle class life, pay our bills, and be on the hook should things go awry.

Not everybody holds that view, however. As he continues in the piece, the author discovers something important along the way:

I always knew business was getting over on me, but I had no idea the extent until I started looking to short-sell. I first learned all I could aboutprivatehome financing. I called up some shady investment groups around town and questioned them at length. I didn’t end up using them, but they were frank, informative and unashamed.

“Who would pay 11 percent on a home loan?” I asked.

“Rich people,” said “Bill” from the legal loan-sharking company. “The rich have terrible credit.”

Rich people = bad credit: Just let that sink in.

Bill told me in roundabout ways that rich people never pay a bill if there is any way around it. If something goes wrong in an investment or a business, they always preserve their own assets first.

Rich people have terrible credit. They know that there’s a system and it has rules. And, for them, these rules can (and should) be optimized for their own benefit. So they do anything and everything that works to their advantage.

There’s a reason and a logic to that which I can appreciate, but it makes me wonder where the rest of us obtained our deep-seeded beliefs about duty and responsibility towards debts.

Similar to rich people, banks do not have any entangling moral restrictions on their behaviors. That absence allows them to get away with extraordinary misdeeds, none more obvious and damaging than those that the Federal Reserve has perpetrated on the nation, specifically, and the world, more broadly.

To understand why, we first have to discuss something called Financial Repression.

Financial Repression

In my recent interview with Daniel Amerman, to whom I will credit much of the concise thinking and for unearthing the sources that I will weave throughout the remainder of this piece (please read his excellent article on Financial Repression here), the truly immoral intent of the Fed's policies really sank in.

In response to the Fuzzy Numbers chapter (18) of the Crash Course, reader JBarney pondered the following:

Thanks for putting this update together. I think one of the problems is there are so many moving parts, so many manipulated numbers it is difficult to get a clear picture. The way it is organized here is helpful.

However,I can't help but wonder about all of the implications of these numbers for the real economy and people's lives. One of the sections which really hits home was the impact inflation has on all of this. If these are the numbers now, what will it be like when things really start to change?

The answer is that while inflation always steals from savers, it really does its dirty work when the central bank and government conspire to create a condition of pervasive and unavoidable negative real interest rates.

This is the heart of Financial Repression: an environment in which you literally cannot save money without paying a penalty.

The main takeaway of Chapter 18 on Fuzzy Numbers is not that the government fibs a little now and then (okay,all the time) merely because that's politically expedient, but it does so in service to a larger and more pernicious aim: forcing people to accept an inflation rate that is higher than either their income growth and/or the market's safe rate of return.

As soon as you are locked into a negative interest rate regime, your capital is losing purchasing power. But simple accounting rules dictate that loss of wealth had to go somewhere. So where did it go? To somebody else.

Negative real interest rates transfer money from every saver to every over-extended borrower. This is especially true with the government (largely because of its special revolving door relationship with the Fed, which both issues the money out of thin air and then buys government debt forcing rates into negative territory).

It's really that simple. The Fed has openly and actively suppressed rates — not to help the credit markets, as they claim, but to engineer a condition of Financial Repression. Because that's what the government needs to stealthily take your wealth to pay down the prior debts it accumulated.

Thus 'negative real rates' are the essential component of transferring wealth from the many to the few, with the 'few' being defined as the government, Wall Street, and others who exploit leverage and liabilities at sufficient scale to be on the right side of that wealth transfer.

This well-known phenomenon is a thoroughly accepted and well-described practice of governments and central banks everywhere. One of the better descriptions of it comes to us courtesy of the BIS in this working paper published in 2011.

From the abstract:

Historically, periods of high indebtedness have been associated with a rising incidence of default or restructuring of public and private debts.

A subtle type of debt restructuring takes the form of “financial repression.”

Financial repression includes directed lending to government by captive domestic audiences (such as pension funds), explicit or implicit caps on interest rates, regulation of cross-border capital movements, and (generally) a tighter connection between government and banks.

In the heavily regulated financial markets of the Bretton Woods system, several restrictions facilitated a sharp and rapid reduction in public debt/GDP ratios from the late 1940s to the 1970s.

Low nominal interest rates help reduce debt servicing costs while a high incidence of negative real interest rates liquidates or erodes the real value of government debt.

Thus, financial repression is most successful in liquidating debts when accompanied by a steady dose of inflation.

Inflation need not take market participants entirely by surprise and, in effect,it need not be very high(by historic standards).

For the advanced economies in our sample, real interest rates were negative roughly ½ of the time during 1945-1980. For the United States and the United Kingdom our estimates of the annual liquidation of debt via negative real interest rates amounted on average from 2 to 3 percent of GDP a year.

(Source)

Let me decode that.

  • Step 1: Governments get into trouble by borrowing too much.
  • Step 2: Rather than pay this down honestly via cutting spending (unpopular) or by defaulting (even more unpopular), the government conspires with the central bank to slowly liquidate the stack of obligations by forcing negative real interest rates on everyone.
  • Step2bHang on one second…it wouldn’t work if people could dodge the Financial Repression, so a ring fence has to be built out of capital controls and explicit rate caps on and across the whole spectrum of interest-bearing securities.
  • Step 3: Sit back and wait for everyone with savings to contribute their purchasing power to those who issued the debts, be those public or private entities.

And this is exactly what has happened. All of the talk about the Fed focusing on unemployment or inflation or whatever are red herrings. What the Fed is really trying to do is to create a set of macro conditions that will allow the federal government to slowly crawl out from under a pile of debt and entitlement obligations that it literally can not pay by honest, above board means.

I guess if we were to imagine a "Step 4" in the above process, it would be to wait for the head of the central bank to come out and deliver a speech in which she expresses a grandmotherly concern for the wealth gap that naturally results from all this, but to deflect attention away from this being a direct and understood consequence of the Fed's intentional goal of financial repression and towards some failure on the part of those who have been targeted to donate to the cause of bailing out the profligate and rewarding the borrowers.

Oh, wait. That did just happen. Here it is, Step 4, courtesy of Janet Yellen last week:

Why Fed Chair JanetYellenis “greatly” concerned about growing inequality

Federal Reserve Chair Janet Yellen on Friday expressed deep concern over widening economic inequality in the country and called for tackling issues such as early childhood education and encouraging entrepreneurship to help narrow the gap.

[Comment:Oh boy…must contain my emotions…did she really just deflect the consequences of the Fed's policy of financial repression towards 'early childhood education? Yep. That's like a burglar saying that we need to invest in better metallurgical processes as the means of preventing doors from being kicked in so easily.]

In a speech at the Federal Reserve Bank of Boston, Yellen said steady growth in inequality over the past several decades represents the most sustained rise since the19thcentury.Living standards for most Americans have been “stagnant,” while those at the very top have enjoyed significant wealth and income gains, she said.

[Comment: Glad the Fed finally noticed that those at the very top have been making out like bandits! This was something I said explicitly would happen as a consequence of future Fed printing back in 2008 in the Crash Course, before the printing even started. How is it that I knew that this would happen back in 2008 and the Fed is just now noticing this observationally? Is my research department better than theirs? In fact this is a very well known and easy to understand process. That the Fed is feigning ignorance speaks volumes about how ignorant they believe we all are. This is a sure sign that we are trapped in a dysfunctional relationship with an abusive partner.]

“I think it is appropriate to ask whether this trend is compatible with values rooted in our nation’s history,among them the high value Americans have traditionally placed on equality of opportunity,” Yellen said in prepared remarks.

[Comment: Once we accept that the Fed is openly and specifically creating the wealth gap as a matter of active and ongoing policy, which it is, then it's actually more appropriate to ask if the Federal Reserve is compatible with values rooted in our nation's history. The answer, obviously, is "no."]

The problem of inequality is an unusual topic for the leader of the Fed, if only because the central bank’s ability to address the issue is limited.

[Comment: Stop right there Washington Post! You've just inserted an assertion that might as well have come straight from a PR press release from the Fed. I, for one, refuse that claim and reject it completely right here and on grounds that hardly have to be substantiated, but I will just for fun. When the Fed buys 'assets' (really debt instruments) from major financial firms using freshly printed money they are,by definition, buying those assets at steadily increasing prices which means that those who hold the largest amounts of these assets get the richest. When the Fed secondarily targets the stock market as something to 'go up' and the top 5% own 82% of all stocks, then the Fed's role is anything but 'limited.' It is direct and proportional and they are 100% responsible for any and all gains that accrue to the top via the 'miracle' of asset inflation. Period. End of story. See also any of the innumerable charts plotting the S&P 500's rise along with the growth in the Fed balance sheet for further confirmation. Sorry Washington post, assertion denied!!]

Yellen listed four factors that can influence economic opportunity: investing in education for young children, making college more affordable, encouraging entrepreneurship and building inheritance.

[Comment:OMG. She just blamed the victims and did it in a very let them eat cake kind of way. How aggravating(!). According to Yellen, if people are finding themselves getting poorer what they need to do is stop scrimping on their kids, become an entrepreneur and then somehow go back in time and have rich parents. This statement of hers calls for pitchforks and torches. Literally. Without a shred of decency, she has shifted all blame from the Fed to the victims. How corrupt or morally adrift does someone have to be to blame their victims? In a criminal case this would be used as evidence of sociopathic if not psychopathic behavior and used by a prosecutor to call for a maximum sentence to prevent a dangerous individual from running loose in society. And rightly so. Such individuals are poor prospects for rehabilitation.]

Yellen did not address in her prepared text whether the Fed has contributed to inequality.

[Comment:No surprise there. Ted Bundy never acknowledged the harm he caused either.]

(Source)

At this point, based on Yellen's testimony, I think it's time to say what everybody is already thinking: the Fed Chairwoman is literally displaying psychopathic tendencies by blaming her victims. I'm serious: if the Fed were an individual, we’d have no problem identifying its behaviors in psychologically pathological terms.

I understand that some, or perhaps many, will excuse this last point by saying that the Fed cannot possibly state the truth because doing so would create loss of confidence or public anger. But I submit that the so-called "white lie" defense is utter nonsense.

A greater harm is done by lying than by telling the truth. You can get away with small lies for a while, but they never actually go away, they just sit there corrosively undermining the very foundation of trust upon which civilized society rests. Large lies just do more damage over a shorter period of time, and that’s exactly where we are today. This explains much in terms of people’s general sense of unease despite an apparently reasonable economy and awesome living standards (by any historical measure).

Here's what truth would sound like if I were to re-write Yellen's speech:

My fellow Americans. Decades of poor fiscal restraint and accommodative monetary polices have brought us to an uncomfortable juncture.

My intention today is not to cast blame – there will be plenty of time for that later – but to take stock of where we are so that we can all decide on the best course forward, openly and honestly, as should be the case in a democracy.

There are no easy choices at this point, only a rather poor range of options spanning from somewhat unpleasant to potentially catastrophic.

The heart of the matter is simply this: the US government has built up an extraordinary amount of public debt, and an even larger pile of unfunded liabilities.

There’s simply no way for those to all be paid back under current terms. And given recent trajectories in play with respect to economic growth and deficit spending patterns, those debts and liabilities are only growing larger with time.

Quite simply our choices are these:

  1. Pay down the debt by taking in more revenue than expenses. This is also known as austerity and given the size of the debts and other obligations, several decades of severe belt tightening would be required. This program would be extremely painful for nearly everybody and would require massive tax hikes coupled to major spending cuts.
  2. Default on the debts and obligations. This simply means not paying people, investors, institutions and countries what we have promised to pay. Down this path lies the potential for massive destruction of our financial and political systems, so we have chosen to not entertain this path any further than to mention it exists.
  3. Do nothing and wait for a fiscal and monetary accident to happen. This is a guaranteed disaster that could result in the sudden and permanent decline of opportunity in this country that would be so painful we cannot even predict the possible outcomes.
  4. Engineer conditions where negative real rates of interest slowly allow the government’s obligations to fall relative to inflation. Over the span of decades this is the least painful route and our country has been down this path before.

We’ve selected path #4 as the least bad option. Since 2009 our policies have been geared towards #4 and we see no alternative besides staying on that path for as long as necessary. The alternative is the literal bankruptcy of our nation and we cannot and will not allow that to happen. Not on our watch.

While path #4 is the least objectionable of them all, it comes with its own share of unfortunate consequences and injustices. At its heart, negative real interest rates are an effective tax on savers and those whose incomes fail to keep pace with the inflation we are creating as an overt act of policy. This generalized and widespread loss of purchasing power takes a little bit from everyone, rather than a lot from a few systemically important institutions such as your federal government, which spreads the pain widely, and therefore causes the least disruptions to our daily lives.

Path #4 has a name: Financial Repression. This policy combines negative real interest rates with various forms of capital controls and tax policy to assure that nobody can evade it.

Obviously this is not fair, nor is it in alignment with our national narrative of prudence and hard work being rewarded because, truth be told, it rewards the profligate and those who produce nothing of real value but can play the game of high finance well. Yet here we are without any better options before us, and so we reluctantly chose Financial Repression.

One other distasteful ‘feature’ of the program of financial repression we’ve been putting you all through is that the rich get richer. Until or unless there is a massive change to the taxation and wealth re-distribution programs of the federal government, the Federal Reserve’s program of Financial Repression will continue to deliver an ever-larger gap between the wealthy and everyone else.

Such is the nature of the compounding function combined with the inequity of who gets first access to the newly created funds we make available in order to drive the interest rate curve into negative territory.

Are there any risks to this program? Well, the largest of them really needs to be discussed. Financial Repression has worked in the past, but it has only worked because we experienced both inflation and economic growth in equal measures.

Today, for reasons that we are still studying, neither the wage growth necessary to incite the sort of inflation we need nor economic growth have arrived as we thought they would.

If economic growth does not return, then the entire program of financial repression could well fail, and fail spectacularly. Everything depends on a return of economic growth sufficient to service the vast increases in debts that will result from the program.

But if that growth does not materialize? If the world is now stuck in a ‘New Mediocre’ of low growth then one risk is the possibility of a crisis that will be rooted in a permanent loss of confidence in debts of all forms, but government debt specifically. Down that road lie currency crises, and a wide variety of related financial upheavals the final result of which is what most will experience as a massive destruction of wealth.

We are working hard to assure that these risks are well contained, but you should be aware that they exist

After all, this is all of our futures that we are experimenting with and we do not have a playbook that we can follow here in 2014. We are in wholly uncharted territory. The exact arrangement of conditions we see across the global landscape is brand new.

We’re sorry to have to be in the position of engineering Financial Repression, but we felt there were no other options before us and we hope that you agree that a slight yearly discomfort to almost everyone is preferable to a major disruption to our way of life, our political system, and the possibility of worse things.

Is this fair? No. Was it avoidable? Yes. Is there anything we can be doing differently today? Not that we are aware of. The choices are between bad, worse and utterly terrible. We're choosing the bad path, and we hope you’ll agree that this is the best we can do at this point.

But you deserve the truth because it’s already completely obvious and available for anybody with access to a computer. Since we are all in this together and we’re all being asked to sacrifice in some way, it's much better that we all agree on the treatment plan.

It’s not a perfect plan, far from it. But considering the alternatives, this is the best one on the table.

If you want to make it more fair, more equitable, and with an eye towards building to a future in which we can all share some hope, you’ll need to turn to your policy makers and ask them to work from the fiscal side to correct what they can. Without a profound realignment of priorities, we’ll just get more of the same and, truth be told, eventually more of the same turns into a fiscal and monetary disaster about which nothing can be done except absorb the pain and loss that it will bring.

Conclusion

Context is everything. The growing gap between the very wealthy and everyone else is a consequence of Fed policy.

Whether you decide to be shocked, angry, or scared by Janet Yellen’s recent speech is up to you. Personally, I'm pissed off at being lectured to that falling further behind the super wealthy is my fault for not investing enough in my kids, not being entrepreneurial enough, and not having wealthy parents.

That level of ‘blame the victim’ is psychopathic, utterly appalling, and I reject it on every level. Worse, the level of trust destruction that happens with such a tone-deaf speech stains our entire national leadership. It is the modern version of Let them eat cake.

Once an institution, be it royalty of old or the Fed today, gets so far off the rails that they cannot locate their own role in the misery they see around them, it’s a sign of a huge problem for that society.

Ms. Yellen should not be allowed by anyone to get away with such a patently and provably false set of arguments. She should have been soundly booed off the stage and the President should be asking for her resignation immediately.

But we’re so far down the rabbit hole that almost nobody blinked an eye at the speech, and thought it perfectly normal.

For you personally, you need to be aware that the debts, deficits and liabilities across the entire OECD world are continuing to grow at a far faster pace than GDP, and far faster than oil production and discoveries of low-cost oil reservoirs (those schooled in net energy understand this to be the real issue), and that the most likely outcome, someday, will be an extraordinary financial accident.

It will be called something else — a period of wealth destruction — but for those who can see it coming, it will actually be period of massive wealth transfer.

And we'll keep up our efforts on how to see clearly amidst the intentional obfuscation, to help those aware to the situation avoid ending up on the wrong side of that transfer.

[/rant]

~ Chris Martenson

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96 Comments

  • Mon, Oct 20, 2014 - 5:40pm

    #1

    Wendy S. Delmater

    Status Diamond Member (Offline)

    Joined: Dec 13 2009

    Posts: 1418

    Bravo, Chris!

    Honestly, it's the way savers that are elderly are getting hurt that angers me the most. My in-laws, in their 80s,  are only suffering-free because they had immense savings to begin with, but it's affecting their capital – of course. I'm the only person in the family my father-in-law takes financial advice from, and it's almost all due to the schooling I've gotten here a Peak Prosperity.

    Let's hope a little financial sense breaks out in Washington and around the world, but I am not holding my breath.

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  • Mon, Oct 20, 2014 - 6:34pm

    Reply to #1
    jennifersam07

    jennifersam07

    Status Member (Offline)

    Joined: Oct 14 2012

    Posts: 115

    Bravo

    My husband (80s) and I (60s) were just discussing how much income we would have if interest rates were 5% the last 5 years. We would be in a completely different financial situation, with room to spare in educating the kids we adopted and living comfortably. Now I will likely outlive the money and have to live with one of these poor kids, drooling and babbling. Sad. This is while the bankers buy yaghts and fine art. To the barricades. Seriously.

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  • Mon, Oct 20, 2014 - 7:20pm

    #2

    davefairtex

    Status Diamond Member (Offline)

    Joined: Sep 03 2008

    Posts: 3156

    financial repression

    Great article, I especially like your version of Yellen's speech.  🙂

    The issue I see is, this isn't just a sovereign debt issue, the way it was last time (i.e. after WW2).  We also have a private debt issue too.  And peaking resources.  How does that affect the plan?

    Here's a chart of "effective real rates" that I generated using my longest-lived time series.  Its imperfect (since it uses the normal CPI) but its interesting anyway:

    GS1: "1 year treasury rates"

    CPIAUCSL: CPI-U

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  • Mon, Oct 20, 2014 - 7:43pm

    #3

    thc0655

    Status Platinum Member (Offline)

    Joined: Apr 27 2010

    Posts: 1482

    Clear the decks!

    In the US corporate world and the US military, when it becomes generally known that the leaders have led the institution into such a predicament as you describe (your hypothetical honest Fed Chair speech) it is common practice to terminate the CEO or the commanding officer and a significant number of second level executives.  At least, in the past that's often what happened.  (In Japan, the tradition is much more severe and requires the suicide of the executive!)  And it makes sense: they steered the ship onto the rocks so they can't be trusted and should be sacked.  To leave them in place is simple moral hazard.  This sometimes still happens in the US military, but it has become quite rare in US politics and corporations.  In fact, the politicians get reelected and the corporate leaders get huge bonuses.

    If we don't find an honorable and legal way to jettison, shame and punish those who led us into this predicament and install new, untainted leaders, there may come a time when they are removed by mob violence or civil war.  I think I can see which path we are on.  "To the barricades" indeed.

    "Welcome to the Hunger Games.  And may the odds be ever in your favor."

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  • Mon, Oct 20, 2014 - 7:48pm

    #4
    phildenn

    phildenn

    Status Member (Offline)

    Joined: Sep 02 2009

    Posts: 0

    Endgame

    Great article as usual. It's tragic that people — even my extended family who I consider to be above average intelligence and education — have absolutely no idea what's going on. The good news is, it's all careening towards a collapse of the paper money system. My children (3 and 5) won't have to pay these debts because they are denominated in a currency that will be inflated away. Message to savers: Save precious metals. I don't see any other way for this to end then a return (post-collapse) to gold-backed money.

    Phil

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  • Mon, Oct 20, 2014 - 8:00pm

    #5
    VeganDB12

    VeganDB12

    Status Bronze Member (Offline)

    Joined: Jul 18 2008

    Posts: 110

    Out of the FOG

     Susan Forward & Donna Frazier refer to FOG in "Emotional Blackmail: When the People in Your Life Use Fear, Obligation, and Guilt to Manipulate You."  Now I see the Fed is committing emotional blackmail with full malice aforethought.

    I find that righteous rage (my own and others) helps pull me out of the FOG so thank you Chris.

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  • Mon, Oct 20, 2014 - 8:40pm

    #6
    Time2help

    Time2help

    Status Platinum Member (Offline)

    Joined: Jun 08 2011

    Posts: 2261

    Another Exponential Function

    Add another one to the list.  

    Turning the hook towards Peak Evil.

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  • Mon, Oct 20, 2014 - 9:06pm

    Reply to #1

    Chris Martenson

    Status Platinum Member (Offline)

    Joined: Jun 07 2007

    Posts: 4703

    I must confess...

    [quote=Wendy S. Delmater]Honestly, it's the way savers that are elderly are getting hurt that angers me the most. My in-laws, in their 80s,  are only suffering-free because they had immense savings to begin with, but it's affecting their capital – of course. I'm the only person in the family my father-in-law takes financial advice from, and it's almost all due to the schooling I've gotten here a Peak Prosperity.
    Let's hope a little financial sense breaks out in Washington and around the world, but I am not holding my breath.
    [/quote]
    I have to confess that this entire subject really gets under my skin.  Perhaps it's the whole Virgo/scales-of-justice thing, but the fact that the Federal Reserve decided to throw savers and those living on fixed incomes under the bus in order to repair big bank balance sheets and enable greater government deficit spending is just maddening.
    And to rub salt in the wound, the big banks went ahead rewarded themselves with record bonuses in the years that followed.  You know, because they deserved it.
    Through it all the Fed acted dumb, pretending they had nothing to do with the big bank's behavior or bonuses and disavowing any connection to real hardship being experienced by those living on fixed incomes.
    Ever been lied to by someone when you know and, worse, you know they know you know it?
    Well, I find that a maddening experience, and that's exactly what Ms. Yellen is doing here.
    Banks' new motto:  "Heads we win, tails you lose!"

