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Greenbacker vs. Goldbug Debate
The general public doesn’t realize it yet, but the first salvos have been fired in the most important debate of our generation.
The fight is over what will replace the current decaying, decrepid financial system.
You can view commentary on the debate here and here.
My take on this is simple.
First, you need to understand the various forms of money. There are three forms of money, and only these three:
1. Interest-bearing debt money as the primary way of supplying circulating media of exchange into the economy. The insane system we currently have. Banks issue this toxic shit. The central banks follow in the trail of the shit to ‘ratify’ the creation of M3 by ‘printing’ e-dollars when the whole thing blows up. The whole thing is an inherently unsustainable Ponzi-scheme scam, as described here. Anyone who thinks this particular form of interest bearing fiat/debt/credit money is sustainable needs their head read. It’s blowing up before your eyes. Idiots.
For this unsustainable system to keep going, you need a steady supply of insanely optimistic borrowers – suckers – to keep going into debt and replenishing the system with money. Or psycho governments wanting to bomb another country to bits. Both insanely optimistic idiots and psycho govts borrow like there’s no tomorrow and – ironically – keep this crazy system going for another day by borrowing like there’s no tomorrow. But at some point tomorrow comes. And that’s where we are today.
2. Interest-free debt-free fiat money. Pure paper money. Greenbacks or tally sticks. Issued by the sovereign. They can be used to pay taxes, so are valuable because the legal system says they are valuable. Have been around for hundreds of years. Forms about 0.5% of our current money supply, but it does still exist as a remnant of our old tally stick culture. Can work. Look at England in the Middle Ages, look at China, look at Guernsey, look at the book Web of Debt. This can also fall into insane hyperinflation in the blink of an eye however.
3. Free-market money. Gold and silver and copper and precious metals. Money as an asset, not representative of a debt. No one’s liability. Malleable. Resistant to decay. Inherently limited supply. God’s money. Yes, fractional reserve scams and trade cycles can be overlayed on gold, but there is also a core economy that can chug away independent of the scams because some people will still hold gold at home. This system allows a shock absorber to be placed between the economy and the financial system. If the financial system goes wild, we can reel it in by taking money out of the banking system. If it’s sound, we can give it legs by allowing them to keep our gold. Checks and balances. Doesn’t work perfectly, but it has worked pretty well in the past – the whole of the 19th century being a good example.
Now, having understood the choices in front of us, let’s think about the financial system that should support accurate, sound prices. What monetary system would be most stable?
In order of preference, my choice of monetary system is as follows;
1. Free market money, including free banking. We get there by nationalizing bankrupt banks, selling them to the highest bidder, wiping out most or all of the illegitimately created national government debts, removing deposit insurance, and repealing legal tender laws. Then let the chips fall where they may.
2. All of the above, but in the end a return to the old government-mandated gold standard and free banking. Messy and inherently unstable, but doable. I know because it’s been done before.
3. Nationalized banking supplying interest-bearning credit, with full reserve requirements on the private banks. The Ellen Hodgson Brown solution. The Commonwealth Bank of Australia option. North Dakota on steroids. It works. The government collects the interest as a community re-investment fund and shares the proceeds with the people via lower taxes and new services.
4. Debt-free money issuance with interest-free fiat money being issued, and full reserve banking. Pure fiat. The Michael Rowbotham solution. That’s being partially tried in the US right now with QE essentially allowing the Feds to spend without cost to keep the economy ‘liquid’ but it’s combined with fractional reserve banking so is inherently inflationary. Nazi Germany – but perhaps this will collapse into Zimbabwe-style inflation pretty quickly.
5. The current system, which is socialism for the rich and capitalism for the poor. Moral hazard for the biggest, and life-crushing debt for the rest.
So anything is better than what we have now, but there are better and worse alternatives to what we have now.
I hope for any change. Anything is better than what we have now, and it’s getting close to the point where the transition costs of experimenting with new systems are worth paying just to get out of the current destructive insane cycle of boom and bust and bust and bust…
The compelling argument for Anarchy
1. Fractional reserve banking is inherently fraudulent.
2. Taxation is coercive theft.
3. Those who support or live off fractional reserve banking or government spending or the interest on government bonds are frauds or thieves or both. Therefore all bankers, stockbrokers, bond traders, financiers, financial planners, speculative property developers, politicians, government employees, government welfare recipients, government teachers and government licensed media, banking, regulatory and legal authorities are either frauds or thieves or both.
4. Those who are frauds or thieves should have their immorally acquired wealth confiscated and the property should be returned to its rightful owners – the legitimate producers. The frauds and thieves should be imprisoned for the benefit of the populace, or if they try to ‘protect’ their immorally acquired property through violent means and intimidation, they must be eliminated completely to prevent the moral, social and economic cancer spreading and enslaving those remaining productive members of society.
5. To tolerate frauds and thieves in your society is to tolerate social disorder.
6. ‘Ordered’ fraud and theft is still fraud and theft. ‘Ordered’ injustice is therefore disorder. Anarchy is preferable to organized crime taking over society completely. Anarchy is the return to natural order and natural justice. Government is parasitic and unnatural. Its ‘order’ is a form of disorder.
7. If there is only anarchy on the one hand, and organized crime taking over society on the other, anarchy is to be preferred.
8. There is only this stark choice. Throughout history, there has only ever been this choice.
Rollover 1981
It was obvious then. It’s obvious now…
Rats caught in their own maze
How do you f*ck up a market so completely that the cancerous mess can’t ever be put back together?
Mix one part moral hazard with two parts corrupt goverment, with three parts central banking, with four parts bad economic theory, with five parts gold confiscation.
Mix well.
Wait 80 years.
Then… BANG!
At Citigroup and GMAC, dotting the i’s and crossing the t’s on home foreclosures was outsourced to frazzled workers who sometimes tossed the paperwork into the garbage.
And at Litton Loan Servicing, an arm of Goldman Sachs, employees processed foreclosure documents so quickly that they barely had time to see what they were signing.
“I don’t know the ins and outs of the loan,” a Litton employee said in a deposition last year. “I’m not a loan officer.”
As the furor grows over lenders’ efforts to sidestep legal rules in their zeal to reclaim homes from delinquent borrowers, these and other banks insist that they have been overwhelmed by the housing collapse.
But interviews with bank employees, executives and federal regulators suggest that this mess was years in the making and came as little surprise to industry insiders and government officials. The issue gained new urgency on Wednesday, when all 50 state attorneys general announced that they would investigate foreclosure practices. That news came on the same day that JPMorgan Chase acknowledged that it had not used the nation’s largest electronic mortgage tracking system, MERS, since 2008.
That system has been faulted for losing documents and other sloppy practices.
