As we begin 2014, it is important to recognize the levels of INSANITY currently existent in the world enabling us to understand the apocryphal nature of the times we live in and prepare ourselves to meet the challenges it represents. The world is leveraged to an extent that has never before seen in history! Debt now masquerades as NOMINAL growth and REAL growth has ceased. Headline economic reports are now nothing more than POLITICALLY CORRECT HOAXES to FOOL the public at large and mask the betrayal of the public by the leaders who hold the reins of power. ECONOMIC Stagnation emerged after the 2008 Global financial crisis and in real terms has NEVER ENDED!
The greatest economic, political and societal collapse in recorded history is unfolding and has been doing so ever since the final denouement of partially sound money occurred at Bretton Woods II in August 1971 – thereby allowing governments, the financial systems and elites to substitute money printed out of thin air and politically correct/corrupt legislation for sound economic policies. This process has been unfolding for 40 years and is nearing its demise.
Growth now is a function of expanding credit, financing government and consumer consumption and calling it GDP. The developed world has become Something for nothing societies are like locusts they eat everything right down to its roots, including next year’s seed corn. They will issue debt until it no longer can be sold. They will print money until it is no longer accepted. This process is well established and underway (think Venezuela, Greece, Argentina, this is the future). To illustrate the LACK of GROWTH, look at this chart of GDP from Chris Wood at CLSA and subtract the deficit:
Most economists are PREDICTING accelerating GDP growth in 2014; you sure wouldn’t come to that conclusion based upon median family incomes since 2008;
Or the crash in PERSONAL incomes over the last year
As you can see, the only period that compares to this CURRENT CRASH in disposable income in the last 20 years was the crash of 2007-2009. Do you think this reflects a robust economy in 2014 as predicted by the MSM and Keynesians? To grow the economy, we must borrow money to finance spending and report it as GDP. DEBT MASQUERADING as GROWTH!
Now, the developed world’s economies have been hollowed out (by runaway regulation, taxes and crony capitalism) and much of the wealth creation occurs in the emerging world. Crony capitalists and their minions in government just attack the private sector where future growth and productivity must come from. They carve it up and destroy the future creative destruction (aka “Capitalism”) which must occur for growing middle classes and economies. The powers that be are MINTING fire hoses of NEW money, creating at least 8000 million dollars/yen a DAY (2 million million a year or 2+ trillion per year) to support the global economy, bankrupt sovereigns and financial systems. Very little BAD can happen when they are printing and injecting this amount of money into the financial system and government coffers on a daily/yearly basis.
“Currencies don’t float they just SINK at different rates”
- Clyde Harrison
Asset-backed economies provide the ILLUSION of growth in the developed world driven by currency depreciation (ASSET prices rise/reprice as the purchasing power of the currency they are denominated in sinks) and never-ending leverage to fund consumption and HIGHER ASSET prices. This is insane behavior, but now is the last refuge of the powers that be.
Insanity in individuals is something rare - but in groups, parties, nations and epochs, it is the rule.
- Friedrich Nietzsche
The crisis will GROW and GROW and continue to unfold until enough people WAKE UP and people begin to take action to preserve themselves, at which point volatility will explode.
"Men, it has been well said, think in herds. It will be seen that they go mad in herds, while they only recover their senses slowly, and one by one."
- Charles Mackay, Scottish journalist, circa 1841
Authors note: Tedbits is global Macro analysis PURELY through the AUSTRIAN lens and when this “Pandora’s Box” series concludes I will have extracted you from the MATRIX of UNREALITY and cut through the ILLUSIONS of the Keynesian world most people live in. YOU will KNOW the truth and SEE the unfolding collapse of the developed world unmasked from political, main stream media and monetary illusions. In coming issues will be covering, stocks, bombs er bonds, something for nothing societies, energy and natural resources, commodities, precious metals and currencies, policies of insolvency, G-8 economies, China, suppressed volatility, politically correct and practically incorrect economic stats, demographics, debt, deflation, inflation, etc. All black swans: which one will land first? Don’t miss an issue as subscriptions are free CLICK HERE. We are nearing the endgame of this global insanity and the opportunities are as great as the pitfalls. The unfolding CHAOS will escalate and escalate as waves of insolvency strike fiat currency and credit systems over and over until the reorganization and reset takes place in the near future as Mother Nature forces man to yield to REALITY. A King Canute moment LOOMS!