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  • Mon, Oct 20, 2014 - 9:26pm

    #7
    macro2682

    macro2682

    Status Gold Member (Offline)

    Joined: Sep 03 2009

    Posts: 320

    What to do...

    So how do you beat a negative interest rate environment?  How do you profit from the conditions of financial repression?

    we all know that gold effectively pays a coupon when real interest rates are negative by a greater percentage than storage costs.  So that's one option, what are others?

    Forget about growing your savings (that's what they want you to do).  Your financial security is a fraction: savings/expenses.  If you want to make that number grow, focus on reducing your expenses.  Reducing a denominator does a lot more damage than increasing a numerator.  Cost savings return is more valuable than investment returns.

    Borrow money, (aligning your interests with those of your government) and use the money to invest in "cost reduction" rather than "pile expansion."  Solar panels might give you an 8% IRR. That's a much more secure return than the stock market can promise, and it hits you in the denominator.  Just make sure you keep enough money liquid to cover the debt, otherwise the next shakedown might cause you to loose your asset.

     

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  • Mon, Oct 20, 2014 - 9:36pm

    #8
    macro2682

    macro2682

    Status Gold Member (Offline)

    Joined: Sep 03 2009

    Posts: 320

    What to do...

    Your incremental $20K should go on your roof, not into the stock market.  Or if you want to be more aggressive, put the incremental $20K into the stock market, borrow against it, and buy solar panels with the borrowing.  If the market tanks, just default on the loan and surrender your stock portfolio.  But don't forget to incorporate!

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  • Mon, Oct 20, 2014 - 9:39pm

    #9

    AKGrannyWGrit

    Status Bronze Member (Offline)

    Joined: Feb 06 2011

    Posts: 464

    Great article!  The analysis

    Great article!  The analysis of Ms. Yellon's speech was very interesting.  I cant help but wonder if someone didn't write the speech for her as it's hard to believe someone in her position can be so apathetic, arrogant and insensitive. Glad Dr. Martenson wrote about her speech.

    Edgar Allen Poe's short story "The Fall of the House of Usher" in my mind, is a great analogy for what is going on today. I remember the 1960 movie "The House of Usher" with Vincent Price. Set in a magnificent mansion the "decay" of the Usher family is paralleled by the disintegration of the mansion. It was thought that the house and the family shared a soul. The dreary landscape around the Usher mansion is compare by the narrator to the sickness caused by the withdrawal symptoms of someone addicted to opium.

    Our leaders, the Fed and the Central Banks and all of us are inexorably linked.  We, I believe, all make up the soul of our nation and like the sick Usher family and the mansion that slowly dies through self destruction our nation is slowing dying. Just as there was a reference to opium we too have many  addictions – to money, power, control, being entertained, to name a few and our withdrawal will be painful. The disintegrating house and destructive behavior of the Ushers symbolize our country, at least in my mind. 

    Thankfully, due to PP, those of us who regularly follow this website have been given the gift of insight so we have some time to prepare ourselves before the mansion collapses.

    Thanks for taking the time to share your thoughts.

    AK GrannyWGrit

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  • Mon, Oct 20, 2014 - 9:41pm

    Reply to #2

    Sterling Cornaby

    Status Bronze Member (Offline)

    Joined: Sep 05 2012

    Posts: 150

    Love the graph...

     
    My "graph head" made me do this to this graph, so I thought I should share —
    Green means savers are 'winning'
    Red means savers are 'losing'  
     

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  • Mon, Oct 20, 2014 - 10:12pm

    Reply to #2

    Chris Martenson

    Status Platinum Member (Offline)

    Joined: Jun 07 2007

    Posts: 4703

    Thanks! Very helpful

    [quote=Sterling Cornaby]My "graph head" made me do this to this graph, so I thought I should share —
    Green means savers are 'winning'
    Red means savers are 'losing'  
    [/quote]
    My eye's did that for me, but less well.
    Also, as Dave warned, his chart uses CPI to draw the winning/losing line.  
    Feel free to mentally adjust that line upwards as you see fit.  By my rough eyeball estimations, moving that line north by 1% means that most of the time savers were losing.
    A 2% hike in the line means that on average, over the last 60 years, savers were losing.
    This is why misstating the CPI by 1% or 2% is really a very big deal.  I know a single percent doesn't sound like a lot, but it really is.

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  • Mon, Oct 20, 2014 - 10:56pm

    #10
    DRS78750

    DRS78750

    Status Member (Offline)

    Joined: Aug 30 2009

    Posts: 3

    Graphs with Shadowstats CPI calculations??

    Could you graphing gurus use the shadowstats.com data series to create those great graphs.

    Dave

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  • Mon, Oct 20, 2014 - 11:56pm

    #11
    nyfarmer

    nyfarmer

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    Joined: Oct 20 2009

    Posts: 1

    Debt, entitlements, and work ethic

    If the debt service and entitlement payouts race ahead of the the inflation gambit is that the end game ?

    The other issue is that if enough people catch on to the gamed system walk away from their obligations will this eventually lead to overall civil upheaval ?  Why work if the accepted norm is to simply take what you feel is entitled to you.

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  • Mon, Oct 20, 2014 - 11:57pm

    #12

    Arthur Robey

    Status Platinum Member (Offline)

    Joined: Feb 03 2010

    Posts: 1814

    "Smokin!"

    (Loki from The Mask)

    Lizards, Lies and Larceny.

    (Reality ends here. Please mind the gap.)

    I have listened to this hypnotic computer voice twice. The first time I fell asleep, so I plowed through it again with determination.

    Let us leave aside the issue of literal truth for a moment and concentrate on the content of the deepest workings of one of one of our finest schizophrenic minds.I choose to interpret the artwork as a metaphore. My amateur analysis is this:-

    • There are "superior beings" (The uber rich and their marionettes. The Deep State.) who really understand what is going on and are ruthlessly exploiting their creation, the profoundly moral and profoundly thick humans.
    • That there are various groups of these lizards that are going to wage war using their livestock. (That's you baby)
    • And that there is some energy technology waiting in the wings, but we have been bred to be too stupid to understand it.

    The reason I put finger to keyboard is to emphasize that at a deep psychological level the great unwashed understand the situation and are expressing their understanding in the usual way that these things come out- in UFO's, Lizards, aliens, gods etc.

    This phenomenon should be taken seriously because it is these cattle who have the pitchforks. It is the Common Meme.

    One last comment:- Make use of the fact that a strawman was created at your birth in order to circumvent your Common Law rights and to burden you with Corporate law. This avenue is available to all of us.

     

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  • Tue, Oct 21, 2014 - 12:23am

    #13

    davefairtex

    Status Diamond Member (Offline)

    Joined: Sep 03 2008

    Posts: 3156

    effective real rates (shadowstats)

    DRS-

    Here is the chart using the Shadowstats CPI.  I don't believe in the whole shadowstats CPI – SS CPI right now is 9.08%, and that doesn't agree with the billion prices project, which I think is probably the more accurate representation of actual price inflation in the US.  I also don't agree with the standard CPI-U, and Chris's main point that 1% matters a whole lot over a 30 year period is quite important.

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  • Tue, Oct 21, 2014 - 12:35am

    #14

    davefairtex

    Status Diamond Member (Offline)

    Joined: Sep 03 2008

    Posts: 3156

    savers always lose

    Chris-

    Savers (almost) always lose, since savings income is taxed at ordinary income rates.

    And that's one of Dan Amerman's main points.  We must pay attention to actual after-tax rates of return when looking at financial repression, since that's one of the government's tricks.  They effectively tax inflation.

    He's got some good math that shows this.

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  • Tue, Oct 21, 2014 - 1:46am

    Reply to #2
    dryam2000

    dryam2000

    Status Bronze Member (Offline)

    Joined: Sep 06 2009

    Posts: 255

    Do you think there's a goal to have an uneducated populace?

    [quote=cmartenson]A 2% hike in the line means that on average, over the last 60 years, savers were losing.
    This is why misstating the CPI by 1% or 2% is really a very big deal.  I know a single percent doesn't sound like a lot, but it really is.
    [/quote]
    Maybe this is why the mainstream educational system has been in a nose dive.  Maybe the intent is to purposefully have an uneducated populace.  I was talking to my girlfriend about her kids and some difficulties they were having in school.  I told her to get the textbook & I'd help them out.  To my surprise, the kids had no textbooks.  I then started talking to my colleagues at work, and they told me about the new core curriculum and the insane way math is taught these days.  One example was that of linear lines.  Instead of teaching y=mx+b and learning about the slope of a line, the kids were being taught to literally guess the value of y without solving the equation.  My physician/engineer friend said his daughter was literally scolded at school for giving the exact right answer after he taught her the real way to do it.  I heard similar stories from no less than 5 other physicians & 3 of them were also engineers.  When things seem to be totally insane I always question why.
    I hate to think in terms of conspiracy theories, but it's hard for me to not consider nefarious intent when it comes to what's being taught in K-12 these days.  Has anyone had similar thoughts?

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  • Tue, Oct 21, 2014 - 2:00am

    #15
    Hotrod

    Hotrod

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    Posts: 161

    Welcome aboard!

    Chris,

    You have grown in your thinking (by way of meticulous research) to accept the fact that the game is rigged and the wealthy and powerful elite really do run the show.  Bravo!   Now, what to do? 

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  • Tue, Oct 21, 2014 - 2:21am

    #16
    Abandon Ship

    Abandon Ship

    Status Member (Offline)

    Joined: Apr 21 2009

    Posts: 19

    Peak financial injustice

    Great article Chris, as always. Like so many, I feel that I'm under financial attack. Being prudent and frugal are being punished by inflation. Being profligate and immoral are being rewarded. This is injustice on a giant scale. It is exponential in nature and will peak eventually. What this looks like on the other side of the peak is anyones guess but history provides a guide to the many directions it may go. Examples include, the French revolution, the ascent of Nazi Germany and the Russian revolution. If the elite wants to maintain the status quo, then they have no choice but to keep on printing at an accelerating rate. This will lead to to something that history tells us will probably be very unpleasant. The only questions are when and what will transpire after the peak of financial injustice.

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  • Tue, Oct 21, 2014 - 7:39am

    #17
    RUSS SMITH

    RUSS SMITH

    Status Member (Offline)

    Joined: Oct 21 2014

    Posts: 1

    Democracy Vs. Republic Etc.:

    Hi!, Patrons Of Peak Prosperity Et Al:

         Mr. Martenson:  Yes, we are under attack by financial repression that leads to many other too many to mention monetary effects that repress jobs creation known as unemployment and the statistics of which as measured by ShadowStats.com are greatly fudged downwards but this doesn't stop news letter writers nor the major media commentators from using those fudged figures within their essays does it, in order to downplay the realities harming OUR citizens capabilities towards making an honest living etc.  If you or your readers are unaware of The American Institute For Economic Research in Great Barrington, Mass. (888)528-1216, contacting them could perhaps add to one's learning curves on the subjects you have covered quite thoroughly except for OUR differences regards the true meaning of Democracy vs. a Republic form of government.  When we say OUR pledge allegiance to the Flag of the United States of America we do not say do we "and for the Democracy for which it stands" but instead we say "and for the Republic for which it stands" do we not?  Anyone interested in pursuing information from the American Institute For Economic Research by calling their toll free telephone number, might ask about their publications (it's been awhile back sense they have resent me these articles and so their present offer of this information is not known) (1): Fungus On A Muck Heap which covers most of the issues you bring up in your article here today etc.; (2): Stand Still Little Lambs To Be Shorn covering the effects of inflation we have to live through; (3): How Do We Know We Know Anything?  Once you contact this non profit, educational organization, they will help contribute much more to your awareness regards present economic events with many statistical charts demonstrating in which direction they see OUR economy heading measured by either expanding or contracting graphs.  The price for receiving their online monthly reports is very light on your pocket book plus you have a choice to receive their Research Reports plus an Investment Guide helping you steer your coarse towards Peak Prosperity based upon your individual finances.  My deceased mentor from Holland helped me entertain my initiation into receiving their publications many years ago.

         Perhaps it would be helpful to some of you who read these posts to understand that in the New Testament Jesus constantly upbraided those hearing Him using the worlds "Because of your hardness of heart etc." which is to say His listeners would not or made no attempts to find the inner resolves to change their complicated normal biases such as the Sadducees who would not change their attitude that there is no resurrection from the dead and even though Jesus took measures to assure them (and US) there is; when He raised His friend Lazarus and restored Lazarus to his sisters Martha and Mary in St. John; Chapter 11.  Are we to think that OUR government and the FED. upon whom OUR government relies for its' spending habits will repent of their dependency upon one another for monetary survival or instead alternatively take down the whole society with them?  In Article 1; Section 10 of OUR US Constitution it calls for we the people to have only gold and silver coins as OUR everyday spending money with no paper money allowed doesn't it?  Had we the people and OUR government abided by this Constitutional edict, no way would there have been a Federal Reserve System that deals only in paper money, digital (so called) money and ATM money etc. Neither could there have existed the Bretton Woods Agreement of 1944 establishing the US $ as the world's hedge money based upon the US $ being redeemable in gold, because the gold in Fort Knox etc. would be in the pockets of we the people where we can keep track of it from one generation to another. The government, being restricted regards how much money it could spend by Natural Law, due to the small amount of gold and silver it could spend from receipts annually, could have NEVER achieved almost an 18 trillion $ deficit based exclusively upon spending gold and silver only.  The myth has been floated therefore that, based upon the limited gold and silver available for such a use, this monetary restriction would starve the world for liquidity but up until President Nixon closed OUR US Gold Window August 15, 1971, the US $ was supposedly backed by gold was it not and the world had plenty of liquidity upon which to make both national (domestic) and international (foreign) transactions.  Now that we have lost OUR we the people grass roots protection of the Constitution and we the people bear the consequences of their (government and FED.) inflation, we are malcontent and venting using many words which do nothing to alleviate the true nature of OUR monetary problems except but for feeding the malcontent of others like ourselves. We are now continuously required to live year by year servicing OUR inflationary or even deflationary entrapment. My mentor had me study Fiat Money Inflaton In France by Andrew Dixon White who was the co-founder of Cornell University.  White's essay covers how the inflation originated, what the inflation brought to the people of France (including the French Revolution and its' reign of terror etc.) and how it ended when Napoleon demanded the French Ministry pay their troops in gold coin rather than their depreciating paper money that robbed the troops of buying power whenever they could try and spend their service pay in the commercial centers plus the printing press plates were smashed in a town square in the center of Paris and those doing the printing of the depreciating paper money were finally hung from light posts.  That's when finally France commanded enough gold in her treasury to keep her finances on the straight and narrow road to prosperity but as we all know only for a certain amount of time.

         Mr. Martenson, a Democracy is rule by the majority vote; while in a Republic individuals make up their own rules on their own property, because they are the owners of the land upon which they pay taxes and remain the kings of their own castles.  Yes, in a Republic there can be public debates with rebuttals but NEVER have one's personal opinions over ridden by the masses voting against one's own personal ideals for their way of life which is totally private unto themselves and their families. If you for example you want to have an American flag waving in the breeze at your place, by majority vote the masses can not vote against and eliminate your decision on your property which is private. This is not to say we should eliminate the proper decisions made possible by common sense but that we are avowed to protect one's private, common sense from others' potential negative biases etc. from impinging upon OUR privacy. How would any of us feel for example if we lived in a community highly populated with modern day Saducees who voted we must be a member of their beliefs in total agreement of pack up and leave town?  How would that set in but in a Republic that could NEVER be given a chance to happen.  This could get into the many realms of psycho political operatives determined to rule, control and direct the actions of various groups of people.  We might even call some of these groups of people by name, by calling them political actions groups or lobbyists?  The list of possibilities is forever and ever endless!!        

    CONCLUSIONS:  My mentor agreed with me that the FED. is somewhat like the Trojan Horse used to mask its' real purposes which is to rob the people of these United States for its' benefactors the International Banking Communities worldwide via inflation that funds deficits upon which we the people pay an annual, massive interest, funding wars whether won or not, because there are enormous amounts of money to made cultivating fears that lead to war sales of planes, tanks, ships, munitions etc., unemployment spawning food stamps, welfare projects and even student debts that add to interest payments paid to them, bailout backstops for too big to fail banks, huge corporate bonuses for which we the people pay while regular employees can hardly keep food on the table for themselves/children etc., awards to major, favorite government contractors who stand to gain from the impoverishment of we the people, etc., etc., etc.  As the old saying goes: "around and around she goes and where she stops nobody knows!"  However, one thing we do know is that this process is many decades long in the tooth and would have been totally eliminated had we the people and OUR government stood by and protected OUR U S Constitutional outlines given to US all freely by OUR Founding Fathers but as Doug Casey has stated many times: "The Constitution Of The United States Has Become A DEAD LETTER!"  My letter here and yours, Mr.Martenson, will make absolutely no difference in the final inning of the once great American Empire's decline.  Dr. Franz Pick wrote a book titled: THE TRIUMPH OF GOLD.  On the fronts piece he placed a picture of a tomb stone with the inscription…..US $, AN ADVANCE OBITUARY which is to say as goes the currency of a nation so goes the nation itself.  Dr. Pick use to be the world's foremost currency expert and was a consultant to major world banks regards currency fluctuations etc. Anyone can look up Dr. Pick on the internet also his book.

    RUSS SMITH, CA. (One Of Our Broke, Fiat Money States)

    [email protected]  

                 

              
         

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  • Tue, Oct 21, 2014 - 8:10am

    Reply to #2

    lake nelson

    Status Member (Offline)

    Joined: Oct 18 2013

    Posts: 1

    Correct! This is the goal of

    Correct! This is the goal of the US Dept of Education. Check out "The Deliberate Dumbing Down of America"

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  • Tue, Oct 21, 2014 - 9:57am

    #18
    bwh1214

    bwh1214

    Status Member (Offline)

    Joined: Jun 01 2011

    Posts: 39

    Haven't seen Chris Mad Before

    Certainly understandable.  I just had not seen that much emotion out of Chris before.  After what I have observed over the past 6 years I am not surprised at what Yellen said at all.  I just haven't seen it out of someone so "grandmotherly" as Chris said.  I actually don't think its in the cards at all to make a speech like what Chris wrote.  Sure we would see it as a breath of fresh air because we understand that reality.  But there are many why are happy living in the matrix and for an individual to snap them out of it would cause mass panic and anger toward that person.  Frankly I can't really blame them for allowing the reckoning to happen as a result of an economic accident then from a speech. 

     

    Not to mention I don't think that financial repression can work.  Federal debt is still growing faster then GDP.  If Financial repression is meant to lower that burden, then it is failing.  How much inflation would they need, well much more then could be politically inconsequential.  And with rates about as low as they can go the only other option would be the E dollar.  

    I want to talk about the E dollar so badly but no one seems interested.  It really is the only way I can see that can get us out of this mess, due to massive growth in the private sector not being in the cards.  If anyone is please respond. 

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  • Tue, Oct 21, 2014 - 12:08pm

    #19

    KennethPollinger

    Status Silver Member (Offline)

    Joined: Sep 22 2010

    Posts: 616

    Sure, go ahead

    Let's hear about the E-dollar.  ALL options are open at this time, no?

    Some analysts say: Get out of all debt.  Others maybe say: Do as the wealthy and governments do: take on MORE debt.  Where do ethics come in here?  Morality? Is it really EVERY man for HIMSELF? Is there a social contract?

    Play their game and make MONEY, but "lose" something much more important?

    Don't play their game and lose MONEY but gain something more valuable?

    Can we survive on "correct" values??  Whatever those are??  Your choice: FREEDOM.

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  • Tue, Oct 21, 2014 - 12:32pm

    Reply to #18

    thc0655

    Status Platinum Member (Offline)

    Joined: Apr 27 2010

    Posts: 1482

    Orwellian wet dream

    bwh1214:I read the article you referenced and almost snorted my orange juice.  It's an Orwellian wet dream for absolute control over the nation's money supply (and therefore absolute control over its population).  Of course, since the author is "a liberal" by his own description, the e-dollar would be instituted "for our own good" (as he himself states).  As they say, there is no worse form of tyranny than that which is instituted for "the good of the people."  If you think the Federal Reserve system is horrible the e-dollar would be the Fed on steroids (negative interest rates would be instituted at a keystroke and there would be no way to avoid it). And if you think about it for a minute, people would catch on that the "currency" was being quickly and dramatically debased (inflation was exploding) and they would take steps to protect themselves.  The e-dollar would make keeping paper dollars under your mattress pointless, so people would buy gold and silver and/or they would spend their "currency" as quickly as possible to buy things they need that can't be debased by e-inflation.  Voila!  E-hyperinflation.  I do have to admire the e-dollar system's ability to do in very short order with laser focus, what the corrupt Federal Reserve system has been doing ever so slowly and subtly over 100 years, bathed in the soft glow of a pink-tinted incandescent bulb.  I think the TPTB would like to do exactly what the e-dollar system would enable them to do, but they realize it would be too obvious and would be rebelled against by the whole population.  It's much better, from their point of view, to slowly rob people blind a penny at a time (like a leech) rather than to take huge bites out of their hide like a lion or a shark.
    The e-dollar, as described by the author, would mark the end of any nation that instituted it.  Revolution would result in one form or another.  I know, personally, if the US ever instituted an e-dollar I would take that as the starting bell for my race to withdraw completely from society and set up my fantasy Mad Max compound in the wilderness complete with a moat, a wall, and multiple gun turrets.
    http://www.businessinsider.com/electronic-currency-2013-11
    http://blog.supplysideliberal.com/post/50888412664/a-minimalist-implementation-of-electronic-money
    "Welcome to the Hunger Games.  And may the odds be ever in your favor."

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  • Tue, Oct 21, 2014 - 12:54pm

    #20
    JayPaul

    JayPaul

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    Joined: Aug 28 2014

    Posts: 60

    Geez, how refreshing but...

    Chris, when I read your refreshing rewrite of Yellen's speech I went "yes" but immediately thought too that we have now entered an immediate Depression too as your rewrite is NOT what people really want to hear. The other options alone would have spooked the market and cash hoarding and greed would have ruled from that moment on.

    Some asked how they should play this to win. I tried to explain after now banking over $100,000 bucks in 10 weeks, and the paranoid here took me to task, and all the followers of which you stroke so masterfully agreed by use of that "Thumbs up" tool thing so everyone follows the "moral" path. I say beyond family, screw everyone else. I want to be first mover so I can capture those things of need too weather the on coming storms with better ease. Down here at street level its just a normal response to survival, you folks act like you are aghast, and I just say "dah!". Of course the "Man" is after your cash, so am I, so beware as that will be common place forever and ever. Always has been, DAH!