The root of today’s problems goes back to the boom years, when home prices were soaring and banks pursued profit while paying less attention to the business of mortgage servicing, or collecting and processing monthly payments from homeowners.
Banks spent billions of dollars in the good times to build vast mortgage machines that made new loans, bundled them into securities and sold those investments worldwide. Lowly servicing became an afterthought. Even after the housing bubble began to burst, many of these operations languished with inadequate staffing and outmoded technology, despite warnings from regulators.
When borrowers began to default in droves, banks found themselves in a never-ending game of catch-up, unable to devote enough manpower to modify, or ease the terms of, loans to millions of customers on the verge of losing their homes. Now banks are ill-equipped to deal the foreclosure process.
“We waited and waited and waited for wide-scale loan modifications,” said Sheila C. Bair, the chairwoman of the Federal Deposit Insurance Corporation, one of the first government officials to call on the industry to take action. “They never owned up to all the problems leading to the mortgage crisis. They have always downplayed it.”
In recent weeks, revelations that mortgage servicers failed to accurately document the seizure and sale of tens of thousands of homes have caused a public uproar and prompted lenders like Bank of America, JPMorgan Chase and Ally Bank, which is owned by GMAC, to halt foreclosures in many states.
Even before the political outcry, many of the banks shifted employees into their mortgage servicing units and beefed up hiring. Wells Fargo, for instance, has nearly doubled the number of workers in its mortgage modification unit over the last year, to about 17,000, while Citigroup added some 2,000 employees since 2007, bringing the total to 5,000.
“We believe we responded appropriately to staff up to meet the increased volume,” said Mark Rodgers, a spokesman for Citigroup.
Some industry executives add that they’re committed to helping homeowners but concede they were slow to ramp up. “In hindsight, we were all slow to jump on the issue,” said Michael J. Heid, co-president of at Wells Fargo Home Mortgage. “When you think about what it costs to add 10,000 people, that is a substantial investment in time and money along with the computers, training and system changes involved.”
Other officials say as foreclosures were beginning to spike as early as 2007, no one could have imagined how rapidly they would reach their current level. About 11.5 percent of borrowers are in default today, up from 5.7 percent from two years earlier.
“The systems were not ever that great to begin with, but you didn’t have that much strain on them,” said Jim Miller, who previously oversaw the mortgage servicing units for troubled borrowers at Citigroup, Chase and Capitol One. “I don’t think anybody anticipated this thing getting as bad as it did.”
Almost overnight, what had been a factorylike business that relied on workers with high school educations to process monthly payments needed to come up with a custom-made operation that could solve the problems of individual homeowners. Gregory Hebner, the president of the MOS Group, a California loan modification company that works closely with service companies, likened it to transforming McDonald’s into a gourmet eatery. “You are already in chase mode, and you never catch up,” he said.
To make matters worse, the banks had few financial incentives to invest in their servicing operations, several former executives said. A mortgage generates an annual fee equal to only about 0.25 percent of the loan’s total value, or about $500 a year on a typical $200,000 mortgage. That revenue evaporates once a loan becomes delinquent, while the cost of a foreclosure can easily reach $2,500 and devour the meager profits generated from handling healthy loans.
“Investment in people, training, and technology — all that costs them a lot of money, and they have no incentive to staff up,” said Taj Bindra, who oversaw Washington Mutual’s large mortgage servicing unit from 2004 to 2006.
And even when banks did begin hiring to deal with the avalanche of defaults, they often turned to workers with minimal qualifications or work experience, employees a former JPMorgan executive characterized as the “Burger King kids.” In many cases, the banks outsourced their foreclosure operations to law firms like that of David J. Stern, of Florida, which served clients like Citigroup, GMAC and others. Mr. Stern hired outsourcing firms in Guam and the Philippines to help.
The result was chaos, said Tammie Lou Kapusta, a former employee of Mr. Stern’s who was deposed by the Florida attorney general’s office last month. “The girls would come out on the floor not knowing what they were doing,” she said. “Mortgages would get placed in different files. They would get thrown out. There was just no real organization when it came to the original documents.”
Citigroup and GMAC say they are no longer giving any new work to Mr. Stern’s firm.
In some cases, even steps that were supposed to ease the situation, like the federal program aimed at helping homeowners modify their mortgages to reduce what they owed, had actually contributed to the mess. Loan servicing companies complain that bureaucratic requirements are constantly changed by Washington, forcing them to overhaul an already byzantine process that involves nearly 250 steps.
Fitch fibs
Bizarre. Fitch has done its own stress test on the Aussie banks. It seems to have taken them about two weeks. Fast turnaround for a comprehensive stress test. And coming shortly after the Cth Bank was quizzed by international investors over the bubble in Oz house prices. How… co-incidental. And how efficient of Fitch to do their analysis so quickly. They must have had very good access to the banks – which means they are very friendly with the banks. Either that or it’s very sloppy work. One or the other.
Fitch reckons a 40 per cent tumble in house prices and a home loan default rate of 8 per cent would be ‘manageable’ for the nation’s banks and mortgage insurers.
Errr… no.
Have they thought of the knock-on effects to small businesses and builders and real estate agents and mortgage providers and banks and governments (at all levels) and … well … every human in Australia from a 40 per cent tumble in house prices?
Answer: No.
So their analysis is either stupid or deliberately deceptive.
I suspect deliberately deceptive, but I don’t put ‘stupid’ past them.
The Fed will starve us to death on high food prices
Portfolio strategist Marshall Auerback connects the dots and finds that the Fed is killing us with food inflation. Yeah. I’ve been saying this for 4 years.
Although I have consistently taken the line that QE is totally useless, in effect an accounting trick which does little for real economic activity, I should have at least acknowledged its powers in terms of fomenting casino-like speculation in the financial markets. Mind you, that’s nothing for the Federal Reserve to be proud about, and it is certainly inconsistent with its stated mandate of controlling inflation and promoting employment.
That said, you can lay a lot of the current gyrations in the commodities complex, bonds, equities and currencies at the doorstep of the Federal Reserve. My friend, Michael Hudson of UMKC, has made the same point: “What is to stop U.S. banks and their customers from creating $1 trillion, $10 trillion or even $50 trillion on their computer keyboards to buy up all the bonds and stocks in the world, along with all the land and other assets for sale in the hope of making capital gains and pocketing the arbitrage spreads by debt leveraging at less than 1% interest cost?”
This is the game that is being played today as a consequence of the Fed’s embrace of “QE2”. So when the Financial Times warns of a global food crisis, one can put 2 + 2 together and begin to understand the damage the Fed and its perversely Wall Street centric approach to economic policy is doing to our economy.
