Guest Post: On Currency Swaps And Why Gartman May Be Wrong In Focusing On The Adjusted Monetary BaseSubmitted by Tyler Durden on 10/14/2012 13:53 -0400
Last week Dennis Gartman, in his homonymous letter said that he was concerned about the fact that the adjusted monetary base has been falling, rather than rising, taking away the bullish case for gold on the topic of “money printing”. One must therefore remind those with this concern that the credit expansion caused by the backstop of the Fed alone is enough to inflate asset prices. This is consistent with the case we made in our last letter, that a commodity based standard is not as relevant as having a 100% reserve requirement. By the same token, if the reserve requirement is below 100%, it is not that relevant to see the expansion of the monetary base! The “printing of money” will eventually come, when EU corporations begin to default and the Fed has to “ensure there is enough US dollar liquidity”. It happened in 1931-33, in spite of the fact that the adjusted monetary base had been contracting since 1929: The US dollar was devalued from approx. $20.65/oz to approx. $34.70oz and gold was confiscated.
Ron 'I'm playing the long-game' Paul will not go quietly into the night - and rightly so, it would seem, given his truthiness. In a recent brief interview on CNBC's Futures Now, he managed to diss Romney, smash the 'belief' in a 'two-party' system, and undermine any hope for economic change from the farce of an election. Summed up simply: "There is essentially no difference between one administration and another, no matter what the platform."
The other day the Huffington Post ran an article by a Bonnie Kavoussi called “11 Lies About the Federal Reserve.” And you’ll never guess: these aren’t lies or myths spread in the financial press by Fed apologists. These are “lies” being told by you and me, opponents of the Fed. Bonnie Kavoussi calls us “Fed-haters.” So she, a Fed-lover, is at pains to correct these alleged misconceptions. She must stop us stupid ingrates from poisoning our countrymen’s minds against this benevolent array of experts innocently pursuing economic stability. Here are the 11 so-called lies (she calls them “myths” in the actual rendering), and Tom Woods and Bob Murphy's responses.
Spoiler Alert: They’re mostly still in office (so much for building suspense).
On October 3, 2008, 338 elected officials (263 House reps, 74 Senators and 1 President) took it upon themselves to save America from certain financial doom by passing the Emergency Economic Stabilization Act of 2008, completely ignoring the will of the American people, opting instead to fulfill a Thomas Jefferson prophesy:
“The end of democracy and the defeat of the American Revolution will occur when government falls into the hands of lending institutions and moneyed incorporations.”
~ Thomas Jefferson
New York Times Concedes that It Is Unknown Whether Syrian Artillery Came from Rebels or Government ... Ron Paul: Beware ...Submitted by George Washington on 10/07/2012 14:44 -0400
Weekend Mideast News Roundup
The conventional validation for perpetual war in the Middle East does not hold when looked at rationally. When the ideas of nationalism and statist glory are wiped away, the state appears as it really is: institutionalized exploitation of the masses by the few. The undertaking of war masks this reality for a short period while accelerating the pace at which liberty is stripped away. In the end, wars are waged to fulfill the sadistic desires of government leaders and to give them an opening to tighten their grip on society. The parasitic class which makes up the state doesn’t just war with other states; it conducts war against the citizens it claims to protect.
You're a Potential Terrorist If You Are Young, Use Social Media, Or Question "Mainstream Ideologies"Submitted by George Washington on 10/02/2012 19:09 -0400
Unless You're An Old, Out-Of-Touch Oligarch ... You're Probably a Terrorist
Our analysis of the physical gold market shows that central banks have most likely been a massive unreported supplier of physical gold, and strongly implies that their gold reserves are negligible today. If Frank Veneroso’s conclusions were even close to accurate back in 1998 (and we believe they were), when coupled with the 2,300 tonne net change in annual demand we can easily identify above, it can only lead to the conclusion that a large portion of the Western central banks’ stated 23,000 tonnes of gold reserves are merely a paper entry on their balance sheets – completely un-backed by anything tangible other than an IOU from whatever counterparty leased it from them in years past. At this stage of the game, we don’t believe these central banks will be able to get their gold back without extreme difficulty, especially if it turns out the gold has left their countries entirely. We can also only wonder how much gold within the central bank system has been ‘rehypothecated’ in the process, since the central banks in question seem so reluctant to divulge any meaningful details on their reserves in a way that would shed light on the various “swaps” and “loans” they imply to be participating in. We might also suggest that if a proper audit of Western central bank gold reserves was ever launched, as per Ron Paul’s recent proposal to audit the US Federal Reserve, the proverbial cat would be let out of the bag – with explosive implications for the gold price.... We realize that some readers may scoff at any analysis of the gold market that hints at “conspiracy”. We’re not talking about conspiracy here however, we’re talking about stupidity. After all, Western central banks are probably under the impression that the gold they’ve swapped and/or lent out is still legally theirs, which technically it may be. But if what we are proposing turns out to be true, and those reserves are not physically theirs; not physically in their possession… then all bets are off regarding the future of our monetary system.
