Tag: economy

SchiffGold: Nearly Half of Small Business Owners Expect to Close Down Permanently

An article at SchiffGold says that Nearly Half of Small Business Owners Expect to Close Down Permanently because of the pandemic shut down. This echoes previous studies. Datapro Research Company found that 43 percent of companies hit by a severe crisis never re-opened, and 29 percent more failed within two years. The American Red Cross has estimated that up to 40% of small businesses that experience a disaster never reopen. And a FEMA report after the 1992 Hurricane Andrew landing found that 80% of businesses which did not have a Business Continuity Plan failed within two years of the storm. We should expect similar numbers.

The economy was booming. The stock market was setting records. Then coronavirus came along and governments shut things down to minimize the pandemic. That led to massive layoffs and a nasty recession. But once states open up, things will spring back to life and the economy will go back to being great again.

That’s the mainstream narrative. But it’s not based on reality.

In truth, the economy was a Fed-induced bubble before the pandemic. The central bank has managed to reinflate the stock market bubble despite the economic destruction, but it is nothing but a Fed-induced sugar high. And the economy won’t likely rebound quickly, even after things open up.

There are all kinds of reasons to doubt the quick economic recovery narrative. We’ve reported on the number of over-leveraged zombie companies, skyrocketing household debt, the battered labor market, and a potential cash-flow crisis even after the economy gets moving.

Now we have another sign of long-term economic trouble. A survey conducted by financial services company Azlo found that nearly half of small business owners think they will eventually have to close their businesses for good.

Forty-seven percent of the small business owners surveyed said they anticipate shutting down, and 41% said they are looking for full-time work elsewhere.

This is on top of the small businesses that have already shut down and will never reopen.

The survey also asked questions about the Paycheck Protection Program (PPP) instituted through the CARES Act. The results were less than stellar, as Newsweek reports.

Less than half of participants—38 percent—involved in Azlo’s recent survey applied for PPP loans. Of those who did apply, 37% said the program was slow to distribute funds and 20% described the process as ‘painful,’ the company reported.”

It’s absurd to think the economy is going to come roaring back when nearly half of small business owners expect to shut down. Small businesses employ 58.9 million Americans, making up 47.5% of the country’s total employee workforce.

The economy would struggle to recover from the shutdown even if it was healthy before the pandemic. And it wasn’t.

Our Finite World: Economies Won’t Be Able to Recover After Shutdowns

Gail Tverberg of Our Finite World writes about the difficulties of recovering our businesses in Economies Won’t Be Able to Recover After Shutdowns. It’s much easier to close businesses than to start them up again.

Citizens seem to be clamoring for shutdowns to prevent the spread of COVID-19. There is one major difficulty, however. Once an economy has been shut down, it is extremely difficult for the economy to recover back to the level it had reached previously. In fact, the longer the shutdown lasts, the more critical the problem is likely to be. China can shut down its economy for two weeks over the Chinese New Year, each year, without much damage. But, if the outage is longer and more widespread, damaging effects are likely.

A major reason why economies around the world will have difficulty restarting is because the world economy was in very poor shape before COVID-19 hit; shutting down major parts of the economy for a time leads to even more people with low wages or without any job. It will be very difficult and time-consuming to replace the failed businesses that provided these jobs.

When an outbreak of COVID-19 hit, epidemiologists recommended social distancing approaches that seemed to be helpful back in 1918-1919. The issue, however, is that the world economy has changed. Social distancing rules have a much more adverse impact on today’s economy than on the economy of 100 years ago.

Governments that wanted to push back found themselves up against a wall of citizen expectations. A common belief, even among economists, was that any shutdown would be short, and the recovery would be V-shaped. False information (really propaganda) published by China tended to reinforce the expectation that shutdowns could truly be helpful. But if we look at the real situation, Chinese workers are finding themselves newly laid off as they attempt to return to work. This is leading to protests in the Hubei area.

My analysis indicates that now, in 2020, the world economy cannot withstand long shutdowns. One very serious problem is the fact that the prices of many commodities (including oil, copper and lithium) will fall far too low for producers, leading to disruption in supplies. Broken supply chains can be expected to lead to the loss of many products previously available. Ultimately, the world economy may be headed for collapse.

In this post, I explain some of the reasons for my concerns.

[1] An economy is a self-organizing system that can grow only under the right conditions. Removing a large number of businesses and the corresponding jobs for an extended shutdown will clearly have a detrimental effect on the economy. 

Figure 1. Chart by author, using photo of building toy “Leonardo Sticks,” with notes showing a few types of elements the world economy.

An economy is a self-organizing networked system that grows, under the right circumstances. I have attempted to give an idea of how this happens in Figure 1. This is an image of a child’s building toy. The growth of an economy is somewhat like building a structure with many layers using such a toy…

Click here to read the entire article at Our Finite World.

 

FFF: Republicans Are Now Good for Exactly…Nothing!

The Future of Freedom Foundation writes about how the Republicans no longer understand the economy in Republicans Are Now Good for Exactly…Nothing!

Nancy Pelosi, Chuckles Schumer and the rest of the Dem wrecking crew surely have the Trumpified GOP by the short hairs.

The latter are clueless about the real imperative, which is to halt the senseless shutdown of the US economy ASAP. So like deer caught in the headlights of public fear, outrage and hurt by the Covid Quarantines, they have blindly succumbed to bailing out one and all; and that, in turn, has opened the US Treasury to a congressional feeding frenzy that would make the New Deal porkers, the LBJ spenders and the Obama shovel-ready folks green with envy.

In less than a month, they have passed the $8.3 billion vaccine bill, the $100 billion relief and paid leave package and the $2.2 trillion Everything Bailout, and are now racing toward another $1.0 trillion interim CARES 2 funding bill to essentially double- down on all the outrageous pork and Free Stuff that was contained in CARES 1, which the House did not bother to even debate or approve by recorded vote.

And, alas, all of this is preliminary to the impending “stimulus/infrastructure” bill where the bidding starts at $2 trillion, meaning that the Imperial City is in the throes of a fiscal bacchanalia that defies imagination. It will leave America with unspeakable debts, political dysfunction and economic debilitation for years, if not decades, to come.

And exactly what is being loaded on the budgetary wagon while the denizens of the political party which is supposed to be the watchdog of the Treasury have their collective snouts buried in the public trough so deep that they too will need a respirator before long?