In fact, one has to query whether the increasing “financialisation” of the commodities complex has played a significant role. Previous to 2000, pensions could not buy commodities because these are purely speculative bets. There is no return to holding commodities unless their prices rise—indeed, holding them is costly. However, Goldman Sachs promoted investment in commodities as a hedge, on the basis that commodities prices are uncorrelated with equities. This is understandable, given the historic lack of involvement of Wall Street in the commodities complex. Hedging activity was generally restricted to end-users like farmers.
That all began to change in the aftermath of the Commodities Futures Modernization Act of 2000, another legacy of the Clinton/Rubin/Summers regime. Of course, the whole basis of the arguments for commodities as a “defensive hedge” non-correlated to financial asset went out the window the minute this legislation was passed. By definition, when managed money flows into an asset class that had previously been uncorrelated with other assets, that asset will naturally become correlated. Hence, by opening up the commodity complex to Wall Street via this legislation, Congress found another potential bubble for Wall Street. Naturally, this garnered huge profits for the investment banks, but ultimately collapsed along with everything else (leaving your average American poorer in the process as usual).
We saw a recent example of this during the oil price spike of 2008. Recall that the Federal Reserve began to cut rates and flooded the system with liquidity in response to the subprime collapse of 2007. Markets for speculative credits were already under great pressure by late 2007. There were no more returns to be earned from leveraged bull speculation in these markets. It appears that leveraged speculators descended on the smallest of all markets – the commodity markets – because they were small enough to squeeze, corner, and thereby generate with lesser financial resources both bubble action and bubble returns.
In spite of the clear deceleration in the US economy, and the correspondingly sharp deterioration in global economic activity, the falls in the stock market and real estate markets, oil prices almost doubled during the first half of 2008. The financialization of commodities, including the growth of OTC markets, pushed prices well out of line with fundamentals. Finally, after midyear marks were posted by leveraged speculators at the end of June 2008, the commodity markets started down. In percentage terms they fell by more in six months than they had ever fallen in history.
Voters might not understand collateralized debt obligations or credit default swaps, but they do understand the ramifications of paying $4.00 plus per gallon of gasoline. The energy bubble popped in what is known as the great Mike Masters inventory liquidation, as pension funds pulled out of commodities on the fear that Congress was coming after them. They didn’t want all the bad publicity that would be caused if workers knew that it was their own pension funds that were driving up gas prices at the pump.
We have just had some pretty spectacular moves in agricultural commodities. They were triggered by adverse weather events around the world which have resulted in production shortfalls. But are these production shortfalls sufficient to explain the percentage gains in these agricultural commodity prices? Probably not. Microeconomic theory says that commodity prices should be driven by the stock to consumption ratios in these markets as well as the rate of change of these ratios as a function of current and projected surpluses and deficits. This used to be more or less the case before Wall Street got its hands on the commodities complex.
Below is a chart of the price of wheat and the global stock to consumption ratio. What do they tell us? Though wheat’s stock to consumption ratio fell into 2007, the decline probably did not warrant the gigantic rise in the price of wheat which then ensued. More importantly, by the first half of 2008 the wheat market was in surplus and global stocks were building to very comfortable levels. The price of wheat should have fallen. Instead it spiked to a degree not seen in a generation.
And take a look at this chart:
More recently large global surpluses have resulted in a high global wheat stock to consumption ratio. This stock level might be in fact higher than the historical data suggests because there has been a tendency across all markets for inventory to sales ratios to fall in a secular fashion. So surely several months ago global wheat stocks were on the high side.
As Frank Veneroso has noted in a recent report (“Commodities: Speculation Driven by Expectations of QE Now Dominates” Oct. 8, 2010):
We have now had a weather shock. It has reduced greatly the Russian crop, as well as crops elsewhere. This supply shortfall has thrown the global market into a deficit. However, this deficit is not that large. Based on the latest USDA data and projections the global wheat stock and the wheat stock to consumption ratio will retrace only a small part of their large rises over the prior year.
Long-time commodities trader and portfolio manager Mike Masters discussed this phenomenon with me in a recent email exchange. According to Masters:
Speculation in commodities can be exemplified from the following illustration. Money can be “created” by fiat. Because there is already much more capital available in the world than hard commodities, and also because money can effectively be created in a nearly infinite way; speculators, without limits, and with determination, can increase the price of consumable commodities, like food stuffs or energy, much higher than traditional consumers and producers (hedgers) can react. When derivative markets are linked to real commodity markets, this nearly unlimited capital from the financial sector can cause financially driven excessive price volatility. This is because in the derivative markets, a nearly infinite amount of new commodity derivative contracts can be created to satisfy the demand of financial sector speculators armed with fresh capital. However, because there is only a FINITE amount of bona fide actual hedgers (producers and consumers of the actual commodity), any speculative demand that exceeds the real amount of commodities that can be hedged at that time must be sourced from other speculators. However, these speculators will only supply new contracts via price- i.e. a new speculative demand that exceeds hedger supply must be sourced from new speculative supply at ever higher prices.
I believe that the activity in the soft commodities illustrates that investment and speculative demands still prevail in spite of the horrific crash sustained in this complex in 2008. The casino behavior of the bubble era – actively fomented by the Federal Reserve and accelerating today – still predominates, and investor and speculator attention to underlying fundamentals is disparaged.
This is all about the coming QE via “Helicopter Ben” Bernanke. He and his cohorts in the Fed are actively inciting greater speculative risk and no doubt will attempt to backstop these bets when they go bad. In the meantime, as my colleague Randy Wray has noted,
Wall Street just happens to be marketing commodities futures indexes to satisfy the demand it has created. It also provides a wide array of complex hedging strategies to shift risk onto better fools, as well as credit default ‘insurance’ and buy-back assurances in case anything goes wrong. If all of these “risk management” strategies were completely successful, the pension fund would achieve a risk-free portfolio.
There is growing evidence that the global economy is now slowing, yet commodity prices are rising in tandem with equity prices. Bond prices are rising as well. In the third quarter of 2010, the prices of equities, government bonds and gold all went up – by 11%, 4% and 5% respectively. Such a conjunction of asset returns is a rare event in the financial markets. In the 123 calendar quarters since 1980, there have been just 4 other quarters, each in the 1980s, when all three asset classes have gone up by 4% or more. The rarity of this event is because there are virtually no economic or financial scenarios that favor equities, government bonds and gold at the same time – at least under normal circumstances.
This is all being driven by the expectation of “QE2”. From the Fed’s perspective: mission accomplished. Animal spirits have been re-ignited in the financial markets (would that the Fed could do the same for the real economy, but unfortunately, that’s in the hands of governments which are totally ignorant of the true uses of fiscal policy).
