World War Is Coming, Currency War That Is - Russia Warns

It will not come as a surprise to anyone who has spent more than a few cursory minutes reading ZeroHedge over the past few years (initially here, and most recently here, and here) but the rolling 'beggar thy neighbor' currency strategies of world central banks are gathering pace. To wit, Bloomberg reports that energy-bound Russia's central bank chief appears to have broken ranks warning that "the world is on the brink of a fresh 'currency war'." With Japan openly (and actively) verbally intervening to depress the JPY and now Juncker's "dangerously high" comments on the EUR yesterday, it appears 2013 will be the year when the G-20 finance ministers (who agreed to 'refrain from competitive devaluation of currencies' in 2009) tear up their promises and get active. Rhetoric is on the rise with the Bank of Korea threatening "an active response", Russia now suggesting reciprocal devaluations will occur (and hurt the global economy) as RBA Governor noted that there is "a degree of disquiet in the global policy-making community." Critically BoE Governor Mervyn King has suggested what only conspiracists have offered before: "we'll see the growth of actively managed exchange rates," and sure enough where FX rates go so stocks will nominally follow (see JPY vs TOPIX and CHF vs SMI recently).

"May The Farce Be With You" - White House Responds To Imperial Death Star Petition

Almost a year ago, in February 2012, Zero Hedge decided to "think outside the box" and take Keynesianism and post-Chartalism (or whatever three letter acronym it is better known as these days) to their absurd, thought-experimental limits with "A Modest Proposal To Boost US GDP By $852 Quadrillion: Build The Imperial Death Star" - a suggestion that instead of growing US debt in dribs and drabs (because as any Ivy league tenured econ Ph.D will tell you, "debt is wealth"), that the US should go the whole hog and just splurge some $852 quadrillion in new debt (don't worry, MMT says that's just a token, no pun intended, amount) to build an Imperial Death Star, a project that would immediately hike US GDP by a factor of 56,000 and create several trillion new jobs, ensuring economic utopia in perpetuity, not to mention galactic dominance. We were mostly joking. We also assume that the creator of a White House petition launched in November to "Secure resources and funding, and begin construction of a Death Star by 2016" was also mostly joking. However, as that petition promptly accumulated well over 34,000 signatures, the White House had no choice but to respond. Here are the White House's thoughts on becoming the next iteration of the Galactic Empire (and, by implication, Barack Obama becoming Emperor Palpatine reincarnated).

The Trends to Watch in 2013

Rather than attempt to predict the unpredictable – that is, specific events and price levels – let’s look instead for key dynamics that will play out over the next two to three years. Though the specific timelines of crises are inherently unpredictable, it is still useful to understand the eventual consequences of influential trends. In other words: policies that appear to have been successful for the past four years may continue to appear successful for a year or two longer. But that very success comes at a steep, and as yet unpaid, price in suppressed systemic risk, cost, and consequence.

2012 - 'Year Of Living Dangerously' In Review

Despite the fact that myself and everyone else acting like they know what lays ahead are proven wrong time and time again, we continue to make predictions about the future. It makes us feel like we have some control, when we don’t. The world is too complex, too big, too corrupt, too lost in theories and delusions, and too dependent upon too many leaders with too few brains to be able to predict what will happen next. This is the time of year when all the “experts” will be making their 2013 predictions - but few will address where they were wrong in previous predictions. I’m more interested in why I was wrong. It seems I always underestimate the ability of sociopathic central bankers and their willingness to destroy the lives of hundreds of millions to benefit their oligarch masters. I always underestimate the rampant corruption that permeates Washington DC and the executive suites in mega-corporations across the land. And I always overestimate the intelligence, civic mindedness, and ability to understand math of the ignorant masses that pass for citizens in this country. It seems that issuing trillions of new debt to pay off trillions of bad debt, government sanctioned accounting fraud, mainstream media propaganda, government data manipulation and a populace blinded by mass delusion can stave off the inevitable consequences of an unsustainable economic system. Will 2013 be the year it all collapses in a flaming heap of rubble? I don’t know. Maybe you should ask an “expert”.