Well, it’s bad enough that Republicans voted for $1200 per person for upwards of 130 million workers who have not and will not loose their jobs and incomes owing to the covid shutdown, even if an unfortunate 30 million do become unemployed for a few weeks at the peak of the shutdown.

But if you ask what possible reason of policy or equity could justify this $300 billion eruption of Free Stuff, the best you can get is some kind of convoluted Keynesian asininity that is even more absurd than the old standby of hiring people to dig holes with teaspoons and then fill them back up with the same tools.

To wit, we are apparently giving the 130 million workers who are and will still be earning the same paycheck but spending far less because everything is closed (you can only spend about $25 per day on Netflix even if you watch movies dawn till dusk) another $1200 to spend on top of their normal income. Then, assuming they can find a place which is open to spend their extra loot, it is hoped such places will hire the 30 million covoid-layoffs so that they too will get back to living hand-to-mouth just like before.

Folks, once upon a time—even in the 1970’s when your editor arrived bright-eyed and bushy tailed on Capitol Hill—Republicans understood fundamental capitalist economics. They did not even have to be told there are no free lunches and that Uncle Sam cannot create production and income (i.e. wealth), but only shuffle it among citizens by taxation currently or by extracting it in the bye-and-bye from future taxpayers via piling up the public debt.

Click here to read the entire article at FFF.org.

See also Mises Institute: Why Keynesians Don’t Want You to Save Your Money

The Trumpet: Financial Reckoning – Here’s What You Can Do Right Now

Timothy Oostendarp of The Trumpet has an article up on the many people facing difficult financial times as a result of the pandemic and some basic things that you can do to regain your financial footing and stay sane – Financial Reckoning Now Confronts Millions

Whether you live in America or somewhere else, right now the biggest problem you’re likely facing is paying your monthly bills. The forced shutdown of the global economy has pulverized national and family budgets. In Canada, it is reported that federal unemployment insurance claims have rocketed to Great Depression levels.

Ding-dong, Dorothy, the economy is dead.

Last month, many Americans were living paycheck-to-paycheck. This month has seen that paycheck taken away.

There is no sense citing endless statistics. Tens of millions of Americans can’t even handle a $400 emergency. Banks and credit card companies are preparing for a tsunami of payment deferrals and loan defaults as consumers buckle.

Like boozy wastrels drunk on prosperity, millions have squandered precious time and money in the face of mounting evidence a crash was coming. Instead of having savings for a rainy day, Americans are now facing a financial reckoning that’s going to burn. The toll isn’t only financial; it’s physical, emotional and spiritual. And authorities are seeing a corresponding spike in suicides and substance and domestic abuse.

The fiscal grim reaper is here. In all fairness, he did send us many notices of his impending arrival, like the Great Recession in the late 2000s. That financial bloodbath was as long as Wall Street and up to the businessman’s belt.

Since that tender time, federal reserve banks have made themselves hoarse yelling into deaf ears. They have repeatedly warned about gross government and corporate debt, the perils of endless quantitive easing (printing money), and escalating household debt.

More than 10 long years have lapsed since the Great Recession. What did we learn? What is this latest economic jolt teaching us? We learned that we are thoroughly addicted to materialism. We learned that decadence defines our daily living. We learned we lack character. Even the poor among us live like feudal kings, yet millions are now beyond broke.

Prosperity is bankrupting us in more ways than we think. If you are suffering financially, the good news is that, if you are willing to correct your living, there is a little time left to set your financial house in order.

Here is what you can do right now.

The first step is to understand God has set basic financial laws into motion. When those laws are broken, penalties result. The penalty is a sign that laws are being broken—and signs are meant to be heeded! God has put penalties in place for broken law to help correct our thinking and our living. When God’s laws are obeyed, great material and spiritual blessings result—including freedom from anxiety, worry and fear.

When someone becomes physically sick with a cold or the flu, the body begins to immediately discharge poisons through mucus production, the eliminative system and by rest. That is the human body trying to bring itself back into alignment with God’s laws governing health. Likewise, financial poison comes in the form of debt, budget deficits (not enough money to cover your bills), and burdensome interest payments. These poisons must be ejected! This is the second step!

Without jeopardizing your health or that of your family, reduce your standard of living to pay off your debts and balance your budget as soon as possible! This means doing everything practically possible to avoid consumer and business debt. A well-considered loan will produce above its principle and interest—meaning it should profit! The wise earn interest while the foolish pay it.

Right now, many governments are offering no-strings-attached money to help small businesses and citizens. If you need to, you might have to take advantage of the assistance your taxes have already helped to pay for or will help to pay for later. God is not against accepting help in time of need. In certain well-advised circumstances, it is the prudent thing to do. There is no shame in taking a handout in a time of need—especially when we are determined to go on and use that help to correct the cause of the problem.

Consider seeking wise counsel before taking on long-term debt or loans for what could be a short-term employment problem. A bad loan will be a poison, which will seriously aggravate your financial problems! Get creative—use drive and initiative. These are some of the laws of personal and financial success. Talk to a rich uncle who might be willing to give you a hand (not handout) during these difficult times. Offer to work for the help. Take odd jobs doing handiwork. The point is, make your opportunities.

The next principle is to set a budget and track your spending. Herein we see another basic law of God: Don’t spend more than you make. Budget! Our financial problems don’t usually revolve around not having enough money but not managing it properly. Slipshod financial management is a reflection of a breakdown in character. We all have to learn to manage our prosperity—especially those who haven’t learned the first principle of working hard.

Examine your attitude toward materialism. God’s law forbids lust and coveting, but coveting drives the world economy. Is it driving your spending? God’s Word says a person trying to get the best of his employer or trying to get riches will not prosper in the end. It often leads to owning substandard possessions and always leads to substandard character.

We all must come to learn the first lesson of life: Seek God’s Kingdom and His character above riches. That is the only way to financial prosperity. Strive to better yourself in an effort to give to your employer, your family and to God—but also strive to learn to be content in your circumstances.

Get creative. Housing, transportation and food are major line items in personal budgets. Excessive car loans that stretch into five to seven years are financial folly. Maybe it’s time to evaluate cutting these areas without jeopardizing your ability to work, and without jeopardizing your health and your family’s well-being.

Another financial law of success is persistence. Don’t throw in the towel! If you’ve recently been laid off, realize many hundreds of thousands have been laid off too. Most of them will begin to waste time. Don’t waste time.

