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
With the Fed once again in the late stages of an easing cycle (affectionately dubbed QE3), we find the 2s/5s curve steepening yet again, hitting its widest level in 30 months at more than 135 basis points on January 1. Given this curve’s uncanny track record, one can’t help but wonder if it will ring the 160 bell yet again when the Fed completes its final purchase operation of QE3. With tapering now upon us, and the end of QE3 almost in sight, one might even be tempted to sell a few 5s against twos in the hopes of catching that final 25 basis points of steepening. A closer examination of that trade, however, reveals that one might be better off doing just the opposite.
Even if you don’t buy that QE and ZIRP will lead to a dollar collapse, you do have to admit that these Fed policies have severely brainwashed investors. The Federal Reserve is the boiler room operation that has pumped up the equities market by way of QE and ZIRP. You are investing in a pump-and-dump scam. And like in all such scams, you will lose. Clear enough for ya?
Yesterday we described how so-called "Progressives" are pimping for the Empire. The same is true of so-called "Conservatives." Conservatives are masters at projecting a preachy devotion to a limited state, democracy, liberty and free enterprise while their support of the Central State undermines every one of these values. Conservatives are like the preacher who issues stern sermons on righteousness every Sunday while skimming big money from pimping sordid, destructive policies Monday through Saturday. "Conservatives" and "Progressives" alike are pimping for the Empire when they support the Central State's essentially unlimited powers.
Even before Abe was elected prime minister on December 26, 2012, Chinese media were warning that he would be overly nationalistic. Upon Abe’s election, major Chinese news outlets expressed dismay over the future of China-Japan relations. It seems that the visit to Yasukuni Shrine was the last straw for Chinese leaders in their dealings with Abe. Hua said that Abe’s decision to visit the Shrine “severely damages the political foundations of China-Japan relations.” Simply put, “There’s no domestic political room for China to ease its attitude toward Japan on the issues of the Diaoyu Islands and the Yasukuni Shrine.” When one or both reaps a domestic advantage from stoking the fire, forget about easing tensions —avoiding actual conflict is the best case scenario. Under the circumstances, the only hope for a reset of China-Japan ties is if Abe is ousted as prime minister.
The central illusion of both Left (so-called Progressives) and Right (so-called conservatives) is that the Central State's essentially unlimited powers can be narrowly directed to further their agenda. Supporting the central state to protect your favored cartels and protect your political power over the state's tax revenues is simply pimping for the Empire. You can call it "progressive," but it's still pimping for the Empire.
Evolutionary theory as a perspective for understanding human behavior within capital markets is a more useful perspective than what economic theory has become... a cloistered, brittle theology that day after day becomes more abstract in its formation and more narrow in its application. The first and most basic lesson of an evolutionary perspective properly applied: we are well served as investors to jettison the superiority complex that comes with living in the present and looking back on what naturally seems a benighted past. The notions of liberal progress and evolution-as-hierarchy are so deeply ingrained that we assume that whatever behaviors are new or modern, including modern investment management practices or modern investment strategies (or modern monetary policy), must be part and parcel of some advancement over what existed in the past. In truth there is no up-and-to-the-right arrow associated with evolution; there is no intelligent design pushing us “forward”.
Are current underwriting practices overly stringent? Yes and no. With the exception of the sub-prime era, underwriting has never been easier. At the same time, it has never been more difficult for many qualified borrowers to get a loan. This strange phenomenon is among the unintended consequences of ill-guided public policies.
The efforts underway by the Service Employees International Union, and its political and media allies, to raise the minimum wage from $7.25 to $15 per hour would, if successful, cause major unemployment among low-skilled workers, who are the supposed beneficiaries of those efforts. No one can question the desirability of being able to earn $15 an hour rather than $7.25 an hour. Still more desirable would be the ability to earn $50 an hour instead of $15 an hour. However, it is necessary to know considerably more than this about economics before attempting to enact sweeping changes in economic policy...
The word “violence” comes with numerous negative connotations. We believe this is due to the fact that in most cases violence is used by the worst of men to get what they want from the weak. Meeting violence with violence, though, is often the only way to stop such abuses from continuing. We tend to discuss measures of non-participation (not non-aggression) because all resistance requires self-sustainability. Americans cannot fight the criminal establishment if they rely on the criminal establishment. Independence is more about providing one's own necessities than it is about pulling a trigger.
At this point, the problem of hitting limits in a finite world has morphed into primarily a financial problem. Governments are particularly affected. They find that they need to borrow increasing amounts of money to provide promised services to their citizens. Debt is a huge problem, both for governments and for individual citizens. Interest rates need to stay very low, in order for the current system to “stick together.” Governments are either unaware of the true nature of their problems, or are doing everything they can to hide the true situation from their constituents. The public has been placated by all kinds of misleading stories about how oil from shale will be the solution. Quantitative Easing (used by governments to lower interest rates) has temporarily allowed stock markets to soar, and allowed interest rates to stay quite low. So superficially, everything looks great. The question is how long all of this will last?
What if our commoditized, financialized definition of wealth reflects a staggering poverty of culture, spirit, wisdom, practicality and common sense?