     

     

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  • Tue, Oct 21, 2014 - 1:01pm

    Reply to #18

    Quercus bicolor

    Status Bronze Member (Offline)

    Joined: Mar 19 2008

    Posts: 195

    bwh1214 wrote:Not to mention

    [quote=bwh1214]
    Not to mention I don't think that financial repression can work.  Federal debt is still growing faster then GDP.  If Financial repression is meant to lower that burden, then it is failing.  How much inflation would they need, well much more then could be politically inconsequential.  And with rates about as low as they can go the only other option would be the E dollar.  
    [/quote]
    I agree, it won't work to keep this game going in the long term or even in the mid term. 
    But what can it do? 
    It can delay the day of reckoning – a goal of many in Washington (and perhaps an unconscious goal of many outside of Washington). 
    More important, it sure is an effective wealth transfer tool, certainly a goal of those who are on the receiving end of the transfer.  They have both the motive (hoarding wealth) and the means (influence over the political process) to pull it off.
    I think we're mostly in agreement about these points, but I thought I'd mention them again since the conversation seems to have focused on the goal of reducing government debt loads, with wealth transfer as an unfortunate consequence rather than an explicit goal of those with power and influence.

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  • Tue, Oct 21, 2014 - 1:03pm

    Reply to #18
    bwh1214

    bwh1214

    Status Member (Offline)

    Joined: Jun 01 2011

    Posts: 39

    KennethPollingerTake a look

    KennethPollinger
    Take a look at the link posted by thc0655 from business insider and it will explain the E dollar concept. 
    thc0655 and KennethPollinger thank you so much for your interest, as you guys know sometimes it is difficult to discuss these ideas. 
    thc0655 I think you may be looking at the E dollar to much from your perspective.  I agree that I would react similar to the way you would but I don't think the general population would.  I actually wrote a book/paper on my view of economics, and wrote on the topic of the E-dollar as a possible outcome.  Below are my thoughts, please read some or all and respond.  Thank you so much for your interest.  Oh and the Mexicans are actively looking at instating an E Peso as we speak.  Imagine being able to eliminate the zero lower bound.  Chris has discussed it as an issue the powers that be have not found away around, I think the E dollar solves this as well as many other problems.
    The E Dollar not only addresses the debt and maintains the unbreakable covenant of historic shifts in US monetary systems.  Namely it allows the banks and government to get stronger.  I tried to respond to you a couple times with the link to the story but I guess the filter blocked it.  So if you would, type in There is an Electronic Currency that can save the Economy – but its not Bitcoin.  The business insider story on the E dollar will pop up.  
    Talk about a patch! There are plenty of problems with this article such as how they don’t indicate why borrowers will not borrow to invest, but we know it is because there is already too much debt.  They also use the word invest in place of what should be the word borrow.  Insert borrow for invest and the story will make more sense.  The cause of the slowing or stopping of borrowing to invest is not some strange physiological new normal; it’s a rational realization that the nation as a whole, in all sectors, already has borrowed enough. But this solution makes perfect sense for central planners in the Fed, member banks, and the government.  So much so that I think it is going to be put in place in the not so distant future, although that’s just an educated guess. 
    The reasons start with the fact that this plan maintains the unbreakable covenant of changing monetary systems, the powers that be, the government and the banks get stronger. After a number of years eventually paper dollars would lose so much valve they would go extinct.
    The list of ways this helps the government is long.  First, since eventually the old paper dollar would go extinct and all commerce would be electronic, it would be easy for the government to track money thus easier to tax.  This would certainly please tax and spend liberals who try and vilify anyone who attempts to avoid taxes, even though that is what this nation was founded on. 
    Another benefit of being able to track the new e-dollars is black market transactions in dollars would disappear.   This would delight right of center.  Without cash, illegal drug trade would have a major barrier.  An even a bigger feather to the right is that it would be more difficult for people to hide secondary income thus take advantage of entitlements while working “under the table”.  Illegal immigrates would also have a much more difficult time living in the US, talk about a plus for the conservatives.  The government also wouldn’t need to spend money to create new bills and coinage.
    Finally the biggest pro is the governmental debt will be priced in the “old” dollars, meaning the burden of the national debt would decrease by as much as the Fed decides to set the negative interest rate at annually.
    So we’ve pleased both sides of the isle, now on to the banks.
    Well the benefit to the banks is quite clear, not only are you forced to keep your savings with them to speculate with and collect their standard fees on, but they also will be able to charge you interest for the privilege. 
    Some of the concerns that run a distant third, those of the people of the United States COULD also be addressed.  I emphasize COULD because they will only help a certain portion of the population and only if the powers in the government and banks feel as if they need more popular support for the E dollar.  As with the government debt, the new system COULD allow ALL old debt to be priced in the old dollars thus lessening the burden on anyone holding previous debts, and with a large portion of the population with underwater home mortgages and huge student loans I’m sure the relief would be welcome. 
    The losers in this would be those who were prudent and didn’t take on large debts but since there are far more debtors then savers, politically the plan would still be a winner.  I have to admit before learning the truth about our system I racked up my fair share of debt and a little piece of me would be relieved.
    Though I think the Government would allow all debt to be priced in the old dollars the only debt that must be would be the government debt.  It would certainly be fairer to price all old debt in the old dollars, but I would not be surprised if the banks were able to use their substantial influence to swap old debts into the gradually more valuable E Dollar.  This is historically what has taken place when there have been failed currencies, and even though the debt agreements may have been made in those currencies the banks attempted, and were often successful in demanding payment in gold.  Even the most powerful such as President Thomas Jefferson was subject to such a debt payment.  
    As was shown the Government and banks have no problem not only giving the citizens the short end of the stick in such monetary changes, but actions tantamount to theft are commonplace. An unfair arrangement surrounding the E Dollar would not be surprising. 
    The other interesting thing that came out of the above story was the reference to bitcoin, and more importantly how the US government reacted to the Crypto Currency recently.  
    When competing currencies to the dollar arise the governmental response has always been the same.  The threat is violently destroyed.  An example is the Liberty Dollar.  The Liberty Dollar was a silver backed currency that the founder, a Mr. Bernard von NotHaus, began to circulate to allow users an alternative to the dollar.  Ironically using the same medium to back the currency that was the original definition of the US dollar, a fixed weight of silver.  
    This silver was stored in a central location while the paper currency circulated and could be redeemed at any time for the physical metal.  The owners of this silver were not the originators of the currency but those who were using it as an alternative to the dollar.
    Von NotHaus was arrested by the FBI, tried and on March 18, 2011, was pronounced guilty of "making, possessing, and selling his own currency".   Take note that he was not charged with fraud but making and selling his own currency.   The silver backing the notes was seized and is still held by the government to this day. There was no due process for the rightful owners of the silver, not Von NauHaus, but the holders of the Liberty dollar certificates.
    One of issues held by the government was the use of the name “dollar”, as if this word held special meaning.  The simple solution would have been to have the creators simply change the name, not throw the originator in prison, and steel property.  No this was done to set an example to those who would challenge the dollars homogony.  The point is any true threat to the dollar would be crushed in short order.
    Now this next part is pure speculation but, why, would bitcoin, something that is touted by many as a direct competitor and even destroyer of the dollar be allowed to survive?  In addition, during the hearings held in congress on bitcoin, there were many positive things said.  According to the headline of a Bloomberg story “U.S. Agencies to Say Bitcoins Offer Legitimate Benefits” or the Wall Street Journal “Authorities See Worth of Bitcoin”.  It was referred to in the hearings as digital currency, and a car dealership in California even called it legal tender in the media. This struck me as very strange considering I knew of the treatment of other “competing currencies”
    This cordial treatment of bitcoin is confusing.  I came to the conclusion that maybe the US government felt that they could control bitcoin.  They could have easily noticed the possible threat of bitcoin early on and decided to obtain as many as possible. Bitcoins come into existence through a system of electronically “mining” them, by which computers solve math problems and in exchange gain the currency similar to real world gold or silver mining.  The mining of bitcoins is how the first owners come to possess them.  They have to be initially distributed somehow.  Well the US government has pretty much more computing capacity than anyone so they could have obtained them through mining.  They could have also bought a significant amount at under a dollar, where the price was for a significant time.   This in addition to the governments seizure of a huge number of bitcoin after the shutdown of the Silkroad, a black-market using bitcoin in drug and other illicit trade, could allow the US government to hold 70, 80 or 90% of the bitcoin market and no one would be the wiser because of the claimed anonymity of bitcoin. 
    I thought that they could then use this market share to crush the market and claim “see bitcoin doesn’t work”.  But this left a big hole in my thought process.  What then, what if bitcoin survived and after the government used its bitcoin to crush the market, bitcoin rebounded and started competing with the dollar again.  Government agencies officially classed bitcoin as a money service similar to money gram or Paypal, not a currency which is how it is being used.  The FBI claimed that the Liberty Dollar was illegal because it was a currency.  Bitcoin is clearly a currency but instead of classing it as a currency and thus having to shut it down under the same laws that brought down the Liberty Dollar, the government went out of its way to class it as a money service.   Why would it not be crushed swiftly like the liberty dollar?
    The answer came to me while reading about the E dollar and listening to an interview of one of the creators of bitcoin, Gavin Andresen by Chris Martenson.  Mr. Andresen was questioned as to how other crypto currencies, which have popped up by the dozens, would compete against bitcoin.  He indicated that bitcoin’s design and source code could not be improved upon enough to overcome bitcoin’s “first kid on the block” advantage.  He said this with one caveat, if a government created a crypto currency similar bitcoin, supported by tax collection and legal tender laws it would have clear advantages over bitcoin, and take back market share.
    This and reading the story on the E dollar made a possibility clear.  The government could easily crush bitcoin price with their market share, say it is illegal, and make a few examples sending people to prison, sizing assets ect, all in the name of protecting the American people, for any number of reasons.  At the same time they could say, as in the congressional testimony, that bitcoin had many benefits but was too dangerous without oversight.  But with the introduction of a US crypto currency, the E Dollar, all of those benefits would be realized without the risk because of additional regulation and safeguards.  Point being, they may be allowing bitcoin to soften people up to the idea of a purely electronic currency, and that is why it is being handled with kid gloves. 
    The hypothesis on bitcoin may be reaching, but something certainly feels off with how the government has handled bitcoin.  The E dollar is a real possibility though, and if you’re still not convinced, consider how you think an everyday business man living in 1926 would have responded if told the US Government would take all of the citizens’ gold coins in 1933 under the harsh penalty of 10 years in prison?  How about if you told someone living in 1961 that ten years later the dollar would not be backed by gold and would, in fact, be backed by nothing.  Still skeptical of the possibility of the E dollar and of a bank taking a little from your account each month, and paper dollars going away?  Well half of that was just introduced in May 2014 when a central bank just as large as the FED, the European Central Bank, the issuer of the Euro, just introduced negative interest rates, and from the responses on CNBC it is a great move. Cash transactions in Europe are also illegal over 1000 Euro. I don’t think the American people will even bat an eye at the E dollar.
    So if this new E dollar system addresses main issue with the current economic environment, namely too much debt, which under the current system cannot be solved, why should it be resisted?  Well first, the E dollar would still be a debt based dollar and future generations, our children and grandchildren, would end up in the same place we are today in twenty, fifty or one hundred years. Second and most importantly it is still rooted in fraud just like the goldsmith loaning what isn’t his to loan.  Fraud should not be addressed by finding a patch to allow it to continue, you stop it.  Granted rash decisions have no place while we are in such a precarious position, bold yes; rash no. 
    The E Dollar could be used as a bridging tool to maintain a functioning economy while transitioning to a more sound monetary system, but any such attempt should be treated with skepticism and monitored closely. 
    There is another challenge to a shift to the E-Dollar, will the international community accept being paid back in the “old” dollars that would decrease in value.  Other nations are certainly relatively more powerful compared to the last major monetary shift when the US decided they would not redeem dollars for gold, and probably are developing their own plan for how to deal with the inevitable failure of the current monetary system. Unlike shutting the gold window in 1971, the rest of the world may not just “go along”. Dealing with interest rates and the bond market would also pose significant challenges.
    The E dollar may never come to fruition, but one thing is for certain the current monetary system is unsustainable, and will be overhauled as it was in 1913, 1933, 1945, and 1971.  Based on stresses now being observed in our economy this overhaul could be in the relatively near future, and due to larger imbalances will be more profound.  To be best prepared for and even prosper in this new economic system it would be invaluable to understand the forces that made it necessary and that the powers that develop it DO NOT have your best interest at heart.  

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  • Tue, Oct 21, 2014 - 1:10pm

    #21
    bwh1214

    bwh1214

    Status Member (Offline)

    Joined: Jun 01 2011

    Posts: 39

    Quercus bicolor Take a look At the E Dollar

    http://www.businessinsider.com/electronic-currency-2013-11

    Quercus bicolor.  Since you agree with my view that Financial repression will not work take a look at the link above as well as my comments on it in post 29 and let me know your thoughts.  

    I love this.  I have been trying to start a dialog on the only way I see the govt getting this thing under control, the E Dollar, for over a year but have not gotten anyone to have an intelligent discussion. 

    Guys thanks a lot for restoring some of my faith in humanity.   Frankly I would love it if Chris would put my thoughts in a story on his site or write on the subject himself.  

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  • Tue, Oct 21, 2014 - 1:32pm

    #22

    Christopher H

    Status Bronze Member (Offline)

    Joined: May 29 2009

    Posts: 120

    Stop me if you think that you've heard this one before....

    I can understand, sympathize with, and share Dr. Martenson's anger regarding the willful looting of savers via monetary policy.  However, at the same time, this is simply a plan that has been played out countless times before — both here in the US as well as in the decline of most civilizations throughout recorded human history.

    While reading this I kept referring back in my mind to some of John Michael Greer's recent articles and interviews (e.g. Episode 81 of the Extraenvironmentalist, Falling Empires).  What we are seeing here is the largely predictable manner in which the rule of law falls apart — or rather elites operate according to a separate set of rules outside of those maintained for the hoi polloi.  A corollary to this trend is the increasing disconnection of elites from society-at-large, something that can be made clear almost everywhere you turn.  There was an excellent article by Mary K. Odum on the US medical establishment's "response" to Ebola that provides an example of this phenomenon at work.  Here's a brief snippet (emphasis mine):

    A nurse in Dallas who was caring for the first EVD patient in the US, in “full isolation gear”, has contracted the disease. Frieden’s first comment on the situation was to blame the nurse. “At some point there was a breach in protocol. That breach in protocol resulted in this infection,” Frieden said. He looked panicky as he announced it, but that is no excuse for blaming the victim. Now you’ve made me mad, Frieden, and it seems that you have made other nurses mad, too. If risk communication by the CDC takes this approach, the nurses are just going to say “I quit” like the nurses in Madrid and West Africa. The optics are poor when a series of wealthy white men unfamiliar with isolation procedures start telling the nurses what to do and where they went wrong. Nurses’ voices have been systematically muzzled over the past two decades with the privatization of healthcare, but this may be where we find our voice.

    Clutching Our World Views with a Death Grip

    And then there's this from JMG (excerpt from "Dark Age America: The Senility of Elites," published 9/24/14 on The Archdruid Report):

    The irony, and it’s a rich one, is that the same conviction tends to become just as widespread outside elite circles as within it. The illusion of invincibility, the conviction that the existing order of things is impervious to any but the most cosmetic changes, tends to be pervasive in any mature society, and remains fixed in place right up to the moment that everything changes and the existing order of things is swept away forever. The intensity of the illusion very often has nothing to do with the real condition of the social order to which it applies; France in 1789 and Russia in 1917 were both brittle, crumbling, jerry-rigged hulks waiting for the push that would send them tumbling into oblivion, which they each received shortly thereafter—but next to no one saw the gaping vulnerabilities at the time. In both cases, even the urban rioters that applied the push were left standing there slack-jawed when they saw how readily the whole thing came crashing down.
     
    The illusion of invincibility is far and away the most important asset a mature ruling elite has, because it discourages deliberate attempts at regime change from within. Everyone in the society, in the elite or outside it, assumes that the existing order is so firmly bolted into place that only the most apocalyptic events would be able to shake its grip. In such a context, most activists either beg for scraps from the tables of the rich or content themselves with futile gestures of hostility at a system they don’t seriously expect to be able to harm, while the members of the elite go their genial way, stumbling from one preventable disaster to another, convinced of the inevitability of their positions, and blissfully unconcerned with the possibility—which normally becomes a reality sooner or later—that their own actions might be sawing away at the old and brittle branch on which they’re seated.
     

    In short, I would no more expect the Federal Reserve to behave in an honest manner with the American people than I would expect a serial adulterer to suddenly become a good spouse.  It's not in their DNA.  They are fully wedded to the same policies and approaches that were set in motion long ago, and now exist largely as products of that long-established inertia.  And just because they stand up and lie about what they are doing while promoting this or that policy does not mean that they are actually in control, outside of their ability to facilitate the looting of the public apparatus by their well-connected friends (overseers?).

    The Chinese have a saying regarding the rise-and-fall of dynasties in their long and storied history.  It goes along the lines of: Dynasties ascend the staircase in hobnailed boots, and come down the other side in silk slippers.  We're well into the silk slippers phase of this game.  That being said, if what I'm surmising here is true, what is there that we can do?

    I'd forget completely about trying to reform the system, for the reasons that JMG outlined in his piece that I excerpted.

    You can go the route of precious metals to try and preserve wealth, but there is no guarantee that those resources won't be seized/outlawed by the authorities in the future, as was done in 1932.  Unless you're a member of the inner circle or one of its high-ranking sycophants, you'll likely lose.

    You can invest in real, physical goods and real estate, but unless you are able to purchase them outright without debt, you stand the very real possibility of losing them in a severe downturn.

    The conclusion that I've reached, even if I've been unable to make the leap to putting it into practice in my own life, is that Dmitry Orlov had it right several years ago.  Collapse now, and avoid the rush.  JMG would characterize this as the Voluntary Poverty promoted by Thoreau all those years ago.  The side benefit of this kind of a change is that it almost automatically forces you to start relying on others in order to maintain your own existence, which in turn develops those deep community networks built on a foundation of trust and mutually-shared obligations.  Of course, this kind of path is anathema even to many of us in the PP crowd, because it goes against EVERYTHING that we have been inculcated to believe our entire lives.  And I in no way exempt myself from that conundrum, as I consider myself to be painfully afflicted by this narrative as well.

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  • Tue, Oct 21, 2014 - 3:08pm

    #23
    Hotrod

    Hotrod

    Status Member (Offline)

    Joined: Apr 20 2009

    Posts: 161

    Real Estate as a refuge

    CAH,

    Great post!

    My family has held onto farmland for close to 125 years and we have purposely continued to farm the land and lead a simple lifestyle to help be prepared for the inevitable realignment (for want of a better term) that is coming.  My only worry is that during the Great Depression many families lost their homes and farms from the inability to pay the property taxes.

    As usual, this site provokes some of the most well thought out discussion available anywhere.  Thanks everyone!

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  • Tue, Oct 21, 2014 - 5:49pm

    #24

    Rector

    Status Bronze Member (Offline)

    Joined: Feb 07 2010

    Posts: 330

    We've Been Here Before - See If This Sounds Familiar:

    “That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.”

    George Washington et al. accomplished this by shooting those who disagreed.  Some of you will move to the next level of understanding; some of you will not.  It only takes 3%.

    I for one am not looking for "the system" to reform itself.

    Rector

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  • Tue, Oct 21, 2014 - 5:58pm

    #25
    Time2help

    Time2help

    Status Platinum Member (Offline)

    Joined: Jun 08 2011

    Posts: 2261

    Ms Fellon

     

     

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  • Tue, Oct 21, 2014 - 6:10pm

    Reply to #19
    macro2682

    macro2682

    Status Gold Member (Offline)

    Joined: Sep 03 2009

    Posts: 320

    KennethPollinger wrote:Let's

    [quote=KennethPollinger]
    Let's hear about the E-dollar.  ALL options are open at this time, no?
    Some analysts say: Get out of all debt.  Others maybe say: Do as the wealthy and governments do: take on MORE debt.  Where do ethics come in here?  Morality? Is it really EVERY man for HIMSELF? Is there a social contract?
    Play their game and make MONEY, but "lose" something much more important?
    Don't play their game and lose MONEY but gain something more valuable?
    Can we survive on "correct" values??  Whatever those are??  Your choice: FREEDOM.
    [/quote]
     
    To me, financial security is a simple fraction: Savings/Expenses
    the higher that number, the more secure I feel.  You can make a fraction grow faster by reducing the denominator than you can by increasing the numerator.  
    With negative real interest rates, the government is trying to get you to spend more and invest all savings.  in the "market."  Instead, you should reduce your expenses and invest your savings in assets that reduce your expenses even further. 
    Solar panels pay an 8% IRR. What does the stock market pay?  8% in the denominator is better than stock market returns in the numerator 

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  • Tue, Oct 21, 2014 - 6:33pm

    Reply to #2

    Chris Martenson

    Status Platinum Member (Offline)

    Joined: Jun 07 2007

    Posts: 4703

    Why we homeschooled our children

    [quote=melissaoverbrook]Correct! This is the goal of the US Dept of Education. Check out "
    The Deliberate Dumbing Down of America"
    [/quote]
    While I am not familiar with the work you linked here, the title was very close to the book that got my wife and I to bite the bullet and homeschool our kids.
    The book that changed us was Dumbing Us Down: The Hidden Curriculum of Compulsory Schooling, by John Taylor Gotto.
    In it he clearly articulates the various regimes and practices of modern public schooling that are designed to create conformity, obedience to authority, and a profound disconnect between and among the various subjects it 'teaches.'
    Perhaps the greatest sin is that schools, both public and private quite often ruin a child's curiosity.  As long as you don't do that, they'll be fine.
    So we were able to homeschool and we did, and we are now 12 years into that experiment and I could not be happier with the results.
    Our kids are curious and engaged and full of hope and life, as they should be.  Everything is related, and interconnected and flat-out magical as long as you remain curious and they have.  There.  That was easy.
    Education is *not* about collecting facts, it is about connecting facts.  Well, at least that's what education should be, but all too often is not.
    Why would we, as a population, agree to give ourselves substandard educations?  Why would we not revel in the magical mystery tour that life is, as opposed to turning into drudgery at an early age?  Teachers should really not be that at all, but mentors, more like experienced tour guides who know that it is far better to let the travelers round the corner and 'discover' the beautiful waterfall for themselves, than tell them all about it and force them to slice it into meaningless names before seeing it.
    If any of you meet my kids (or have as the case may be) you'll see what I mean…they are intelligent human beings…not *kids* or students or children.  And that is the potential birthright of every young human being….as long as they are not taught otherwise along the way.

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  • Tue, Oct 21, 2014 - 7:01pm

    #26

    davefairtex

    Status Diamond Member (Offline)

    Joined: Sep 03 2008

    Posts: 3156

    e-dollars/digital currency & armstrong

    Martin Armstrong is convinced that the gang in charge wants to create an E-currency for all the reasons listed above.

