“The risk of catastrophe will be very high. The nation could erupt into insurrection or civil violence, crack up geographically, or succumb to authoritarian rule. If there is a war, it is likely to be one of maximum risk and effort – in other words, a total war. Every Fourth Turning has registered an upward ratchet in the technology of destruction, and in mankind’s willingness to use it.”
The core elements of this Fourth Turning continue to propel this Crisis: debt, civic decay, global disorder. Central bankers, politicians, and government bureaucrats have been able to fashion the illusion of recovery and return to normalcy, but their “solutions” are nothing more than smoke and mirrors exacerbating the next bloodier violent stage of this Fourth Turning. The emergencies will become increasingly dire, triggering unforeseen reactions and unintended consequences. The civic fabric of our society will be torn asunder.
The Bitcoin phenomenon has now reached the mainstream media where it met with a reception that ranged from sceptical to outright hostile. The recent volatility in the price of bitcoins and the issues surrounding Bitcoin-exchange Mt. Gox have led to additional negative publicity. It is clear that on a conceptual level, Bitcoin has much more in common with a gold and silver as monetary assets than with state fiat money. The supply of gold, silver and Bitcoin, is not under the control of any issuing authority. It is money of no authority – and this is precisely why such assets were chosen as money for thousands of years. Gold, silver and Bitcoin do not require trust and faith in a powerful and privileged institution, such as a central bank bureaucracy. Under a gold standard you have to trust Mother Nature and the spontaneous market order that employs gold as money. Under Bitcoin you have to trust the algorithm and the spontaneous market order that employs bitcoins as money (if the public so chooses). Under the fiat money system you have to trust Ben Bernanke, Janet Yellen, and their hordes of economics PhDs and statisticians.
As we warned on Friday, the military escalation in Ukraine has had dire consequences for the financial state of the country, its banks, and ultimately its people. The central bank promised to rescue domestic banks so long as they agreed to its complete control and it appears the first consequences of that "we are here to help you" promise is coming true:
UKRAINE'S PRIVATBANK LIMITS ATM WITHDRAWALS TO UAH1,000/DAY ($103/day)
Privatbank is Ukraine's largest bank and while claiming this move is temporary (just like Cyprus' capital controls), the bank has also ceased new loans amid what it calls "geopolitical instability". In summary, you can't have your money back! Expect long angry lines at Ukrainian banks on Monday morning (and at the pace of collapse in the Hyrvnia, hyperinflation next).
Inflation is always somebody else’s fault. Ludwig von Mises called out finger pointing central bankers and politicians decades ago in his book, Economic Policy. “The most important thing to remember is that inflation is not an act of God, that inflation is not a catastrophe of the elements or a disease that comes like the plague. Inflation is a policy.” Don’t expect the printing to stop any time soon. Central bankers believe they are doing God’s work. “To ensure that my people survive, I had to print money,” Zimbabwe's Gideon Gono told Newsweek. “I found myself doing extraordinary things that aren’t in the textbooks. Then the IMF asked the U.S. to please print money. The whole world is now practicing what they have been saying I should not. I decided that God had been on my side and had come to vindicate me.”
"Gold will keep rising as long as US policy is exporting volatility—we see no imminent change in this situation under Janet Yellen’s Federal Reserve."
You know what’s it like, the driver stands there in front of the car that has just hit you up the back while looking at something happening down the street rather than checking on you hitting your breaks…and yet, he says “sorry, but you stopped too quickly, it wasn’t my bad driving”.
It’s the same old story being told in the London housing market and it’s like a re-run of a boring series or some B movie starring George Osborne, the UK Chancellor of the Exchequer and the Prime Minister David Cameron.
So it’s been Christmas and the holiday season and Santa had his sacks stuffed with chocolate. Then it was Cupid and Valentine’s Day and the chocolate got bought up in the shops and the loved one’s will be complaining that they put on too much on their hips or the boyfriend felt sick after gorging himself on the stuff and you still reply they look chocolate-boxy and fine.
When it comes to complex systems and unintended consequences, the key phrase is "be careful what you wish for." A lot of people are remarkably certain that their understanding of how systems will respond in the future is correct. Alan Greenspan was certain there was no housing bubble in 2007, for example (or he did a great job acting certain). Some are certain the U.S. stock market is going to crash this year, while others are equally certain that stocks will continue lofting higher on central bank tailwinds. Being wrong about the way systems responded in the past doesn't seem to deter people from being certain about the future. Complex systems don't act in the linear way our minds tend to work.
Yields on United States 10-year bonds rose above 3% at the beginning of January. The yield on the 10-year had reached its lowest point in history in July 2012 at 1.43% as a result of the Fed’s policy of Quantitative Easing. Since then yields have doubled as markets have incorporated the impact of the Fed tapering their purchase of U.S. Government securities. This raises the question, how high could interest rates go from here? Could interest rates move up to 3% per quarter? U.S. interest rates were that high back in 1981 when the yield on US 10-year Treasuries hit 15.84% and 30-year mortgage rates hit 18.63%. What about 3% per month?
We all knew that cultures were different and that we all had a unique way of doing things that run our daily lives. In Europe they tell the banks that they will die if they are weak (apparently, after the statement issued by Danièle Nouy, overseer of the Singe Supervisory Mechanism).
Imagine the scenario. The company accounts are going to get checked out; the accounts department doesn’t have them ready. There’s a gap in the figures and they don’t tally. Never mind, they may just get through at a pinch and nobody will notice.
Joseph Stiglitz, Nobel Laureate and Professor at Columbia University believes that the US economy was and still is sick. He believes that it will remain sick because of bad choices that have been made from 2008 onwards:
Inflation is hot property today, hyperinflation is even hotter!
As we noted previously there is a race to the bottom between the Argentine currency and its central bank's reserve balance as day by day both slide seemingly unceasingly. However, as JPMorgan notes in a rather aggressive note, a local press article sheds doubts over Argentina's 'honest' reporting of international reserves. Though long used to the lies about inflation (that ended up with the economy minster being fired and it being deemed 'illegal' to tell the truth), JPMorgan blasts that during a balance of payments crisis - as Argentina is undergoing - such manipulation of official statistics (and one so critical for market sentiment) is detrimental to the needed confidence building around the transition in the FX regime and is "a very very bad idea". Simply put, Argentina is over-stating its reserves... considerably.