It’s easy to be negative about the U.S. economy these days. Find a glint of silver, and folks come running to point out all of the dark clouds looming about. This, of course, is what we got last week when the monthly jobs report was released from the U.S. Department of Labor (DOL). Folks pooh-poohed the number of jobs and whining that they’re not enough or that it’s less than a bunch of economists thought that it might be. But you know what? Stuff ’em.
Given how poorly states like California and Illinois have funded the pension funds for their own employees, one would think that this would stop dead in its tracks any plan to have the government assist in managing private sector funds too. The spate of recent activity, however, suggests otherwise.
The financial world is plodding along like a drunken sailor avoiding debt collectors by keeping no cash in his wallet. It’s not the kind of calm that’s going to last or end well. But the storm will have to wait until after the Olympics.What a game! We’ve never watched ice hockey closely before. But watching […]
“When they come for my gun, they will have to pry it out of my cold, dead hands,” is a common refrain I often hear from the Neo-Cons when there is a threat, credible or otherwise, that the U.S. government is going to take their firearms.And, when I hear this crazy talk, I agree with […]
Last year was quite the year for Bitcoin. We’ve seen exponential growth in Bitcoin’s exchange rate and extensive coverage in the media. Another phenomenon we have witnessed is the proliferation of alternative cryptocurrencies, five of which we’ve provided below.What all of these cryptocurrencies have in common is that they rely on a decentralized network to […]
The nonpartisan Congressional Budget Office is acting in a bipartisan way to cover up the biggest single threat to the bipartisan political alliance that is stripping America of its wealth: the United States Congress.There is no question that the following policy is bipartisan. Democrats and Republicans in Congress are completely agreed that the following information […]
Amidst all the revelations about how the American people, many of whom are absolutely convinced they live in a free society, have their telephone calls, emails, website visits, and who knows what else under surveillance by their own government, let’s not forget the massive infringements on financial privacy that have gone on for decades.Consider, for […]
Image: ShutterstockBitInstant CEO Charlie Shrem, along with alleged co-conspirator Robert Faiella, was arrested by federal authorities last week for allegedly laundering more than $1 million worth of Bitcoins. This is a tiny amount compared to the largest drug-and-terrorism money laundering case ever. Yet when British bank HSBC was found guilty in 2012 of laundering billions, […]
The exercise had an awesome name, inspired by the movies: “Quantum Dawn 2.”On July 18, scads of U.S. banks, stock exchanges and government agencies took part in a digital fire drill — a practice run in the event all of Wall Street came under massive cyberattack.This isn’t the first time banks have come under an […]
The faces of the Detroit bankruptcy are the thousands of pensioners whose promised benefits are suddenly part of the restructure negotiation. When Motown filed for Chapter 9 last July, the city had $11.5 billion in unsecured liabilities. The vast majority of this was pension and health care benefits owed to retired city employees.The images of […]
So you’ve maneuvered the Obamacare website, plugged in your top-secret information and found out how much you are forced to pay to avoid a fine.And for some of you, it turns out you qualify for a government subsidy — making the premium sound like a bargain. But signing on that line to accept the government’s […]
The Largest Company in History:“The United States Corporation of Government (USCOG)”I follow global social and commercial networks, looking for entrepreneurial opportunities.Innovation surges when industry and government models change. Buggy whips. Landline phones. Railroads. The Soviet Union. Apartheid South Africa. All marked social and commercial innovation, both bad and good.We are witnessing a new form of […]
We’d like to give the banks in Australia some credit. They’ve finally gone and done it. They have caught up with 1960s technology. They’ve figured out how to use PIN numbers.How to only use PIN numbers, that is. They’re considering scrapping signatures on credit cards to cut down on fraud. Apparently, having to verify your […]
We put in a good-citizen call to the SEC the other day.“There’s a massive scheme to manipulate stock prices,” we told the friendly agent.“I have to tell you that your call is being monitored so that we can better serve the public,” he replied.“Oh, don’t worry about that. The NSA is tapping our call anyway.”“Are […]
Bitcoins are largely considered digital currency (or “crypto currency”) so you’d expect it to be treated like currency on a retail web site. But the Internal Revenue Service might not think so.