In effect, we are re-establishing another bubble, seeking to restore the status quo ante that prevailed in 2006 when the creation of bubbles was the main driver of economic activity. Typically, these bubbles prevail because our governments repeatedly succumb to political pressure from the conservatives and either don’t expand fiscal policy enough or prematurely abort fiscal expansion. These episodes have repeatedly occurred in history.
The end result is that the onus is left totally on monetary policy, which has over the past quarter century been conducted with a view toward ensuring the well being of Wall Street, than enhancing the productive sectors of our economy. If quantitative easing by the Fed and other global central banks turns out to be dramatic, the desire to hold physical assets may increase – no matter how high their cost of carry and how weak the global economy may become. Commodity prices will then remain high relative to stock availability, and might go much higher.
But the current state of affairs is unlikely to last. On the previous occasions that equities, bonds and gold moved up together, at least one of the assets ultimately proved to be mispriced. At the end of 1980, bond prices declined by 20%, while gold plummeted by 40%. In 1983, bond prices fell 10%. Serious collateral damage can occur in the real economy when the Federal Reserve incites speculative bubbles. So the next time you are wondering what’s happened to all of your discretionary spending power, as you plunge into that pricey breakfast cereal, or ponder your rising grocery bills, you can thank Ben Bernanke and the Federal Reserve.
Late weekend funny
Better late than never…
Counterfeiters and Thieves?
Nice piece from Dan Denning:
What’s the difference between a thief and a counterfeiter? A thief takes what is not his without another’s consent. A counterfeiter passes off as genuine that which he knows to be a fraud. Or, in simpler terms, one is a politician and the other is a central banker.
We’ll get back to that in a moment. But judging by the complete and utter lack of interest in our comments earlier this week on the Queensland Rail float (other than a reminder that in Australia they’re called ‘railways’ and not ‘railroads’) now must be a very good time to buy things that nobody else wants. The prospectus isn’t out yet, but we’ll have a look when it is and let you know what we think.
Maybe your best short-term strategy at the moment is to ride the counterfeiter’s put. If the Federal Reserve, the Bank of Japan, The European Central Bank, and the Bank of England are all going to create money to buy assets and “reflate” the economies they are in charge of respectively, that new money is going to leak somewhere. It could be stocks.
Mind you, this makes stocks a total speculator’s play at this point. Excess credit distorts values by elevating prices (price and value, of course, are not the same thing). There is no hope for a diligent investor in this environment. His best bet is to stay on the sidelines and wait for the liquidity to slosh its way around. Maybe this is why Greg Canavan at Sound Money. Sound Investments took the week off. He’s a value pilgrim in an unholy land.
Alan Kohler over at Business Spectator contributed an extremely useful insight to the ‘currency war’ metaphor that is now all the rage. Earlier this week he pointed out that low interest rates, easy monetary policy and fiscal stimulus are all ways for a government to steal demand from the future to make present growth look better. A whole lot of global theft took place since late 2008.
But with household deleveraging taking grip somewhere in the part of the Western brain that produces a profound, emotional sense of fear, it’s been hard for governments to encourage their peoples to spend monies they don’t have and don’t want to borrow. We have reached the next stage of the strategy.
If the first stage was “beggar the future” with borrowing and spending, the next stage is “beggar thy neighbour” by stealing his demand. Kohler points out that when you can’t steal any more future demand from your economy; you have to steal future demand from someone else’s economy. The most direct route to that kind of theft is to manipulate the hell out of your currency so your exports are always cheaper to your neighbour and he keeps buying what you’re selling.
The long-term consequences of this policy are mixed. On the one hand, the export driven model that relies on competitive currency devaluation has left the world awash in surplus productive capacity and cheap goods (with a hat tip to slave wages in some parts of the emerging markets). More stuff. Cheaper stuff. Good, no?
It is, if you like stuff. It is not, if you like work. Now a lot of people don’t like work. But other than inheriting money from your rich father, it remains the best way to pay the bills ever invented. It also, if you want to be philosophical, is one of the activities that gives our lives meaning, purpose, a sense of fulfilment, and tangible accomplishment. Work is how we make the world better, richer, or at least busier.
Competitive currency devaluations steal work from one country and give it to another. That makes them unpopular in the countries where jobs begin disappearing. This is why currency wars quickly become political hot potatoes. Out of work citizens are angry voters. And angry voters want somebody to do something about the problems.
That is where we are now. And that is why gold – which is nature’s currency and can’t be printed by anyone and is relatively scarce in the earth’s crust – is going up against all that paper money serving a devious master. But as the Aussie dollar reaches parity, something must give.
That is, if now resembles the past few years, this latest move down by the dollar and up by the commodities would be reversed. Gold, copper, silver, tin, oil and the rest would fall as the dollar corrects. Corrects to what, though? Can you think of a good reason why the U.S. dollar should get stronger from here?
We can’t either – unless it’s just the simple observation that everyone is agin’ it and no one is for it. If everyone is a dollar bear, is it a good trade to be a dollar bull? Or is this the long-awaited moment where the dollar begins to circle the hyper-inflationary drain?
It’s a moment we’ve been talking about for years. Does the simultaneous rise of all asset classes against the greenback indicate that the moment is finally here? And if it is….what should you be doing, or have already done?
This is one of the subjects we’ll be taking up next month in Sydney at the Australian Gold Symposium. You should have received a note about it yesterday afternoon. Daily Reckoning readers get a special discount to the show. But as always, space at these things is limited. And gold is pretty hot now. Have a look at the program and if it suits your tastes, lock in your discount while you still can.
By the way, a hat tip to our small cap sleuth and cheeseburger connoisseur Kris Sayce. It’s not a well kept secret anymore that one of his top rare-earth stock is going through the roof. It’s up 202% from his May buy-price. It’s up so much, in fact, that it’s listed as a hold in his newsletter. The buying frenzy has well and truly taken hold.
As we said, it’s not a mystery to figure out what the share is. It’s been all over the headlines lately with the rare earths story becoming main stream. But it was most definitely not in the headlines with Kris tipped it. And that is really the whole point of what he’s trying to do: get in early on big ideas.
Of course with small caps, the earlier you are the riskier it is. Most small businesses fail or blow up. The up-side is that it doesn’t cost you much to have a small portfolio of business experiments. And when one or two gets it right and the project or business is “de-risked”, you can do quite well. But they key is being willing to take a punt and buy something when there’s no confirmation from anyone else that you’re on to something good.
This is counterintuitive and contrarian instinct. It’s also why we prefer deserted, slightly derelict pubs to fashionable ones (plus the beer is cheaper). For investors right now, it’s a horrible market. There’s only one pub. It’s crowded. And everyone is drunk.