What is the REALITY I speak of? It can be summed up in THREE words: COMPLETE SYSTEMIC INSOLVENCY. The world is locked into debt spirals where debt just continues to compound and growth has become a STATISTICAL fiction. They are simply unpayable and inextinguishable PROMISES TO PAY (Bonds and the IOUS /“currencies” in which they are denominated: IOUS denominated in IOUS) at every level of Government, and the FIAT Currency and financial systems are their circulatory systems.
Add to this the MORAL and FISCAL insolvencies which has evolved throughout the developed world governments who are SOCIALIST in everything but name only.
“The American people will never knowingly adopt socialism. But, under the name of “liberalism,” they will adopt every fragment of the socialist program, until one day America will be a socialist nation, without knowing how it happened.”
- Norman Thomas 1944
Socialism is MISERY SPREAD WIDELY as economies collapse under its policies. It is the transfer of wealth from the poorest (aka the private sector, individuals and small businesses in particular) among us to the central governments and their special interest constituents as THEY are the most defenseless to their policies. In other words, you and me.
"Socialism is a philosophy of failure,The creed of ignorance,and the gospel of envy,Its inherent virtue is the equal sharing of misery.."
- Winston Churchill
This socialism and financialization of world economies has careened out of control, funded by MONEY PRINTED out of thin air since 1971! Bretton Woods II was a breathtaking betrayal of the American people and the developed world as money being a store of value CEASED to EXIST.
At Bretton Woods II, the developed world’s economies were converted from Capitalist economies (based upon semi-sound money, sound regulatory policy which encouraged and rewarded entrepreneurism and wealth creation, producing more than you consume, creating real wealth/savings and allocating capital to people that delivered more goods and services for less money).
This RECIPE had been in place since the founding fathers were inspired by GOD and created the US constitution and a nation of FREE MEN. All that is required for REAL wealth creation is FREEDOM from the shackles of corrupt rulers and human behavior. We did it for 200 years and created the wealthiest country the earth had ever known.
“Capitalism has created the highest standard of living ever known on earth. The evidence is incontrovertible and yet those who are loudest in proclaiming their desire to eliminate poverty are loudest in denouncing capitalism. Man’s wellbeing is not their goal.”
- Ayn Rand
Deng Xiao Pings epiphany on capitalism and that to “Get rich is glorious” has lead china to the top of the world’s GDP tables in just 25 years. The Chinese people suddenly were given the freedom to reap the rewards of their efforts and human behavior, once again, did the rest.
“The best way to destroy the capitalist system is to debauch the currency. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.The process engages all of the hidden forces of economic law on the side of destruction, and does it in a manner that not one man in a million can diagnose.”
- John Maynard Keynes, 1920
Bretton Woods II turned the developed world economic models into economies which consumed more than they produced, borrowed money from the future, converted the monetary systems into confiscation devices of morally bankrupt governments, elites and banking/financial systems. Economic growth is now a function of credit expansion, government growth (consumption/spending labeled as economic growth), and misstated inflation. And a redistribution scheme where the unproductive TAKERS loot the MAKERS of wealth with public servants in charge at the point of a government gun.
At least 10 to 20% of this debt is NO GOOD, UNPAYABLE, INEXTINGUISHABLE and SITTING on the books of the financial (banks), insurance and pension industries. This bad debt is far in excess of the reserves held to offset losses. The US economy now requires about $11 dollars of new debt to create $1 dollar of GDP! A big portion of this debt was and is used to finance welfare state consumption, thus it is not self-liquidating. It is just a FUTURE tax on our and our children’s income.
When this leverage FAILS, and it will, we will face a CURRENCY and FINANCIAL system EXTINCTION event. Note how this tiny reduction in leverage in 2007-8 almost destroyed the GLOBAL financial systems. Reserves against losses have dwindled to a point in which we essentially run an UNRESERVED financial system. The rules of Basel III is now being debated as to whether banks can run with 3 or 4% common equity, the difference being whether they run at 25 to 1 leverage or 33 to 1 leverage… Operating with INSANE levels of LEVERAGE, especially in a fasby 157 world where assets are marked to model/MYTH. PROPERLY MARKED the Developed world’s banks are operating in regulatory approved INSOLVENCY. The Federal Reserve created approximately $15 trillion dollars ($15 million million) during that period and injected it to prevent bankruptcies throughout the developed world’s financial systems.