Sloth is stealing, even if it’s only stealing time that can’t be recovered. Put your time to profitable use. Stay productive. Read a good book; improve your skills; refinish some old furniture; play games with your children; go for a walk; breathe in fresh air.

“Chomp at the bit” to get back to work. A robust work ethic is at the heart of building righteous character. Begin calling prospective employers. Line up interviews. Make a job out of getting a job.

This can be a time to advance your career! Employers will start hiring again. Make sure your name is at the top of the list. God is a producer. He expects the same from us. He doesn’t waste a moment or an opportunity. Hiring may be at a momentary freeze, but you don’t have to be frozen in time or frozen in one spot. Be zealous and work hard!

Next, when you get back to a solid financial footing, start saving for a rainy day. There are two types of savings to aim for: operational savings and reserve savings. Operational savings are for emergency repairs and other out-of-the-blue expenses. Reserve savings should equal three times your monthly net income—or at least enough to cover your expenses for three months. If need be, put your budget on a diet, because austerity may be the order of the day to achieve the results you need. The old saying applies: Make hay while the sun shines. Time is fast running out.

When tragedy strikes this world, God is often accused of loafing on the job. Mankind shakes his collective fist at God. He is accused of being heartless, unwilling to lend humanity a helping hand. God gets blamed for nearly all tragedy, pain and suffering. But if He were to stop you from chasing your pleasures that lead to such destruction, you’d soon accuse Him of interfering in your life. When the tragedy strikes, who is to blame? We can’t have it both ways.

Related:

Motley Fool: What to Do If Coronavirus Cuts Your Income

CNBC: How to Build a Cash Reserve If Coronavirus Causes You to Miss Work

USA Today: How to pay the bills during the coronavirus pandemic

Fox: Coronavirus financial concerns: What to do if you can’t pay your bills

James Kunstler: Forced Liquidation

Author of The Long Emergency and many other books dealing with energy and financial predicaments of our society James Howard Kunstler gives a few thoughts on the direction of the economy in Forced Liquidation.

Historians of the future, pan-roasting fresh-caught June bugs over their campfires, may wonder when, exactly, was the moment when the financial world broke with reality. Was it when Nixon slammed the “gold window” shut? When “maestro” Alan Greenspan first bamboozled a Senate finance committee? When Pets.com face-planted 268 days after its IPO? When Ben Bernanke declared the housing bubble “contained?”

If our reality is a world of human activity, then finance is now completely divorced from it for the obvious reason that, for now, there is no human activity. Everyone, except the doctors and nurses, and some government officials, is locked down. So, the only other thing actually still out there spinning its wheels is finance and, to those of us watching from solitary confinement, it is looking more and more like an IMAX-scale hallucination with Dolby sound.

How many mortals can even pretend to understand the transactions now taking place among treasury and banking officials? On their own terms ­­­– TALFs, Special Purpose Vehicles, Commercial Paper Funding Facilities, Repo Rescue Operations, “Helicopter Money” ­– stand as increasingly empty jargon phrases that signify increasingly futile efforts to paper over the essence of the situation: the world is bankrupt. It’s that simple.

The world is locked down and in hock up to its eyeballs. It faces what the bankers euphemistically call, ahem, a “work-out,” which is to say, a restructuring. The folks in charge are resisting that work-out with all their might, because it will change many of the conditions of everyday life (especially theirs), but it is coming anyway. When debt can’t be paid back, money vanishes. Money isn’t capital, but it represents capital when it is functioning. When it isn’t functioning, it stops being money. Now the whole world realizes that the debt can’t be paid back, will never be paid back… and that’s the jig that’s up.

The Federal Reserve’s balance sheet is the black hole in the financial universe where money goes to die. Money is rushing in there at a fantastic rate these days, and the Fed is trying to spew out new money at an equal rate to replace it ­– raising the question: is it even money anymore, or just a figment in the larger hallucination? Kind of seems that way, a little bit. They brought out their biggest money-launching bazookas only a few days ago, and it may only be few days more before that gigantic salvo proves inadequate. What then?

Perhaps the key is how long the ordinary folk agree to their orderly confinement, even in the face of the corona virus. That moment may be a bit further out, with the melodrama mounting especially in New York City right now, numbers of sick people going all hockey-stick, and frightful scenes in the hospitals. But then, whether it’s a week from now, or Easter Sunday, or sometime after that, what will the ordinary folk do when they decide en masse to de-confine and come roaring out in the streets?

I must imagine that one vignette will feature a mob of inflamed formerly middle-class Long Islanders swarming into the Hamptons with blood in their eyes for the hedge funders cringing in their majestic show-places, who will discover with maximum chagrin that privet hedge is no hedge at all against the wrath of the plebes. There has never been a bigger swindle in history than the aggregate shenanigans on Wall Street lo these years of the new millennium, and we all know it, even if it’s hard to explain just how they did it. The money boyz should be taking a haircut-and-a-half now instead of wailing for bail-outs, but such is the perversity of human greed that they made one last desperate attempt to nail down their fortunes when everybody else was losing…everything.

You understand that banking and finance was headed firmly south long before corona virus stole onto the scene. The tremors started back in September with the Fed jamming untold trillions into the black hole that had opened in overnight lending between banks. That was an infection, too, and boy did it spread — as fast as corona virus! This is indeed a most unfortunate convergence of events, but it should tell you that the banking and finance system, and the global economic arrangements that evolved with it, had already passed their event horizon. History had punched our ticket and was embarking us on a journey whether we were ready or not.

Is it a comfort to know that Joe Biden waits patiently on the sidelines to wave his aviator glasses and make everything normal again? I didn’t think so. Mr. Trump, for all the awe of his office, is not much better positioned to turn about the ship we’re now sailing on. Rough seas ahead, in uncharted waters, as we seek landfall in the next new world.

Northman Trader: The Lesson

Sven Henrich of Northman Trader has a post up about the fragility of the US economy, the fickleness of politicians, and other lessons –The Lesson.

The lesson of it all? The lesson is that lessons are not being learned. Of course the human species has an ingrained problem: We are all born with a blank sheet and have to learn everything from scratch. It would be helpful though if the elders could pass lessons from past mistakes on to the new generation.

But no. So we keep making the same stupid mistakes.

And here we are. Just four weeks after all time highs in markets America is again turning into bailout nation.