For speculators like Kris, it’s great. They were already in the pub and had a position in select shares when the party started. True, in a world with so much liquidity it’s getting harder to find stuff that hasn’t gone up or could be mis-priced or undervalued. The party wont’ last forever, either. That’s when you’ll want to head for the door before everyone starts vomiting and the fists start flying.
Serfs plundered by human sociopaths
It’s happening everywhere. Manchester United was taken over through a leveraged buy-out. Now they face record losses as the record revenues go into servicing debt.
Nasty.
How do you make money out of this? Buy into an asset at the early stages. Wait for the shark to bite. Give it up to the shark. Run and buy into gold.
Never follow a shark. All you will ever make is shark sh*t.
Bifurcating Bell Curves
I’ve written about this so many times before, it’s almost become boring to repeat it, but here goes: Not one mainstream economist understands risk in financial markets, understands the role of Ponzi-debt in financial markets and understands how the bell curve of probabilities bifrcates under stress.
But you will get to this all in real time.
From Rocky Vega of The Daily Reckoning:
Just this week an inevitable milestone came to pass, the Federal Reserve surged ahead of Japan as the second largest owner in the world of US debt… second only to China. Of course, the funds used to generate that massive debt position have only been made possible through the smoke and mirrors of quantitative easing. Zero Hedge notes this, and two other generally under-reported US debt facts, in a recent post.
Here’s the short version:
“#1: The US Fed is now the second largest owner of US Treasuries… Setting aside the fact that this is abject lunacy, this policy is trashing our currency which has fallen 13% since June… as in four months ago…
“#2: ‘There are only about $550 billion of Treasuries outstanding with a remaining maturity of greater than 10 years.’ […] the US has entered a debt spiral: a time in which fewer and fewer investors are willing to lend to us for any long period of time… at the exact same time that we must roll over trillions in old debt and issue an additional $100-150 billion in NEW debt per month in order to finance our massive deficit… So we’re talking about TRILLIONS of old debt coming due in the next decade…
“#3: The US will Default on its Debt… either that or experience hyperinflation. There is simply no other option. We can NEVER pay off our debts. To do so would require every US family to pay $31,000 a year for 75 years… Obviously that ain’t going to happen…”
The last point should be no surprise to any regular Daily Reckoning reader… but the extent to which the Fed has been purchasing Treasuries is appalling, as is the maturity of the Treasuries. You can read a more detailed description of these three issues in Zero Hedge’s coverage of three horrifying facts about US debt.
Metastasizing Monetary Cancer
Banking fraud, done on a small scale, is tolerable.
Yes, it distorts property rights. It cripples savers. It encourages speculation in unsustainable projects. It rips apart the lives of marginal communities and small farmers. It corrupts governments. It facilitates counterfeiting. It encourages parasitic, predatory behavior. It narrows everyone’s focus on short-term financial gain.
But done on a small scale, these effects are marginal, like the slow growing mole on your back.
But when the financial system completely distorts the price mechanism, it’s like the mole has grown into the size of a football. The cancer is everywhere. Everyone becomes a banker. In other words, everyone tries to steal as much as they can as quickly as they can and flee the consequences – or at least shove them onto the government to fix later.
Bankers inflated the housing bubble in the US. Now we find the documentation supporting the mortgages is rubbish. So the debt slaves are fighting to stay in their foreclosed houses – effectively for nothing. The master-slave relationship is breaking down. Cats are sleeping with dogs. Slaves are rising up against their masters, not respecting the ‘moral’ arguments that the masters were using to keep them in financial slavery. The bankers are not getting their interest payments and the security has turned to mush. Every single investor who has an interest in a CDO has no f*cking idea what they’ve bought. The value is effectively zero until this is sorted out. This stuff is currently on the books of banks and pension funds to the tune of hundreds of billions of dollars.
Property rights have turned to mush.
As I said, a little cancer is OK. But when everyone is in on the scam, the cancer turns malignant.
And what we have here is one gigantic cancer that has become visible to everyone. Including the cancer cells themselves.
Hilarious FT.com headlines
On the front page of today’s FT, there are two headlines:
‘QE hopes drive price moves’
‘What’s driving gold?’
On the one hand, they are hoping that QE will drive stock prices higher. On the other, they are puzzled by the ‘bubble’ in gold.
Are they kidding?
You can tell they are losing it when the senior editors cannot even identify inconsistent headlines in their own paper.
We’re freaking doomed!
I’m not joking. Nor is the Mogambo Guru:
Rick Mills of aheadoftheherd.com posted a chart from earthpolicy.org showing “World Irrigated Area Per Thousand People, 1950-2007” which is almost Malthusian in its implications, in that the world “irrigated area” per thousand people reached its maximum of about 75.5 hectares per thousand people in 1980, but has now fallen to 43 hectares, which is the same area as was irrigated in 1960!
Since we are talking about it, I want to get it off my chest that a hectare is a unit of measure that leaves me confused and befuddled, even when I am told that a hectare is 2.47 acres, which doesn’t mean much to me either, even when they exasperatingly go on, their teeth gritted to conceal in a painfully irritating effort to explain it to me, that an acre is 4,840 square yards.
My face a blank, it finally dawns on me what they are talking about when they multiply 4,840 square yards per acre times 2.47 acres per hectare to give square yards in a hectare, which measures out as a square of land with 109.34 yards on a side!
Finally! Something we can all relate to! 109.34 yards is, of course, immediately meaningful because it’s, as everyone knows, a solid pitching-wedge to the green, with maybe about 5 miles per hour of wind at your back, perhaps followed by a one-putt for an eagle, hopefully not with a one-putt needed to save par, but probably a three-putt for a double bogey at least, and you will be so upset that you won’t care diddly-squat about any stinking acres, or hectares, or any of that crap, so why bother with something as irrelevant as land-measurement when you should be thinking of proper club selection, grip, stance, shot alignment, shifting wind conditions, shoulder turn, hip turn, wrist pronation, and hitting solidly down the line of ball flight, Just For Freaking Starters (JFSS)?
I bring this up for Two Important Reasons (TIR). Firstly, because there is a whole generation of people who wonder, “What if I am called upon to measure out a hectare of land, and all I have is a golf ball and a set of golf clubs?” Now they will know!
Secondly, it is remarkable that technology allowed us to produce enough food, on the same amount of land, for a world population that has doubled in 50 years. This is a mighty big increase in productivity per hectare, which (if you will recall from a previous paragraph) is the size of a square of land where each side is as along as a good shot with a pitching wedge.