The problem we are going to face at some point as a nation and in fact as a civilization is this: there is no well-developed economic theory inside the corridors of power that will explain to the administrators of a failed system what they should do after the system collapses. This was true in the Eastern bloc in 1991. There was no plan of action, no program of institutional reform. This is true in banking. This is true in politics. This is true in every aspect of the welfare-warfare state. The people at the top are going to be presiding over a complete disaster, and they will not be able to admit to themselves or anybody else that their system is what produced the disaster. So, they will not make fundamental changes. They will not restructure the system, by decentralizing power, and by drastically reducing government spending. They will be forced to decentralize by the collapsed capital markets. The welfare-warfare state, Keynesian economics, and the Council on Foreign Relations are going to suffer major defeats when the economic system finally goes down. The system will go down. It is not clear what will pull the trigger, but it is obvious that the banking system is fragile, and the only thing capable of bailing it out is fiat money. The system is sapping the productivity of the nation, because the Federal Reserve's purchases of debt are siphoning productivity and capital out of the private sector and into those sectors subsidized by the federal government.
But what if one wants Ron Paul to be elected? Can one vote for Ron Paul then?
Find Out If You Are Doing Things Which Might Be Considered Suspicious
The single most often broached argument that Liberty Movement writers, analysts, and strategists are confronted with by skeptics alongside well meaning but cynical newcomers is the assertion that while we happen to be very effective at pointing out the dangers of globalism and centralization, we rarely seem to take the initiative to offer “solutions” to the problem. This same argument is also used by establishment shills as a way to distract the public’s attentions from the very real despotic enterprises of their elitist employers. In reality, the contention that the Liberty Movement offers no solutions is entirely false. We have constructed many. The problem is that these solutions are not the kind that the general American public wants to entertain. The bottom line is that there is little time left for top-down political fairytale dreams, and little utility left in standard street actions. The real solutions require blood, sweat, and tears, starting with a method I have discussed for quite some time: Decentralization.
Justices Souter and O’Connor, Intelligence Agency Heads and Congressmen All Warn of Tyranny in America
Bernanke took the plunge yesterday by embarking on QE3 or what would be better described as “Currency Debasement 3”. Improving the U.S. job market and therefore economy was the reason given for the extremely radical measures. However, the scale of the open ended monetary commitments suggests the Fed is worried about another Great Depression and an economic collapse. The move was described as "stunningly bold" by some analysts as it is "open ended" with Bernanke pledging to print or electronically create, with no time limit, an extra $40 billion every single month until the labour market improves. This is the frightening vista we have been warning of for some time. It means that should the US economy enter a recession and or depression, which still seems very likely, that the Fed will continue printing money and debasing the dollar thereby leading to dollar devaluation and inflation - potentially virulent inflation on a par with or worse than that seen in the 1970's. We had long said that QE3 was inevitable - the question was when rather than if. Indeed, we had said that given Bernanke's closeness to Wall Street we expected that QE4, QE5 etc. were likely. The "open ended" nature of this new round of QE as enunciated yesterday means that the Fed could if it wished or believes it is necessary print unlimited quantities of dollars.
"Yellow journalism" – which seems almost the only kind we have these days dominates our newsflow, but the truth is out there. As with everything else though, it's subject to Pareto's Law. So, 80% of what's out there is crap, and 80% of what's left is merely okay. But that remaining 4% of quality, uncensored, free information flow is extremely valuable. The terminal corruption of the major news corporations and the lack of interest in seeking the truth among the general population augurs very poorly for the prospects of the US and the current world order. This creates speculative opportunities, but prospects for mainstream investments are not good. Western civilization is truly in decline and far down the slippery slope.