Guest Post: Santa Keynes and the Hayekian Grinch

We are now approaching the fourth Christmas of the great debate between the benign supporters of Santa Keynes and the walnut-hearted acolytes of the Hayekian Grinch. Or at least that’s how Keynesians seem to see it. Far from being a success, Keynesian policies have retarded recovery and extended the downturn, just as they did in the 1930s and the 1970s. They’re the “moral” policy present that keeps on taking, supported by those who claim that their opponents have hearts “two sizes too small.”

Samuelson: "Frank Knight Thought Keynes Was The Devil" And Other Insights

In the fall of 1996, John Cassidy arranged to interview Paul Samuelson in his office at M.I.T. for an article he was writing on the state of economics. He began by asking Samuelson whether he was still a Keynesian: "I call myself a post-Keynesian," Samuelson replied. "The 1936 Model A Keynesianism is passé..." He recalled attending an event that was held in Cambridge, England, in 1986 to mark the one-hundred-and-fiftieth anniversary of Keynes's birth. "Everybody was there. And they all stood up and said, 'I am still a faithful Keynesian. I am still a true believer.' I was a bit rude. I said, 'You remind me of a bunch of Nazis saying, I’m still a good Nazi.' It’s not a theology: it’s a mode of analysis. I think I am a different Keynesian than I was ten years ago."

Bombshell: Deutsche Bank Hid $12 Billion In Losses To Avoid A Government Bail-Out

Forget the perfectly anticipated Greek (selective) default. This is the real deal. The FT just released a blockbuster that Europe's most important and significant bank, Deutsche Bank, hid $12 billion in losses during the financial crisis, helping the bank avoid a government bail-out, according to three former bank employees who filed complaints to US regulators. US regulators, whose chief of enforcement currently was none other than the General Counsel of Deutsche Bank at the time!

Rational Exuberance

Sixteen years ago today, Alan Greenspan spoke the now infamous words "irrational exuberance" during an annual dinner speech at The American Enterprise Institute for Public Policy Research. Much has changed in the ensuing years (and oddly, his speech is worth a read as he draws attention time and again to the tension between the central bank and the government). Most critically, Greenspan was not wrong, just early. And the result of the market's delay in appreciating his warning has resulted in an epic shift away from those same asset classes that were most groomed and loved by Greenspan - Stocks, to those most hated and shunned by the Fed - Precious Metals. While those two words were his most famous, perhaps the following sentences are most prescient: "A democratic society requires a stable and effectively functioning economy. I trust that we and our successors at the Federal Reserve will be important contributors to that end."

Kyle Bass: Fallacies Such As MMT Are "Leading The Sheep To Slaughter" And "We Believe War Is Inevitable"

"Trillions of dollars of debts will be restructured and millions of financially prudent savers will lose large percentages of their real purchasing power at exactly the wrong time in their lives. Again, the world will not end, but the social fabric of the profligate nations will be stretched and in some cases torn. Sadly, looking back through economic history, all too often war is the manifestation of simple economic entropy played to its logical conclusion. We believe that war is an inevitable consequence of the current global economic situation."

Guess What They Are Not Cutting In The Fiscal Cliff...

In his farewell address to Congress yesterday, Ron Paul blasted the dangers of what he called 'Economic Ignorance'. He's dead right. Around the world, economic ignorance abounds. And perhaps nowhere is this more obvious today than in the senseless prattling over the US 'Fiscal Cliff'. US government spending falls into three categories: Discretionary, Mandatory, and Interest on Debt. The only thing Congress has a say over is Discretionary Spending. But here's the problem - the US fiscal situation is so untenable that the government fails to collect enough tax revenue to cover mandatory spending and debt interest alone. This means that they could cut the ENTIRE discretionary budget and still be in the hole by $251 billion. This is why the Fiscal Cliff is irrelevant. Increasing taxes won't increase their total tax revenue. Politicians have tried this for decades. It doesn't work. Bottom line-- the Fiscal Cliff doesn't matter. The US passed the point of no return a long time ago.