    Do they imagine that simply because the currency is now electronic, black market behavior will go away?  It will just change form.  No doubt they'll institute a new criminal charge, that of not using E-currency.  The temptation to control everything "for the good of society" is so strong, both on the right and the left.

    I saw a lady (mid-30s) buying a relatively large amount of groceries yesterday with cash – she plopped down $200 in $20 bills.  You don't see that every day.  I caught myself thinking, "hmm, I wonder where all that cash came from."  That's the popular thinking here in the US.

    In Thailand, on the other hand, I've seen cash used routinely for large transactions (in the thousands or tens of thousands of dollars – and their income is 1/5th of ours) and nobody even blinks.  Withdraw $10k in cash?  Your banker doesn't ask you a million questions, eye you suspiciously, and then run off to file a suspicious transaction report with the Treasury.  The teller checks your ID, compares it to the one on file, smiles and says "here you go" handing you a large stack of cash.

    Our culture has changed dramatically and most people probably do not notice.  One more step: electronic money – how difficult would that really be for the bulk of the nation?

    I do think it would be good news for PM holders.  I suspect a required-use electronic currency would spur a move into gold and silver – and as the government got more repressive and had more control over the economy, gold and silver would become even more attractive.

    Armstrong (again) maintains that gold – portable concentrated wealth – is a hedge against government economic mis-deeds, and thus the price of gold should rise as confidence in the government itself falls and/or the level of repression rises.

     

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  • Tue, Oct 21, 2014 - 7:22pm

    Reply to #26

    Christopher H

    Status Bronze Member (Offline)

    Joined: May 29 2009

    Posts: 120

    Moving beyond just financial capital

    Armstrong (again) maintains that gold – portable concentrated wealth – is a hedge against government economic mis-deeds, and thus the price of gold should rise as confidence in the government itself falls and/or the level of repression rises.

    There's a (slight) problem that I have with this outlook, and it's quite common among all financial types.  It only looks at one type of capital (financial) while ignoring the other kinds that are out there.  I highly recommend that everyone read the article "The Eight Forms of Capital" by Ethan Roland of Appleseed Permaculture (http://www.appleseedpermaculture.com/8-forms-of-capital/), as it explains how there are other, often unrealized forms of capital we can tap into but often ignore in favor of financial capital.
    Chris had Ethan on his podcast back in May to discuss this as well: https://www.peakprosperity.com/podcast/85573/ethan-roland-8-forms-capital

    If we can shift toward social, natural and spiritual capital, we can significantly reduce our reliance on financial capital.  The former forms are much, much harder for the authorities to regulate, while they will attempt to regulate, distort, and just plain seize the latter.
     
     

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  • Tue, Oct 21, 2014 - 8:09pm

    Reply to #2
    Richard Hare

    Richard Hare

    Status Member (Offline)

    Joined: Sep 21 2009

    Posts: 3

    New Homeschooling Documentary

    Our son-in-law's new film opened in LA & is currently on tour up the west coast.  The trailer can be seen at http://classdismissedmovie.com.  Please give it a go!

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  • Tue, Oct 21, 2014 - 8:14pm

    #27
    efarmer.ny

    efarmer.ny

    Status Member (Offline)

    Joined: Jan 07 2012

    Posts: 8

    Janet wose that Ted?

    [Comment:No surprise there. Ted Bundy never acknowledged the harm he caused either.]

    JCD: If I were able to ask the kind of questions that are being asked, one would be, “Are you thinking about all those victims and their families that are so wounded? Years later, their lives aren’t normal. They will never be normal. Is there remorse?”

    Ted: I know people will accuse me of being self-serving, but through God’s help, I have been able to come to the point, much too late, where I can feel the hurt and the pain I am responsible for. Yes. Absolutely!

     

    Source

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  • Tue, Oct 21, 2014 - 8:42pm

    Reply to #26
    bwh1214

    bwh1214

    Status Member (Offline)

    Joined: Jun 01 2011

    Posts: 39

    E Dollar Causing Extinction of Paper Dollar

    davefairtexWhile I agree that since the E Dollar would cause paper dollars to go extinct the underground economy would find another medium of exchange.  And I would agree that would probably be precious metals.  That said I think the underground economy would shrink.  
    Most Americans, lower through upper middle class, try to live by the rules, as eluded to in Chris's article.  I think the next monetary shift, to the E Dollar or some other system will come with it a clamp down in gold and silver.  I may have the conviction to not turn my stack into the authorities but I don't think I would start transacting in it.  My willingness to take that kind of a risk has its limits.  
    Take for instance a holder of gold in 1933.  Under Executive order 6102 you faced the penalty of 10 years in prison and or $10,000 fine (that's $625,000 today) for just holding gold.  If you wanted to be ballsy I could see burying your stash, but I don't see running a black market in gold.
    Again the E Dollar fixes many of the debt problems, at least from the governments perspective, and though many on this site would not be happy the average American will not bat an eye. 

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  • Tue, Oct 21, 2014 - 9:58pm

    #28

    KennethPollinger

    Status Silver Member (Offline)

    Joined: Sep 22 2010

    Posts: 616

    Hotrod and farms with property tax

     You stated: "many families lost their homes and farms from the inability to pay property taxes"

    That's one reason why I have property and a farm in Costa Rica: property tax: 0.25%, plus the weather is GREAT!

    Also, with all the talk about gains being taxed, why not do as the wealthy do: buy tax-free municipals,as part of your portfolio.  True, the value could go down but with the tax-free quarterly payments you'd probably beat that aspect over time. I've not heard a word about this is in all I have read so far. Am I off here?

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  • Tue, Oct 21, 2014 - 10:20pm

    #29

    KennethPollinger

    Status Silver Member (Offline)

    Joined: Sep 22 2010

    Posts: 616

    A THOUGHT EXPERIMENT by Rickards

    Have fun

     
    Baltimore, Maryland 
    October 21, 2014
     
    Peter Coyne
    Dear Reader,

    Jim Rickards was in Austin, Texas, by way of Nashville, Tennessee, when his call came through…

    "A former White House communications director," Jim explained to me, "said that you know that your work is having an impact when other people are talking about it."

    Hold that thought…

    We set up today's reckoning — our friend Richard Duncan's forecast for QE4 — in yesterday's episode. A timely opportunity to stir the pot, however, has led us to postpone that plan until tomorrow or Thursday.

     
    We’re talking bioimplants… capital controls… neofascism… currency collapses and rebirths…
    Instead, we're going to give you an exclusive look at Jim Rickards' provocative first article with Agora Financial. It was featured in issue No. 1 of Strategic Intelligence, Jim's newsletter. It's called "In the Year 2024."

    The piece is an economic and political thought experiment (we stress "thought experiment") based in the year 2024 and written through Jim's eyes.

    It's shocking… dystopian… and generating a little bit of a buzz on the Interwebs. Buzz, we suspect, that will mushroom after we publish it on our website in a few minutes. 

    It makes Mad Max looks like a Peanuts special. We're talking bioimplants… capital controls… neofascism… currency collapses and rebirths… stock market panics… asset freezes… wealth destruction… extreme egalitarian policies… 

    Here's one fellow's Twitter reaction:

     
    Rickards Retweet

     

     
    Naturally, gloomy, doomy statements make people shift in their seat… or call BS… or both.

    So when one of our colleagues sent us an ArabianMoney blog post entitled"All the World's Gold to Be Confiscated and Buried in Switzerland by 2020, Argues Jim Rickards," we weren't too surprised.

    ArabianMoney, which we recommend checking out, is written by Peter Cooper, an insightful financial commentator based in the United Arab Emirates. We've frequently featured him in these pages. He was also a regular and popular speaker at our annual Vancouver Investment Symposium. 

    Long-suffering reckoners will remember our founder Addison Wiggin and our own Chris Mayer traveling to Dubai to meet Mr. Cooper and survey the investment climate there in 2009.

     
    “Has the normally sober and thoughtful Mr. Rickards lost his marbles?”
    Needless to say, we respect Peter's opinion. When he says something we do is "too wacky," we sit up and recheck our work.

    "Has the normally sober and thoughtful Mr. Rickards lost his marbles?" asks Cooper in his review of Jim's article. According to Mr. Cooper, the line Jim draws between prediction and fiction isn't clear enough.

    "How do you know what is a 'thought experiment,'" asks Cooper, "and what is meant to be taken as the truth? As the opening article of a new newsletter, it seemed well off beam. I still don't actually get the point he was trying to make.

    "However," Mr. Cooper concludes, "within all these visionary tales, there is usually more than a grain of truth, or a few grams of real gold."

    "My '2024' piece," Jim explained to us, "was actually meant to be highly realistic. Most of the elements are already here.

    "Larry Summers wants negative interest rates… Thomas Piketty and the IMF do want global wealth taxation and redistribution… Police are already using tollbooth scanners to interdict people in flight.

     
    “Cash is almost obsolete… The rule of law is being disregarded every day.”
    "Sensor implants are here… Cash is almost obsolete…. The rule of law is being disregarded every day. The 10-year plan for special drawing rights has already been published…. Swiss army mountain fortresses are being converted into gold vaults…

    "The only fictional part," Jim went on, "is threading it all together and thinking of a market panic big enough to be used as cover for extreme government action."

    The name politicians ramrodding such a dystopian future into place use, Jim explains, is "shock doctrine," derived from Naomi Klein's eponymous book. Jim has a second article by that name in his debut Strategic Intelligenceissue as well.

    "The idea," he told us, "is you use a shock as an excuse to roll out a preplanned agenda that may have nothing to do with the triggering event. The elites are just waiting for a scared population to push their agenda."

    That said, you're best off forming your own opinion on the matter. Read on for Jim Rickards' "In the Year 2024"…

    Then send us comments, questions or the business, here:[email protected]

    [Ed. note: We closed access to Jim's Strategic Intelligence last week. Word is we will be reopening it soon. However, since we dangled topics from Jim's debut issue, I'm willing to make an exception today if you haven't joined up yet. There's no long-winded video or lengthy letter to read. Just an easy-to-fill-out form. Click here to join now.]

     
     
     
     
    One simple step for “disappearing in plain sight”
     
    The No. 1 mistake that needlessly exposes you and your family to the risk of violence, theft, burglary, frivolous lawsuits, illegal government “sneak and peek” intrusions… and WORSE.
     
    Click here to protect yourself now.
     
     
     
     
    The Daily Reckoning Presents… "The following article," says Jim Rickards, editor of Strategic Intelligence, "describes a fictional dystopia in the spirit of Brave New World or 1984. It is not a firm forecast or prediction in the usual analytic sense. Instead, it is intended to provide warning and encourage readers to be alert to dangerous trends in society, some of which are already in place." Read on…

    ******************************
     
    In the Year 2024
    Jim Rickards writing from the future on Sunday, Oct. 13, 2014
     
    by Jim Rickards
     
    James Rickards
    As I awoke this morning, Sunday, Oct. 13, 2024, from restless dreams, I found the insect-sized sensor implanted in my arm was already awake. We call it a "bug." U.S. citizens have been required to have them since 2022 to access government health care.

    The bug knew from its biometric monitoring of my brain wave frequencies and rapid eye movement that I would awake momentarily. It was already at work launching systems, including the coffee maker. I could smell the coffee brewing in the kitchen. The information screens on the inside of my panopticon goggles were already flashing before my eyes.

    Images of world leaders were on the screen. They were issuing proclamations about the fine health of their economies and the advent of world peace. Citizens, they explained, needed to work in accordance with the New World Order Growth Plan to maximize wealth for all. I knew this was propaganda, but I couldn't ignore it. Removing your panopticon goggles is viewed with suspicion by the neighborhood watch committees. Your "bug" controls all the channels.

     
    My work now is only historical, because markets were abolished after the Panic of 2018.
    I'm mostly interested in economics and finance, as I have been for decades. I've told the central authorities that I'm an economic historian, so they've given me access to archives and information denied to most citizens in the name of national economic security.

    My work now is only historical, because markets were abolished after the Panic of 2018. That was not the original intent of the authorities. They meant to close markets "temporarily" to stop the panic, but once the markets were shut, there was no way to reopen them without the panic starting again.

    Today, trust in markets is completely gone. All investors want is their money back. Authorities started printing money after the Panic of 2008, but that solution stopped working by 2018. Probably because so much had been printed in 2017 under QE7. When the panic hit, money was viewed as worthless. So markets were simply closed.

    Between 2018–20, the Group of 20 major powers, the G-20, abolished all currencies except for the dollar, the euro and the ruasia. The dollar became the local currency in North and South America. Europe, Africa and Australia used the euro. The ruasia was the only new currency — a combination of the old Russian ruble, Chinese yuan and Japanese yen — and was adopted as the local currency in Asia.

     
    There is also new world money called special drawing rights, or SDRs for short.
    There is also new world money called special drawing rights, or SDRs for short. They're used only for settlements between countries, however. Everyday citizens use the dollar, euro or ruasia for daily transactions. The SDR is also used to set energy prices and as a benchmark for the value of the three local currencies. The World Central Bank, formerly the IMF, administers the SDR system under the direction of the G-20. As a result of the fixed exchange rates, there's no currency trading.

    All of the gold in the world was confiscated in 2020 and placed in a nuclear bomb-proof vault dug into the Swiss Alps. The mountain vault had been vacated by the Swiss army and made available to the World Central Bank for this purpose. All G-20 nations contributed their national gold to the vault. All private gold was forcibly confiscated and added to the Swiss vault as well. All gold mining had been nationalized and suspended on environmental grounds.

    The purpose of the Swiss vault was not to have gold backing for currencies, but rather to remove gold from the financial system entirely so it could never be used as money again. Thus, gold trading ceased because its production, use and possession were banned. By these means, the G-20 and the World Central Bank control the only forms of money.

    Some lucky ones had purchased gold in 2014 and sold it when it reached $40,000 per ounce in 2019. By then, inflation was out of control and the power elites knew that all confidence in paper currencies had been lost. The only way to re-establish control of money was to confiscate gold. But those who sold near the top were able to purchase land or art, which the authorities did not confiscate.

     
     
     
     
     
    He spent 29 soul-crushing years behind the walls of the most feared and despised agency in the United States — the IRS — discovering every tax secret and investment strategy known to man. Until one day he vanished…
     
    Thanks to one little known discovery he made at the agency…he suddenly walked out and took an early retirement. Ever since, he’s dedicated his life to exposing this secret the IRS would prefer you didn’t know.
     
    A lot of people hate this man… but you’ll love him after you SEE THIS.
     
     
     
     
    Those who never owned gold in the first place saw their savings, retirement incomes, pensions and insurance policies turn to dust once the hyperinflation began. Now it seems so obvious. The only way to preserve wealth through the Panic of 2018 was to have gold, land and fine art. But investors not only needed to have the foresight to buy it… they also had to be nimble enough to sell the gold before the confiscation in 2020, and then buy more land and art and hang onto it. For that reason, many lost everything.

    Land and personal property were not confiscated, because much of it was needed for living arrangements and agriculture. Personal property was too difficult to confiscate and of little use to the state. Fine art was lumped in with cheap art and mundane personal property and ignored.

    Stock and bond trading were halted when the markets closed. During the panic selling after the crash of 2018, stocks were wiped out. 

    Too, the value of all bonds were wiped out in the hyperinflation of 2019. Governments closed stock and bond markets, nationalized all corporations and declared a moratorium on all debts. World leaders initially explained it as an effort to "buy time" to come up with a plan to unfreeze the markets, but over time, they realized that trust and confidence had been permanently destroyed, and there was no point in trying.

     
    By 2017, the U.S. government required sensors on all cars.
    Wiped-out savers broke out in money riots soon after but were quickly suppressed by militarized police who used drones, night vision technology, body armor and electronic surveillance. Highway tollbooth digital scanners were used to spot and interdict those who tried to flee by car. By 2017, the U.S. government required sensors on all cars. It was all too easy for officials to turn off the engines of those who were government targets, spot their locations and arrest them on the side of the road.

    In compensation for citizens' wealth destroyed by inflation and confiscation, governments distributed digital Social Units called Social Shares and Social Donations. These were based on a person's previous wealth. Americans below a certain level of wealth got Social Shares that entitled them to a guaranteed income.

    Those above a certain level of wealth got Social Donation units that required them to give their wealth to the state. Over time, the result was a redistribution of wealth so that everyone had about the same net worth and the same standard of living. The French economist Thomas Piketty was the principal consultant to the G-20 and World Central Bank on this project.

    To facilitate the gradual freezing of markets, confiscation of wealth and creation of Social Units, world governments coordinated the elimination of cash in 2016. The "cashless society" was sold to citizens as a convenience. No more dirty, grubby coins and bills to carry around!

     
    The “cashless society” was sold to citizens as a convenience.
    Instead, you could pay with smart cards and mobile phones and could transfer funds online. Only when the elimination of cash was complete did citizens realize that digital money meant total control by government. This made it easy to adopt former Treasury Secretary Larry Summers' idea of negative interest rates. Governments simply deducted amounts from its citizens' bank accounts every month. 

    Without cash, there was no way to prevent the digital deductions.

    The government could also monitor all of your transactions and digitally freeze your account if you disagreed with their tax or monetary policy. In fact, a new category of hate crime for "thoughts against monetary policy" was enacted by executive order. The penalty was digital elimination of the wealth of those guilty of dissent.

    The entire process unfolded in small stages so that investors and citizens barely noticed before it was too late. Gold had been the best way to preserve wealth from 2014–18, but in the end, it was confiscated because the power elites knew it could not be allowed. First, they eliminated cash in 2016. Then they eliminated diverse currencies and stocks in 2018. Finally came the hyperinflation of 2019, which wiped out most wealth, followed by gold confiscation and the digital socialism of 2020.

    By last year, 2023, free markets, private property and entrepreneurship were things of the past. All that remains of wealth is land, fine art and some (illegal) gold. The only other valuable assets are individual talents, provided you can deploy them outside the system of state-approved jobs.

    Regards,

    Jim Rickards
    for The Daily Reckoning

    ve fun.

     

     

    Login or Register to post comments

  • Tue, Oct 21, 2014 - 10:23pm

    Reply to #29

    KennethPollinger

    Status Silver Member (Offline)

    Joined: Sep 22 2010

    Posts: 616

    KennethPollinger wrote:Have

    [quote=KennethPollinger]
    Have fun
     

    Baltimore, Maryland 
    October 21, 2014
     

    Dear Reader,

    Jim Rickards was in Austin, Texas, by way of Nashville, Tennessee, when his call came through…

    "A former White House communications director," Jim explained to me, "said that you know that your work is having an impact when other people are talking about it."

    Hold that thought…

    We set up today's reckoning — our friend Richard Duncan's forecast for QE4 — in yesterday's episode. A timely opportunity to stir the pot, however, has led us to postpone that plan until tomorrow or Thursday.
     

    We’re talking bioimplants… capital controls… neofascism… currency collapses and rebirths…

    Instead, we're going to give you an exclusive look at Jim Rickards' provocative first article with Agora Financial. It was featured in issue No. 1 of Strategic Intelligence, Jim's newsletter. It's called "In the Year 2024."

    The piece is an economic and political thought experiment (we stress "thought experiment") based in the year 2024 and written through Jim's eyes.

    It's shocking… dystopian… and generating a little bit of a buzz on the Interwebs. Buzz, we suspect, that will mushroom after we publish it on our website in a few minutes. 

    It makes Mad Max looks like a Peanuts special. We're talking bioimplants… capital controls… neofascism… currency collapses and rebirths… stock market panics… asset freezes… wealth destruction… extreme egalitarian policies… 

    Here's one fellow's Twitter reaction:
     

     

     
    Naturally, gloomy, doomy statements make people shift in their seat… or call BS… or both.

    So when one of our colleagues sent us an ArabianMoney blog post entitled"All the World's Gold to Be Confiscated and Buried in Switzerland by 2020, Argues Jim Rickards," we weren't too surprised.

    ArabianMoney, which we recommend checking out, is written by Peter Cooper, an insightful financial commentator based in the United Arab Emirates. We've frequently featured him in these pages. He was also a regular and popular speaker at our annual Vancouver Investment Symposium. 

    Long-suffering reckoners will remember our founder Addison Wiggin and our own Chris Mayer traveling to Dubai to meet Mr. Cooper and survey the investment climate there in 2009.
     

    “Has the normally sober and thoughtful Mr. Rickards lost his marbles?”

    Needless to say, we respect Peter's opinion. When he says something we do is "too wacky," we sit up and recheck our work.

    "Has the normally sober and thoughtful Mr. Rickards lost his marbles?" asks Cooper in his review of Jim's article. According to Mr. Cooper, the line Jim draws between prediction and fiction isn't clear enough.

    "How do you know what is a 'thought experiment,'" asks Cooper, "and what is meant to be taken as the truth? As the opening article of a new newsletter, it seemed well off beam. I still don't actually get the point he was trying to make.

    "However," Mr. Cooper concludes, "within all these visionary tales, there is usually more than a grain of truth, or a few grams of real gold."

    "My '2024' piece," Jim explained to us, "was actually meant to be highly realistic. Most of the elements are already here.

    "Larry Summers wants negative interest rates… Thomas Piketty and the IMF do want global wealth taxation and redistribution… Police are already using tollbooth scanners to interdict people in flight.
     

    “Cash is almost obsolete… The rule of law is being disregarded every day.”

    "Sensor implants are here… Cash is almost obsolete…. The rule of law is being disregarded every day. The 10-year plan for special drawing rights has already been published…. Swiss army mountain fortresses are being converted into gold vaults…

    "The only fictional part," Jim went on, "is threading it all together and thinking of a market panic big enough to be used as cover for extreme government action."

    The name politicians ramrodding such a dystopian future into place use, Jim explains, is "shock doctrine," derived from Naomi Klein's eponymous book. Jim has a second article by that name in his debut Strategic Intelligenceissue as well.

    "The idea," he told us, "is you use a shock as an excuse to roll out a preplanned agenda that may have nothing to do with the triggering event. The elites are just waiting for a scared population to push their agenda."

    That said, you're best off forming your own opinion on the matter. Read on for Jim Rickards' "In the Year 2024"…

    Then send us comments, questions or the business, here:[email protected]

    [Ed. note: We closed access to Jim's Strategic Intelligence last week. Word is we will be reopening it soon. However, since we dangled topics from Jim's debut issue, I'm willing to make an exception today if you haven't joined up yet. There's no long-winded video or lengthy letter to read. Just an easy-to-fill-out form. Click here to join now.]

     

     

     

     

    One simple step for “disappearing in plain sight”
     
    The No. 1 mistake that needlessly exposes you and your family to the risk of violence, theft, burglary, frivolous lawsuits, illegal government “sneak and peek” intrusions… and WORSE.
     
    Click here to protect yourself now.

