300 Years of Central Banking say it's a Matter of Months.
Very good work. Most "economics" is just banking propaganda so it's nice to read something that is actually correct. It is beginning to look like every single "recession" is meticulously planned to crash the economy so they can use printed money to buy everything on the cheap before they start pumping again....
Your 3 minute videos are a mandatory morning ritual for me now.
Good stuff as always. What level of malinvestment was cleared by the lockdowns? It seems that will determine the severity of the downcycle..
So it is a real pity that no one on Capital Hill knows or studies economics. I wonder what their personal check books look like and how much credit card debt they have?
When you refer to getting back to normal interest rates, what do you have in mind? Are current rates particularly high on a historic basis?
Have you heard about the book, The Great Taking?
The Great Taking by David Rogers Webb: https://thegreattaking.com/
Bill Holter’s commentary on The Great Taking:
I have spent half of Labor Day reading this article. I found it to be very well researched and footnoted. I highly recommend you read this in its entirety as it discusses the “how” you will own nothing (but not how you will be happy). What hooked me on reading the entirety is the discussion of “securities” and that book entry securities will be confiscated LEGALLY in the great margin call to come. This harkens back to my JSMineset days where Jim urged everyone to get their certificates issued in paper form. The rest of the article is bone chilling, but I cannot disagree with the author’s how or where it all leads to. May God help us all! Please do not e-mail me with questions regarding certificate issuance. Please contact your individual companies and query who their transfer agent is and how to have your certificate issued. As for any questions on the overall article, please contact the author directly.
Mario Innecco/Maneco64, finance expert who used to work in the City of London, read the book and thinks the author and his warnings are legit:
How the Central Bankers Plan to Come After Your Assets.
Get Ready for "The Great Taking" Doug Casey's Take [ep.#275]
The Great Taking...The Plan To Hand Over YOUR Assets To The Banksters
This guy is a Brit and toward the beginning he talks about how they don't actually own their homes/property over there. Apparently, if TPTB want the property, they can take it. Makes me wonder if we have something similar here in the US--I read this book back in 2009, but I'm pretty sure the authors suggested something similar:
They Own It All (Including You!) By Means of Toxic Currency
Here's more info on the book here http://newpeopleorder.com/
Ellen Brown, lawyer and author of Web of Debt, has read The Great Taking, and is now trying to spread the word about the immense risk of massive collateral taking that humanity faces. Here's what she's sending out to other attorneys: “Every form of collateral from deposits to stocks to bonds, is being pooled; and those players with super priority status in bankruptcy can take from the pool before the bankruptcy proceedings even start. I knew that about deposits-derivatives have super priority status in bankruptcy- but didn’t realize it about stocks and bonds. The derivatives bubble will inevitably pop, and it is larger than all the assets in the world, which have been pooled by international agreement as the author shows”
Rates of interest, which are arguably the most important prices in an economy, mislead consumers and investors when manipulated, as with any price manipulation, causing pervasive distortions which must be wrung from the system at some point...painfully. By distorting interest rates central banks manage financial markets and the economy in the same sense that substance abusers "manage" their mental state. Of course the reality is central banks aren't managing markets they are afflicting the entire financial system and economy with misinformation inevitably causing financial and economic distortions, which are now global and massive.
At this point having driven nominal rates to zero central banks will not be able to further distort the system by driving nominal short rates meaningfully below zero, fomenting another speculative mania. We should now be prepared for resolution of decades of distortion via secular financial collapse rather than another interim collapse, such as those suffered in recent decades. If history is any guide that means the ultimate bottom won't be reached for 12 years or more. Loss of wealth held in paper financial assets could reach and exceed 90% with fixed rate paper suffering the deepest losses in inflation adjusted terms.
Central banks now have just two dreadful options; deflationary secular collapse or inflationary secular collapse. With all world currencies fiat resolution of distortions extant will be via price inflation, no doubt. Physical assets offer refuge, particularly financially liquid physical assets (e.g. precious metals).