Politicians — elected officials — are street smart rather than book smart.If you care about influencing government policy it helps to know how they think.Forbes contributor Nathan Lewis argues that:“Too much is done today on the oral tradition. That is, literally, what it is. In this post-Gutenberg age, we have some better alternatives.“Thus, we need […]
Bitcoin has been making headlines for months now. Extreme price fluctuations have sparked a vigorous debate: Is it a currency or a scam? Is Bitcoin viable in the long-term, or are we witnessing a bubble waiting to burst?The answers to these questions are simple: Yes, Bitcoin is a currency, but we cannot know if it […]
The Silk Road was an undercover website where you could buy or sell illegal goods — drugs mainly. I believe passports were changing hands for about $6,000, and I understand weapons were also sold, but that was ceased in response to the spate of shootings in the U.S. over the summer. The essence of the […]
The market has selected different things as money throughout history. Some of these items have served as money in isolated places for specific periods of time — for instance, cigarettes in prisoner-of-war camps. Cigarettes continue to be a currency in prisons if allowed, but if not, according to Wikipedia, “postage stamps have become a more […]
[Ed. Note: This article originally published on Jan. 24, 2013]Stocks up. Gold down. Bitcoin… waaay up.The S&P 500 busted through the 1,500 mark this morning. Stocks haven’t been this expensive since 2007… right before they got a whole lot cheaper… for a whole lot longer. Gold, meanwhile, dipped a tad. This, despite central bankers of […]
Now, this is sheer entertainment. The Chicago branch of the Federal Reserve has addressed the great monetary question of our day. A researcher has taken a detailed look at the prospects for market-based crypto-currency, with a special focus on Bitcoin. It concludes that Bitcoin is not a viable replacement for the dollar. The report includes […]
The standard version of how money came to be goes like this: First, there was barter. (A handful of nails for a pint of ale!) Then, along came various forms of money. An evolutionary derby eventually crowned gold and silver as the supreme money. And finally, credit (or debt) was born. This is the apex […]
2013 represents another turning point in the demise of the American Empire. If you view it in economic (rather than ethical or moral) terms, the high water mark of Empire was probably in the late 1990s.But the Internet bubble and bust marked an important turning point. It coincided with the birth of the euro, a […]
It was a wild ride last week in the world of the Deep Web, that section of the Internet that requires special tools to access. The feds took down the site called Silk Road and claim to have arrested its founder and administrator. The news streams were filled with lurid tales of derring-do in this […]
My community in the Deep South prides itself on friendship, community feeling, and an overall happy spirit. So it was a bit strange for all of this to be utterly smashed and obliterated in the course of a few calamitous weeks in which friend turned against friend, colleagues became antagonists and enemies, and families were […]
A new assessment of state pension obligations suggests the problem is even worse than it already appears.How much worse?EMPTY COOKIE JAR: Pension liabilities are worse than many states’ official figures indicate.Using a more conservative method of accounting for financial gains in the marketplace, there is a $4.1 trillion gap between assets and liabilities — known […]
I dreamed I saw Bernard von NotHaus, alive as you or me.Said I, “But Bernard, you’ve been jailed two years.”“I never was,” said he.Bernard has been the called the Rosa Parks of the alternative money movement. More than 10 years ago, he had this idea that he would make his own money — not the […]
During the last debate, Mitt Romney emphatically stated he would blast China for manipulating its currency the first day he takes office. Talk about priorities. Of all the nation’s pressing issues, the minute the oath is over, he’ll be calling out China for manipulating the yuan.
A remark like that should cause exasperation for anyone in the know. As Mary Anastasia O’Grady writes in The Wall Street Journal, “To be consistent, Mr. Romney should call out the Federal Reserve on day two for engaging in its own currency manipulation by way of ‘quantitative easing,’ which undermines the value of the dollar relative to Latin American currencies.”