I think it foolhardy to expect similarly fantastic results in the future, as finite arable land cannot produce infinitely more yield, just as trees do not grow to the skies, bull markets do not run forever, the Federal Reserve cannot create excess money forever without something bad happening, and only an idiot such as the mentally-ill idiots of the Obama administration could possibly believe that the federal government constantly deficit-spending such unbelievably massive amounts of money created by the Federal Reserve could possibly make things better, or even prevent the inevitable collapse of such a bloated, ridiculous, distorted, malignant, government-centric economy, except maybe once in a million years, or maybe once in a billion years, or maybe once in freaking billion billion billion billion years, but probably, almost certainly, not even then.
Unfortunately, the inevitability of the federal government attempting the impossible task of reversing the damage done by massive deficit-spending and money-creation will turn an ordinary bout of painful inflation in consumer prices, and a painful deflation in asset prices, into a ruinous hyperinflation where all food is stolen because nobody can afford to pay the high prices for food and everything else, and the government responds with even more deficit-spending.
So, to those of you, like Junior Mogambo Rangers (JMRs) everywhere, who are hip to the demand/supply dynamic that automatically clears the market with price changes, the news of the certainty of catastrophic failure of dysfunctional fiscal policy, irresponsible monetary policy versus the natural limits of production shows that you are right to be alarmed and to be buying gold, silver and oil with a frantic, mindless abandon.
Those who are not alarmed should turn to the Mogambo Junior Ranger Handbook (MJRH) under the heading, “Fan, things hitting, monetary policy leading to, fiscal policy leading to, inevitability of, destructive nature of, morons in Congress and the Federal Reserve, fiat money. Also see ‘We’re Freaking Doomed!’ page 63.”
Peter T and me
I’ve just had an interesting interaction on Steve Keen’s blog.
Here it is:
ME (Karmaisking):
Steve
You know I admire a lot of your work. You know I admire your modelling of the current credit-based monetary system, which is essentially a Ponzi scheme.
But you consistently disappoint me on your understanding of monetary history and your blindness to the damage wrought by govt monopoly control of fiat money.
Do you acknowledge that for 99 percent of human history gold and silver have been money? Have you ever wondered why? Have you read Michael Rowbotham, Jorg Guido Hulsmann, Hans Hermann Hoppe, Jesus Huerta de Soto, Murray Rothbard, Ludwig von Mises, Lew Rockwell, Bill Anderson, Robert Murphy, Jeffery Tucker, Mark Thornton?
Have you googled 2020 Speculator to see my own writings?
This is willful blindness. I’ve mentioned the Austrian School before and you’ve dismissed it out of hand. Their recommendations don’t gel with your left-leaning ‘governmet-is-good-private-business-is-bad’ mindset.
To say that you don’t care how money is created is a huge indictment on your analysis.
The analogy to drugs is not only offensive and simplistic. It is wrong. The solution is NOT to allow the monetary equivalent of legalised drug-trafficking, simply because some drug traffickers exist in society and make super-normal profits. The solution is to give working families a real return on their legal labor, giving them sufficient resources and time and leisure NOT to resort to drug trafficking to survive. In other words, it is to promote and encourage stable money and deflation.
I give you another analogy.
Imagine that the Mafiso take over a corrupt govt and steals the gold and silver that the local Sicilian people have been using as stable money for generations and forces the people to use worthless paper tokens as money instead – on threat of jail if they do not comply. Imagine that in order to live in Sicily, to house yourself and your family, to educate your children, you need FIRST to get into unrepayable debt to the Mafioso and are then forced to work for these worthless paper tokens and the Mafioso print for essentially no cost, which the Mafioso supplies first to its corrupt friends so they can enjoy watching the rest of the Sicilian people beg and fight for these inherently worthless paper tokens. And imagine that these paper tokens slowly decay so that anyone who tries to save them for their retirement finds that the paper turns to mush over the course of a year.
If you think this is an extreme analogy, read all of this discussion, including clicking and reading all the links:
http://en.wikipedia.org/wiki/Talk:Criticism_of_fractional-reserve_banking/Archive_1
I don’t expect you to read it.
Monetary history appears to bore you. That much is clear from the complete ignorance of the topic you display in your writings
PHILIP:
Show some respect – Steve is way ahead of most economists from all schools of economic thought in analyzing monetary and financial systems. There is no problem with disagreeing but not in this manner
JOHNYH:
Karmaisking, im with you
Funny how the left is masquerading as if it has all the answers when the downfall of western society has been led by leftist political, cultural, religious and as a consequence economic influence
the economy is just a bi-product of the greater human morality, if man is unjust in his heart so his world will be, nothing is just, nothing is moral, the prices of everything are unjustifiable, the market manipulation, the banker and stock broker billionaire thieves, the booming American poverty industry, politicians with investment properties suppressing land releases (in aus)driving immigration and first home buyer housing demand while suppressing “wage inflation” in the masses, corruption is endemic but who is to judge when that would be hypocritical, nothing is wrong or right, everyone has a right to their own (truth)(justice) opinion
the left is better described as the rebellion against the natural and definable greater morality, when the left wins the day politically and culturally natural morality is side lined, morality becomes whatever is most progressive
now that the left have utterly ruined stable and conservative society, politically, culturally, religiously and by effect economically, the progressives pose to say “we have the answer”… more of the same, but this time enforce it! Make it global! Surprise surprise.
But natural laws have a way of coming back to bite ya. Fiat is dying, and fast! the currency wars have begun and every nation is desperately trying to devalue their fiat, the natural currencies of Gold and Silver won’t have to be blessed by some globalist progressive dirt bag before they are re-instated, people are not fleeing toward gold and silver for “safe haven”, they are fleeing back to gold and silver for reality.
SIRIUS:
Karmaisking
“But you consistently disappoint me on your understanding of monetary history and your blindness to the damage wrought by govt monopoly control of fiat money.
Do you acknowledge that for 99 percent of human history gold and silver have been money? Have you ever wondered why? Have you read Michael Rowbotham, Jorg Guido Hulsmann, Hans Hermann Hoppe, Jesus Huerto de Soto, Murray Rothbard, Ludwig von Mises, Lew Rockwell, Bill Anderson, Robert Murphy, Jeffery Tucker, Mark Thornton?”
Both Gold and fiat paper money have their masters. Both have been used to oppress people.
History does reveal that.
In truth one has to understand what real “money” is, and then apply that measure to whatever you choose to consider as money.
I would suggest you look at what really happened in history, what I would refer to as “social history”
ME:
Sirius
You’re saying there are bad people in the world. You’re saying there are parasites who always gravitate to monopoly control over money.
Yeah, that’s right. Big deal.
The question is: What monetary system is most difficult for these money-hungry parasites to take control over?
History has proven that “natural” money is most difficult for a central power to control because its value is determined by the market.
