WHAT BIG CON? There are so many in the worlds of central banking, economics, government, and money that we list only a few.
- We Need A Central Bank: Mainstream Media (MSM), politicians, and bankers promote this lie. It’s not true.
- Debt can increase forever without material consequences. This is a dangerous con. Debt matters and will cause major pain in the next five years. Don’t believe the MSM regarding harmless debt.
- Deficits don’t matter. Deficits matter little to politicians. If deficits were important, congress would not raise the “debt ceiling” every year or two. Deficits and massive debt transfer wealth to the political and financial elite.
- A sovereign government that issues bonds in its own currency (such as the U.S.) can’t go broke. Well, maybe. Yes, they can pay off maturing debt by issuing new debt. If nobody wants to buy the new sovereign debt notes, the central bank can “print” currency units to purchase the debt. The government is not technically broke, but monetization leads to massive debts and hyperinflation. Think Zimbabwe, Argentina, and Venezuela. Who wants to be a Zimbabwe multi-billionaire when their central bank prints 100 trillion Zim dollar notes and pretends they are valuable?
- “We can grow our way out of debt.” Mainstream media (MSM) and pandering politicians have abandoned that lie because people realize $22 trillion in debt will not be extinguished. That story was a con job to support more debt, larger government, and more military expenditures.
- Debt ceiling, deficit limit, balanced budget, etc. More cons. Who takes any spending or debt limits seriously?
- “The dollar is as good as gold.” That story might have been true in the 1950s when gold sold for $35 per ounce. Now it’s laughable and untrue.
- Inflation in the U.S. is low. The official story is wearing thin for anyone who buys food, pays for health insurance, medical care, buys an auto, pays college tuition etc. Yes, TV’s are less expensive, but low inflation is a statistical con job that supports confidence in the dollar and the Federal Reserve.
- Stock buybacks are good. GE executives borrowed too much and bought back $billions in their stock, which peaked at $30.51 in July 2016. Today the company is scrambling to reduce debt. GE closed at $8.79 on August 16. Will GE survive?
- Jeffery Epstein… oh why bother? The fix is in. Important questions are: How much will this fiasco diminish confidence in the FBI and government agencies? Will people assume stories from MSM and the government are lies?
- One could add under-funded public and private pension plans, QE programs, MMT (Modern Monetary Theory or Magic Money Tree economics), negative interest rates, Guaranteed Basic Income, free tuition, Medicare for all, “you can keep your doctor,” and more.
- Insert 100 of your favorite con jobs that MSM, government agencies, Wall Street and politicians are selling.
SO WHAT? Consequences are Inevitable!
- People “talk their book” and sell stories that benefit them. Occasionally we hear the truth. It should be no surprise that bankers, politicians, central bankers and the military are playing fast and loose with facts.
- There are consequences. Markets react to manipulation, inexpensive debt and distorted information, first in one direction, and then in the opposite direction. Bubbles grow and crash. Examples shown below include crude oil, the 2000 NASDAQ bubble, Deutsche Bank, General Electric, Baltic Dry Index, and the Austria 100-year bond.
WHAT IF THE ECONOMIC AND MONETARY NONSENSE IS PLANNED? IS IT MORE THAN GRAFT, CORRUPTION, STUPIDITY, AND GREED?
From John Mauldin: “Larry Kotlikoff and The Big Con”
“Larry will share some provocative ideas on what caused the Great Recession. As you’ll read, he demolishes the explanations Wall Street and Pennsylvania Avenue want us to believe. Instead he argues that our financial system was built to fail, failed spectacularly, and was then rebuilt to die another day.”
Repeat: “built to fail.”
- The current economic system depends upon leverage, ever-increasing credit and debt, digital and paper currency units, no tangible backing from gold, political payoffs, and greed, lots of greed.
- Wall Street runs the big con, pays off politicians, enjoys huge profits and occasionally demands bailouts.
- Sometimes the economic system hits “peak debt” or builds excessive leverage or an exogenous event slams the economy and it collapses. Governments and central banks leap into action to protect banks, people (bottom 90%) lose jobs and homes, wealth is transferred to the elite, and the game continues. It happened in the Great Depression and after the 2008 crash. It can happen again.
- The rich get richer and the poor… well, the elite don’t care.
- The banking and political systems distract the masses and transfer wealth to the elite. Privatize profits and subsidize losses.
- Perhaps they designed and built the system to fail. The failure cripples the economy, while central bankers and governments preserve power and increase their controls. Wealth and assets are transferred to the elite, and government agencies exercise more influence over people and the economy.
WHAT COMES NEXT? We don’t know, but:
- More debt and larger deficits are nearly guaranteed.
- Negative interest rates and more QE are likely, even though they are nutty ideas.
- MMT, “helicopter money” and Guaranteed Basic Income given to citizens are possible. “Free Stuff” rides again.
- Debt defaults, bankruptcies, falling stock and bond markets.
- Increasing unemployment, distrust and social unrest.
- Market corrections/crashes will occur. Crazy asset valuations will fall if honest price discovery triumphs over central bank distortions. (Maybe, hopefully.)
- Rising gold and silver prices, along with many commodities.
WHEN? IS A MASSIVE CORRECTION INEVITABLE AND/OR IMMANENT?
Jim Sinclair: “The party is over in mid-2019.” [Looks correct!]
Christenson: “The fireworks will start in May-June 2019.” [Many markets peaked and fell in May. Silver and gold bottomed.]
MORE GUESSES: The dam bursts in September—October. Markets then correct higher, but stock markets fall hard in December – January.
Inevitable: Certainly not, but unpayable debt, insane bond prices, trade wars, negative interest rates, a recession, market crashes, currency wars, flawed thinking, and dangerous 2020 political promises will create disastrous consequences for many people outside the elite class.
- Debt, deficits, leverage, “out-of-control” spending, bond monetization, excessive credit growth, stock buybacks, and lies will hurt the economy and many individuals.
- Market bubbles, such as the current “everything bubble,” always correct, sometimes violently. The stock market correction/crash may have begun, or perhaps the powers-that-be can delay it until after the 2020 election.
- Credible arguments by Larry Kotlikoff suggest that economic and banking systems encourage recessions, corrections, and crashes. Wall Street and governments thrive, while others pay the price. Another recession and/or crash is coming.
- When central bank interventions establish prices instead of functioning markets, some assets are over-priced while others are underpriced.
Gold and silver are priced too low in 2019. Expect much higher prices.
Miles Franklin will exchange recycled dollars rescued from over-priced digital assets for real money—gold and silver coins and bullion. The last few months have shown that we should expect much higher metals prices in the next five years.
The Deviant Investor