     

     

     

     

    The Daily Reckoning Presents… "The following article," says Jim Rickards, editor of Strategic Intelligence, "describes a fictional dystopia in the spirit of Brave New World or 1984. It is not a firm forecast or prediction in the usual analytic sense. Instead, it is intended to provide warning and encourage readers to be alert to dangerous trends in society, some of which are already in place." Read on…

    ******************************

     

    In the Year 2024
    Jim Rickards writing from the future on Sunday, Oct. 13, 2014

     

    by Jim Rickards

     

    As I awoke this morning, Sunday, Oct. 13, 2024, from restless dreams, I found the insect-sized sensor implanted in my arm was already awake. We call it a "bug." U.S. citizens have been required to have them since 2022 to access government health care.

    The bug knew from its biometric monitoring of my brain wave frequencies and rapid eye movement that I would awake momentarily. It was already at work launching systems, including the coffee maker. I could smell the coffee brewing in the kitchen. The information screens on the inside of my panopticon goggles were already flashing before my eyes.

    Images of world leaders were on the screen. They were issuing proclamations about the fine health of their economies and the advent of world peace. Citizens, they explained, needed to work in accordance with the New World Order Growth Plan to maximize wealth for all. I knew this was propaganda, but I couldn't ignore it. Removing your panopticon goggles is viewed with suspicion by the neighborhood watch committees. Your "bug" controls all the channels.
     

    My work now is only historical, because markets were abolished after the Panic of 2018.

    I'm mostly interested in economics and finance, as I have been for decades. I've told the central authorities that I'm an economic historian, so they've given me access to archives and information denied to most citizens in the name of national economic security.

    My work now is only historical, because markets were abolished after the Panic of 2018. That was not the original intent of the authorities. They meant to close markets "temporarily" to stop the panic, but once the markets were shut, there was no way to reopen them without the panic starting again.

    Today, trust in markets is completely gone. All investors want is their money back. Authorities started printing money after the Panic of 2008, but that solution stopped working by 2018. Probably because so much had been printed in 2017 under QE7. When the panic hit, money was viewed as worthless. So markets were simply closed.

    Between 2018–20, the Group of 20 major powers, the G-20, abolished all currencies except for the dollar, the euro and the ruasia. The dollar became the local currency in North and South America. Europe, Africa and Australia used the euro. The ruasia was the only new currency — a combination of the old Russian ruble, Chinese yuan and Japanese yen — and was adopted as the local currency in Asia.
     

    There is also new world money called special drawing rights, or SDRs for short.

    There is also new world money called special drawing rights, or SDRs for short. They're used only for settlements between countries, however. Everyday citizens use the dollar, euro or ruasia for daily transactions. The SDR is also used to set energy prices and as a benchmark for the value of the three local currencies. The World Central Bank, formerly the IMF, administers the SDR system under the direction of the G-20. As a result of the fixed exchange rates, there's no currency trading.

    All of the gold in the world was confiscated in 2020 and placed in a nuclear bomb-proof vault dug into the Swiss Alps. The mountain vault had been vacated by the Swiss army and made available to the World Central Bank for this purpose. All G-20 nations contributed their national gold to the vault. All private gold was forcibly confiscated and added to the Swiss vault as well. All gold mining had been nationalized and suspended on environmental grounds.

    The purpose of the Swiss vault was not to have gold backing for currencies, but rather to remove gold from the financial system entirely so it could never be used as money again. Thus, gold trading ceased because its production, use and possession were banned. By these means, the G-20 and the World Central Bank control the only forms of money.

    Some lucky ones had purchased gold in 2014 and sold it when it reached $40,000 per ounce in 2019. By then, inflation was out of control and the power elites knew that all confidence in paper currencies had been lost. The only way to re-establish control of money was to confiscate gold. But those who sold near the top were able to purchase land or art, which the authorities did not confiscate.

     

     

     

     

    CONFESSION: Ex-IRS Agent Secrets Revealed
     
    He spent 29 soul-crushing years behind the walls of the most feared and despised agency in the United States — the IRS — discovering every tax secret and investment strategy known to man. Until one day he vanished…
     
    Thanks to one little known discovery he made at the agency…he suddenly walked out and took an early retirement. Ever since, he’s dedicated his life to exposing this secret the IRS would prefer you didn’t know.
     
    A lot of people hate this man… but you’ll love him after you SEE THIS.

     

     

     

     

    Those who never owned gold in the first place saw their savings, retirement incomes, pensions and insurance policies turn to dust once the hyperinflation began. Now it seems so obvious. The only way to preserve wealth through the Panic of 2018 was to have gold, land and fine art. But investors not only needed to have the foresight to buy it… they also had to be nimble enough to sell the gold before the confiscation in 2020, and then buy more land and art and hang onto it. For that reason, many lost everything.

    Land and personal property were not confiscated, because much of it was needed for living arrangements and agriculture. Personal property was too difficult to confiscate and of little use to the state. Fine art was lumped in with cheap art and mundane personal property and ignored.

    Stock and bond trading were halted when the markets closed. During the panic selling after the crash of 2018, stocks were wiped out. 

    Too, the value of all bonds were wiped out in the hyperinflation of 2019. Governments closed stock and bond markets, nationalized all corporations and declared a moratorium on all debts. World leaders initially explained it as an effort to "buy time" to come up with a plan to unfreeze the markets, but over time, they realized that trust and confidence had been permanently destroyed, and there was no point in trying.
     

    By 2017, the U.S. government required sensors on all cars.

    Wiped-out savers broke out in money riots soon after but were quickly suppressed by militarized police who used drones, night vision technology, body armor and electronic surveillance. Highway tollbooth digital scanners were used to spot and interdict those who tried to flee by car. By 2017, the U.S. government required sensors on all cars. It was all too easy for officials to turn off the engines of those who were government targets, spot their locations and arrest them on the side of the road.

    In compensation for citizens' wealth destroyed by inflation and confiscation, governments distributed digital Social Units called Social Shares and Social Donations. These were based on a person's previous wealth. Americans below a certain level of wealth got Social Shares that entitled them to a guaranteed income.

    Those above a certain level of wealth got Social Donation units that required them to give their wealth to the state. Over time, the result was a redistribution of wealth so that everyone had about the same net worth and the same standard of living. The French economist Thomas Piketty was the principal consultant to the G-20 and World Central Bank on this project.

    To facilitate the gradual freezing of markets, confiscation of wealth and creation of Social Units, world governments coordinated the elimination of cash in 2016. The "cashless society" was sold to citizens as a convenience. No more dirty, grubby coins and bills to carry around!
     

    The “cashless society” was sold to citizens as a convenience.

    Instead, you could pay with smart cards and mobile phones and could transfer funds online. Only when the elimination of cash was complete did citizens realize that digital money meant total control by government. This made it easy to adopt former Treasury Secretary Larry Summers' idea of negative interest rates. Governments simply deducted amounts from its citizens' bank accounts every month. 

    Without cash, there was no way to prevent the digital deductions.

    The government could also monitor all of your transactions and digitally freeze your account if you disagreed with their tax or monetary policy. In fact, a new category of hate crime for "thoughts against monetary policy" was enacted by executive order. The penalty was digital elimination of the wealth of those guilty of dissent.

    The entire process unfolded in small stages so that investors and citizens barely noticed before it was too late. Gold had been the best way to preserve wealth from 2014–18, but in the end, it was confiscated because the power elites knew it could not be allowed. First, they eliminated cash in 2016. Then they eliminated diverse currencies and stocks in 2018. Finally came the hyperinflation of 2019, which wiped out most wealth, followed by gold confiscation and the digital socialism of 2020.

    By last year, 2023, free markets, private property and entrepreneurship were things of the past. All that remains of wealth is land, fine art and some (illegal) gold. The only other valuable assets are individual talents, provided you can deploy them outside the system of state-approved jobs.

    Regards,

    Jim Rickards
    for The Daily Reckoning

    Have fun.
     
     
    [/quote]

    Login or Register to post comments

  • Tue, Oct 21, 2014 - 11:37pm

    Reply to #2

    Sterling Cornaby

    Status Bronze Member (Offline)

    Joined: Sep 05 2012

    Posts: 150

    Got it; updated my views

    I got the idea, so I updated the view:From this:
     
    To more like this:

     
    or like this:

    Again green is 'better' for savers and red is 'worse' for savers.  Anyway you slice it being a saver is getting really hard.  That stinks for equality.  Thanks for your insights to what these graphs mean — I thought I should finish this exercise.
     
    And to CAH, I too see a very discontinuous change approaching in our society, as you stated so well.  One day I believe everything will be very different. 
    This 'financial capital' stuff is being abused into oblivion.  Moving away from money type security is very very counter culture, a million bucks seems to be the solve-all in our societies mind.  I will say I would really like to 'cash out' into other forms of capital, such as discussed by Ethan Roland of Appleseed Permaculture.  Wow, its hard, because it is so counter culture.  These ideas are presently infusing my mind; thank you for the comment.  
     
    Sterling
     
     
     
     

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  • Wed, Oct 22, 2014 - 12:17am

    #30
    Guns-n-Gold

    Guns-n-Gold

    Status Member (Offline)

    Joined: Oct 21 2014

    Posts: 2

    Did anyone bother to click on the source for this article

    Chris,

    I believe in the premise of your article, however I believe you took the author out of context in his article to make your point.  Salon.com is hardly a legitimate source for the fine work you do.  The author in his text was trying to justify strategic default as a way to get back at the "wrongs of society" (rich people) and was trying to make a political point.  Your work is to good to use this as a reference for your points.  I took the time to read your article then I took the time to click your source link.  If I had clicked the source link first, I wouldn't have bothered with the rest of your article.  I'm feeling a little disappointed, but believe you can find other source material besides articles published by Edwin Lyngar.  I believe most people here probably don't share his views or would use him as a reference in any of their work.

    Please don't take this personally, but I wanted to share my honest opinion.  You do great work, but this time I feel the source was twisted.

    G-n-G

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  • Wed, Oct 22, 2014 - 12:17am

    #31
    Guns-n-Gold

    Guns-n-Gold

    Status Member (Offline)

    Joined: Oct 21 2014

    Posts: 2

    Did anyone bother to click on the source for this article

    Chris,

    I believe in the premise of your article, however I believe you took the author out of context in his article to make your point.  Salon.com is hardly a legitimate source for the fine work you do.  The author in his text was trying to justify strategic default as a way to get back at the "wrongs of society" (rich people) and was trying to make a political point.  Your work is to good to use this as a reference for your points.  I took the time to read your article then I took the time to click your source link.  If I had clicked the source link first, I wouldn't have bothered with the rest of your article.  I'm feeling a little disappointed, but believe you can find other source material besides articles published by Edwin Lyngar.  I believe most people here probably don't share his views or would use him as a reference in any of their work.

    Please don't take this personally, but I wanted to share my honest opinion.  You do great work, but this time I feel the source was twisted.

    G-n-G

    Login or Register to post comments

  • Wed, Oct 22, 2014 - 1:23am

    #32

    Greg Snedeker

    Status Silver Member (Offline)

    Joined: Oct 22 2012

    Posts: 380

    The Fed, Education, Homeschooling and Control

    After listening to the recordings of inside the Fed that were leaked a couple of weeks ago, the fear that I heard in every one of the voices I heard reinforced something that my intuition has been telling me. The system has an inertia, and that inertia pushes good people in a direction that they feel they have to go. I use the word "feel" because I think their decisions ultimately come from fear. I'm seeing it in government and education. Fear brings the action of control. The technostructure of the economy is what feeds this fear and creates this inertia. I'm past seeing those in the Fed as villians. I see them now as terrified. Think of about it, it must be terrifying. The system has taken somewhat of a pathological nature over many years of development (decades). Now, what seem like logical choices push us toward an even more pathological system.

    DaveF, I think you said it…"The temptation to control everything "for the good of society" is so strong, both on the right and the left." Where is this temptation coming from?

    Chris wrote: "Education is *not* about collecting facts, it is about connecting facts.  Well, at least that's what education should be, but all too often is not."

    I'm glad homeschooling has worked out for you and your family. It's one way of dealing with some of the issues of education. Homeschooling can create other issues for some children though, as I'm sure you're aware. Also, some parents have the education and means to educate their own children, others do not. I agree with you about curiosity. Creating the spark of learning how to love learning is crucial, but it's also about allowing students to discover their potential, whatever that potential is.

    What I've seen in education is not a deliberate dumbing down of education (as that would entail having to dupe a whole lot of smart educators, teachers that taught you and me), but rather the same temptation to control that DaveF mentions. This is creating a narrowing of learning. The inertia that is taking place right now is causing our collective administration to grow even more than the enormous size it is. Here's a very simple youtube video that in my opinion hits the nail on the head as to what's really wrong with education using the word itself:

    Thank you, GB

     

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  • Wed, Oct 22, 2014 - 3:48pm

    #33
    jgritter

    jgritter

    Status Bronze Member (Offline)

    Joined: Dec 13 2011

    Posts: 157

    When in the course of human events. ...

    As romantic as the notion of shouldering arms and marching off to "stick it to the Man" might be, it won't work.  In 1775 the majority of Americans lived on, or had close ties to, small, organic, energy independent farms.  The general population could "shelter in place" literally indefinitely.  Today all that TPTB need do is stop truck traffic for a week or so and the masses will be turning in the 3%ers for a sandwich and a bottle of water. 

    While I don't discount the possibility of dying at a barricade, in a gulag, or curled up under a bush in the snow, collapse early and avoid the rush seems like the best course of action.  As distasteful as it sounds, shuffling along with one's head down and mouth shut, building the new world as the old one collapses under it's own weight, seems like it has the greatest likely hood of resulting in something positive. A fifteen year collapse to an Eighteenth century lifestyle would seem to be much better to me than a fifteen day collapse to a paleolithic one.

    John G

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  • Wed, Oct 22, 2014 - 4:31pm

    Reply to #32
    Brad

    Brad

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    Posts: 3

    "The principles of Humanistic Education"

    [quote=gillbilly]What I've seen in education is not a deliberate dumbing down of education (as that would entail having to dupe a whole lot of smart educators, teachers that taught you and me), but rather the same temptation to control that DaveF mentions. This is creating a narrowing of learning. The inertia that is taking place right now is causing our collective administration to grow even more than the enormous size it is.
    [/quote]
    I got my CA teaching credential back in 1990 through the U.C. system and I witnessed first hand this "deliberate dumbing down" by the promoting of "the principles of Humanistic Education" in the student teacher curriculum. Foremost among the tenets of this new approach were: "the only form of meaningful evaluation is self-evaluation, and "feelings, as well as knowledge, are important in the learning process." This was the beginning of the "everyone gets a prize, touchy, feely" denigration of both academic and artistic excellence in the public schools, in lieu of this insidious and burgeoning "moral relativism."
    On a side note, I recall being infuriated at the time when my girlfriends son (an extremely bright kid who was then in third grade) told us what was going on in his class …the new "humanist way" was to have him stop his own progress if he got at all ahead, and have him go around and help teach the other kids in the class until everyone was caught up…something which bored him to no end, and made him dread going to school. This was one of the new teaching techniques aimed at stultifying the kids at the top, by forcing them to go at a snails pace "for the good of the collective."
     
     
     
     
     

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  • Wed, Oct 22, 2014 - 5:11pm

    Reply to #2

    HughK

    Status Gold Member (Offline)

    Joined: Mar 06 2012

    Posts: 571

    The wonders of life can be found in many places

    [quote=cmartenson]If any of you meet my kids (or have as the case may be) you'll see what I mean…they are intelligent human beings…not *kids* or students or children.  And that is the potential birthright of every young human being….as long as they are not taught otherwise along the way.
    [/quote]
     
    Hi all,
    I'm on a trip in Venice with my students so here is a quick response.
    Sometimes I struggled in public school, partly because I had to study something I didn't want to, and this was a barrier to my curiosity or motivation.  But, the biggest barriers to my motivation personally seem to have been connected to some emotional obstacles that I faced, and which took me a long time to overcome.  So, the system was only part of my personal obstacles to learning.
    I also had the experience of having my curiosity sparked at school.  Biology teacher Ms. Metter allowed my and my friend Jason to stay after school in 7th grade to help her with the fish tanks.  In 3rd grade, Ms. Stauffer let us create our own muppets and make our own muppet show, based as much on our own personalities as the real Muppets.  My positive experiences in high school are too many to recount, but I am still in touch occassionally with Mr. Landry, Mr. Frissel, Ms. Groupe, and I also have many fond memories of other high school teachers with whom I wasn't in touch.  One thing that happened in high school was that I became my own person, more separate from the wonderful, but also sometimes tyrannical, nuclear family structure.  Developing adolescent-to-adult relationships with my peers and teachers and coaches (Mr. Hamilton – my swim coach – was a star…) was a huge part of my maturation process.  
    Today in Venice we went to see a PhD oceanographer talk about sea level rise, then to the Biennale to let students explore contemporary architecture, and then students had free time to study a subject which they chose on their own – granted from a menu of about 45 options in Venice.  Some of these students are very self-motivated and curious and some are not as much, but certainly we see their potential shine forth at different moments.
    I agree that the compartmentalization of public and private education can kill curiosity, but I also think that thing are a little deeper than described above.  In some cases, moms and dads can certainly kill curiosity, restrict knowledge, and limit a young person's exposure to other adult perspectives, sometimes as much or more than teachers.  In most cases, parents have certain weaknesses and flaws that, in spite of their many strengths, can be oppressive if a young person does not have a chance to meet other adults.  This meeting of others allows the teen to have a broader and more diversified view of the world, giving him/her more exposure to more models of what it means to be an adult.  
    Heck, in some of my classes, students even get to explore heterodox economic paradigms like biophysical economics and alternative thinkers like Charles Hall or Chris Martenson… Their parents almost certainly would not have led them towards those particular waterfalls, at the very least.
    Intellectually, school is also where many young people may enter world of curiosity, not leave it.  This was certainly true to a great extent for my mother, whose parents were kind and hard working, but not intellectually curious.  Mom, however, took off at school, reading, performing in plays, writing for publications and otherwise doing things that her parents had not imagined.
    Also, we are all playing this game in the gordian knot of modern industrial civilization.  Certainly our modern educational system is a part of that and can often – but certainly not as much as some argue – take the joy from life.  But, this is true about a lot of aspects of our modern, compartmentalized world.  I am sure that the indigenous communities and ecosystems whose gold we (yes, us…) are pillaging indirectly by bidding up the price of gold would like us to see the waterfall, the forest, and the earth as a whole.  
    I heard a great quote on this recently….you wouldn't sell the Duomo in Florence for its bricks…it's worth a lot more than that as a whole, integrated work.  Yet our system as a whole (and those of us here who buy PMs) are of course selling off parcels of our biosphere in just such a way.  So, sometimes we want to look at things as a whole when it suits us, but we'd like to keep looking at things as discrete and private parcels of property when that suits us as well.
    I am all for home schooling if it works for people, as I certainly think that parents and young people should have a lot of freedom of choice about education.  But there is a lot of good happening in public and private classroom education as well, even if it is part of a larger system that we would like to transform.
    We are seeing waterfalls, mountains, (rising) lagoons, beautiful paintings, and much more both in the classroom and beyond.
    Cheers,
    Hugh
     

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  • Wed, Oct 22, 2014 - 8:48pm

    #34
    Adam Price

    Adam Price

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    The entire premise of this

    The entire premise of this article is BOGUS and shows a complete lack of understanding of the only 2 interest rates the Federal Reserve controls and how banks determine interest rates they pay on any and all time deposits.

    The Federal Reserve CANNOT AND DOES NOT CONTROL INTEREST RATES AT ALL IN THE ECONOMY and only controls the following 2 interest rates which have nothing whatsoever to do with the economy:

    1) Federal Discount Rate – currently 0.75%

    2) Federal Funds Rate (which it influences) – currently 0.25%

    Both rates are only for VERY SHORT TERM LIQUIDITY PURPOSES AND APPLY ONLY TO BANK BORROWING, with the Federal Discount rate being for direct borrowing by banks from the Federal Discount Window at the Federal Reserve and the Federal Funds rate being for interbank borrowing.

    The only 2 rates set by the Federal Reserve have absolutely nothing to do with the interest rates that banks pay on savings account, other than to "influence" the banks to perhaps pay higher or lower rates on those accounts.

    There is no minimum amount that was ever coded into regulations that banks have to pay on a savings account, although there were once maximums with Regulation Q which was part of the Glass Steagall Act and those were 5.25% for banks and 5.50% for thrifts (savings and loans).

    Banks USED TO GENERALLY FOLLOW the Federal Discount Rate in terms of what they would pay savers as recently as 2007, but that was before they discovered that they could pay savers 0.000000000000000000001% and not have any significant loss of deposits.

    As long as banks have LOW DEMAND FOR BORROWING against depositor funds, the chance of banks "competing" with other banks to pay higher rates to attract funds (which used to include FREE TOASTERS, etc. along with bonus interest rates for a period of time) is nada, zip, zilch, and nil.
     

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  • Wed, Oct 22, 2014 - 9:36pm

    #35

    Greg Snedeker

    Status Silver Member (Offline)

    Joined: Oct 22 2012

    Posts: 380

    I agree

    Brad, I remember those days. It was annoying to see everyone get a prize of some sort. Don't know if you're still teaching, but many schools have moved away from that. We all have our limited experience, so I'm only speaking from mine. Some schools are turning out excellent learners, others not so much. I agree with Hugh as well, there are some pretty amazing students graduating every year. I also agree with him that having a wide varieties of approaches helps, whether it be home schooling, public, private, technical, etc.

    I sat with my advisees today and asked them what they would like to see change in their school experience. Their response…we want more freedom to choose our curriculum and schedule. The more requirements that are added, the less they are able to choose. They are feeling controlled. I asked them to explain. They said the administration and some teachers didn't trust them to make their own choices, and that it was those adults that seemed to fear the mistakes the students might make.

    My take…there is a lot of money that rides on test scores (which effects public and private schools) and behavior (which effects admissions primarily private schools, but public as well), and the students feel the pressure of that fear from adults. Just my observation.

    Wonder where Yellen went to school?

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  • Thu, Oct 23, 2014 - 12:30am

    Reply to #2

    pinecarr

    Status Gold Member (Offline)

    Joined: Apr 13 2008

    Posts: 1088

    Excellent, balanced post, HughK!

    I was heartened to hear about your positive experiences with the educational system.  But you particularly hit a chord with me with the following:

    Also, we are all playing this game in the gordian knot of modern industrial civilization.  Certainly our modern educational system is a part of that and can often – but certainly not as much as some argue – take the joy from life.  But, this is true about a lot of aspects of our modern, compartmentalized world.  I am sure that the indigenous communities and ecosystems whose gold we (yes, us…) are pillaging indirectly by bidding up the price of gold would like us to see the waterfall, the forest, and the earth as a whole.  
    I heard a great quote on this recently….you wouldn't sell the Duomo in Florence for its bricks…it's worth a lot more than that as a whole, integrated work.  Yet our system as a whole (and those of us here who buy PMs) are of course selling off parcels of our biosphere in just such a way.  So, sometimes we want to look at things as a whole when it suits us, but we'd like to keep looking at things as discrete and private parcels of property when that suits us as well.