Yes coronavirus is an unforeseen shock. So what?

We’re supposed to handle a shock. We’re supposed to be prepared. We’re supposed to have savings and great balance sheets. After an 11 year recovery and market bull run based on cheap and easy money shouldn’t things be great and shouldn’t we be well prepared for the next downturn?

Is that really too much to ask?

Apparently.

We can’t even go 4 weeks without the Fed going apeshit on cutting rates to zero, launching $700B in QE, making discount windows available and launching $500B, even trillion dollar repos.

We can’t even go 4 weeks without the government launching a proposed $850B stimulus package, tax cuts, free money checks of $1,000 to Americans and suggesting bailouts for $BA and $GE.

That’s how fragile things are. They must be, otherwise the system would be able to handle a temporary shock.

But it can’t. Why?

Well for one our supposed great economy ever has the vast majority of Americans live paycheck to paycheck:

That’s a systemic problem. Sure you can blame people for living beyond their means, but in general most people just don’t have the income power to keep abreast with rising medial costs, home prices and all the other fun inflationary items that the Fed simply doesn’t count as inflation. How ignorant they are. PCE deflator. Please.

And then of course the same lesson again not learned that keeps repeating ahead of every bust: Greed and more greed.

When has it ever been a good idea to chase stocks to 150% market cap to GDP or even higher?

The answer is never. Yet they convinced themselves and others that it’s different this time. New flash: It wasn’t.

A lesson not learned and yet they did it. The chart was screaming unsutainability. And here we are 4 weeks later, yesterday closing at 109.5% market cap to GDP:

Reversion to the mean. And it could eventually get much worse.

I showed this chart in Bull Cliff in February and I stated:

“Investors keep piling money into this historically priced market….Central banks can deny all they want that they are not responsible for asset price inflation, but everybody knows better. The denials are not only hollow they are straight out lies.

And having created the Pavlovian effect we now see in the investment community they are leading investors to abandon all sense of risk when risks are mounting ever more around us as valuations and earnings multiples keep expanding as a result of monetary policy. And hence it may be said that central bankers may be leading investors off the cliff.”

Well done. Did anyone listen? I can’t say, but most haven’t. And now they are all in major pain…(continues)

Click here to read the entire article at Northman Trader.

Alt-Market: How Long Will It Take for the US to Collapse

Brandon Smith at Alt-Market has written on what a collapse looks like and how long it usually takes.

There are a multitude of false assumptions out there on what the collapse of a nation or “empire” looks like. Modern day Americans have never experienced this type of event, only peripheral crises and crashes. Thanks to Hollywood, many in the public are under the delusion that a collapse is an overnight affair. They think that such a thing is impossible in their lifetimes, and if it did happen, it would happen as it does in the movies – They would simply wake up one morning and find the world on fire. Historically speaking, this is not how it works. The collapse of an empire is a process, not an event.

This is not to say that there are not moments of shock and awe; there certainly are. As we witnessed during the Great Depression, or in 2008, the system can only be propped up artificially for so long before the bubble pops. In past instances of central bank intervention, the window for manipulation is around ten years between events, give or take a couple of years. For the average person, a decade might seem like a long time. For the banking elites behind the degradation of our society and economy, a decade is a blink of an eye.

In the meantime, danger signals abound as those analysts aware of the situation try to warn the populace of the underlying decay of the system and where it will inevitably lead. Economists like Ludwig Von Mises foresaw the collapse of the German Mark and predicted the Great Depression; almost no one listened until it was too late. Multiple alternative economists predicted the credit crisis and derivatives crash of 2008; and almost no one listened until it was too late. People refused to listen because their normalcy bias took control of their ability to reason and accept the facts in front of them.

There are a number factors that cause mass blindness to economic and social reality. First and foremost, establishment elites deliberately create the illusion of prosperity by rigging economic data to the upside. In almost every case of economic crisis or geopolitical disaster, the public is conditioned to believe they are in the midst of a financial “boom” or era of “peace”. They are encouraged to ignore fundamental warning signs in favor of foolish faith in the system. Those people that try to break the apathy and expose the truth are called “chicken little” and “doom monger”.

In the minds of the cheerful lemmings a “collapse” is something very obvious; they think they would know it when they saw it. It’s like trying to teach a blind person about colors; it’s not impossible, but it’s very difficult to get all these Helen Kellers to understand that what they perceive is not the whole reality. There’s a vast world hidden from them and they have no concept of how to observe it.

Crash events are like stages in the process of collapse; they create moments of clarity for the blind. However, they are also often engineered to benefit the establishment. There’s a reason why the elites put so much energy into hiding the real data on the state of the economy, and it’s not because they are trying to keep the system from faltering by using sheer public ignorance. Rather, a crash event is a tool, a means to an end. As Congressman Charles Lindbergh Sr. warned after the panic of 1920:

“Under the Federal Reserve Act, panics are scientifically created; the present panic is the first scientifically created one, worked out as we figure a mathematical problem…”

Central bankers and their cohorts manipulate economic data and promote the false notion of a boom before almost every major crash because they WANT to ambush the populace. They WANT to create panic, and then use it to their advantage as they rebuild and mutate the system into something unrecognizable only decades ago. Each consecutive crash contributes to the collapse of the whole, until eventually the society we once had is barely a distant memory.

This process can take decades, and the US has been subject to it for quite some time now. Once again in 2019 we are seeing the lie of an “economic boom” being perpetuated in the mainstream. The public was growing too aware of the danger and had to be subdued. More specifically, conservatives were growing too aware. The sad thing is that the boom propaganda is most prominent today among conservatives, who are desperately trying to ignore the fundamentals in an attempt to defend the Trump Administration…

Click here to read the entire article at Alt-Market.com.

James Kunstler: Forecast 2020

In this somewhat lengthy article, author James Howard Kunstler makes some predictions for 2020 — political, economic and other. Kunstler’s main works have been on peak-oil and what that means to society and also urban and suburban development issues. It may or may not be of relevance, but Kunstler is a Democrat, though he has been described as “an angry, disaffected one.” That is mentioned here only because some read his acidic commentary on the impeachment charade and think that he is conservative, Republican, or pro-Trump — of which he is none.

