The Days the Music Died

The music died many times in the past. To name a few:

  • 1929 Market crash
  • 1933 President Roosevelt confiscates citizen gold and declares it illegal to own more than a few ounces.
  • 1971 President Nixon “closed the gold window” and severed the last link between the devaluing dollar and gold.
  • 1987 Stock market crash
  • 2000 Stock market and “dot-com” crash
  • 2008 Stock market and housing crash
  • 2019? Stock market and “everything bubble” correction/crash
  • 2020-2025? “Inflate or Die” QE, bond monetization, helicopter dollars etc.

Continue reading

A Wealth Tax Consumes Capital

By Keith Weiner – Re-Blogged From Gold Eagle

It seems one cannot make a name for one’s self on the Left, unless one has a proposal to tax wealth. Academics like Tomas Piketty have proposed it. And now the Democratic candidates for president in the US propose it too, while Jeremy Corbyn proposes it in the UK. Venezuela finally added a wealth tax in July.

A Wealth Tax

So how does a wealth tax work? The politicians quibble among themselves, as if the little implementation details that differ between them are important. But they share the key idea. The wealth taxman is to go to the people who have wealth, and take some. And next year, come back and take more. And so on.

It should be obvious that this is morally wrong. But we want to focus on the economics. To do that, we need to drill down into the nature of wealth. What is wealth?

Continue reading

Obvious Capital Consumption

By Keith Weiner – Re-Blogged From Gold Eagle

We have spilled many electrons on the topic of capital consumption. Still, this is a very abstract topic and we think many people still struggle to picture what it means. Thus, the inspiration for this week’s essay.

Enterprise Car Service

Suppose a young man, Early Enterprise, inherits a car from his grandfather. Early decides to drive for Uber to earn a living. Being enterprising, he is up at dawn and drives all day. He finds that he makes a comfortable living. He grosses $250 a day, minus $50 in gas, or $200 net. He works the standard 220 days a year, so he takes home $44,000. Not a bad living.

One day, the transmission breaks. It costs $1,000 to repair. Early has no choice but to pay. He arranges with the shop to get his car back and work it off that week. He does not eat for that week, but he pays and is back to normal.

Continue reading

The Coming Middle East Oil Crisis: The Collapse Of Net Oil Exports

By SRSrocco – Re-Blogged From Silver Phoenix

The Middle East is heading for a crisis in its oil industry.  Unfortunately, the market doesn’t realize there is any danger on the horizon because it mainly focuses on how much oil the Middle East is producing rather than its exports.  You see, it doesn’t really matter how much oil a country produces but rather the amount of its net oil exports.

A perfect example of this is Mexico.  As I mentioned in a recent article, NEXT OIL DOMINO TO FALL? Mexico Becomes A Net Oil Importer, Mexico is now a net importer of oil for the first time in more than 50 years.  Furthermore, the IEA – International Energy Agency, published in their newest OMR Report that Mexico is forecasted to lose another 170,000 barrels per day of oil production in 2019.  Thus, this is terrible news for the United States southern neighbor as it will have to import even more oil to satisfy its domestic consumption.

Continue reading

How A ‘No Deal’ Brexit Could Lead To The “Lehmanization” Of Europe

[Some of us think the disaster is way overdone. -Bob]
By Mark O’Byrne – Re-Blogged From Gold Eagle

(The Telegraph) — Odds of a ‘no deal’ Brexit next week have risen markedly, as the Commons fails to coalesce around a viable alternative to Theresa May’s deal, while once again rejecting the “best possible deal” negotiated between the prime minister and the EU27, albeit by a smaller, yet still considerable, margin than in the past.

This is why, for the first time in a while, speculation about ‘no deal”s impact, not only on the UK, but on the European, and broader global, economy is at the forefront of the market’s mind, as investors have finally been forced to confront the reality that the UK crashing out of the EU next week isn’t only possible, but extremely probable.

Continue reading

The Duality Of Money

By Keith Weiner – Re-Blogged From Gold Eagle

Last week, in Is Capital Creation Beating Capital Consumption, we asked an important question which is not asked nearly often enough. Perhaps that’s because few even acknowledge that capital is being consumed, and fewer tie it to the falling interest rate (perhaps that is because the fact of the falling interest rate is, itself, controversial). At any rate, we showed a graph of Marginal Productivity of Debt.