The Unabridged Ron Paul Guide To Being A Libertarian

Presented with little comment since whatever we say would likely be superfluous to this all-encompassing speech. The full Ron Paul 'Farewell to Congress' speech and transcript.

...To achieve liberty and peace, two powerful human emotions have to be overcome.  Number one is 'envy' which leads to hate and class warfare.  Number two is 'intolerance' which leads to bigoted and judgmental policies.  These emotions must be replaced with a much better understanding of love, compassion, tolerance and free market economics. Freedom, when understood, brings people together. When tried, freedom is popular.


The best chance for achieving peace and prosperity, for the maximum number of people world-wide, is to pursue the cause of LIBERTY...

If nothing else, read the five greatest dangers that the American people face today that impede the goal of a free society.

Ron Paul's Farewell To Congress - Live Webcast

Representative Ron Paul gets his opportunity to say farewell - providing a compendium of reality and liberty for all that choose to listen.. He begins: "My goals in 1976 were the same as they are today: to promote peace and prosperity by a strict adherence to the principles of individual liberty" and goes on..."economic ignorance is common place, as the failed policies of Keynesianism are continually promoted"... "psychopathic totalitarians endorse government initiatives to change our world" - live webcast (and full speech)...

David Einhorn Explains How Ben Bernanke Is Destroying America

"We have just spent 15 years learning that a policy of creating asset bubbles is a bad idea, so it is hard to imagine why the Fed wants to create another one. But perhaps the more basic question is: How fruitful is the wealth effect? Is the additional spending that these volatile paper profits are intended to induce overwhelmed by the lost consumption of the many savers who are deprived of steady, recurring interest income? We have asked several well-known economists who publicly support the Fed’s policy and found that they don’t have good answers. If Chairman Bernanke is setting distant and hard-to-achieve benchmarks for when he would reverse course, it is possibly because he understands that it may never come to that. Sooner or later, we will enter another recession. It could come from normal cyclicality, or it could come from an exogenous shock. Either way, when it comes, it is very likely we will enter it prior to the Fed having ‘normalized’ monetary policy, and we’ll have a large fiscal deficit to boot. What tools will the Fed and the Congress have at that point? If the Fed is willing to deploy this new set of desperate measures in these frustrating, but non-desperate times, what will it do then? We don’t know, but a large allocation to gold still seems like a very good idea."

Guest Post: How To Spot A Keynesian

The truth of the matter is that there is no such thing as a free lunch. The phony prosperity of monetary inflation is entirely illusory. You cannot get something for nothing. "So, whenever you see a criticism of austerity as fostering recession, you are reading a Keynesian. He may not call himself a Keynesian, but in this case, he is delusional. Only Keynesianism teaches that reduced national government spending (“austerity”) in a nation whose national government spends 40% of its GDP (Greece) will produce a recession." Keynesian economic pundits advance many fallacious arguments about government spending. Chief among them is the egregious notion that mortgaging your posterity with debt and deficits is somehow “virtuous.”


BoE Finds Gold Standard Leads To Less Crises Than Fiat Regime

There should be three objectives for a well-functioning monetary system: i) internal balance, ii) allocative efficiency and iii) financial stability. The international financial and monetary system (IFMS) has functioned under a number of different regimes over the past 150 years and each has placed different weights on these three objectives. Overall, this recent Bank of England paper finds that today’s 'fiat' system has performed poorly against each of its three objectives, at least compared with the Bretton Woods System, with the key failure being the system’s inability to maintain financial stability and minimize the incidence of disruptive sudden changes in global capital flows. There is little consensus in the academic literature, or among policymakers, on what are the underlying problems in the global economy which allow excessive imbalances to build in today’s IMFS and/or which impede the IMFS from adjusting smoothly to counteract these imbalances. Critically though, while the fiat money system we are currently does indeed exhibit lower GDP growth volatility (by design), it has dramatically more incidents of banking and currency crises than under a Gold Standard.