…These diseases of mind and culture are synergized by an aroused political ethos that says the ends justify the means, so that bad faith and knowing dishonesty become the main tools of political endeavor. Hence, a venerable institution such as The New York Times can turn from its mission of strictly pursuing news and be enlisted as the public relations service for rogue government agencies seeking to overthrow a president under false pretenses. The overall effect is of a march into a new totalitarianism, garnished with epic mendacity and malevolence. Since when in the USA was it okay for political “radicals” to team up with government surveillance jocks to persecute their political enemies?

This naturally leads to the question: what drove the American thinking class insane? I maintain that it comes from the massive anxiety generated by the long emergency we’ve entered — the free-floating fear that we’ve run out the clock on our current way of life, that the systems we depend on for our high standard of living have entered the failure zone; specifically, the fears over our energy supply, dwindling natural resources, broken resource supply lines, runaway debt, population overshoot, the collapsing middle-class, the closing of horizons and prospects for young people, the stolen autonomy of people crushed by out-of-scale organizations (government, WalMart, ConAgra), the corrosion of relations between men and women (and of family life especially), the frequent mass murders in schools, churches, and public places, the destruction of ecosystems and species, the uncertainty about climate change, and the pervasive, entropic ugliness of the suburban human habitat that drives so much social dysfunction. You get it? There’s a lot to worry about, much of it quite existential. The more strenuously we fail to confront and engage with these problems, the crazier we get…

There’s an excellent chance that the Democratic Party will be in such disarray by summertime, that it may break apart into a radical-Wokester faction and a rump “moderate” faction. That would make the election somewhat like the 1860 contest on the eve of the first Civil War. The current crop of leading candidates — Biden, Sanders, Warren, Buttigieg — all look to me like horses that ain’t gonna finish. Michael Bloomberg could end up leader of the rump moderates, propelled by his inexhaustible bank account, but I doubt his appeal to the racial minorities and the new millennial voters Democrats depend on. I’m not sure he’s left with much else.

I’m convinced that Joe Biden is in still in the contest solely to avoid investigation. He’s already obviously not wholly sound of mind, and he’s not even in the White House yet…

the attempts at impeachment have a peevish Lilliputian flavor. Keeping it up —bringing a threatened second or third bill of impeachment with extra charges — will only reinforce Mr. Trump’s anti-fragility. Second to the economic issues is the question whether the firm of Barr & Durham will manage to pin some criminal responsibility on the people who undertook the RussiaGate coup against Mr. Trump — a ghastly mis-use of government power now celebrated by Democrats, who, you might recall, used to be against police states. A series of perp walks by the likes of Brennan, Comey, Clapper, and others could finally burst the bubble of credulity that the Mueller face-plant and the damning Horowitz report failed to achieve among the True Believers of Rachel Maddow…

Liberty Blitzkrieg: Monetary Looting

Michael Krieger of Liberty Blitzkrieg has written this article about the corrupt and predatory state of our financial system and Federal Reserve banking system – Monetary Looting.

The United States has historically bragged about its free and transparent markets. But what the Fed is doing today is pulling a dark curtain around the financing of this so-called free and transparent market. The public has no idea which Wall Street firms have received this $3 trillion or why they can’t borrow it elsewhere. This kind of obfuscation by the Federal Reserve could actually stimulate distrust in the U.S. banking system. The Fed admitted as much in its most recent Federal Open Market Committee (FOMC) minutes, writing that participation in the Fed’s loan program “could become stigmatized.”

– Wall Street on Parade: Is the Fed’s $3 Trillion in Loans to Trading Houses on Wall Street Legal?

The business model of Wall Street is fraud.
– Bernie Sanders

Financial services as currently structured is the most pernicious, predatory and corrupt industry on earth. Moreover, it’s the deliberately complex and opaque nature of the industry which then limits public debate when some problem arises and governments and central banks are called upon to take emergency measures to “save the system,” which is just a euphemism for enormous sums of corporate welfare being funneled to people and institutions who couldn’t survive otherwise.

It is systemic looting on a massive scale and the primary patrons of this ongoing and seemingly endless scheme are central banks. In the U.S. this means the Federal Reserve, which recently came back into the “market” with enormous new interventions in both the repo market and via renewed balance sheet expansion. I’ve read many of the smart takes on the repo crisis and still don’t feel confident I know precisely what’s going on. This is intentional.

One of the main reasons big finance is able to pull off scam after scam in plain sight relates to the complexity, opacity and esoteric jargon associated with the industry. Repo is a perfect example. The market had a spasm in September and the Fed immediately rushed in with billions to bring the rate down without offering any transparency or a credible explanation of what was going on. Meanwhile, as the crisis continued over subsequent months and the central bank response grew larger and larger, we actually seem to be learning less with each passing day.

Instead of providing the public with the transparency it deserves, Fed officials run around pretending to be financial surgeons called in to perform an unexpected emergency operation on a patient after a freak accident. In reality, central banks are merely pumping billions into an already dead body while enriching connected and powerful individuals and institutions in the process. They know exactly what they’re doing and we need to stop pretending otherwise.

While I’m grateful to those who’ve spent time trying to thoughtfully explain the mechanics of the repo crisis and why it happened, I think that’s a sideshow at this point since nobody who really knows what’s going on is talking. Instead, we should focus on the absurd and unconscionable lack of transparency with regard to Federal Reserve actions. As far as I know, we have no idea which parties are taking up this expanded central bank funding. Think about how criminally insane that is. We have no idea if it’s driven by a troubled institution like Deutsche Bank, hedge funds with over-leveraged trades, treasury issuance, a combination of these factors, or something else.

We don’t know because they don’t want us to know, and they don’t want us to know because they don’t want the public thinking or talking about it. It’s at times like these when the totalitarian nature of central banking comes into crystal clear focus. What we have is government via unelected, unaccountable bankers. It’s the opposite of self-government, and understanding this simple fact blows apart all the myths about our so-called democracy and freedom. Nothing of the sort exists in reality, and when push comes to shove, you’re just a peasant living in an imperial oligarchy…

Click here to read the entire article at Liberty Blitzkrieg.

Backdoor Survival: 3 Proven Profitable Activities in a Collapse, Venezuelan Edition

This article was written by Jose Martinez, an eyewitness to the collapse of Venezuela, for Backdoor Survival. It details three occupations that are allowing people to continue to survive in Venezuela – small scale farmer, plumber, and electrician.

The worst part of the economic collapse has already passed and people have slowly understood that they can´t keep working to receive useless and worthless currency.