    I used to know someone whose work would take him to Indonesia.  I was concerned for his safety because the State Department warned Americans that there was violence and unrest, and that going there wasn't necessarily safe. But the more I read, the more I started to learn that there was more to the story than "bad people causing civil unrest".  https://www.carnegiecouncil.org/publications/archive/dialogue/2_11/section_3/4459.html/:pf_printable

    The Amungme and Kamoro are the original indigenous landowners of the areas of Papua that are now occupied by Freeport’s massive copper and gold mining operations. At the time of Freeport’s arrival in 1967, the two communities numbered several thousand people. With lands spanning tropical rainforest, coastal lowlands, glacial mountains, and river valleys, the Kamoro (lowlanders) and Amungme (highlanders) practiced a subsistence economy based on sustainable agriculture, forest products, fishing, and hunting — their cultures intimately entwined with the surrounding landscape.
    Today, Freeport’s Papua mining operations are among the largest in the world. The company has decapitated one of Papua’s mountains, held sacred by the Amungme, and dumped millions of tons of mining waste into local river systems. Freeport’s despoliation of Kamoro and Amungme lands and natural resources have brought serious harm to the economies and livelihoods of local communities. Compounding the problem are the hordes of outsiders who have swarmed to the economic “boom town” created by the mine. The area’s population has exploded to some 120,000 people, making Timika the fastest-growing “economic zone” in the entire Indonesian archipelago.
    For the Amungme and Kamoro the conflict with Freeport began with the company’s confiscation of their territory. Freeport’s 1967 Contract of Work with the Indonesian government gave Freeport broad powers over the local population and resources, including the right to take land, timber, water, and other natural resources, and to resettle indigenous inhabitants while providing “reasonable compensation” only for dwellings and permanent improvements. Freeport was not required to compensate local communities for the loss of their food gardens, hunting and fishing grounds, drinking water, forest products, sacred sites, and other elements of the natural environment.

       The more I read, the more I was blown away with the total disregard with which the gold and copper mining operations devastated the indigenous people's natural environment.  But what really made it hit home was reading how, in destroying the mountains and rivers, the mining operations were literally defiling what the indigenous people viewed as the embodiment of the sacred "female earth spirits". https://www.carnegiecouncil.org/publications/archive/dialogue/2_11/section_3/4459.html/:pf_printable

    This usurpation of indigenous land is particularly harsh in view of Amungme cosmology, which regards the most significant of its female earth spirits, Tu Ni Me Ni, as embodied in the surrounding landscape. Her head is in the mountains, her breasts and womb in the valleys, and the rivers are her milk. To the Amungme, Freeport’s mining activities are killing their mother and polluting the milk on which they depend for sustenance — literally and spiritually. In addition, mountains are the home to which the spirits of Amungme ancestors go following death.”

    So yes, I think you bring up a very valid and uncomfortable point, that there are times (like when we buy gold), when wemay  turn a blind eye to the "whole picture".

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  • Thu, Oct 23, 2014 - 4:30am

    Reply to #34
    Time2help

    Time2help

    Status Platinum Member (Offline)

    Joined: Jun 08 2011

    Posts: 2261

    BOGUS

    [quote=Adam Price]The entire premise of this article is BOGUS and shows a complete lack of understanding of the only 2 interest rates the Federal Reserve controls and how banks determine interest rates they pay on any and all time deposits.
    The Federal Reserve CANNOT AND DOES NOT CONTROL INTEREST RATES AT ALL IN THE ECONOMY and only controls the following 2 interest rates which have nothing whatsoever to do with the economy
    [/quote]
    You should try yelling LOUDER.

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  • Thu, Oct 23, 2014 - 8:49am

    Reply to #2

    Bankers Slave

    Status Silver Member (Offline)

    Joined: Jul 26 2012

    Posts: 513

    And why not,

    deliberately dumb down Americans? They would be moulded to accept everything that they are told by the PTB as gospel and not to question authority. As far as the biggest lie is concerned, it seems to be working just dandy. It certainly is working over here in old blighty, "The government would never do that to their own people" I hear them say, but the application of that which is missing, logic and reasoning, tells us the opposite is true. Big tick in the box for homeschooling from me!

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  • Thu, Oct 23, 2014 - 11:51am

    Reply to #34

    Chris Martenson

    Status Platinum Member (Offline)

    Joined: Jun 07 2007

    Posts: 4703

    Incorrect

    [quote=Adam Price]The entire premise of this article is BOGUS and shows a complete lack of understanding of the only 2 interest rates the Federal Reserve controls and how banks determine interest rates they pay on any and all time deposits.
    The Federal Reserve CANNOT AND DOES NOT CONTROL INTEREST RATES AT ALL IN THE ECONOMY and only controls the following 2 interest rates which have nothing whatsoever to do with the economy:
    [/quote]
    Assuming you are here to learn and be part of an open-mined discussion, I'll respond.  The Fed directly controls interest rates along the entire Treasury curve and even specifically targeted the long end of the curve with Operation Twist, which saw them swap short paper for long.
    And they told us what they were doing and why.  They were driving down interest rates on the long end of the curve with the intent of lowering borrowing costs for long-term purchases, namely houses and corporate investments.
    It's not at all reasonable to say that's anything other than controlling interest rates in the real economy.
    So there's that.
    Next, when the Fed buys a $ trillion in MBS paper, the recipients of all that new cash, by definition, have to do something with that cash.  They could hold onto it, they could store it at the Fed in excess reserves, or they could use it to buy up more financial assets.
    To the extent that they used that fresh cash to buy a new debt instrument is the extent to which the prices for those assets rose as a result (and boy did they!) which, of course, drives interest rates lower (and boy did they!) and that's the indirect mechanism for driving rates lower.
    But this is all very well known and easy to find out, and I'd invite you to read up on the subject. 
     

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  • Thu, Oct 23, 2014 - 12:32pm

    #36

    davefairtex

    Status Diamond Member (Offline)

    Joined: Sep 03 2008

    Posts: 3156

    fed controlling rates

    adam price-

    The Federal Reserve CANNOT AND DOES NOT CONTROL INTEREST RATES AT ALL IN THE ECONOMY and only controls the following 2 interest rates which have nothing whatsoever to do with the economy:

    The Fed has demonstrated effective control over short term rates through their QE programs that created a massive pile of Excess Reserves that is constantly seeking a return, which has driven short rates to zero.  Was this their intent?  I think so.   Short rate control: Mission Accomplished.

    The Fed's effective control over long rates is more questionable.  They certainly have tried hard (buying 4 trillion in bonds with the stated intention of lowering rates is a decent sign of "trying hard" in my book) to lower rates, but the market seems to flex its muscles every now and then that makes me wonder just how complete their control is over longer rates.

    Evidence of the desire to control long rates here:

    http://usatoday30.usatoday.com/money/economy/story/2012-06-20/full-text-of-fed-statement/55711168/1

    … The Committee also decided to continue through the end of the year its program to extend the average maturity of its holdings of securities. Specifically, the Committee intends to purchase Treasury securities with remaining maturities of 6 years to 30 years at the current pace and to sell or redeem an equal amount of Treasury securities with remaining maturities of approximately 3 years or less. This continuation of the maturity extension program should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative.

    So, since explicit policy statements from the Fed itself reveals a desire to control long rates, we can debate whether that policy was successful or not but what is not up for debate is the attempt was made.

     

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  • Thu, Oct 23, 2014 - 12:44pm

    #37
    robie robinson

    robie robinson

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    Posts: 879

    Dave and Chris,

    Your patience with the folks here is to be admired. I have too few thumbs with which to congratulate.

     

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  • Thu, Oct 23, 2014 - 4:04pm

    #38

    Wendy S. Delmater

    Status Diamond Member (Offline)

    Joined: Dec 13 2009

    Posts: 1418

    FYI the "exec dividend program" ad in Rickard's article?

    It's really about warrants, per the Stock Gumshoe.

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  • Thu, Oct 23, 2014 - 4:29pm

    Reply to #35
    Brad

    Brad

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    Posts: 3

    Permissive teaching practices, and the Gen Yers

    [quote=gillbilly]Brad, I remember those days. It was annoying to see everyone get a prize of some sort. Don't know if you're still teaching, but many schools have moved away from that. We all have our limited experience, so I'm only speaking from mine. Some schools are turning out excellent learners, others not so much. I agree with Hugh as well, there are some pretty amazing students graduating every year. I also agree with him that having a wide varieties of approaches helps, whether it be home schooling, public, private, technical, etc.
    [/quote]
    Hey Gillbilly, I can only speak to what I saw going on in the teacher training arena back in the 90’s, as my career took another path (computer animation) after getting my teaching credential. At that time art and music teachers were being laid off statewide, not hired (as so very many bi-lingual teachers were.) And, within the context of “the dumbing down of education,” one can certainly point a finger at the Feds open border policy, and massive influx of non-English speaking students, which diverted resources away from “higher level cognitive training,” and opportunities for promoting divergent/creative/critical thinking within the curriculum.
    Was this all being done purposely back then, in tandem with the thrust towards “humanization” and “moral relativism” in the classroom…in order to “soften the curriculum?’…i.e. “The Naked Communist, goal 17)
    I think it’s instructive to compare the spectrum of parenting styles (permissive, authoritative, authoritarian) that we learned about back in Psych 101, to what was then being introduced into the classroom, and then take a look at the generation of graduates that it produced…the Gen Yers.
    Here’s a quote from one article: “…impulse control is often difficult for children of permissive parents. This contributes to the behavioral problems that these children tend to demonstrate at school, where their peers tend to outperform them academically. Children of permissive parents also tend to be immature and find it difficult to take responsibility for their actions.”
    And from another article: “Harvey’s conclusion? As a group, he says, Gen Yers are characterized by a “very inflated sense of self” that leads to “unrealistic expectations” and, ultimately, “chronic disappointment. And if you think the Gen Yers in your workplace are oversensitive as well as entitled, Harvey’s findings back that up, too. Today’s 20-somethings have an “automatic, knee-jerk reaction to criticism,” he says, and tend to dismiss it. Even if they fail miserably at a job, they still think they’re great at it..”
    So, there appears to be some evidence of a causal link between the permissive teaching styles that were being pushed on student teachers in the 90’s with the behaviors and attitudes of the students that subsequently came under their tutelage.
     

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  • Thu, Oct 23, 2014 - 6:18pm

    Reply to #35

    Snydeman

    Status Member (Offline)

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    Posts: 521

    Brad wrote:I think it’s

    [quote=Brad]
    I think it’s instructive to compare the spectrum of parenting styles (permissive, authoritative, authoritarian) that we learned about back in Psych 101, to what was then being introduced into the classroom, and then take a look at the generation of graduates that it produced…the Gen Yers.
    Here’s a quote from one article: “…impulse control is often difficult for children of permissive parents. This contributes to the behavioral problems that these children tend to demonstrate at school, where their peers tend to outperform them academically. Children of permissive parents also tend to be immature and find it difficult to take responsibility for their actions.”
    And from another article: “Harvey’s conclusion? As a group, he says, Gen Yers are characterized by a “very inflated sense of self” that leads to “unrealistic expectations” and, ultimately, “chronic disappointment. And if you think the Gen Yers in your workplace are oversensitive as well as entitled, Harvey’s findings back that up, too. Today’s 20-somethings have an “automatic, knee-jerk reaction to criticism,” he says, and tend to dismiss it. Even if they fail miserably at a job, they still think they’re great at it..”
    [/quote]
     
    As opposed to the Baby Boomers, and Woodstock generation, who clamored for change on just about every level, but then hypocritically have enjoyed massive and disproportionate prosperity at the expense of later generations? The hippie-turned-yuppies? Yeah, these new generations are just butt-holes.
    I'm not arguing they don't display the qualities you are talking about – some of them anyway – but I don't think we should start slinging mud across generations without looking at which generations really screwed the pooch, and which generations are just doing as their parents and grandparents taught them to do. As a generation Xer, I blame my parents, their parents, and my own generation. Apples don't fall far from the trees that bear them, after all.
    Honestly I think these current generations are treated with such kid gloves, and hyper-inflated senses of self, precisely because the boomers and Gen-Xers subconsciously feel guilty about screwing over the future so badly with their greed and insatiable need for material wealth.
     

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  • Thu, Oct 23, 2014 - 6:30pm

    Reply to #2

    Snydeman

    Status Member (Offline)

    Joined: Feb 06 2013

    Posts: 521

    cmartenson

    [quote=cmartenson][quote=melissaoverbrook]
    Correct! This is the goal of the US Dept of Education. Check out "
    The Deliberate Dumbing Down of America"
    [/quote]
    While I am not familiar with the work you linked here, the title was very close to the book that got my wife and I to bite the bullet and homeschool our kids.
    The book that changed us was Dumbing Us Down: The Hidden Curriculum of Compulsory Schooling, by John Taylor Gotto.
    In it he clearly articulates the various regimes and practices of modern public schooling that are designed to create conformity, obedience to authority, and a profound disconnect between and among the various subjects it 'teaches.'
    Perhaps the greatest sin is that schools, both public and private quite often ruin a child's curiosity.  As long as you don't do that, they'll be fine.
    So we were able to homeschool and we did, and we are now 12 years into that experiment and I could not be happier with the results.
    Our kids are curious and engaged and full of hope and life, as they should be.  Everything is related, and interconnected and flat-out magical as long as you remain curious and they have.  There.  That was easy.
    Education is *not* about collecting facts, it is about connecting facts.  Well, at least that's what education should be, but all too often is not.
    Why would we, as a population, agree to give ourselves substandard educations?  Why would we not revel in the magical mystery tour that life is, as opposed to turning into drudgery at an early age?  Teachers should really not be that at all, but mentors, more like experienced tour guides who know that it is far better to let the travelers round the corner and 'discover' the beautiful waterfall for themselves, than tell them all about it and force them to slice it into meaningless names before seeing it.
    If any of you meet my kids (or have as the case may be) you'll see what I mean…they are intelligent human beings…not *kids* or students or children.  And that is the potential birthright of every young human being….as long as they are not taught otherwise along the way.
    [/quote]
    This right here is why I moved from public to independent school teaching. My wife, who still teaches in the public system, now has to jump through so many flaming hoops and test-preparation strategies that are not only exhausting her, but are sucking from her the LOVE of teaching…which in my opinion is the most important characteristic any teacher can have. For my part, I will leave my profession the moment my passion for it dissipates, and when I feel I can no longer subvert the authority of the powers that be by teaching my kids to make the *connections* of history, and to THINK, rather than to memorize and regurgitate facts. Now, facts are important, don't get me wrong…but they are less important than the connections that can be made between those facts, or the trends and larger movements of history than can be seen from those facts. The problem is that we teachers, like anyone, have mortgages to pay and food to put on the table for our children. We have to follow the "rules" if we wish to remain employed, and when it comes down to the choice between being a dissident and unemployed or being a sheep going along with the system for the sake of making a living, most everyone I know would choose the latter. So, let's be kind with our teachers here…they are as much subjects of the system as anyone else, even though many teachers I know want to go back to an education system that teaches critical thinking. The problem is that teachers – like many professions – are not the ones who are in charge of education, nor educational policy. It's the PhDs and suits who determine it. Sound familiar?
    I try my hardest to be a teacher who "flies under the radar" while teaching my kids, as much as possible, to think things through, to never blindly trust authority (even me…I tell them they should feel free to counter anything I say, as long as they have facts and details to back it up), to analyze and interpret, and to look for the history they AREN'T teaching you, rather than the canned shit they are trying to pass off as important. Am I perfect? Not by a long shot. But my first series of lessons on the modern world is where I ask them to use documents and maps to answer the question: "What were the consequences/effects of Columbus's accidental discovery of the "New World"?" On the first station they come across two maps – one from pre-Columbian Americas showing all the major tribal and ethnic groups, and then compare it to the map of the European colonies two hundred years later. Then I ask them to explain what story these maps are telling us. It's HARD for them to think outside the paradigm that Columbus was a hero and that the post-Columbian world was better off for it, but as newbies go they do a damn good job of coming up with the notion that those people are not here anymore, and then they begin to ask why. On my unit test on the Scientific Revolution and Enlightenment, the most important questions I ask them are why was the Enlightenment revolutionary? and How did the scientific revolution change social attitudes about women? (answer: it didn't. It used science to further justify existing patriarchal views) The test finished up with them writing a paragraph explaining what they learned in this unit, why it is relevant (or not) today, and what they "take away" from what they learned. I'd love to try to include some photo examples of student responses embedded in this post, but I'm not proficient enough to figure out how to do that, and I have papers that are crying out to get graded, so I have no time to figure it out.
    In my economics course, I am infusing elements of the Crash Course into what I'm teaching, but what may surprise you is how unsurprised the students are by the corruption, unsustainable nature and inherent frailty of the system. They are more observant than we sometimes give them credit for, and smarter too. When I explained how governments issued bonds to cover shortfalls in budgeting, it took maybe 5 seconds before one of them raised her hand and said "But, wait, a debt has to be paid off. So the more debt this generation takes on, the more we will have to pay back in the future, right?" Better yet, when I asked how the budget problems could be fixed, they collectively looked indignant…as if my question was an insult to their intelligence due to its simplicity. 
    "We could cut spending."
    "We could increase taxes."
    Then, the most brilliant response: "We're probably better off doing both. That way we don't have to raise taxes or cut spending as much individually."
    I tell you, they're on to us. They know in the depths of their souls that the game is rigged and the party is coming to an end, and they trust us less for lying to them about it. In fact, I consider it the height of my teaching year so far when a student, examining some basic charts, asked if the system was "sustainable," and I responded "I don't think so, but you'll need to draw your own conclusion." Her riposte was, "can we fix it?" and I said, simply, that I didn't know, but I intended to continue trying. For the first time ever, I could see a respect on their faces underneath the fear generated by a teacher acknowledging the bitter truth; a respect that here was an adult who was not going to rose-color things up just to make them feel better. 
    When I teach about the Federal Reserve, unlike my partner teacher who will teach all the normal things, I will start them out with a video produced by the FED concerning its role in the economy, then I will show Chris's segment on the Fed. If asked which is the truth, I will not tell them anything other than that they need to look deeper and always ask why anyone in authority might say certain things…and then I'll let their already capable minds lead them. Others might disagree if these approaches are professional of me, of course, and I am walking a dangerous line. Even posting this much about it makes my skin tingle, as if the eyes of my school's administrators might somehow fall on this post and lose me my job. Public school teachers are watched a WHOLE lot more than I am, too.
    So, my executive summary is this:
    1) Kids are smarter and more observant than we think, and most of them ain't fooled by the hypocritical and dishonest adult world around them.
    2) There are teachers out there in the system fighting against common core and the education of obedience. It'd be nice if more voters would help us out on that front, though.
    3) The majority of teachers are just trying to make ends meet too. Let's not blame them for this educational train-wreck in progress, please.
    4) Despite my own bugle-trumpeting, I'm not the best teacher out there. Trying my best, but that rarely translates into actually doing an excellent job.
     

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  • Thu, Oct 23, 2014 - 7:10pm

    Reply to #35
    Brad

    Brad

    Status Member (Offline)

    Joined: Feb 11 2009

    Posts: 3

    Snydeman wrote:As opposed to

    [quote=Snydeman]
    As opposed to the Baby Boomers, and Woodstock generation, who clamored for change on just about every level, but then hypocritically have enjoyed massive and disproportionate prosperity at the expense of later generations? The hippie-turned-yuppies? Yeah, these new generations are just butt-holes.
    I'm not arguing they don't display the qualities you are talking about – some of them anyway – but I don't think we should start slinging mud across generations without looking at which generations really screwed the pooch, and which generations are just doing as their parents and grandparents taught them to do. As a generation Xer, I blame my parents, their parents, and my own generation. Apples don't fall far from the trees that bear them, after all.
    [/quote]
    Great points!…there are lots of moving pieces to this societal experiment. But, how much of what has happened to bring us to this seeming critical juncture has just been happenstance, and how much has been social engineering? Do you see "the elites fingerprints" upon the long-term trends in public education?  I guess my premise is that there is indeed a nefarious unseen "guiding hand," that's determined to break down both the moral character and the general intelligence of the U.S. population….and that public schooling is one of the more effective tools that they use to this end.
     
     

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  • Thu, Oct 23, 2014 - 8:06pm

    #39

    Snydeman

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    Joined: Feb 06 2013

    Posts: 521

    I tend to..

    Brad, I tend to stray away from conspiracy theories, and it would take much evidence to prove to me that there has been a deliberate plan and coherent vision coming together by the powers that be to dumb America down. Rather, I see it as a thousand little decisions – some made for nefarious reasons, and others made for noble ones – and the inherent chaos of the system that have led us to where we are today. I blame conservatives and liberals equally, but I don't think it has been planned and executed in any Orwellian way.

    But, then again, I'm not too bright, so… 😉

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  • Thu, Oct 23, 2014 - 11:29pm

    Reply to #36
    Adam Price

    Adam Price

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    Joined: Oct 22 2014

    Posts: 15

    Your assertions are false. 

    Your assertions are false.  The funds created by QE and used to purchase securities from the banks are NOT SEEKING ANY RETURN AT ALL and are all sitting to the tune of around $3 trillion in the excess reserves accounts of those banks at the Federal Reserve from whom the Federal Reserve purchased the securities.  Those funds in the excess reserves accounts are paid interest at the Federal Funds Rate of 0.25% by the Federal Reserve.QE has has no impact whatsoever on either long term or short term yields (interest rates) in the bond markets.  Those rates have been pushed to very low levels by VERY HIGH DEMAND FOR US TREASURIES where prices of bonds are inverse to yields.  Demand for those bonds pushes up the prices which in turn lowers the yields.
    [Moderator's note: Took the comment out of boldface type.  All-caps and all-bold comments are the equivalent of yelling, and are not allowed on the forums.]

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  • Thu, Oct 23, 2014 - 11:41pm

    Reply to #34
    Adam Price

    Adam Price

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    Joined: Oct 22 2014

    Posts: 15

    Chris, it is obvious you

    Chris, it is obvious you simply don't know what you are talking about.  What I stated is completely correct.  The Federal Reserve DOES NOT CONTROL ANY INTEREST RATES WHATSOEVER other than the two interest rates I specified correct which are:1) Federal Discount Rate – currently 0.75%

    2) Federal Funds Rate (which it influences) – currently 0.25%

    Both rates are only for VERY SHORT TERM LIQUIDITY PURPOSES AND APPLY ONLY TO BANK BORROWING, with the Federal Discount rate being for direct borrowing by banks from the Federal Discount Window at the Federal Reserve and the Federal Funds rate being for interbank borrowing.