Every attempt at fiat money (China, John Law’s France, 20th century, now this crisis) has failed. Every single attempt.
PETER T:
As a matter of empirical fact, precious metals were not the original money, nor ever but a small part of the money in circulation. The original money was tradeable “tally sticks” (actually sealed clay tablets) issued by temples and merchants. They became money when they became transferable – which was quite early (2nd millenium bc in Mesopotamia). And such bills of exchange, or tallies, or similar, always constituted by far the largest part of the money in circulation. Gold and silver set some limits to the unit of value, not the amount of money (eg, you had some idea of what, say, a Venetian sequin was worth by reference to a notional gold content – but the content was more often notional than not, and trades were not, for the most part, settled in coin but in bills of exchange discounted for the adjudged credit-worthiness of the issuer).
Happy to provide any number of references.
ME:
You’re both right and wrong.
Tally sticks (Europe) and paper (China) have for the majority of history been circulating as REPRESENTATIVE of money.
Sometimes they have switched between representative and exchangeable for gold and silver to being “money” proper.
But gold and silver have for the majority of history been considered money within the temple/banking/govt structure itself.
So for most of history you’ve had “classes” of money:
Tally sticks for the plebs, which can be used to pay taxes/debts
Silver for the merchants
Gold for the bankers and royalty
I’m sure your sources (read carefully) would confirm this. Check out Jesus Huerta de Soto’s massive treatise to support this proposition. I bet my de Soto against your texts anytime.
The whole US banking system could be sued for fraud
Jim Willie tells it like it is.
This is getting UGLY.
MISH gets angry
Ha Ha Ha! MISH is funniest when he’s angry.
He’s right of course. Bernanke knows it’s hopeless, so is preparing the way out for the Fed. Blame everyone else.
Too late.
Much too late.
Why is Keen’s analysis so good and his policies so bad?
People specialize. Some people are good at analysis and terrible at predictions. Some are good at maths and terrible at written English.
Steve Keen is a great example of a ground-breaking analyst of the current monetary system who is genuinely terrible providing concrete policy prescriptions to correct the weaknesses in the monetary system which he describes so brilliantly.
His latest contribution is here on his blog.
There are so many holes in his prescriptive “solutions” to the problem of debt and credit, it’s embarrassing to even have to respond to them.
First, his criticisms of the American Monetary Act are incredibly weak. From hearing him talk at the recent conference, it’s as though he objects to any anti-bank reform he hasn’t proposed himself. He’s very critical of everyone else’s ideas but his own.
He says the regulators are captured and Glass-Steagall was abandoned. Yeah. After 70 years. That’s not too bad of a record. Constraining unregulated banking for a few decades is better than throwing up your hands entirely and just giving up.
We all agree leverage and the issuance of what Mises called ‘fiduciary media of exchange’ is what causes crisis after crisis. Why not support the AMI’s general push to regulate banking? It’s not going to get up anyway, so why not add your name to the cause just to add weight to their cause? I would support their proposal over the current monetary system. And I’m a Libertarian free-trader!
Second, his two policy prescriptions (a time limit on shares and limits on leverage of property) are equally vulnerable to being termited and watered down. How could you possibly limit leverage on property to 10 times rental? Why not 12? Or 20? It’s so arbitrary there’s no way his proposal has any chance of getting up.
I’d prefer the AMI’s clear, simple and elegant solution – nationalize the banks. As a Libertarian I’d then recommend break up and privatization of the banking system along with the monetary system, but anything is better than self-immolation – which is what the current system guarantees.
Obviously the ideal solution would be to allow a free market in money production. Libertarians and Austrians both believe gold and silver would quickly return as money because of their inherent physical qualities as money. Gold is real money. It’s malleable, inherently limited, easily divisible into coins and impervious to decay. It is a ‘natural” store of value.
Contrast this solution to Steve Keen’s tinkering at the edges with ridiculous and politically impossible proposals.
He says he doesn’t care how money is produced.
He is morally blind to the process of counterfeiting so doesn’t have a problem with it.
Therein lies both his moral weakness and his analytical blindness.
Sad, for such a brilliant modeller to be so ignorant of the principles of sound money.
But then, you can’t have everything…
Fire department doesn’t come to the rescue
Check this out.
There is a sort of childish taunt that liberals use against proper libertarians sometimes, in which they humorously propose that the fire department be privatized, because the “invisible hand” of the market would be more efficient at putting out house fires. And then everyone has a laugh — the liberals because they think they just scored a really great rhetorical point, and the libertarians because they are high.Meanwhile, out in Tennessee, a man’s house burned down because he didn’t pay the fire department.
The homeowner, Gene Cranick, said he offered to pay whatever it would take for firefighters to put out the flames, but was told it was too late. They wouldn’t do anything to stop his house from burning.Each year, Obion County residents must pay $75 if they want fire protection from the city of South Fulton. But the Cranicks did not pay.The mayor said if homeowners don’t pay, they’re out of luck.This fire went on for hours because garden hoses just wouldn’t put it out. It wasn’t until that fire spread to a neighbor’s property, that anyone would respond.Turns out, the neighbor had paid the fee.
[…]
It was only when a neighbor’s field caught fire, a neighbor who had paid the county fire service fee, that the department responded. Gene Cranick asked the fire chief to make an exception and save his home, the chief wouldn’t.So some self-interested rational actor decided not to pay for fire protection — an optional service — and then his house burned down, because the firefighters obviously didn’t want to open the firefighting program up to a bunch of free riders.
So, we are getting the worst of both Libertarianism and Socialism. Terrific. And people say I’m crazy for being a Libertarian…
Why we all despise Paul Krugman
All Libertarians despise Paul Krugman. Gonzalo Lira explains why:
Now that Larry Summers is on the way out, and Tiny Timmy Geithner has been handed his hat, Paul Krugman is clearly positioning himself for a role in the Obama administration – which is fine: Everyone has a right to advance their career. On paper, Krugman would seem like an ideal candidate, for some policy position – right?
Wrong.
Krugman has the résumé for any of the top policy jobs in the administration – but he lacks a moral center of gravity.
It’s not the differences in policy prescriptions that I object to: It’s Krugman’s cavalier belief that a war – a total, full-on war, with all its attendant fiscal spending – is what saved the American economy from the Great Depression.
It’s Krugman’s disturbing, nihilist inference, which he makes over and over, tucked away in his articles, but always there, like a nasty aftertaste of a drink laced with a roofie: So maybe another total war might not be such a bad idea now, so as to get us out of this new Global Depression.
That is what I object to in Paul Krugman: He seems to be offering up another war as the only way to fix the economy.