We said that this shows that consumption of capital is winning the race. And promised to introduce another new concept to explain why.

Continue reading

Is Capital Creation Beating Capital Consumption?

By Keith Weiner – Re-Blogged From Gold Eagle

We have written numerous articles about capital consumption. Our monetary system has a falling interest rate, which causes both capital churn and conversion of one party’s wealth into another’s income. It also has too-low interest, which encourages borrowing to consume (which, as everyone knows, adds to Gross Domestic Product—GDP).

What Is Capital

At the same time, of course entrepreneurs are creating new capital. Keith wrote an article for Forbes, showing the incredible drop in wages from 1965 to 2011. There was not a revolution, because prices of goods such as milk dropped at nearly the same rate. The real price of milk dropped as much as it did, because of increased efficiency in production. The word for that which enables an increase in efficiency is capital.

Or, to put it another way, capital provides leverage for productive human effort. We don’t work any harder today, than they did in the ancient world (probably less hard). But we are much richer—we produce a lot more. The difference is capital. They had not accumulated much capital. So they were limited to brute labor, to a degree which we would find shocking today.

Continue reading

The “Productivity Of Debt” Myth

By Steve Saville – Re-Blogged From http://www.Silver-Phoenix500.com

Page 4 in Hoisington Investment Management’s latest Quarterly Review and Outlook contains a discussion about the falling productivity of debt problem. According to Hoisington and many other analysts, the problem is encapsulated by the falling trend in the amount of GDP generated by each additional dollar of debt, or, looking from a different angle, by the rising trend in the amount of additional debt required to generate an additional unit of GDP. However, there are some serious flaws in the “Productivity of Debt” concept.

There are three big problems with the whole “it takes X$ of debt to generate Y$ of GDP” concept, the first being that GDP is not a good indicator of the economy’s size or progress.

Continue reading

Reverse Mortgages, Gold, & Silver

By Keith Weiner – Re-Blogged From http://www.Gold-Eagle.com

We hope everyone had a happy New Year.

There is a long informercial airing on American TV. It shows an endless parade of senior citizens, struggling to pay their bills, unable to buy that motorized stairway lift, play golf, or eat out at restaurants. The solution?

Get a reverse mortgage! The number to call is 1-800-GET-CASH. That number again is one eight hundred get your free cash now!

Continue reading

On Say’s Law

By Alasdair Macleod – Re-Blogged From http://www.Gold-Eagle.com

One of my regular readers has raised the important subject of Say’s Law, the denial of which both Keynesian and modern monetarists are emphatic. They need this fundamental axiom to be untrue to justify state stimulation of aggregate demand. Either Say’s Law is right and state intervention is economically disruptive, or if it’s wrong modern economists are right to ignore it and progress their science beyond it.

The basis of post-Keynesian economic stimulation assumes a breakdown between consumption and production can occur, and the correct response is for government to step in and revive failing demand. It is the favored explanation of the 1930s slump. Obviously, Say’s Law would have to be discarded.

This article revisits this subject, explains where Keynes went wrong, redefines the Law to include money as a good, and explains why supply-side is less destructive than demand management. Say’s Law is crucial to understanding why increasing state intervention to revive economic demand cannot work, and has led us into the current crisis.

Continue reading

Three Reasons Why The US Government Should Default On Its Debt Today

By Doug Casey – Re-Blogged From http://www.Gold-Eagle.com

The overleveraging of the U.S. federal, state, and local governments, some corporations, and consumers is well known.

This has long been the case, and most people are bored by the topic. If debt is a problem, it has been manageable for so long that it no longer seems like a problem. U.S. government debt has become an abstraction; it has no more meaning to the average investor than the prospect of a comet smacking into the earth in the next hundred millennia.

Many financial commentators believe that debt doesn’t matter. We still hear ridiculous sound bites, like “We owe it to ourselves,” that trivialize the topic. Actually, some people owe it to other people. There will be big transfers of wealth depending on what happens. More exactly, since Americans don’t save anymore, that dishonest phrase about how we owe it to ourselves isn’t even true in a manner of speaking; we owe most of it to the Chinese and Japanese.

Another chestnut is “We’ll grow out of it.” That’s impossible unless real growth is greater than the interest on the debt, which is questionable. And at this point, government deficits are likely to balloon, not contract. Even with artificially low interest rates.

Continue reading