As New Chairman Janet Yellen and vice chair Stanley Fischer (mentor and teacher to so many of today’s central bankers) set to take office you can expect an event to materialize shortly as markets challenge them as they have every new chairman in the last 50 years (Miller, Volcker, Greenspan, Bernanke). No one knows where the challenge (dozens to choose from as I will outline in this series) will come from but you can bet it will ARRIVE shortly (2 to 18 months). The federal reserve has three mandates: foster inflation of 2% a year, support employment and NOW GUARANTEE the GLOBAL financial system with their printing presses.
Quoting Ludwig Von Mises:
"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."
- Ludwig von Mises
Something for nothing societies (communist/socialist) now inhabit what once were capitalist economies in the developed world. The public school monopolies have now turned the majority of their citizens into “USEFUL IDIOTS” (as described by Vladimir Lenin) who believe hard work is not a requirement for success and happiness, but is simply a lifestyle choice. This lack of education has destroyed their ability to get a job, advance or think for themselves, making them RIPE for Main stream media MANIPULATION. They are not taught how to think for themselves but what to think.
A democracy will continue to exist up until the time that voters discover they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship.
- Alexis de Tocqueville 1835
The dictatorship de Tocqueville speaks of is under construction in Washington DC (the district of corruption). Central Planning has become the policy of government. Growth in government started its transition from servant to master after Bretton Woods II when it became UNSHACKLED from SEMI-sound money:
Government is not reason; it is not eloquent; it is force. Like fire, it is a dangerous servant and a fearful master.
- George Washington
The UNITED STATES has now become the nation the constitution was meant to PREVENT, a socialist centrally-planned economy on its way to dictatorship as the economy fails and the something for nothing societies EAT the minorities who actually produce REAL wealth. Cannibalism of the worst sort! The founding fathers CAREFULLY crafted the constitution to protect minorities from the tyranny of the majority. Those protections have now been dismantled and what’s left of the private sector sits on the buffet table.
Those protections are now routinely repealed/ignored as we recently witnessed the REPEAL of the 60 vote majority rule by Senate democrats. That rule has been in place for 229 years and its demise will allow all sorts of political ideologues to ascend to positions where the checks and balances of our government (which are essential to the freedoms of all) are REPEALED or ignored.
The regulatory state, implemented since 1971, stands ready for ENFORCEMENT during the UNFOLDING crisis which the economic and financial collapse will create (this will be covered in detail in subsequent editions of TedBits). Most of US citizens break dozens of laws on a regular basis and don’t even realize it, as the laws are too numerous and complex to comply with, unknowingly waiting for the government to show up and arrest/fine them if they GET OUT OF LINE! (Ask Jamie Dimon about this)
A steady theft of freedom through CENTRAL GOVERNMENT regulation has been in process since 1971 when the road to Leviathan government was ALSO born at Bretton Woods II. Get ready to hear from our masters inside the beltway, Brussels and world capitals: “IT’S THE LAW” will be their rallying crie as their authoritarianism finds no limits as future events unfold.
“The more corrupt the state, the more it legislates”
What you see below is nothing less than the creeping corruption of our federal governments and the rise to power and wealth of those who control it. Now, global capitals and the political parties are nothing but the Gotti’s and Gambino’s fighting turf wars known as elections to see who gets the front row fleecing the sheep aka what’s left of the private sector.
Competition, Capitalism, Innovation, Freedom is INCREASINGLY PROHIBITED by LAW!
When you see that in order to produce, you need to obtain permission from men who produce nothing; when you see that money is flowing to those who deal not in goods, but in favors; when you see that men get rich more easily by graft than by work, and your laws no longer protect you against them, but protect them against you...you may know that your society is doomed.
- Ayn Rand - Atlas Shrugged
This is the face of Crony Capitalism being IMPLEMENTED, the beltway is controlled by those with the most money. Just 10 corporations control most of the brands you use every day:
Each one of these employs armies of LOBBYISTS to INFLUENCE the LAW for them and against their customers and competitors, let’s call it politically regulated demand.
