A Wormhole on Wall Street

Intense sunshine beamed down upon the canyons of Wall Street, illuminating potholes, dark alleys, secrets and mass delusions. Most people paid no attention because phones, the impeachment circus, Facebook posts, stock prices, and money worries distracted them.

It was a normal day. I took a random walk down Wall Street, checked my phone for useless news and accidentally stepped into a cosmic wormhole or time-warp.

Perhaps it was only a deep hole in the sidewalk. Like Alice, I fell head over heels, and dropped my precious phone. My New York financial world faded, and blackness enveloped me.

To my surprise, I landed softly on my feet in a huge underground cavern with marble floors and dim glowing lights. Stunned by the silence instead of New York street noise and pollution, I stared in awe at the blemished walls of the cavern. It smelled like ancient mold and burnt toast.

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The Monetary Lessons From Germany

By Alasdair Macleod – Re-Blogged From GoldMoney

Germany suffered two currency collapses in the last century, in 1920-23 and1945-48. The architect of the recovery from the former, Hjalmar Schacht, chose to cooperate with the Nazi successors to the Weimar Republic, and failed. In that of the second, Ludwig Erhard remained true to his free market credentials and succeeded. While they were in different circumstances, comparisons between the two events might give some guidance to politicians faced with similar destructions of their state currencies, which is a growing possibility.

Introduction

Let us assume the next credit crisis is on its way. Given enhanced levels of government debt, it is likely to be more serious than the last one in 2008. Let us also note that it is happening despite the supposed stimulus of low and negative interest rates, when we would expect them to be at their maximum in the credit cycle, and that some $17 trillion of bonds are negative yielding, an unnatural distortion of markets. Let us further assume that McKinsey in their annual banking survey of 2019 are correct when they effectively say that 60% of the world’s banks are consuming their capital before a credit crisis. Add to this a developing recession in Germany that will almost certainly lead to both Deutsche Bank and Commerzbank having to be rescued by the German government. And note the IMF recently warned that $19 trillion in corporate debt is a systemic timebomb, and that collateralised loan obligations and direct exposure to junk held by the US commercial banks is approximately equal to the sum of their equity.

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GDP-B Doesn’t Cut It Either

By Alasdair Macleod – Re-Blogged From Gold Eagle

GDP is hyped-up to be an all-important measure of economic activity. It does not measure economic activity, instead recording meaningless money-totals spent in unsound currency over a given period. A bad statistic such as GDP is wide open to official manipulation, and there is always a desire to enhance it. GDP-B, which includes an estimated consumer surplus, appears to conform with this desire. If it is successfully introduced, GDP would be substantially increased, making governments look good, and reducing their debt to GDP ratios. However, it is no more than a statistical cheat.

Gross Domestic Product-B attempts to capture the added value of things we don’t pay for, such as Facebook, WhatsApp, Google and other digital services free to the user. B stands for benefits; the benefits consumers receive from free and subsidised services. It was devised by Erik Brynjolfsson, a professor at MIT, and is a work-in-progress. He points out that according to the US Bureau of Economic Affairs, the information sector in GDP statistics has been stuck at between four and five per cent of GDP for the last twenty-five years. Yet, the importance of this mainly digital sector now dominates both work and leisure activities, benefits not recorded in GDP.

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Preparing for the Possibility of Hyperinflation

By Anthony Gilbert – Writer at http://www.realfx.com/blog/

Hyperinflation is a rapid increase in inflation where the prices rise so drastically that calling it inflation becomes meaningless.  While there is no set percentage for hyperinflation, it is often used to describe price increases of 50% or more over a short period.  The sharp increase is what separates hyperinflation from other types of inflation.

What Causes Hyperinflation?

Hyperinflation can occur when the government begins printing larger amounts of money to pay for spending.  As the amount of money being printed increases, the prices of goods and services will increase.  Typically the government would lower the supply of money to curb inflation, but when they continue to print more, there can be an imbalance in supply and demand of currency.  Prices will then skyrocket, and currency will begin to lose its value.  This results in hyperinflation.  Hyperinflation can occur at any time but historically has often happened as results of war economies.

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How Gold Can Rescue Pensions

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

The World Economic Forum, in conjunction with Mercers (the actuaries) recently estimated that the combined pension deficit currently stands at $66.9tr for eight countries, rising to $427.8tr in 2050. The eight countries are Australia, Canada, China, India, Japan, Netherlands, UK and US. Of the 2016 figure, $50.5tr is unfunded government and public employee pension promises. Yes, we are now talking in hundreds of trillions. Other welfare-providing states missing from the list have deficits that are additional to these estimates.

$66.9tr is roughly 1.5 times the GDP of the eight countries combined, and $427.8tr is nearly ten times. Furthermore, if we take out the non-productive government element, the figures relative to the private sector tax-paying base are closer to twice productive GDP today, and thirteen times greater in 2050. That 2050 deficit assumes a 5% compound annual growth rate. This is a linear projection, but the deterioration in finances for unfunded government pensions may turn out to be exponential, in line with the accelerated increase in the broad money quantity since the great financial crisis.

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Safety In Banking

By Alasdair Macleod – Re-Blogged From http://www.Silver-Phoenix500.com

There was a time when banks acted as custodians of their customers’ money. Indeed, keeping a person’s money and using it as if it belonged to you without their agreement is fraud in common law. A banking license legally exempts banks from charges of criminality in pursuing the normal course of fractional reserve banking business, by making it clear that you, the customer, agree to being a creditor of the bank instead of the bank acting as custodian for your money.

