The system is doomed to fail, because the resilience of natural complex systems requires freedom of action for its individual components. We do not observe resilient complex systems with central control. Yet central control is the dominant ideology of our present political and economic systems. Total control, with a vanishingly thin veneer of democracy, ephemeral as the morning dew.
A number of readers have recently suggested there must be collusion between America and China over the transfer of physical gold from Western capital markets. They assume that governments know what they are doing, so there is a bigger game afoot of which we are unaware.
The truth is that China and Western capital markets view gold very differently and with very different philosophies about gold.
Of the various flavors of government interventionism in our lives, the minimum wage is perhaps the most welcomed. It appeals not only to our innate sense of “fairness” but also to our self-interest. Its allure may erroneously lead us to the conclusion that because “it is popular,” ergo “it is right.” The more astute proponents of the minimum wage, however, immediately point to the obvious; namely, that an extreme minimum wage ($1,000 per hour) would be unequivocally detrimental. However, the proponents quickly turn to dismissing this fear by asserting that, empirically, no such job loss occurs when the minimum wage is slowly raised. This is akin to arguing that although fire can boil water, a small fire won’t heat it up.
President Obama has recently promoted inequality as a fundamental threat to our way of life, saying, “The combined trends of increased inequality and decreasing mobility pose a fundamental threat to the American Dream, our way of life, and what we stand for around the globe.” You can read the rhetoric here. Let’s look at the reality.
Five years after the 2008 crisis hit, economies are more financialised than ever. If the politicians and regulators ever had any balls they have been amputated by the casino managers, under the anaesthesis of perceived self-interest. They have become the casino eunuchs. An apparent early consensus on the systemic problems of over financialisation has melted away into a misconceived search for ‘business as usual’.
The following is Part 2 (Part 1 here) a firsthand story of how and why a former US citizen - who kindly shared this information on condition of anonymity - decided to renounce his US citizenship
Hjalmar Schacht was Hitler’s economic guy. According to Wikipedia, Schacht: ”became a supporter of Adolf Hitler and the Nazi Party, and served in Hitler’s government as President of the Reichsbank and Minister of Economics. As such, Schacht played a key role in implementing the policies attributed to Hitler.” Now, we all know what happened to Hitler. But what about Schacht?
People often ask today: if the Fed has created so much new money, why hasn’t it produced more inflation?
We have long held that Africa is a crucial region of the world in the near future because there is no more incremental debt capacity at any level: sovereign, household, financial or corporate - in any other region. As tensions between China and Japan multiply, there is an increasing battle for influence in other states. While China and Japan may look like they’re competing in Africa, the two countries are actually playing different games. Whereas Abe seems content to have Japanese businesses make profits, China is actively pursuing soft power on the continent.
There is a certain level of dishonesty in the common study of history. We look back at the tyrannies of the past, the monstrous governments, the devastating wars and the unimaginable crimes, and we wonder how it could have been possible. How could the people of that particular generation let such atrocities come to pass? Why didn’t they do something? Why didn’t they protest? Why didn’t they fight back? Perhaps many societies fail to prepare or act in the face of tyranny because they had forgotten their own histories, making the demise of their culture appear so schizophrenic they would not believe what their eyes were telling them. When we examine recent U.S. legislation, the exposure of classified documents, and the openly admitted criminality of political leadership, we are consistently reminded of Franz Kafka’s The Trial.
After a botched rollout that was universally panned, it may seem like things are finally moving more smoothly for Obamacare. But 2014 and beyond promise more turbulence for consumers, with premium tax credits likely to be another crisis.
Tax burdens are so high that it might not be possible to pay off the high levels of indebtedness in most of the Western world. At least, that is the conclusion of a new IMF paper from Carmen Reinhart and Kenneth Rogoff - “The size of the problem suggests that restructurings will be needed, for example, in the periphery of Europe, far beyond anything discussed in public to this point.” The 'not different this time' couple see two facts of life for Europe’s future: financial repression through higher inflation rates and taxes levied on savings and wealth.
Hyperinflation leads to the complete breakdown in the demand for a currency, which means simply that no one wishes to hold it. Everyone wants to get rid of that kind of money as fast as possible. Prices, denominated in the hyper-inflated currency, suddenly and dramatically go through the roof. The most famous examples, although there are many others, are Germany in the early 1920s and Zimbabwe just a few years ago. German Reichsmarks and Zim dollars were printed in million and even trillion unit denominations. We may scoff at such insanity and assume that America could never suffer from such an event. We are modern. We know too much. Our monetary leaders are wise and have unprecedented power to prevent such an awful outcome. Think again. Like previous hyperinflations throughout time, the actions that produce an American hyperinflation will be seen as necessary, proper, patriotic, and ethical; just as they were seen by the monetary authorities in Weimar Germany and modern Zimbabwe.
It has been commonplace to speak of central bank independence - as if it were both a reality and a necessity. Discussions of the Fed invariably refer to legislated independence and often to the famous 1951 Accord that apparently settled the matter.  While everyone recognizes the Congressionally-imposed dual mandate, the Fed has substantial discretion in its interpretation of the vague call for high employment and low inflation. It is, then, perhaps a good time to reexamine the thinking behind central bank independence. There are several related issues.
- First, can a central bank really be independent? In what sense? Political? Operational? Policy formation?
- Second, should a central bank be independent? In a democracy should monetary policy—purportedly as important as or even more important than fiscal policy—be unaccountable? Why?
- Finally, what are the potential problems faced if a central bank is not independent? Inflation? Insolvency?
The following is a firsthand story of how and why a former US citizen - who kindly shared this information on condition of anonymity - decided to renounce his US citizenship