    The only 2 rates set by the Federal Reserve have absolutely nothing to do with the interest rates that banks pay on savings account, other than to "influence" the banks to perhaps pay higher or lower rates on those accounts.

    The Federal Reserve HAS NO CONTROL WHATSOEVER ON YIELDS ON US TREASURIES and can only influence those in a limited way by jawboning and by increasing or lowering demand for them by buying or selling US Treasuries.  The Federal Reserve holds less than 15% of all outstanding US Treasuries.  The annual market for US Treasuries is around $9 trillion in newly issued US Treasuries from the US Treasury and the Federal Reserve only buys about 8% of these, mostly to replace matured US Treasuries which have been paid off in full to the Federal Reserve by the US Treasury.  The Federal Reserve is essentially a RELATIVELY MINOR PLAYER in the overall market for US Treasuries with about 92% of all US Treasuries each year purchased by parties other than the Federal Reserve.  Do you not comprehend that?  If not, I would suggest you review US Treasuries at:
    http://www.TreasuryDirect.gov
    As to cash proceeds from QE, ALL OF THOSE PROCEEDS TO THE BANKS TO THE TUNE OF AROUND $3 TRILLION HAVE GONE DIRECTLY INTO THEIR EXCESS RESERVES ACCOUNTS AT THE FEDERAL RESERVE which is where those funds are sitting and have been sitting so there is obviously nothing else to do with those funds as you either ignorantly or naively assert.
    EXCESS RESERVES ACCOUNTS OF BANKS TOP $2.5 TRILLION – WSJ

    So what exactly are excess reserves, and why should you care? Like most central banks, the Fed requires banks to hold reserves—mainly deposits in their "checking accounts" at the Fed—against transactions deposits. Any reserves held over and above these requirements are called excess reserves.

    Not long ago—say, until Lehman Brothers failed in September 2008—banks held virtually no excess reserves because idle cash earned them nothing. But today they hold a whopping $2.5 trillion in excess reserves, on which the Fed pays them an interest rate of 25 basis points—for an annual total of about $6.25 billion. That 25 basis points, what the Fed calls the IOER (interest on excess reserves), is the issue.

    http://online.wsj.com/news/articles/SB10001424052702303997604579238403178592262
     
    [Moderator's note: Removed boldface type.]

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  • Fri, Oct 24, 2014 - 12:02am

    Reply to #34

    Snydeman

    Status Member (Offline)

    Joined: Feb 06 2013

    Posts: 521

    Wow, really?

    [quote=Adam Price]Chris, it is obvious you simply don't know what you are talking about.  What I stated is completely correct.  The Federal Reserve DOES NOT CONTROL ANY INTEREST RATES WHATSOEVER other than the two interest rates I specified correct which are:
    1) Federal Discount Rate – currently 0.75%

    2) Federal Funds Rate (which it influences) – currently 0.25%

    Both rates are only for VERY SHORT TERM LIQUIDITY PURPOSES AND APPLY ONLY TO BANK BORROWING, with the Federal Discount rate being for direct borrowing by banks from the Federal Discount Window at the Federal Reserve and the Federal Funds rate being for interbank borrowing.

    The only 2 rates set by the Federal Reserve have absolutely nothing to do with the interest rates that banks pay on savings account, other than to "influence" the banks to perhaps pay higher or lower rates on those accounts.

    The Federal Reserve HAS NO CONTROL WHATSOEVER ON YIELDS ON US TREASURIES and can only influence those in a limited way by jawboning and by increasing or lowering demand for them by buying or selling US Treasuries.  The Federal Reserve holds less than 15% of all outstanding US Treasuries.  The annual market for US Treasuries is around $9 trillion in newly issued US Treasuries from the US Treasury and the Federal Reserve only buys about 8% of these, mostly to replace matured US Treasuries which have been paid off in full to the Federal Reserve by the US Treasury.  The Federal Reserve is essentially a RELATIVELY MINOR PLAYER in the overall market for US Treasuries with about 92% of all US Treasuries each year purchased by parties other than the Federal Reserve.  Do you not comprehend that?  If not, I would suggest you review US Treasuries at:
    http://www.TreasuryDirect.gov
    As to cash proceeds from QE, ALL OF THOSE PROCEEDS TO THE BANKS TO THE TUNE OF AROUND $3 TRILLION HAVE GONE DIRECTLY INTO THEIR EXCESS RESERVES ACCOUNTS AT THE FEDERAL RESERVE which is where those funds are sitting and have been sitting so there is obviously nothing else to do with those funds as you either ignorantly or naively assert.
    EXCESS RESERVES ACCOUNTS OF BANKS TOP $2.5 TRILLION – WSJ

    So what exactly are excess reserves, and why should you care? Like most central banks, the Fed requires banks to hold reserves—mainly deposits in their "checking accounts" at the Fed—against transactions deposits. Any reserves held over and above these requirements are called excess reserves.

    Not long ago—say, until Lehman Brothers failed in September 2008—banks held virtually no excess reserves because idle cash earned them nothing. But today they hold a whopping $2.5 trillion in excess reserves, on which the Fed pays them an interest rate of 25 basis points—for an annual total of about $6.25 billion. That 25 basis points, what the Fed calls the IOER (interest on excess reserves), is the issue.

    http://online.wsj.com/news/articles/SB10001424052702303997604579238403178592262
     
    [/quote]
    Let's see…you've called Chris ignorant, naiive, and stupid. Pray tell, how many multi-hour presentations have you done where you lay out a very data-driven and economically sound argument for why our financial system, energy system, and environment are all headed for crises? Published numerous articles on all sorts of economic trends and issues? What are your credentials again? I may not always agree with Chris on some finer points, but you're calling him stupid in the field he knows a hell of a lot about, so you might want to; a) give some respect in your tone, which right now resembles an adolescent who is pissed his Dad won't let him go to the party where all the girls are hanging out, and b) bring to the table some data and logic and engage him on his points directly. Oh, and don't quote the Wall Street Journal without back-checking their data. Posting things from the mainstream media here, and acting as if they are gospel, will get you as far as Paris Hilton will get, naked, in a gay bar.
    Try refuting his points without resorting to name calling. It might make your argument more convincing.

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  • Fri, Oct 24, 2014 - 12:09am

    #40
    Adam Price

    Adam Price

    Status Member (Offline)

    Joined: Oct 22 2014

    Posts: 15

    Federal Reserve has nothing to do with interest paid to savers

    THE FEDERAL RESERVE HAS NOTHING WHATSOEVER TO DO WITH INTEREST RATES PAID BY BANKS OR MONEY MARKET FUNDS TO SAVERS WITH TIME DEPOSITS.  Nothing, nada, zip, zilch, nil.

    The Federal Reserve CANNOT AND DOES NOT CONTROL INTEREST RATES AT ALL IN THE ECONOMY and only controls the following 2 interest rates which have nothing whatsoever to do with the economy:

    1) Federal Discount Rate – currently 0.75%

    2) Federal Funds Rate (which it influences) – currently 0.25%

    Both rates are only for VERY SHORT TERM LIQUIDITY PURPOSES AND APPLY ONLY TO BANK BORROWING, with the Federal Discount rate being for direct borrowing by banks from the Federal Discount Window at the Federal Reserve and the Federal Funds rate being for interbank borrowing.

    The only 2 rates set by the Federal Reserve have absolutely nothing to do with the interest rates that banks pay on savings account, other than to "influence" the banks to perhaps pay higher or lower rates on those accounts.

    There is no minimum amount that was ever coded into regulations that banks have to pay on a savings account, although there were once maximums with Regulation Q which was part of the Glass Steagall Act and those were 5.25% for banks and 5.50% for thrifts (savings and loans).

    Banks USED TO GENERALLY FOLLOW the Federal Discount Rate in terms of what they would pay savers as recently as 2007, but that was before they discovered that they could pay savers 0.000000000000000000001% and not have any significant loss of deposits.

    As long as banks have LOW DEMAND FOR BORROWING against depositor funds, the chance of banks "competing" with other banks to pay higher rates to attract funds (which used to include FREE TOASTERS, etc. along with bonus interest rates for a period of time) is nada, zip, zilch, and nil.
     

    [Moderator's note: This is a repeat post. Not allowed.]

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  • Fri, Oct 24, 2014 - 12:16am

    Reply to #34
    Adam Price

    Adam Price

    Status Member (Offline)

    Joined: Oct 22 2014

    Posts: 15

    Try refuting a single one of my points

    Snyderman, you apparently don't comprehend the facts related to the Federal Reserve and interest rates, either.  I'd suggest you read and attempt to comprehend exactly what I stated and further review the information available at:http://www.FederalReserve.gov
    http://www.TreasuryDirect.gov
    You haven't managed to refute a single point that I made and are just acting as an apologist for Chris and his delusional and dead wrong assertions.
    [Moderator's note: At this point it is difficult to tell whether your animosity is serious, or whether you are simply having fun being a troll.  I think you will find that the crowd at PP.com is a bit too mature and level-headed to be easily goaded into shouting back at you.]

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  • Fri, Oct 24, 2014 - 12:37am

    #41

    Aaron M

    Status Platinum Member (Offline)

    Joined: Oct 22 2008

    Posts: 790

    Dialog vs Trolling for arguments

    Adam Price,

    You've  decided to challenge the presented work – it is therefor incumbent on you to display the data disproving the assertions made. The scientific method can steer all fact based dialog to a refined understanding. Provided you have the facts, you present them to support your claim.

    You have given nothing to refute except links. Present the code or law that dictates the responsible party for interest rate laws and how they work, or accept the work as presented. That is how it works, and you'll find:

    a. the attitude is entirely unnecessary here, and;

    b. It won't get you very far.

    Cheers,

    Aaron

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  • Fri, Oct 24, 2014 - 2:46am

    #42
    Time2help

    Time2help

    Status Platinum Member (Offline)

    Joined: Jun 08 2011

    Posts: 2261

    Darbikrash, is that you?

    It would seem that he's the Darbikrash of modern economic theory.

    no

    Mr. Price – Whatever they are paying you, it's too much.

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  • Fri, Oct 24, 2014 - 3:03am

    Reply to #41

    davefairtex

    Status Diamond Member (Offline)

    Joined: Sep 03 2008

    Posts: 3156

    proof by repeated assertion

    Mr Price has decided to utilize the "proof by repeated assertion" technique.  I'm not impressed.  He's a troll.  End of story.  I suggest: ignore him and hopefully he'll just go away. 
    [Moderator's note: A.M., time2help, davefairtex, and Snydeman, thank you for putting the maturity and level-headedness of our community on fine display.  Adam Price will be taking a vacation from the forums now.]

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  • Fri, Oct 24, 2014 - 12:19pm

    Reply to #36

    Chris Martenson

    Status Platinum Member (Offline)

    Joined: Jun 07 2007

    Posts: 4703

    The importance of using facts correctly

    [quote=Adam Price]Your assertions are false. he funds created by QE and used to purchase securities from the banks are NOT SEEKING ANY RETURN AT ALL and are all sitting to the tune of around $3 trillion in the excess reserves accounts of those banks at the Federal Reserve from whom the Federal Reserve purchased the securities.  Those funds in the excess reserves accounts are paid interest at the Federal Funds Rate of 0.25% by the Federal Reserve.
    [/quote]
    Adam, here's the thing about this site.  We use facts.  
    To just cite one example, out of many, that I could pursue to demonstrate where your thinking is leading you astray, I'll use the bolded text above about excess reserves as a starting point.
    If the facts that underlie the bolded parts are wrong we can save a LOT of time by not bothering to refute or attempt to counter the assertions built off of them, because they will be, by definition, flawed.
    Make sense?
    OK, so your main claim above is that all the funds created by QE are sitting in excess reserves and therefore cannot be out there influencing interest rates.  If true that's a pretty good starting point for the rest of your arguments.
    Luckily, the data we need to verify that claim is easily accessible with a few mouse clicks
    From the Federal Reserve we find these data points.

    Fed balance sheet on Sept 1, 2009 before the crisis hits = $895 billion.
    Fed balance sheet today = $4,461.6 billion
    Difference between the two = $3,566.6 billion (this is the total amount of Fed QE balance sheet additions)
    Total excess reserves today = $2,667 billion
    The difference between excess reserves and Fed QE additions  = $899.6 billion

    Thus, rounding up slightly, the amount of money out there influencing things like interest rates is $900 billion, which is more than the entire size of the Fed balance sheet before the crisis hit.
    Your primary claim is that the injection of some $900 billion into the US financial system did not influence interest rates in any meaningful way, even though this amount was larger than the entire size of the pre-existing Fed balance sheet that had been accumulated through nearly 100 years of careful monetary policy execution.
    That's not a reasonable claim, at all, ergo any assertions built off of that are potentially even more unreasonable.
    As you've already noted, hopefully, we are allergic to unfounded assertions around here.

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  • Fri, Oct 24, 2014 - 12:25pm

    #43

    Jim H

    Status Diamond Member (Offline)

    Joined: Jun 08 2009

    Posts: 1798

    Fed balance sheet: The gift that keeps on giving

    This caught my eye this morning;

    http://www.bloomberg.com/news/2014-10-24/fed-s-4-trillion-holdings-keep-boosting-growth-beyond-end-of-qe.html

    As the Federal Reserve prepares to end its third round of bond buying next week, the central bank plans to hang on to the record $4.48 trillion balance sheet it has accumulated since announcing the first round of purchases in November 2008. …………

    Chair Janet Yellen opened the door to keeping a multi-trillion-dollar portfolio for years, saying a decision on when to stop reinvesting maturing bonds depends on financial conditions and the economic outlook. Shrinking the balance sheet to normal historical levels “could take to the end of the decade,” Yellen said at her press conference last month.

    This is a very, very simple point.. but I think it is lost on most folks.  The balance sheet becomes a self-perpetuating source for ongoing QE.. in other words.. just because the FED has stopped printing money..  does not mean that the distortion to the bond market, and the resulting rate manipulation across the maturity spectrum (This one's for you Adam!) will end.  Now I guess this balance sheet income amounts to sterilized QE, in other words not amounting to newly printed money… but it's still distortive, obfuscating the true supply vs. demand picture for US debt.   

    Think of it this way – if the FED merely allowed for the balance sheet to wind down via the self-liquidating (they get paid off) nature of bonds, it would be pretty painless, because they would not be "selling" per se.. just not replacing.  But they can't, or won't even do that.  I suppose someone could take the balance sheet data and approximate the level of stimulus we are talking about… but let's just say that 10% of the balance sheet liquidates yearly, that's $448 B, or $37 B monthly.  Any way you slice it, we are talking real money.  Still think the economy is getting better?      

     

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  • Fri, Oct 24, 2014 - 12:44pm

    #44

    Jim H

    Status Diamond Member (Offline)

    Joined: Jun 08 2009

    Posts: 1798

    Adam Price vs. the FED

    Here we go;

    Adam said,

    THE FEDERAL RESERVE HAS NOTHING WHATSOEVER TO DO WITH INTEREST RATES PAID BY BANKS OR MONEY MARKET FUNDS TO SAVERS WITH TIME DEPOSITS.  Nothing, nada, zip, zilch, nil.

    The Federal Reserve CANNOT AND DOES NOT CONTROL INTEREST RATES AT ALL IN THE ECONOMY

    San Fran FED President John Williams said,

    San Francisco Fed President John Williams, who also supports ending QE, said in a presentation in Washington earlier this year that research shows purchases have “sizable effects” on lowering bond yields, though uncertainty remains about the magnitude of these effects and their impact on the overall economy. He cited several research papers showing QE2 lowered yields on the 10-year Treasury note by around 15 to 25 basis points.

    Since all interest rates, both paid and earned, key off of UST bond yields, I would say that the FED itself has invalidated Adam's trollish argument.  I will stop now   : )

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  • Fri, Oct 24, 2014 - 5:11pm

    Reply to #2

    Greg Snedeker

    Status Silver Member (Offline)

    Joined: Oct 22 2012

    Posts: 380

    Well done Snydeman

    Great points Snydeman. I also work in a private school now, but taught for years in public schools and universities.

    The problem is that teachers – like many professions – are not the ones who are in charge of education, nor educational policy. It's the PhDs and suits who determine it. Sound familiar?

    Administrations originally were beneath the faculty in the hierarchy, but since they worked 12 months out of the year, they were eventually paid more, and then "paid more" eventually meant "more important."
    The policies and curriculums are being dictated from the top down. Look no further than Silicon Valley, which dictates to the government, which in turn tells the universities and so on down the line. Let's take the IPad/BYOD initiatives in public school that puts tablets in every kids hands. I can tell you these devices are not all they're cracked up to be. They distract the kids and the interface is pretty awful for education (can't type on them, difficult to use e-texts and to take notes). Some apps are okay, but even in private schools we're being told by the administration that we have to use them in our classes (literally, they ask us to send them a list of apps that you are using…heaven forbid we don't use any). What's interesting is there really isn't anyone under the age of 25-30 who grew up using these devices in the classroom, so we really don't know how they effect learning and the classroom environment, but you'd be hard-pressed to find a school that isn't racing to the finish line to outfit every student with a tablet. I can't tell you how many faculty meetings have been taken up with discussing what to do about students abusing their tablet in class (shopping, facebook, twitter, email, etc). Furthermore, we are now seeing seniors in high school that have trouble spelling simple words because they have been using a computer with spell check to write their papers for years.
    I agree with you as well about conspiracy, it would take a lot of evidence to convince me. Whether you call it dumbing down or narrowing, I think it lies in the millions of little "logical" decisions made over the years, and that creates an inertia that takes on a life of its own.
    Love your executive summary points!

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  • Fri, Oct 24, 2014 - 6:54pm

    Reply to #2

    Snydeman

    Status Member (Offline)

    Joined: Feb 06 2013

    Posts: 521

    gillbilly wrote:The policies

    [quote=gillbilly]
    The policies and curriculums are being dictated from the top down. Look no further than Silicon Valley, which dictates to the government, which in turn tells the universities and so on down the line. Let's take the IPad/BYOD initiatives in public school that puts tablets in every kids hands. I can tell you these devices are not all they're cracked up to be. They distract the kids and the interface is pretty awful for education (can't type on them, difficult to use e-texts and to take notes). Some apps are okay, but even in private schools we're being told by the administration that we have to use them in our classes (literally, they ask us to send them a list of apps that you are using…heaven forbid we don't use any). What's interesting is there really isn't anyone under the age of 25-30 who grew up using these devices in the classroom, so we really don't know how they effect learning and the classroom environment, but you'd be hard-pressed to find a school that isn't racing to the finish line to outfit every student with a tablet. I can't tell you how many faculty meetings have been taken up with discussing what to do about students abusing their tablet in class (shopping, facebook, twitter, email, etc). Furthermore, we are now seeing seniors in high school that have trouble spelling simple words because they have been using a computer with spell check to write their papers for years.
    [/quote]
    Oh good lord, don't get me started on the role of technology in the classroom! Our school started integrating required computer tablets 7 years ago for all students, and teachers were hard-pressed to figure out how to make technological education "innovative" (an overused and overvalued word, in my opinion). After three years, most teachers were still teaching the same way, but a few of us were seriously trying to utilize the technology to make learning more fun, efficient, and relevant. In my fourth year I piloted a program using Microsoft's OneNote program, where I toggled server permissions and sharing functions in such as way as to enable a digital class notebook, where I could drop notes, pictures, outlines, anything into an organized notebook that would almost instantly sync to student tablets. Students could also do their homework in a personal notebook which would sync with my own tablet, so handing in work was as simply as starting up your computer.
    The great thing was that they could do group or individual work anywhere on campus and I could see what they were doing in real-time, correct any misunderstandings or problems, offer feedback, etc, in real-time! A great example was I had some students looking up the Roman religious system, and they were sitting down the hall on the floor, stretched out, doing their research. When they started listing out the GREEK names of gods, I circled the names with my tablet pen and wrote "these are the Greek gods. Look for the Roman equivalent!" I heard a squeal from the group a few seconds later, and then watched a few minutes after that as they updated the list. It was a truly "innovative" use of technology- that is, it supported or enhanced the learning. Most technology interferes, disturbs, or complicates learning, in my experience.
    The punch-line of my story is that the following year my school went to a one-to-one computer policy, where students could bring in ANY computer (Apples, PCs, Tablets), and since there was no longer a required suite of programs the students had to use, my school stopped paying for MS OneNote, and students did too. SOOOOO much work, down the tubes. I'm not bitter.
    Ok, just a little.
    My favorite "innovation," by the way, was something called back-channeling, where students would participate in a chat room with one another and the teacher, answering questions and 'digging deeper' into the content of a film or documentary as they were watching it. Yes, they were expected to watch their computer screens, think deeply, and actively watch the movie at the same time. Beyond the ludicrous nature of this, it goes against all the brain research I've ever seen, not only on teenagers but on adults as well; we simply can not focus 100% on multiple things at once, especially if the tasks encompass similar modalities. So watching a screen and watching a screen simultaneously just aren't really possible without losing a lot in transition. Then again, had anyone asked an experienced teacher I'm pretty sure we could have saved them a lot of research money and told them it was a stupid idea.
    Back-channeling now lies six feet under the soil in the cemetery of stupid pedagogical ideas generated by people with too little classroom experience and too much so-called education. May it rest in peace, and not come back as a zombie, as so many stupid pedagogical ideas seem to do.
     
    In any case, after 7 years using tech in the classroom, I've learned the following:
    -Kids hate reading anything online that is of any substantial length. They need to feel the paper in their hands, to annotate it, to see it in context, and to physically manipulate it.
    -Computer technology in and of itself does not revolutionize education, anymore than the TV did for my generation. Kids are excited to use technology for what they want to use it for….not for what WE want them to use it for. Videotaping a boring lecture and posting the video online for students to trudge through doesn't make it any less a lecture nor any less boring. By comparison, during my unit on World War One, I have students go to a website and participate in a choose-your-own-path game that puts them in command of a British regiment in the trenches and asks them to make hard decisions and see the consequences play out on the screen. They never forget the lesson.
    -If given the choice, kids won't even open their tablets. They don't choose to take notes on them, they don't choose to do research with them, and they certainly don't want to be forced to read on them.
    -Technology fails, falters, hiccups, and can be hacked. I have yet to see any student have a picture they draw in their notebook get hacked and posted online. The server on a notebook never goes down. Opening up the notebook is only as slow as the person opening it. I've had ALL of these things happen regularly when using tech in my room. Usually, of course, these things fail when I really need them to work…so I've learned not to lean on technology overly much.
    -All this technology is fine during an era of still-cheap energy, but where will we be in five or ten years time, when energy and resource costs have likely spiraled out of control? For all the talk administrators and education PhDs have about the "future of education," precious few of them seem to pay enough attention to the likely outlook of the future. Then again, maybe I'm wrong and we're going to be just fine, but I doubt it.
    I'm sure I'm missing something, but trust me…I feel your pain!