But World War II was not fought for economic gain – on the contrary: The war was fought at tremendous cost, with tremendous sacrifice by everyone in the population, without any sort of certainty that the end of it would be remotely good.
No one fought the War thinking, “When this is over, we’re gonna make so much money!” The War was fought to defend civilization – and a lot of sober, sane people thought that the Nazis and the Imperial Japanese would likely win: Yet they fought anyway. They fought not because they thought they’d “improve the U.S. economy” – they fought because it was the right and decent thing to do, even if it might be a losing cause.
Krugman doesn’t see this at all. Instead, with perverse rigor, Krugman – implicitly, relentlessly – implies that the War was really just a great way to stimulate the U.S. economy . . . so maybe . . . it might not be a bad idea to, y’know . . . wouldn’t it be great to have a big huge round of fiscal stimulus – just like World War II?
This is what Paul Krugman is saying. And he is saying it over and over and over again – so it’s not some miswritten phrase, or ambiguous sentence: It’s what he believes. It’s what he stands for:
Krugman believes in war, as a means to fix the American economy.
I think having someone in an important policy position in the U.S. Federal government whose moral attitude is so out of kilter is just another nail in the coffin of the American Republic. I think appointing someone who so cavalierly thinks war is an excuse to stimulate the economy is sick.
I contrast Krugman with Robert Reich – a man whom I think is even more wrong about his policy prescriptions.
Yet Reich is someone whom I respect completely. I have no doubts whatsoever as to the moral clarity of his vision. I have no doubts as to his decency. As to practical policy initiatives, I’m on the opposite end of the table from Reich – but as a man, and as a human being, I have no doubts about him, and complete respect for him.
But Krugman? I have no doubts about him either – Krugman is despicable. And he should not be allowed a seat at the table of policy discussions, no matter what.
Someone has to say something: That’s why I’m writing this piece – Paul Krugman is the last person the American Republic needs to help fix the current economic situation. Better a decent man who is completely wrong, than a nihilistic liar like Paul Krugman.
Four Corners on the political intrigue of the independent stuff up
Four Corners just presented a fascinating insider profile on the decision-making process behind the independents’ decision to support Labor.
The madness and narrow-mindedness of the process was obvious. Small-minded losers being overawed by climate-change zealots/’experts’. Small-minded losers trying to ‘think big’ on the ‘big issues’. Small-minded losers trying to compare which party’s policies would deliver ‘more’ to the rah-rahs – rural and regional Australia.
Not one of them asked the most basic questions:
Who will steal the least?
Who will make the fewer governmental stuff-ups?
Who will indebt the next generation the least?
Who will control the banking establishment the most?
Who will return the country to gold and silver as money?
Instead these idiots asked the hated politician’s question:
Who will spend the most on what I want?
That’s why we got Labor: Part seduction, part corruption.
Appear far-sighted and then appeal to their greed.
The Liberals played it badly. They left these guys alone. They let go of the moral high ground. They left it to the ‘experts’ to convince these idiots that the ‘clever’ thing to do would be to vote Labor.
And push us further down the path of Green-Communism.
Money-printing stokes market confidence
The AFR had a headline in their finance section today along the lines of ‘Money-printing stokes market confidence.’
Other suggested headlines for the AFR in future, when QE2 kicks in:
‘Counterfeiting legalized to help stimulate the economy.’
‘Local businesses supported by king counterfeiter.’
‘Economy on a roll now that every Freemason has been given a govt-sanctioned money-printing machine.’
‘Counterfeiting allowed on Mondays, Wednesdays and Fridays to help stimulate the economy.’
‘Govt considers whether to engage Mafioso to print new currency.’
‘Gold outlawed to enable stimulus to continue indefinitely.’
‘Govt puzzled by ignorant people swapping stimulus toilet paper for real money. Govt considers compulsory medical treatment for all delusional conspiracy-nut goldbugs.’
If you think I’m a kookie conspiratologist….
….and if you trust the wisdom of our government, SELL YOUR GOLD AND SILVER TO ME. Pllleeeeaaaaaaassssssssseeeeeeeee…
Why gold isn’t in a bubble
It’s all explained here.
Bill Bonner tells it like it is
Zombies have taken over.
We’re on zombie watch…
They’re everywhere…but especially here in the Washington metropolitan area.
Zombies get their money from the government – directly or indirectly. Or some other perk…some edge…some benefit.
Just open The Washington Post. Skip the international news, which is nothing but humbug and claptrap…usually having to do with Iraq, Afghanistan or Israel.
Go to the local news.
Let’s see…how about this: a little item. Martena Clinton made the news after her car was towed by the Secret Service and then lost. She had parked in a handicapped section. But wait…what’s this? Ms. Clinton isn’t handicapped. She’s not a half-wit. She’s not lame. In fact, in the photo, she looks pretty good.
So what’s she doing in the gimpy parking section? Well, her husband is said to be mobility challenged.
Special parking spaces seemed like a nice gesture when they were originally introduced. But the zombies quickly took advantage of them. Now, they’re used by friends and families of an invalid…often passed down from one generation to the next after the cripple dies.
That’s how zombies do it. They take advantage of an easily-corruptible system. Government salaries and benefits, for example, are typically about 30% better than those in the private sector.
You can see the difference here in Bethesda. The houses are all tarted up. The cars are all new and expensive. The streets and restaurants are full. Everything is modern, rich….
The editor of US News & World Report talks of a “great divide” in the US…those who have government salaries…and the rest of us. People who work for government – or otherwise are supported by the government – have made steady income gains over the last 30 years. Others have not. Government employee labor unions have grown while others have declined.
Being a zombie pays. And it’s likely to pay even better in the future. Because now zombies control the White House (it was the zombie states…those that owed the most money…and those that get most money from the government) that elected Barack Obama. They control the Congress too. Zombies have the time (what else do they have to do?) and the resources (often, direct contact with the government itself) to get involved in elections. They have a motive too – they can pass legislation putting more money in zombie hands. Military contractors, tax lawyers, “educators” and the handicapped – all have a keen interest in elections. The rest of us have our work, business, families, careers to attend to. Not that every tax lawyer is a chiseler, every military contractor is a cheat, and every person who can’t walk is a malingerer – far from it. But they have to be doubly honest and independent to avoid the corrupting gravity of Planet Zombie.
Weekend funny
Ireland is so screwed it’s not funny. It’s caught in a deflationary trap with no way out. The govt tries to be ‘responsible’ by contracting spending. Bond yields rise as international investors sense an increase in default risk. Higher interest rates further contract the economy.
Nasty.
And there is no solution to structural unemployment other than an extended period of adjustment, dislocation and crisis. And no one wants to go through the pain. So the pain will increase, just not all at once.
2020 Speculator 