The mafia has injected (illegally, I guess, as the most parts of what they do) hundreds of tons of dollars to increase the liquidity they destroyed themselves, with shadowy intentions.

Maybe not so shadowy after all, if we see the hundreds of kilos of all kinds of drugs that “someone” is smuggling all over the place.

How this amount of illegal product circulates in our roads and gets through the airports, is a mystery for me as a civilian. Unless, of course, those responsible to keep the country safe are busy in some other “activity”…

This is not intended to be a list compiling what you should study to be the most wanted employee in the next collapse. It’s just a simple, reliable and proven testimony of how some people, who could not or would not flee and leave our beloved and sunny country behind, are surviving and getting enough food on their table, medicines, clothing, and generally sneaking into the dark waters of this induced collapse á-lá Cuban…

1. Small Scale Farming and Food Production

This seems obvious? It is not. Small farms in Venezuela never were excessively productive, with some honorable exceptions I personally know of. It takes a lot of hard, back-breaking work. Being smaller, usually, owners don’t invest in tons of machinery, even if they could have afforded them at some time. They may have some grinding equipment, for cattle feed and such. Small tractors are found expensive for many owners. I know because they have talked to me about this and listened.

Cheap Chinese spare parts could make equipment fail in the worst possible moment and ruin the entire crop, so they prefer renting or trading in some way when they need plowing or some kind of tractor work. They hire laborers to crop, or rent the needed machinery, once again…

Click here to read the entire article at Backdoor Survival.

Alt-Market: The Economic Crash So Far

Brandon Smith at Alt-Market has penned this article on the current state of the US economy in November 2019.

The Economic Crash So Far: A Look At The Real Numbers

There are many problems when attempting to track a faltering economy. For one, the people in government generally do not want the public to know when the system is in decline because this looks bad for them. They prefer to rig statistical indicators as much as possible and hope that no one notices. When the crash occurs, they then claim that “no one saw it coming” and the disaster “came out of nowhere”, so how could they be to blame?

I have even heard it argued that political leaders, including the president, have a “duty” to lie about the state of the economy because once they admit to the decline they will cause a panic and perpetuate the crisis. This is stupidity. If an economic system is in disrepair and is built on a faulty foundation, then the problems should be identified and fixed immediately. The weak businesses should be culled, not bailed out. The wasteful government spending should be cut, not increased. The downturn should not be hidden and prolonged for years or decades. In most cases, this only makes the inevitable crash far worse and more damaging.

Another factor, which some people might call “conspiracy theory” – but it has been proven time and time again in history – is that the money elites have a tendency to engineer economic disasters while deliberately hiding the real statistics from the public. Why? Well, if the real data was widely disseminated, then a crash would not be much of a surprise and the populace could be prepared for it. I suspect the elites hide the data because they WANT the crash to be a surprise. The bigger the shock, the bigger the psychological effect on the masses. This fear and confusion allows them to make changes in the power structure of a nation or of the entire world that they would not be able to accomplish otherwise.

The most rigged statistics tend to be the least important overall in analysis, but this does not stop the mainstream media and investors from hyper focusing on them. How many times have you told friends and family about the collapse in manufacturing or the explosion in consumer and corporate debt, only to hear them say, “But the stock market is at all-time highs!” Yes, even though stock markets are a meaningless trailing indicator, even though GDP stats are a complete fallacy, and even though jobless numbers do not include tens of millions of people out of work, these are the stats that the average person takes mental note of when consuming their standard 15 minutes of news per day.

While the issue of rigged statistics makes analysis of a crash difficult, a willfully ignorant citizenry makes reporting on the real data almost impossible. It’s sad to say, but a large number of people do not want to hear about negative information. They want to believe that all is well, and will delude themselves with fantasies of blind optimism and endless summers. Like the tale of “The Ant And The Grasshopper”, they are grasshoppers and they see anyone who focuses on the negative as “chicken littles” and “doom mongers”. In their minds they have all the time in the world, until they freeze and starve when winter comes.

When I encounter people who actually believe the manipulated numbers or buy into the stock market farce or simply don’t want to accept that a crash could happen in their lifetime, I always ask them to consider these questions: If the global economy is not on the verge of collapse, then why did central banks keep propping it up for the past ten years? And if central banks have been propping up the system, how much longer do you think they can do this? How much longer do you think they want to do it? What if one day they decide to let the entire house of cards tumble? What if such an event actually benefits them?

We’ve seen that a broken economy can be technically held together for a decade, but under the surface, the structure continues to rot. The bottom line is that even if the elites wanted to keep the system going for another ten years, and even if politicians continued to help them by pumping out false statistics, there is no way to hide the effects of crumbling fundamentals. We saw this during the crash of 2008, and now we’re seeing it again…

All of these factors and more show an economy in recession or depression (depending on what historic standards you use). In the darker corners of the investment world, the great hope is that the central banks will return to pumping trillions into the banking sector ($16 trillion during the TARP bailout dwarfs the $250 billion the Fed has recently pumped out in their repo markets). They hope that this will free up even more credit. Meaning, they believe only more debt will save the system from suffering.

I say, time is up on the debt party. More stimulus will not stall the crash that is already happening, and the Fed does not appear poised to print anywhere near what it did during the credit crisis, at least not in time to change the trend. The can has been kicked for the last time. The grasshopper mentality will not save people from the clear reality. Only preparation and planning will.

Click here to read the entire article at Alt-Market.

AIER: Paul Krugman Is Wrong on Gov Debt

The American Institute for Economic Research has up an article on why economist Paul Krugman is wrong when he says that government “debt is money we owe to ourselves” and therefore not anything to worry about.

Krugman’s Zombie Idea: We Owe It to Ourselves

Paul Krugman coined the term “zombie ideas” to describe “policy ideas that keep getting killed by evidence, but nonetheless shamble relentless forward, essentially because they suit a political agenda.”

Krugman has revived one of his favorite zombies: the notion that high government deficits aren’t dangerous in the way that an individual incurring heavy debt is because the national debt is “money we owe to ourselves.” He doubled down on his claims in response to an article comparing the dangers the debt poses to future generations to climate change.

Krugman has repeatedly written on this topic at his blog (see here and here). It was a common refrain of his during the Eurozone crisis and in the aftermath of the Great Recession when there was a bipartisan push to cut future deficits to prevent future Greek-style debt crises.