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  • Fri, Oct 24, 2014 - 11:38pm

    #45
    climber99

    climber99

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    All debts get repaid;

    All debts get repaid; somehow.

    95% or so of 'money' is created by banks as debt (plus any services and assets that banks purchase). This money circulates and eventually comes back to the banks as principal and interest repayments to be destroyed.

    Savings is just 'money' that is in circulation but stationary at the moment. i.e. waiting to be spent and circulated again.

    The central banks are lenders of last resort. Debt default cascades down to the central banks who, in practice, simply rolled over the debt.  Providing enough new debt is issued to repay older debts and interest, the show continues to roll.  If not enough new debt is issued (like in Greece), then savings and existing assets get liquidated i.e. gold reserves get taken, National assets gets privatised, individual savings account get raided. 

    May I add, that this is the financial system we have now, i.e. based on debt, but there are many others ways that 'money' in circulation could be created, which may or may not be more suited to an age of declining Net energy production.  A topic for future discussion perhaps.

    Ed

     

     

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  • Sat, Oct 25, 2014 - 8:47am

    #46
    climber99

    climber99

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    Just to follow on from my

    Just to follow on from my last comment.

    You are correct that it is unfair that borrowers can default (or pass the debt burden onto someone else, to be exact) and suffer no personal consequences; and then for tax payers and for savers to ultimately end up paying this debt off.  The lenders of last resort have largely avoided this from happening by increasing the National debt.

    Those people calling on governments to reduce their debts levels should be careful what they wish for. If debts cannot be rolled over then savings and existing assets must be used to pay the principal and interest on existing debts. 

    Ed

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  • Sat, Oct 25, 2014 - 1:55pm

    Reply to #46
    James Knight

    James Knight

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    Only if the banks are allowed

    Only if the banks are allowed to.Karl Denninger has the answer to this with 'One Dollar of Capital': Banks should not be allowed to lend more than the value of all their assets. Then anyone defaulting on their loans will mean the bank shareholders losing their own money, not other people's. This should make banks far more cautious about who they lend to, and eliminate the growth of asset bubbles.

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  • Sun, Oct 26, 2014 - 1:58am

    Reply to #15

    agathon

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    http://www.conventionofstates

    http://www.conventionofstates.com/ 

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  • Sun, Oct 26, 2014 - 3:04pm

    Reply to #46
    climber99

    climber99

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    Perhaps

    Sounds good but how would you expand and contract the money supply? Without control of the money supply you have no control over inflation/deflation.  Does it matter if you do not have control of these? I don't know, is the short answer.Ed

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  • Sun, Oct 26, 2014 - 3:06pm

    Reply to #43
    climber99

    climber99

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    Sterilized - well remembered

    You are one of the few who can remember the term 'sterilized' QE, Jim.  At the start of QE in 2008 or whenever, the FED made the very important point that QE was 'sterilized'.  For those who don't understand the term, it means that QE can be reversed.  It was still 'money' born out of debt and you can reverse QE just by selling the treasuries, mortgage backed securities or whatever and pay back the debt. Reserving QE  i.e. QE is NOT debt free money printing. Remember, 95% of our money supply is created through debt and QE is no different.Your point; is QE distortive?  Probably, but they are desperate to keep the World growing.  My point has always been;  is World growth approaching it's limits anyway and if so, how can QE be reversed and can our current system of money creation survive.
    I have a hunch that we will need some form of debt free money creation at some point in the future so as to wipe out some of the debt which will unfortunately also wipe out an equal amount of savings. It's not going to be very popular !!!
    Ed 

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  • Sun, Oct 26, 2014 - 5:46pm

    Reply to #43

    Jim H

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    monetary thought experiments...

    Climber said,

    I have a hunch that we will need some form of debt free money creation at some point in the future

    I think you are right, it's just a matter of whether the monetary powers that be get their act together and come up with their own solutions before we the people completely repudiate their debt-based, ever more digital fiat money in a wave of hyperinflationary revulsion.  Many commentators, including myself, believe that the free market has already presented us with an alternative currency with many benefits – namely Bitcoin… but I don't want to turn this into a Bitcoin thread.  
    Following your lead, I have thought about the flaws in the current system and come up with my own version of a fix.  The main root problem, in my opinion, is the fact that a pure debt-money system creates the principle, but not the interest to pay off the loans.  (Much abuse layers over this flaw in terms of the power of central banks, the collusion of central banks and governments, etc… and this would need to be addressed as well – but for now I am just addressing the core flaw).  In this way, debt always runs away from the total money in the system, which creates the imperative for inflation.  The imperative for inflation is therefore based on nothing but a technical, or dynamic flaw in the money creation system.  How might this be fixed? 
    Here is my thought experiment – it is a hybrid system;  Calculate the total amount of money owed as interest, on a regular basis (say quarterly), for all newly created debt money in the system… all mortgages, car loans, school loans, and gov't borrowing (if QE serviced).  Then create this amount of money debt-free and distribute it equally to all families and/or individual tax payers in the US.  Very, very simple in concept. What would be the outcomes?
    1)  There would be more money in the system, which would reduce the need for the monetary authorities to induce inflation through other means – means that often tip the system in favor of banks and the already wealthy. 
    2)  While generally inflationary, this plan would aim the benefits at those who usually get hurt the most by inflation – the poor and middle class.  They would get first access to the newly created money, and since all parties would get equal amounts, on a per income % basis the poor would benefit most.  
    3)  Payouts would scale to the amount of underlying debt creation.. meaning that the creation of debt free money would scale roughly with underlying growth.  
    4)  Over time, the amount of debt-free, non-self liquidating money would build up in the system as a % if total debt, creating a bigger and bigger buffer against the short term deflationary tendencies of the business cycle downside.  This should allow for central banks to leave the free markets more to themselves and reduce the need to blow sequential bubbles.
    5)  As interest rates normalize, the pain of increased borrowing costs to a regular person who needs a car loan or a new mortgage is reduced.. because their, "debt money system benefit payout" would increase… remember, the payout is sized to fill the gap between the principle and total owed (principle + interest)… higher interest means higher payouts of debt-free money.  
    Of course, much of this would never happen because it would turn so many of the benefits that are today in the hands of the banks and the wealthy back to the common folk… but it's at least interesting to think about how simple it could be to fix the core problem with debt-based money.     
                         
       

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  • Sun, Oct 26, 2014 - 7:41pm

    Reply to #43
    climber99

    climber99

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    Thanks Jim, but

    I think that the FED and other central banks round the world are thinking about how they are going to unwind the huge debt mountain and unfunded future liabilities they have when World growth peaks and then starts its decline, just like you have done.However, I'm going to make make myself very unpopular with you for which I'm very sorry. There is a very common misconception in the blogosphere that 'interest' money is not created before hand and hence creating the need for debt to ever increase in order to cover it. This is what really happens.
    Money is created by a bank whenever a loan is made AND whenever the bank buys services (including wages for staff, dividend payments etc) or assets (like investments on behalf of the bank).  If the money supply is being kept constant, then this amount will equal the loans being repaid and interest payments..  (Central banks set interest rates to alter this balance to fine tune the money supply)
    Ed
     
     

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  • Sun, Oct 26, 2014 - 9:01pm

    Reply to #43

    Jim H

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    fractional reserve money creation...

    Ed,  You will never be unpopular with me for sincere discussion… insincere and/or trollish behavior, especially when it supports the cause of paperbugs, will cause me to come out swinging though, as many here know.  Anyway, you said,

    Money is created by a bank whenever a loan is made AND whenever the bank buys services (including wages for staff, dividend payments etc) or assets (like investments on behalf of the bank).

    Can you please find some references for this feature of banking?  I don't think these actions on the part of a bank actually, in and of themselves, lead to more money creation.  I have though seen the argument before that bank wages, for instance, may account for some of the debt based money that would otherwise have been destroyed not being destroyed.  Nevertheless, It is demonstrable that in most Western debt-based fiat systems, total debt runs away from total money.  That's what this guy (who himself is naive regarding the way banks create money) found when he looked into it, noting that a debt-to-money ratio > 1.0 supports my point;

      http://simonthorpesideas.blogspot.com/2013/04/total-global-debt-and-money-supply.html

    How do you explain this?  What am I missing?  
    I will end with a quote;

     
    “That is what our money system is. If there were no debts in our money system, there wouldn’t be any money.”

    Marriner S. Eccles, Chairman and Governor of the Federal Reserve Board
    http://en.wikipedia.org/wiki/Marriner_Stoddard_Eccles
    http://minneapolisfed.org/pubs/region/99-06/martin.cfm

     
     

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  • Sun, Oct 26, 2014 - 10:39pm

    #47
    climber99

    climber99

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    Hi Jim. Thank you for your

    Hi Jim. Thank you for your kind words.  I too believed what you do now.  However I did a lot of reading around the topic a few years back and bought a copy of this http://www.neweconomics.org/publications/entry/where-does-money-come-from

    It goes into a lot of depth on the topic of money creation including debunking the 'interest money is not created' myth

    As regards your second point as to why debt is greater than money supply, I wrote some tentative theories in the comments section of http://www.peakprosperity.com/blog/87874/national-failure-save-invest-crash-course-chapter-16 They are only tentative at the moment.

    Ed

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  • Sun, Oct 26, 2014 - 10:44pm

    #48
    pgp

    pgp

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    Here Here

    Absolutely correct CM.  I've known about financial repression for 15 years.  When they first "invented" superannuation in Australia (like a 401k) and I sat down with a calculator and worked out that my retirement benefit after inflation was going to be the equivalent of one year of current annual salary which in those days was already pretty ordinary.   That superannuation and 401k are just giant tax revenue engines didn't occur to me until more recently.

    Meanwhile people rush to put extra money into their super (401k) and use it as a kind of tax dodge because the tax on contributions is lower than capital gains taxes – and lose cash flow to do it.  They all get swayed by six figure retirement figures 30 years hence and think they are doing ok. 

    What surprises me of course is that everyone buys into it.  Even people you think are intelligent, people who hold degrees in engineering and science.  I guess it demonstrates that fiscal awareness is something independent of mathematical genius.

    Perhaps labeling the crime with the words "financial repression" is key to getting people aware.  They don't have to understand what it means just that it is bad and being practiced by the FED, IMF and governments and that it is tantamount to stealing from the non-rich.   Like GMO – no-one actually knows what it means and yet no-one will eat food containing GMOs.  Financial repression or better yet "financial oppression" needs to become a household term that everyone starts talking about.

    Until people figure out that they are victims I fear the middle classes will just chug along getting poorer until the USD hegemony breaks and financial collapse happens. 

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  • Mon, Oct 27, 2014 - 2:59am

    Reply to #47

    Jim H

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    A very detailed discussion of the no shortage theory here...

    Thus, according to this analysis, the source of the perpetual growth imperative can be attributed to two factors that prevent 100% recycling of principal and interest, namely…
    using interest income to increase the pool of principal and secondary lending itself.
    Defenders of the "no shortage theory" argue that there can never be a shortage because the "flow" can be speeded up. We just need to work harder to pay the extra charges. But "speeding up the flow" means increasing earning and spending Ie. Gross Domestic Product, economic growth.
    This just proves what I claimed in the movie… that a structural money shortage necessitates constant expansion of the real economy. With this argument, my critics prove me correct.
    http://paulgrignon.netfirms.com/MoneyasDebt/disputed_information.html

    I remain convinced that the growth, or inflation imperative is embedded into the system based on the fact that the money to pay interest, for the most part, does not exist in the system.  

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  • Mon, Oct 27, 2014 - 7:42am

    Reply to #47

    davefairtex

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    stocks and flows

    The exponential growth in money is definitely there, but it is not there because of "not having enough money in the system to pay the interest."Two examples:
    A wage slave makes $36k/year, is paid monthly, and spends his entire salary each month.  How much money supply is required from the system to provide "economic lubrication" for his annual salary?  Is it $36k?  No.  Since he is paid monthly, he only needs $3k total from the system, since he only ever sees $3k at a time.  That's an example of a "36k annual flow" requiring only a $3k total money supply – $3k is the stock, while $36k/annual is the flow.
    Let's look at another loan.  How much money do I need to have to make my monthly payment on my $1M loan @ 5%.  Each year, I owe $50k.  Do I need to have $50k in the bank to make each monthly payment?  No.  I just need $4166, every month.  And in fact as long as I make $4166 each month, I can make my payment even though on a yearly basis I really do need $50k.  And the system itself needs only provide me with $4166 as my share of "aggregate money supply" to support my debt of $1M.
    Loan is $1M, flow required is $50k, but money stock required to make my payment is only $4166.  And if interest payments are recycled, that $4166 can circulate indefinitely – and as long as $4166 of value is added monthly to the economy by the debtor, he has no problem in making his payments without any more money being created.
    Suggesting that the system must have enough "money supply" in the system so that every debtor is able to make their entire annual interest payment at any given moment is just absurd.  The "system" doesn't need this, any more than individual debtors need to have their annual aggregate interest payments sitting in their banks in order for them to be able to make their payments.  Its just not how things really work.
    Again, its a stocks & flows thing.  All debtors need is enough "flow" to make the payments.  And the "stock" doesn't need to equal the "flow" for it all to work out.
    The whole thing about "working harder" is a non sequitur.  Monthly payments is how the magic trick works.  If all interest payments were annual – if you really had to have $50k to make your 5% payment on the $1M loan, and you were required to pay it all once per year, then there might really be a problem.
    But of course that's not how things really work so – no problem.
     

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  • Mon, Oct 27, 2014 - 1:31pm

    Reply to #47
    climber99

    climber99

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    I think that we can agree

    I think that we can agree that there is some sort of 'growth imperative' in action. The exact mechanism behind this will be debated, am sure, between us during the coming years here on Peak Prosperity. As World GDP growth slows, peaks and then starts to decline, the interaction between this and our monetary system is going to be very interesting.

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  • Mon, Oct 27, 2014 - 2:51pm

    #49

    Jim H

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    This has all been hashed out before....

    Dave, I know you are sold on the Steve Keen model that says things can work out based on a certain set of behaviors as programmed into a stock-to-flow model he has.  Here is what one Chris Martenson wrote back in June; 

    https://www.peakprosperity.com/comment/167806#comment-167806

    Steve Keene is being a complete egghead on this one, by which I mean utterly divorced from simple real-world realities.

    I agree with the highly simplified and utterly unrealistic set up which has all flows of money coming back into the bank and then flowing back out into the world, perfectly balanced with all stocks, and no accumulations of said stocks at any particular points.

    Under those conditions of idealized and perfect stocks and flows it's theoretically possible to make it all balance out.

    However, out there in the real world, where there's $57 trillion in debt, it's impossible to have all $2 trillion in debt remittances flow into the bank and back out as wages in a manner that prevents exponential growth in the money system.

    By way of evidence I have charts of both debt and money spanning many decades with near perfect exponential growth.  R^2 of 0.99, baby!

    So what does it matter if it's theoretically possible under heavily constrained conditions in a stripped down spreadsheet to make stocks and flows balance for a couple of turns of the crank?  Stocks and flows are never ideal or perfect and, because of this, you get the exponential behavior we see in the real world.

    In this particular argument, I agree with Chris.  Left to it's own devices, our monetary system is dynamically unstable in that total debt tends to run away from total money.  This is quite obviously a feature of the system given that the money creation mechanism creates the principle, but not the interest.

    The new "argument:" you give above, that monthly payments are somehow the key to understanding your point… makes no intuitive sense to me.  As an engineer, looking at the money system as a whole, the relative "lumpiness" of the payment stream would seem to make little difference.  Sure, from a personal affordability standpoint, and given human nature.. it is important.  But, from a system stability vs. instability point… and I am arguing that the debt based money system is prone to instability, whether payments are made weekly, monthly, or yearly, would make little difference when viewed in aggregate.  Total payments would be about the same on a yearly basis whether paid monthly or yearly, and over many loans the dates of these (much larger, much lumpier) yearly payments would amount to exactly the same hill of beans.  

    As I have shown in a post above, total debt in Western money systems tends to outpace total money by about 2X.  I suggest this is because total debt = total principle + total interest, and the interest portion of this equation is never explicitly created. 

    A specific case as food for thought;

    As one digests this particular dynamic of our money system, it occurs to me that the system could get into trouble especially during the latter half of a housing boom.  Since housing debt. is the bulk of our total consumer debt, it really wags the dog when it comes to the dynamics we are talking about.  As of this Nov. '13 report, mortgages accounted for 70% of our total indebtedness;

           http://www.newyorkfed.org/householdcredit/2013-Q3/HHDC_2013Q3.pdf

    What do we know about mortgage loans?  Well, for one, they are big, creating a LOT of money all at once.  Two;  They are long lived, most of the time 30 years in length.  Thirdly, they are highly front loaded in terms of interest payments… the payoff of principle being back loaded.

    Because of these three dynamics, we can imagine the following;  Since mortgages are so long-lived – the interest compounds for so long, the amount of interest is very high relative to the initial loan amount.  

    For example, a $100,000 mortgage at 5.75 percent paid for 30 years will actually cost the borrower $210,000 to repay.

    While each monthly payment is the same (approximately $583 a month), the payment is not divided into level amounts of interest and principal. At the beginning, the payments are mostly interest. At the end, the payments are almost entirely principal and no interest.

    http://www.bizjournals.com/cincinnati/stories/2004/04/26/focus5.html?page=all

    So, let's say you have a housing boom… lots of money is being created, and most of it is being paid back as interest, meaning that most of it is not being destroyed.  Everybody is happy.. lots of liquidity in the early stages. 

    But what happens at the tail end of this boom, say 15 years in?  Well… much of the interest has been paid, and the payments are tipping over to favor principle.  Money is being destroyed.  The system's liquidity is being reduced (all other factors equal).  I don't see how anyone could argue that this is not so.  

    Some may view all of this as some kind of academic argument.  I don't.. .I think understanding these points are key to understanding what motivates our central bankers.  Around the 14:00 mark in the video below, Alasdair is talking about money creation, and the need for ongoing and increasing money creation.  He says,

    either they (the banks) do it, or the FED does… the reason the FED does QE is they are worried the banks aren't doing enough….

    The FED wants the total amount of fiat money to continue to expand – otherwise they see a potential crisis.

    When the banks are pushing on a string… QE is the only way to keep shoveling money in.  Now ask yourself this;  Do you think we are done with QE now that the taper is completing?  Do the stock vs. flow (model) guys like Dave and Steve Keen think our banking system will be fine through such a liquidity squeeze?  Do their models account for the distorting effects of all the derivatives, interest rate and otherwise?  Will deflation be allowed?  Or do we in fact have a system that is almost always net starved for liquidity because of the fact that total debt runs away from total money?                  

     

     

     

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  • Mon, Oct 27, 2014 - 3:08pm

    #50

    davefairtex

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    Posts: 3156

    growth imperatives

    Climber-

    Yes I certainly agree with there being a growth imperative endemic in our current system.

    But like a doctor who doesn't care if a fever is caused by a virus or a bacterial infection, if we don't understand the cause of the growth imperative, we might end up prescribing the wrong medicine – or a medicine that will not result in improvement if taken.

    So while it sounds super wonky, I actually think its important to understand the root cause of our exponential growth in the money system, so we don't end up trying to "fix" something that isn't actually broken.

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  • Mon, Oct 27, 2014 - 7:27pm

    Reply to #49

    davefairtex

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    Posts: 3156

    hashed out before?

    I'd say it has been "hashed on" before, rather than "hashed out."Chris's response at that time missed the essence of Steve Keen's argument,  as I pointed out in my follow-on comment which you didn't see fit to include.  🙂  So I'll include it here:

    … Keen is not saying "things work out" with our 57 trillion in debt.  He's saying that on this one specific claim – "its not possible to pay the interest on the debt stock because the money isn't created" – it is a stocks/flows fallacy.
    In the rest of his talk he shows that bankers have this innate desire to create more debt, and this desire (and their eventual control over government through their profitability) coupled with the ratchet effect will inevitably and repeatedly drive us into crisis as debt continues to grow until we finally blow up from a massive debt bubble…
    [Keen] did NOT say that the stocks/flows situation means there is no exponential growth in debt.  But he did seem to suggest it wasn't because of the interest – but rather, the ratchet effect.  No – wait – it was the whole Minsky ponzi finance that first drives everything up, and then breaks down when the "fundamental buyers" start to sell assets because they can no longer cover their interest payments with their cash flow, and that triggers the pop.

    So with the added context, now I will answer your questions.
    Do people ever pay down their mortgages and get into the "mostly principal is being repaid" stage?  Generally no.  Americans move every 5 years, so we're always paying down the first part of the loan cliff, the point of maximum interest payments.  Tax deductible, of course.  And of course as rates drop, people also refi to get the lower rates.  We haven't been in a rising rate environment for a very long time.  But that's a non-sequitur; its beside the point.
    Are banks pushing on a string right now?  Yes.  Will banking system be fine?  No.  Will deflation be "allowed"?  Not if they can help it.
    Mostly, I come to the same conclusions you do, while seeing the root cause of the problem as something completely different.
    Loans outstanding rise because bankers are extremely motivated to create money – that's how they make money; more loans = more income.  Its banker motivation, not some systemic requirement for a constantly growing money supply that somehow demands loaning the interest payments into existence to keep the system afloat.
    In microcosm it is easy to see that the system need not create money stock equal to the aggregate annual interest payment for the whole economy, as long as payments are monthly rather than annually.  Most people's "money needs" don't equal their annual interest burden, or their annual salary – most people place liquidity requirements on the system equal to their income for their pay period, because it goes right back out the door as soon as it comes in.
    Yet some people continue to imagine that if you have a $1M loan @ 5%, this requires the outstanding credit in the system to grow by $50k per year or else you just can't make your interest payment.  Certainly, if interest payments vanished into thin air once made, this would be true.  Or if interest payments had to be saved up during the year and made all at once, this would be true too.  But that's not reality.
    Again, I share your understanding of the likely consequences, while disagreeing with your diagnosis about the cause.  This distinction seems difficult for me to communicate – both you and Chris persist in imagining I see some happy outcome as a result of me not accepting the "must create money to pay the interest" theory.  I don't.
    Again, we agree the patient is being killed.  We just disagree about whether its bacteria or a virus.
    That said, knowing the true cause is critical being able to prescribe an effective remedy.

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  • Wed, Oct 29, 2014 - 3:43pm

    Reply to #46
    James Knight

    James Knight

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    Posts: 63

    Karl Denninger posted this

    Karl Denninger posted this link today:http://www.barnhardt.biz/2014/10/29/notes-for-apres-la-guerre-part-2-banking-and-financial-market-theory/

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