"Europe Is Now Run By Big Banks, Big Business, and Big Bureaucrats"
- Nigel Farage UKIP
And the United States I must add. For a thorough discussion of the illuminati and who REALLY OWNS the world, this video is a must see - James B. Glattfelder: Who Controls The World. Add to this the 19 too-big-to-fail banks which own and control the Federal Reserve (government granted currency and financial system monopoly) and you know who controls the central government in Washington, Brussels and the developed world’s capitals.
"Let me issue and control a nation's money and I care not who writes the laws"
- Mayer Amchel Rothschild
It has now been 100 years since this statement became true in the United States and it is clearly the reality in which we live. Can anyone give me an example of a MONOPOLY which serves its customers before themselves? The Federal Reserve was created in 1913, and a monopoly on money was exchanged for UNLIMITED funding government.
Remember Bastiat’s words from the beginning of this commentary? Look around you; is this not the situation TODAY? Is it impossible to lose money you lent to others if you PRINTED IT OUT OF THIN AIR. In exchange, the banks which own the Federal Reserve were given the go-ahead to run the U.S. to their benefit rather than the benefit of the American people. The founding fathers knew these rascals well and placed constitutional bars to fiat money which have been completely circumvented. For 135 years, these rascals tried to circumvent the founders’ intentions and the battles happened continuously until Woodrow Wilson finally succeeded and betrayed the American people.
The developed world’s money was converted to IOU’s in 1971 and the road to debt slavery for the nation and its citizens began. Socialists throughout the developed world didn’t utter a word when the final strings of the dollar to gold were CUT. The printing press and ability to fund politicians’ grandest plans suddenly became affordable and within their grasp. Their greed became UNBOUNDED as did that of the banking systems, corporations and elites who controlled them.
”Of all contrivances for cheating the laboring classes of mankind, none has been more effective than that which deludes them with paper money.”
- Daniel Webster
The transfer of wealth from those that hold it in paper to those that don’t accelerated. There is also a secular ECONOMIC decline which began that day. As politicians substituted political choices of governance for practical ones, the conditions for REAL WEALTH creation have been destroyed. As this has evolved over 4 decades, nominal growth has taken over real economic growth. These are the Keynesian illusions which are used to FOOL you.
Now, wages are PAID in paper wealth and the equivalent of JUNK bonds: promises to pay by entities which are financial zombies and walking dead also known as developed world governments, central banks and financial system, SUCKING the wealth (purchasing power) out of the money people are paid in and store their wealth in. Author’s Note: In my opinion the greatest manmade disaster and OPPORTUNITY in history is unfolding in every corner of the world. Are you diversified or operating with EYES WIDE SHUT? Are you prepared to turn it into opportunity by properly diversifying your portfolio? Adding absolute return investments which have the potential to thrive (up and down markets) regardless of what unfolds economically? Hedging the printing presses impact on your paper money? This is what I do for investors; help them diversify into investments which are created with the potential thrive in the storm. For a personal consultation with me CLICK HERE! Nothing can be done to avoid the UNFOLDING collapse. It is written in stone and has happened countless times in history and we are below the event horizon of a proverbial BLACK HOLE, thus our fate is INESCAPABLE. We have placed our trust in sociopaths and psychopaths and they are driving us to the ultimate societal and financial denouement. It is a story that can be seen littered throughout history and the FINAL outcome has never deviated. It is a story of Man versus God and Darwin, and Mother Nature.
Man may win skirmishes during the ongoing conflict to define reality, but has NEVER WON the WAR. This is a MAN-MADE disaster of epic proportions and the people who have created the disaster have NO ABILITY to FIX or STOP IT!They live inside a Keynesian matrix and KNOW NOTHING ELSE, the ability to restart real growth, restore freedoms and incentives to produce are unknown and inconceivable to them. In fact, they have no desire to do so, as the crisis unfolding offers the opportunities to take freedoms and to control others to “SAVE US”! This is called the Cloward Piven strategy of collapsing societies and financial systems to seize control and is unfolding as we speak…
“A crisis is a terrible thing to waste”
-Rahm Emanuel, WH chief of staff
In closing: 2014 will be a year when we stumble from one crisis to another until BANG the BIG kahuna hits. We know they will ALWAYS look to paper printed out of thin air to solve any EXCESSES which may erupt. Remember, to a Keynesian the solution to ANY PROBLEM is always monopoly money and unreserved credit, if that doesn’t do it CREATE MORE. The 2014 outlook series will open your eyes to the various cliffs edges we are at the precipice of. Austrian economics are extremely PREDICTIVE and few Austrians where surprised in 2008.