About a month ago, Brazilian Finance Minister Guido Mantega called out Ben Bernanke for manipulation, blasting the Fed’s QE3 (or QE Infinity) policy for setting off currency wars.
Again this year we’ve had the Fed, the ECB, and the Bank of Japan all announcing easing within days of each other. And the effects are inflation in China, food riots in Egypt, stock bubbles and consumer price inflation in Brazil, and higher unemployment in developing countries.
International Monetary Fund Managing Director Christine Lagarde took the central banks to task in a speech delivered at the IMF’s October meeting, warning that easy money from developed country central banks creates asset price bubbles in developing countries.
Romney’s hectoring of China is not so harmless. Combine the Romney rhetoric with the Federal Reserve’s stated policy to keep interest rates at virtually zero until… forever, these are the sounds of Currency War III (CWIII) in its initial stages.
The big picture is that governments inevitably reduce the value of their currencies to the value of their physical content. But in the meantime, politicians are looking for votes, and governments look for advantage over competing governments. It is not just rockets and bombs that are fired; war is raged on the economic front, with currency manipulation as the primary weapon.
While American politicians talk about peace, America’s military-industrial complex wages war all over the world. At the same time, we constantly hear noise about a strong dollar, while America has been a leading advocate of currency debasement for the past 200 years: through the Revolution, the Civil War, the Great Depression, the inflation of the Carter years and now Bernanke’s QE Forever.
James Rickards in his book Currency Wars warns of a complete collapse of the dollar. He says that Fed chair Ben Bernanke “is engaged in the greatest gamble in the history of finance.” He says the dollar crash is overdue and that it’s not a matter of guesswork — the preconditions are already in place.
Bernanke’s attempt to print America’s way out of its economic jam is, in essence, the declaration of a currency war on the entire world. And the major central banks are retaliating. Rickards writes, “The new currency war is the most meaningful struggle in the world today — the one struggle that determines the outcome of all others.”
The author explains that while currency wars are fought on the world stage, they begin with a domestic economy lacking in growth, high unemployment, a weak banking sector, and worsening public finances. With economic growth stymied, time and time again, countries look to depreciate their currencies to promote export growth and investment. Sound familiar?
There was once a classical gold standard in the world, and it was self-equilibrating, operated like a club, with members strictly adhering to the unwritten but well-understood rules. Free-market forces prevailed; government interventions were minimal; exchange rates were stable. It worked because there was no U.S. central bank to mess up monetary matters.
This monetary tranquility was jarred with the creation of the Federal Reserve in 1913. The Federal Reserve Act was just a part of the wave of legislation brought about by the Progressive movement. Big business was tired of competing and continually innovating to stay ahead of falling prices. Business would much rather use the power of government to establish and maintain cartels in an effort to ensure high profits. The plan was to transform the economy from more or less laissez-faire to centralized and coordinated statism.
What Rickards calls Currency War I began with the German hyperinflation in 1921 and ended with France breaking with gold in 1936 at the same time England was devaluing the pound sterling. In between were continual monetary fireworks.
Moviegoers who’ve seen Midnight in Paris probably wonder how or why an amazing collection of literary and creative U.S. expatriates ended up in Paris in the mid-1920s. The answer is that the French franc collapsed in 1923, allowing Ernest Hemingway, Scott and Zelda Fitzgerald, and Gertrude Stein to afford comfortable lifestyles in Paris by converting their dollars from home.
By this time, the classic gold standard was long gone, replaced by a deeply flawed gold-exchange standard that allowed central banks to inflate, causing the boom of the 1920s, which therefore brought about the required correction of the 1930s, exacerbated by government policy.
FDR started his term in office by closing banks and then confiscating the people’s gold. The language of FDR’s order is chilling, giving citizens until May 1, 1933, to deliver to the Federal Reserve System “all gold coin, gold bullion, and gold certificates now owned by them” with the threat of a $10,000 fine or 10 years in prison.