This is so frustratingly true: "Those borrowers, above all the government, effectively get free money in the form of cheap loans. They use them to take over hunks of economy and society, while driving the very income inequality that ironically animates the communists to advocate for yet more government control."
October doesn't bode well with student loan repayment starting (chaos ensured) and a more likely than not 1-2 week .gov shutdown (a good thing, but will add to the chaos). Hoping it holds together into the winter so we can complete liquidation of some RE.
Thanks for another great article!
I have a great deal of respect for Austrian economics, which seems to be the only school to acknowledge that TANSTAAFL. But I do have a couple of areas of disagreement, including the idea that the business cycle is always and everywhere a governmental phenomenon. Bear with me if you will:
Imagine a low-tech society where the only scarce consumer goods are flour and cheese. (Cheese pies are the staple diet). People currently grind wheat by hand. Now Bob decides to build a water mill. He reckons that the extra flour production will pay for the capital expenditure in 10 years. There's a big increase in economic activity over 1 year as people give up leisure time to produce capital goods to sell to Bob to make the mill. (He promises to pay them in flour over the following years). The investment's successful, Bob reaps the benefits by producing flour much faster, and after 10 years, he's produced enough extra flour to pay everyone who sold him capital goods. He continues to benefit from the increased production for another 20 years, getting to buy more cheese and eat more cheese pies.
Now consider the effects on GDP. There was a significant increase while the mill was being built. Then GDP drops sharply as capital goods production stops, but to a level somewhat higher than the pre-mill period, due to the extra flour production (and perhaps cheese makers deciding to work overtime).
If investments like this occurred randomly through time, it would add up to a fairly steady increase in GDP. But suppose they were highly correlated, perhaps because there is a burst of investment when a new technology becomes available. Then the overlapping investment periods would be characterised by a large increase in GDP, and the benefit reaping periods would lead to a sharp drop from this extreme level, although still to a level above the baseline. This pattern is sustainable: waves superimposed on a steadily-increasing straight line. It's the classic graph of business cycles in a growing economy.
My take is that ABCT describes our current situation very well, where absurdly low interest rates, subsidies and bailouts over recent decades have caused a monstrous misallocation of capital (and labour and land) into malinvestments, and all governments and central banks want to do is more of the same to delay the consequences (while aggravating them). But I think that the Austrian school should recognise that there could be other reasons for business cycles too: not doing so opens it up to being accused of being out of touch with the real economy. There can be unused capacity in the economy. Many schools of economics want to force it to produce against its own best interests. I'm happy to see it put to work of its own free will and to its own benefit. That leads on to the subject of credit, but that's for another day...
Thanks for this...
Murray N. Rothbard
The Panic of 1819: Reactions and Policies
"This book would never have come into being without the inspiration, encouragement, and guidance of Professor Joseph Dorfman. I am also indebted to Professors Robert D. Cross, Arthur F. Burns, and Albert G. Hart for many valuable suggestions."
America's First and Second National Banks were quite prosperous for "the people" in America until Andrew Jackson killed America's Banks in favor of private banking.
Interest rates were set between lender and borrower.
“We only ask you to examine the history of the times, during the existence of the two Banks, and compare those times with the miserable present,” - Abraham Lincoln 1843 speech.
When the Federal Reserve Act took control of interest rates, they also took control of "public opinion" by "buying" media, education, and the political class.
"The Currency" The Special Currency Committee set up by New York Chamber of Commerce 1906 pg. 10
“By the control of its rate of interest and of its issues of notes it would be able to exert great influence upon the money market and upon public opinion. Such power is not possessed by any institution in the United States.”
The Federal Reserve Act of 1913 gave the power of "elastic" money to the private international bankers which was a violation of the Coinage Act of 1792 which made debasing money a felony punishable by death. Essentially, a coup d'état.
Furthermore, does anyone know why Ludwig von Mises did not discuss Washington, Hamilton, and the first congress "American System" of economics in "Human Action"?
It seems odd that Mises would dismiss the AmericanSystemnow.com in his writings.
Amazing write-up! It's like Economics in one article/e-mail, instead of "Economics in one lesson".
Who will buy the $5 trillion in Treasuries?