“The U.S. government has a technology, called a printing press, which allows it to produce as many U.S. dollars as it wishes at essentially no cost.”
- Ben Bernanke, Chairman of the Federal Reserve
Since 2008, some issues have diminished - The banks in the US (Europe has done NOTHING) have more reserves from FINANCIAL repression. Corporations have repaired and refinanced TON’s of debt and slimmed down expenses and trillions of dollars of toxic debts have found their way onto central bank balance sheets where they can die a quiet death. The Central Banks have restored a great amount of control and stability to their ponzi economies, but cannot control what comes out of PANDORAS box.
Empires rise and fall upon the foundations of their CURRENCY, Financial, economic and political systems and this time is NO DIFFERENT. This is the biggest episode in HUMAN HUBRIS in history, as rarely have we seen so many areas across the GLOBE practicing the same suicidal societal behaviors. Authoritarianism is reaching a crescendo and, as the tide turns, they will be wiped out.
These behaviors are well-chronicled throughout history and it is history repeating on the grandest scale in history as globalization assures it. The collapse will be the LARGEST in recorded history, written about and studied for decades or centuries into the future. I am dedicated to explaining it to you to prepare yourselves to prosper rather than to be a victim of it.
DO NOT BE AFRAID. This could be the greatest opportunity of your life. Let’s chat. CLICK HERE
It is inflate or die for the powers that be. They know the ECONOMIC and financial system collapse is INEVITABLE, but will play their hands until the ultimate denouement when the LEVERAGE FAILS. The leaders of the developed world are the man with a gun to his head: Will he duck or take the bullet? You know the answer. Of course they will duck… and let you (PUBLIC at LARGE) take the bullet.
Authors note: Tedbits is global Macro analysis PURELY through the AUSTRIAN lens and when this “Pandora’s Box” series concludes I will have extracted you from the MATRIX of UNREALITY and cut through the ILLUSIONS of the Keynesian world most people live in. YOU will KNOW the truth and SEE the unfolding collapse of the developed world unmasked from political and monetary illusions. Don’t miss this series as subscriptions are free CLICK HERE.
In coming issues, I will be covering, stocks, bombs er bonds, something for nothing societies, energy and natural resources, commodities, precious metals and currencies, policies of insolvency, G-8 economies, China, suppressed volatility, politically correct and practically incorrect economic stats, unmargined derivatives, financial repression, QE, demographics, debt, deflation, inflation, etc. All black swans: which one will land first TRIGGERING the next CRISIS? In my opinion this is the greatest opportunity in history but you need a clear vision of it, don’t miss the next TedBits! - CLICK HERE.
Gold and silver backed means that various commodity options strategies in gold and/or silver may be used. When buying options, you may lose all of the money paid for the option. When selling options, you may lose more than the funds received for selling the option. Strategies using combinations of positions, such as spreads or straddles, may be as risky as taking a simple long or short position. A high degree of leverage is used to buy or sell a sufficient quantity of options and/or underlying futures contracts equal to the value of the entire portfolio. The high degree of leverage can work against you as well as for you and lead to large losses as well as large gains. Absolute-return is not meant to imply that a positive return can or will be achieved. Absolute-return describes investment strategies which are designed to have the potential to succeed in rising, market-neutral and falling market conditions. Gold and silver backed and absolute return investments do not mean the investor will take actual physical possessions of any precious metal. Nor should any promise or guarantee be implied that such investments will perform better than any other investment in any possible future scenario described herein nor that such investments can or will preserve or protect in such possible future scenarios.
TedBits may include information obtained from sources believed to be reliable and accurate as of the date of this publication, but no independent verification has been made to ensure its accuracy or completeness. Many of the statements and views made are the opinions of the author. Opinions expressed are subject to change without notice. This report is not a request to engage in any transaction involving the purchase or sale of futures contracts or options on futures. There is a substantial risk of loss associated with trading futures, foreign exchange and options on futures. This letter is not intended as investment advice, and its use in any respect is entirely the responsibility of the user. Past performance in never a guarantee of future results.