Citizens received $20.67 per ounce from the government, only to watch their new president move the price up to $35 an ounce over three months — a 70% devaluation.
Rickards places Currency War II from 1967 to 1987. In between CWI and CWII was the Bretton Woods era (a phony gold standard scheme) that both Henry Hazlitt and Jacques Rueff predicted would collapse, setting the stage for CWII.
CWII began with a number of crises in the British sterling and then a flight from the dollar into gold, with French president Charles de Gaulle calling for a return to the gold standard. The French president “helpfully offered to send the French navy to the United States to ferry the gold back to France.”
This all led up to Richard Nixon preempting Bonanza on Aug. 15, 1971, telling the nation he was closing the gold window, because of evil international speculators. Of course, it was money printing and budget deficits that were to blame. Nixon also instituted a 10% surtax on all imports, effectively devaluing the dollar in the trade arena.
The devaluation was to spur employment, but within two years, the United States was mired in recession. The United States suffered three recessions from 1973 to 1981, while purchasing power dropped by half from 1977 to 1981. Suddenly, “stagflation” was on the tip of everyone’s tongue.
Paul Volcker took over as Fed chairman and quickly hiked interest rates, looking to stop the price inflation. The price of gold collapsed along with the inflation rate, and the dollar strengthened.
But dollar strength finally got in the way of export jobs and the Plaza Accord of September 1985 was an attempt to drive down the greenback’s value primarily against the yen and the mark. And it worked, from 1985 to 1988: The dollar fell 40% against the French franc, was cut in half against the yen, and fell 20% against the mark.
However, the devaluation did little for the U.S. economy, and by 1987, monetary authorities met in Paris at the Louvre. The Louvre Accord was hatched to stop the dollar’s fall. The Bank of Japan’s willingness to expand its money supply to depreciate the yen would fuel one of the biggest stock market bubbles of all time, with the Nikkei stock average roaring from around 10,000 in 1985 to a peak of 38,957.44 on Dec. 29, 1989. More than two decades hence, that market still hasn’t recovered.
Currency War III has just begun, and after 40 years of massive money printing and the explosion of derivatives, CWIII will be fought on a massive scale, with a real risk of a collapse of the entire monetary system.
So how’s this currency war to end all currency wars going to turn out? Let’s use Ludwig von Mises’ outline of the three stages of inflation.
In Mises’ stage one, government prints all the money it can, because prices don’t rise nearly as much as money supply.
In stage two, the demand for money falls, which intensifies price inflation.
Finally, in stage three, prices go up faster than money supply. A shortage of money develops, and people urge government to print more; when the government does this, prices and money supply spiral upward.
A small change in preferences among just a few people could lead to a collapse, because the financial framework is a weakly constructed Keynesian contraption of fiat money, government deficits and financial alchemy. Any one of thousands of events could trigger the collapse, and the last straw will not be known until after the fact.
It’s been said that war is the health of the state. Currency war is a desperate government willing to wreck its citizens’ lives to benefit its own agenda. Chaos is the most likely outcome of the latest currency war. It won’t be pretty. After the government gets desperate, it gets mean. After currencies collapse, the government freezes people’s assets, gold is confiscated, and capital controls are imposed.
A currency war is neither a spectator sport nor a game. We all have to participate. It’s the government’s war on each and every one of us. It’s not a matter of if: The war has already started.
Now is the time to get prepared. First, order Jim Rickards’ Currency Wars from Laissez Faire Books to understand the problems we face on the currency front.
Next, I’d like to introduce you to Addison Wiggin’s Apogee Advisory. “Apogee,” as you may know, means the “farthest and highest point.”
And in Addison Wiggin’s Apogee Advisory, that’s what you’ll get — high-level economic and financial analysis boiled down to actionable solutions.
Wiggin is the New York Times best-selling author of three books on this subject, including The Little Book of the Shrinking Dollar, which will be mailed to you free with a trial subscription to Apogee.
This war on you has already started. There is no time to waste.