Purchasing Power

There is no way Fed policy can be win-win-win for all participants.

Well, we got a look at the IBC-Br monthly real GDP indicator on Wednesday and as you can probably imagine given the stagflationary nightmare currently unfolding in Brazil, the picture was not pretty. If fact, we just witnessed the largest Y/Y contraction in series history.

Central planners around the world are waging a War on Cash because, as Ron Paul so eloquently put it "the cashless society is the [government]’s dream: total knowledge of, and control over, the finances of every single [citizen]." It is perhaps ironic then that Sweden, which became the first country in Europe to issue paper money in 1661, is probably going to be the first in the world to entirely eliminate it.

“If they end up doing nothing to address this budget issue ... Houston could be facing the same problem Chicago is now."

It is important to keep in mind that the dollar’s attacks on gold always end the same way – in a painful knockout for the dollar. There have been no exceptions to this rule throughout monetary history, nor will there be this time. Hence the well-known market rule: “Any maximum of the gold price is not the last one.” It would be naive to believe that this golden rule is unknown to that grandmaster of patience, Vladimir Putin, and to Xi Jinping. By systematically increasing their gold reserves, Russia and China are relentlessly moving forward to strip the US dollar of its status as a global reserve currency. America’s standard military solution won’t work in this situation.

In very raw terms, if a man wanted to buy a house and a car in 1975 he had to work just under five years to pay for them.

If he wants a house and a car today, he has to work almost 11 years...

Two nephews of Venezuelan President Nicolas Maduro were set to appear in front of a New York judge today after the pair was accused of attempting to smuggle some 800 kilos of coke into the US. The case raises further questions about drug smuggling among Venezuelan officials and individuals with ties to powerful figures. For his part, Maduro tweeted the following:"The fatherland will follow its course. Neither attacks nor imperialist ambushes can harm the people of the liberators."

The failure of the Fed’s policies of massive money creation, corporate bailouts, and quantitative easing to produce economic growth is a sign that the fiat money system’s day of reckoning is near. The only way to prevent the monetary system’s inevitable crash from causing a major economic crisis is the restoration of a free-market monetary policy.

China's exports fell for the fourth consecutive month in October as evidence of collapsing global demand and trade continues to pile up. “A lot of Westerners think this helped us out a lot. But the 2% depreciation actually hurt us. It was in every newspaper and customers called us within hours pushing for 6% discount, so we had to give them 4%."

The developing deflationary cycle stunting the world economy has arisen from the monumental harm that central bankers have already done, not from lack of sufficient vigor and boldness in attempting to contravene its consequences.

The cries for going totally crazy are growing louder... the lunatics are running the asylum. One shouldn’t underestimate what they are capable of. The only consolation is that the day will come when the monetary cranks will be discredited again (for the umpteenth time). Thereafter it will presumably take a few decades before these ideas will rear their head again (like an especially sturdy weed, the idea that inflationism can promote prosperity seems nigh ineradicable in the long term – it always rises from the ashes again). The bad news is that many of us will probably still be around when the bill for these idiocies will be presented.

“Consider for example a tax cut for households and businesses that is explicitly coupled with incremental Bank of Japan purchases of government debt – so that the tax cut is in effect financed by money creation”

- Ben Bernanke, Some Thoughts on Monetary Policy in Japan, 2003

While most of us would realize that something sinister is afoot right now in the global banking system if we merely diverted our attention away from the Sunday football game or the Game of Thrones episode on our TV for just 10 minutes to think about these issues, unfortunately, the vast majority of us still do not ever stop to do so.

Almost all serious analysts see a Terminal problem developing - "We will go from deflation to hyperinflation without seeing inflation." But hyperinflation is a political phenomenon. It is caused by those same authorities the masses think they can trust. When they are threatened, they will protect themselves by printing money on a scale we haven’t seen since the War Between the States (consumer prices in Richmond, Virginia, had risen 6,700% by the end of the war).