As with most myths, there is a grain of truth to the claim. National debt does differ from the debt individuals and households incur in a few notable ways. Individuals have a finite lifetime to incur and repay their debts. Governments don’t; they can pass debt onto future generations. So long as people are willing to lend it money and the government can service debt as it comes due, government debt can persist in perpetuity. And to the extent that the debt is owned by domestic citizens, the money that is used to repay the debt needn’t leave the economy.

That said, this grain of truth doesn’t eliminate the ocean of evidence against Krugman’s claim that worrying about the burden the national debt might impose on future generations is nonsensical. Here are some reasons why this argument is fundamentally flawed.

A large share of the national debt is owed to foreigners

For starters, it’s not the case that the national debt is entirely owed to “ourselves” (i.e., that it is exclusively owned by US citizens). Nearly one-third of the US debt ($6.636 trillion of the $22 trillion in debt) is owned by foreign governments and international investors.

This isn’t necessarily a bad thing. The willingness of foreigners to lend to the U.S. government has helped keep Treasury rates at historical lows, making it cheaper for future taxpayers to repay the interest on the national debt. If the US government is running deficits to finance justifiable initiatives (say, fighting World War II) and spending programs that will boost future growth, we should welcome funds from investors regardless of their nationality.

Nevertheless, it undercuts Krugman’s case that repaying the debt won’t burden future taxpayers and the future economy on net because the money will “stay in the U.S. economy.”

The fallacy of “we” and the reality that future taxpayers really do “foot the bill”

A bigger problem is that Krugman commits what Don Boudreaux calls the “Fallacy of Us, We, and Our.” Even if the entire national debt is owned by US citizens, there is no real sense in which “we” owe the debt to “ourselves.” The individuals incurring and benefitting from the debt are entirely different from the individuals who must bear the burden of repaying that debt.

Once we move past the intellectual sleight of hand of using collective pronouns like “we” and “ourselves” to describe all Americans across time, we get a much clearer picture of who gains and loses from the national debt.

Current taxpayers and citizens clearly benefit; they receive the benefit of increased government spending without incurring the full cost of those expenditures. Future taxpayers and citizens, who will have to repay the debt as it comes due, are clearly hurt. They have to pay higher taxes to repay the debt incurred and owned by the prior generation.

This insight remains true even if the older generation sells them its bonds before they pass. As James Buchanan astutely noted decades ago, future generations first have to buy these bonds from the prior generations. And, in order to buy them, they must first reduce their consumption. It is that reduced consumption — not the higher taxes they’ll have to pay when the debt is retired (since, by assumption, that money will flow right back to them as bondholders) — that is the true cost imposed on future generations from government debt.

Government debt “crowd outs” private investment and creates deadweight loss

The “we owe it to ourselves” argument also glosses over two of the most important arguments for why deficit spending is not a free lunch for taxpayers or the future economy.

First, deficit spending crowds out private investment…

Click here to continue reading at AIER.org.

Mises: Mercantilism, Merchants, and “Class Conflict”

Conceived in Liberty is a book authored by economist Murray Rothbard, detailing the revolutionary USA’s founding struggle between liberty and power. The excerpt below is from the book, briefly discussing mercantilism and class conflict. It seems relevant in this day as Democrats and Republics alike squabble over the spoils of a strong government intervening in economic affairs. Conceived in Liberty is available as a free pdf download from Mises or as a hardback book.

Mercantilism, Merchants, and “Class Conflict”

[This article is excerpted from Conceived in Liberty (1975), volume 1, chapter 32: “Mercantilism, Merchants, and ‘Class Conflict.'”]

The economic policy dominant in the Europe of the 17th and 18th centuries, and christened “mercantilism” by later writers, at bottom assumed that detailed intervention in economic affairs was a proper function of government. Government was to control, regulate, subsidize, and penalize commerce and production. What the content of these regulations should be depended on what groups managed to control the state apparatus. Such control is particularly rewarding when much is at stake, and a great deal is at stake when government is “strong” and interventionist. In contrast, when government powers are minimal, the question of who runs the state becomes relatively trivial. But when government is strong and the power struggle keen, groups in control of the state can and do constantly shift, coalesce, or fall out over the spoils. While the ouster of one tyrannical ruling group might mean the virtual end of tyranny, it often means simply its replacement by another ruling group employing other forms of despotism.

In the 17th century the regulating groups were, broadly, feudal landlords and privileged merchants, with a royal bureaucracy pursuing as a superfeudal overlord the interest of the Crown. An established church meant royal appointment and control of the churches as well. The peasantry and the urban laborers and artisans were never able to control the state apparatus, and were therefore at the bottom of the state-organized pyramid and exploited by the ruling groups. Other religious groups were, of course, separated from or opposed to the ruling state. And religious groups in control of the state, or sharing in that control, might well pursue not only strictly economic “interest” but also ideological or spiritual ones, as in the case of the Puritans’ imposing a compulsory code of behavior on all of society.

One of the most misleading practices of historians has been to lump together “merchants” (or “capitalists”) as if they constituted a homogeneous class having a homogeneous relation to state power. The merchants either were suffered to control or did not control the government at a particular time. In fact, there is no such common interest of merchants as a class. The state is in a position to grant special privileges, monopolies, and subsidies. It can only do so to particular merchants or groups of merchants, and therefore only at the expense of other merchants who are discriminated against. If X receives a special privilege, Y suffers from being excluded. And also suffering are those who would have been merchants were it not for the state’s network of privilege.

In fact, because of (a) the harmony of interests of different groups on the free market (for example, merchants and farmers) and (b) the lack of homogeneity among the interests of members of any one social class, it is fallacious to employ such terms as “class interests” or “class conflict” in discussing the market economy. It is only in relation to state action that the interests of different men become welded into “classes,” for state action must always privilege one or more groups and discriminate against others. The homogeneity emerges from the intervention of the government in society. Thus, under feudalism or other forms of “land monopoly” and arbitrary land allocation by the government, the feudal landlords, privileged by the state, become a “class’ (or “caste” or “estate”). And the peasants, homogeneously exploited by state privilege, also become a class. For the former thus constitute a “ruling class” and the latter the “ruled.”1 Even in the case of land privilege, of course, the extent of privilege will vary from one landed group to another. But merchants were not privileged as a class and therefore it is particularly misleading to apply a class analysis to them.