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The Fractional Reserve Banking Sideshow

cropped-bob-shapiro.jpg   By Bob Shapiro

I have seen a recent flurry of articles, including one by Austrian School Economist, Frank Shostak, of the Mises Institute, discussing the evils of Fractonal Reserve Banking (FRB) regarding the Boom-Bust Cycle.

While I also am a Free Market guy, subscribing to the Austrian School, I think the critics of FRB are allowing themselves to fight the wrong fight – to be diverted by a red herring.

Let us consider three countries. Each one has a Money Supply of $1 Trillion, which has remained constant for several years. Country 1 has as its money a Gold Standard. Country 2 uses a 100% paper currency. And Country 3 has a basic, unchanging money supply made up of 1/10th base money (either Gold or paper money – take your pick), plus 90% bank credit of the FRB type, totaling $1 Trillion.

Image result for fractional reserve banking

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The Fiscal Grand Canyon

By Jeffrey Lewis – Re-Blogged From http://www.Silver-Phoenix500.com

The cycle of hyperinflation is already upon us. It was set in motion long ago.

We are in the ultimate conundrum. Politically, the US Government, Treasury, and Central Banks must satisfy – pay for – unfunded liabilities and promises. But the “money” is simply a desperate conjuring meant to keep the doors of government open.

The dollar as a concept is temporary and limited. Many outside the mainstream have observed ubiquitous evidence that the end is near. We know it’s limited because history shows this to be true. All fiat currencies, all world reserve currencies eventually died.

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The Twilight of Cash?

By Andy Sutton – Re-Blogged From http://www.Silver-Phoenix500.com

Many decades ago you could walk into almost any bank with a bundle of cash and exchange it for a predetermined amount of gold and/or silver. Cash was used because of its portability, light weight, and the confidence of the citizenry that it was as good as gold. I’m sure you already know where this is going. Fast forward to present day and look around you at the plight of cash. It is now redeemable for nothing, is essentially worth nothing, has zero intrinsic value, and despite ludicrous measures, is rather easily counterfeited. So the question I’m going to pose is this: Why oh why would banks, the USGovt, and the global establishment want to outlaw and abolish something that is already a proxy for slavery and servitude? The dollar (and all paper currency for that matter) has already fulfilled its predestined purpose. A dollar buys a nickel’s worth – quite literally – and still people will break their backs, sacrifice their families, and even take the life of another all in the pursuit of pieces of paper. Why is the establishment so against cash?

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Falling Yields, Rising Asset Prices

By Keith Weiner – Re-Blogged From http://snbchf.com/gold-standard/

Our monetary system is failing, but explaining that isn’t easy. The most popular argument is that the dollar has falling purchasing power and rising inflation. The problem with this argument is that consumer prices aren’t skyrocketing now. So, of course, people remain skeptical.

Yields across all markets were falling worldwide. This causes the income generated from assets to fall. I wrote about this serious problem last time, introducing the concept of yield purchasing power—which is how much you can buy with the interest on your savings.

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Prove You’re Not a Terrorist

By Jeff Thomas – Re-Blogged From http://www.Silver-Phoenix500.com

Recently, France decided to crack down on those people who make cash payments and withdrawals and who hold small bank accounts. The reason given was, not surprisingly, to “fight terrorism,” the handy catchall justification for any new restriction governments wish to impose on their citizens. French Finance Minister Michel Sapin stated at the time, “[T]errorism feeds on fraud, money laundering, and petty trafficking.”

And so, in future, people in France will not be allowed to make cash payments exceeding €1,000 (down from €3,000). Additionally, cash deposits and withdrawals totaling more than €10,000 per month will be reported to Tracfin—an anti-fraud and money laundering agency.

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Does China Have An Option?

By Bill Holter – Re-Blogged From http://www.Gold-Eagle.com

As an addendum to yesterday’s writing, today we should tie together the new alliances and what appears to be Western defections toward the East.  Just overnight, Australia also applied for membership to the Asian Infrastructure Investment Bank (AIIB), a U.S. rebuke is sure to follow, who is next?  With this in mind, it is my belief the Chinese will be the key player in the gold market and the “pricing” of gold in the future.  In turn they will gain even more financial strength because of the massive amounts they have already accumulated.  As a side note, do you believe it is by mistake China is now the largest gold producer in the world?  I think not.  I will give you my theory first, then work my way toward supporting it.

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The Gold Standard For Skeptics

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

A skeptic said to me recently, “The dollar is money and gold isn’t.”

I asked, “OK, how do you define money?”

He responded, “You use dollars to buy groceries, not gold.”

He defines money as the accepted medium of exchange. Let’s drill deeper into that.

The government forces gold out of circulation. Taxation is one way (there are others). If the price of gold rises, it’s taxed as a capital gain. The result is that gold cannot circulate, because no one wants the possibility of a tax bill on every transaction.

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Return to a Sound Money in the US

cropped-bob-shapiro.jpg   By Bob Shapiro

Germany, after World War I, was forced to pay war reparations that it couldn’t afford. In 1921, it paid 2 Billion gold marks, but in 1922 it couldn’t make the payment, but was allowed to pay “in kind” in coal, steel, etc. In 1923, France and Belgium invaded and took over Germany’s industrial Rurh Valley.

Workers went on strike, and the government printed paper money to feed them. Thus began Weimar Germany’s Hyperinflation. From 1922

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