A particularly misleading form of class theory has often been adopted by American historians: inherent conflicts between the interests of homogeneous classes of “merchants” as against “farmers,” and of “merchant-creditors” versus “farmer-debtors.” And yet it should be evident that these disjunctions are extremely shaky. Anyone can go into debt and there is no reason to assume that farmers will be debtors more than merchants. Indeed, merchants with a generally larger scale of operations and a more rapid turnover are often heavy debtors. Moreover, the same merchant can shift rapidly from one point of time to another, from being a heavy net debtor to net creditor, and vice versa. It is impermissible to think in terms of fixed persisting debtor classes and creditor classes tied inextricably to certain economic occupations.

The merchants, or capitalists, being the peculiarly mobile and dynamic groups in society that can either flourish on the free market or try to obtain state privileges, are, then, particularly ill-suited to a homogeneous class analysis. Furthermore, on the free market no one is fixed in his occupation, and this particularly applies to entrepreneurs or merchants whose ranks can be increased or decreased very rapidly. These men are the very opposite of the sort of fixed status imposed on land by the system of feudalism.

Forward Observer: Economic Warning – June 2019

Sam Culper at Forward Observer has a short article up discussing recent economic projections for a recession to begin in 2020 or even this year.

What follows is the Economic Warning portion of this week’s Watch Report.

In this month’s FOMC meeting, Federal Reserve chairman Jerome Powell acknowledged that there was soft economic data emerging — a potential warning sign of recession. Many investors expect a cut to interest rates next month to stave off a recession. Some economists expect two rate cuts this year, regardless of when they happen. One asset manager said he expected four rate cuts this year.

Recession and Trump’s reelection chances

This month, Jeffrey Gundlach, Morgan Stanley, and JPMorgan Chase all revised their expectations of recession forward to 2020. JPMorgan’s Bruce Kasman said it might even start this year. That’s a big shift from what these firms were saying last month, so I agree that we can expect the Fed to cut interest rates in order to stave off a recession. Gundlach, who has no faith in the Fed’s predictive capability, believes that by the time the Fed has to cut rates, it will already be too late.

This, of course, will have major implications for President Trump’s reelection chances. High profile managers like Scott Minerd and Kyle Bass both believe that the recession will be average or mild, respectively. Others, like Gundlach, have warned that this recession is going to present more difficult challenges.

If this recession poses the risks that Gundlach describes (below) then Trump’s chances of reelection will be seriously threatened. If that’s the case, then it’s time to batten down the hatches for higher taxes and wealth redistribution based on what we saw during this week’s Democratic debates and what’s been proposed in the lead up.

The problem with cutting interest rates this year to stave off a recession next year is that the Fed will have less to cut once a recession does hit, which increases the likelihood that the recession is more painful than “mild.”…

Click here to read the entire summary at Forward Observer.

Burning Platform: 2019 From a Fourth Turning Perspective

William Strauss and Neil Howe (both historians, among other things) wrote a book in 1997 called The Fourth Turning: An American Prophecy — What the Cycles of History Tell Us About America’s Next Rendezvous with Destiny — which introduced what is now called Strauss-Howe Generational Theory. According to that theory, there is a four stage cycles of eras, called turnings, which repeat in cycles of approximately 80-100 years, the fourth of which is the Crisis turning, an era of destruction and revolution. The theory has its critics as well as proponents, so, as with everything, use your think-thingy. The following is an excerpt from a lengthy article on The Burning Platform titled 2019 From a Fourth Turning Perspective, which gives some overview of the theory and applies it to world and US events.

“An impasse over the federal budget reaches a stalemate. The president and Congress both refuse to back down, triggering a near-total government shutdown. The president declares emergency powers. Congress rescinds his authority. Dollar and bond prices plummet. The president threatens to stop Social Security checks. Congress refuses to raise the debt ceiling. Default looms. Wall Street panics.” – The Fourth Turning – Strauss & Howe

Image result for budget impasse trump schumer

Strauss and Howe wrote their book in 1996. They were not trying to be prophets of doom, but observers of history able to connect events through human life cycles of 80 or so years. Using critical thinking skills and identifying the most likely triggers for crisis: debt, civic decay, and global disorder, they were able to anticipate scenarios which could drive the next crisis, which they warned would arrive in the mid-2000 decade. The scenario described above is fairly close to the current situation, driven by the showdown between Trump and the Democrats regarding the border wall.

It has not reached the stage where all hell breaks loose, but if it extends until the end of January and food stamp money is not distributed to 40 million people (mostly in urban ghettos) all bets are off. The likelihood of this scenario is small, but there are numerous potential triggers which could still make 2019 go down in history as a year to remember.

As we enter the eleventh year of this Fourth Turning, the fourth Crisis period in U.S. history, the mood of U.S. citizens and citizens around the globe continues to darken. Fourth Turnings are driven by generational configuration and the emotional reaction to events by the Prophet generation leaders, Nomad generation spearheads, and Hero generation cannon fodder.

As we close out this year, stock markets are gyrating wildly, central bankers are trying to reverse their nine years of interventionist strategies to sustain the establishment, civil chaos spreads across the European continent, saber rattling between the U.S., Russia and China increases, the animosity between political parties reaches new heights, the Deep State relentlessly pursues their Mueller led coup against Trump, mega-social media corporations tighten their grip on free speech by silencing conservatives, leftists push their socialist, open borders, normalizing degeneracy agenda, and global recession gains momentum as trade declines and global debt reaches unserviceable levels…

Click here to read the entire article at The Burning Platform.

Patriotman on American Partisan has his own take on the article, The Fourth Turning & The Future, As I See It:

…I think that the article was very closely aligned with my fears. The biggest threats we face as a country are all intertwined (thus, don’t consider this a ranked list) and are: civil unrest due to a growing divide between ideologies, economic slowdowns due to massive debt and employment trends, and outside challenge of the unipolar world by China and Russia.

I don’t think that any of these are the causation for the others, but if I was forced to choose it would be the differing of ideologies that is driving the other two. The urban and rural divide has always been present obviously, but the obvious disconnect between the coastal elites in their ivory towers and those in the hinterlands seems unsolvable at the moment. The problem mostly lies with the former as the latter would like nothing more than for everyone to be left alone by everyone else. It is the liberal elites who insist on forcing their culture, norms, and ideology on those conservatives in rural America and continually try to remake the system in their permanent favor. They attack our religion, our culture, and our lifestyle because they do not approve of it…