Posts Tagged ‘poverty’

Tic, toc… tic, toc…

September 9, 2011

As outlined in these pages over the past few years, the hammer is about to strike the 12th hour…

Prospect Of Empty Coffers Looms Large

http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_08/09/2011_405503

The gravity of the situation is indicated by the fact that the government [of Greece] has frozen all disbursements apart from salaries and pensions.

If you think only Greece is in such dire straits you have anothing thing coming… can you sing the Jaws-is-lurking tune?

Count down to war ticking inexorably away….

 

What you can do

January 16, 2011

If you like many today, feel the Western democratic political process has failed you. If you, like many others, feel you have been taken advantage of by your leaders. If you, like many others, feel you are enslaved by an economic system that exploits you and gives nothing back. If you, like many others, feel there must be an alternative.

Here is what you can do and it won’t cost you any more than US$50. Not only that but it is also legal and safe. No need to take to the streets and risk being shot by an increasingly detached, tetchy and arrogant government.

Read on.

If you follow this blog you know I contend the monetary system is upstream of all human dynamics. Thus our entire socio/economic construct inscribes itself within our monetary system. Similarly, you will also know that the choice and management of the monetary system falls outside of the democratic process. Ergo, not only do politicians impose the system upon society but they also retain the right to manage it by decree.

So much for capitalism or, indeed, for our “open” societies based on democratic principles.

Western politicians have imposed a debt based fiat monetary system upon our societies. In the USA it started in 1913 and then from 1971 it gradually spread to all other countries.

The problem is that debt based fiat money is predicated on inflation. But inflation is a dynamic that conforms to the law of diminishing marginal utility so that greater degrees of inflation are progressively required in order to obtain the same result. In this case the “result” we seek is GDP expansion. So that in  order to keep GDP on a positive trajectory in a debt based fiat monetary system, government must necessarily induce progressively greater degrees of inflation in the economy.

But since inflation conforms to the law of diminishing marginal utility, it follows that the effect of inflation on GDP expansion must inherently be limited mathematically.

https://guidoromero.wordpress.com/2009/11/07/the-utility-of-a-fiat-monetary-system/

As the effect of inflation gradually wanes as it is mathematically true it will, government must necessarily intervene in the economy directly and at progressively greater and deeper degrees till government becomes the largest actor in the economy. This dynamic is accompanied by increasingly more severe and pervasive political crisis that is necessarily always accompanied by expedient politics, aberrant economic regulation and increasing degrees of corruption. As this dynamic evolves, social unrest becomes more pervasive and increasingly violent until it morphs into organized social unrest i.e. revolution.

History is replete with examples of what happens when a sovereign currency is debased.

The clearest indication that our current monetary system is pushing the mathematical limits is the endemic and pervasive corruption that permeates Western governments and institutions. It is clear today that the civic and political mechanisms that have made the West the envy of developing societies around the world have lost their intended function. Western governing elites no longer represent the aspirations and the hopes of their people and are instead beholden to select banks, corporations and unions in an attempt at maintaining the spending power of their office and that of their cronies in an attempt at perpetuating their own personal self interest.

I suppose that one of the clearest and most glaring examples of the incestuous and self serving nature of Western governments is given to us by none other than current US President Barak Hussein Obama whom, despite his pledge of change that carried him to the White House, just nominated another bank executive to the position of White House Staff thus not only reinforcing but also confirming and shouting it out loud from the roof tops that it is the banks that today pull the strings of puppet politicians.

But enough ranting.

Democratic politics is no longer a viable option for the common people. So, other than a violent uprising a la Tunisia, what can everyday folks do?

The easiest, most effective and devastating way to affect the political dynamic today LEGALLY is to exploit the weakness of the monetary system.

I say “legal” because it is still legal to suggest what I am about to suggest. However, beware! In Holland for example, a law is being debated that would criminalize the mere act of suggesting something similar to what I am about to suggest.

WHAT YOU CAN DO

Debt based fiat money is predicated on the constant expansion of inflation. Inflation can only be expanded if the credit markets can be expanded.

You want to bring down currently sitting politicians and institutions?

Then you can prevent the expansion of the credit markets.

The easiest way to do that is to start accumulating gold and silver ingots or coins. We are not talking large sums here. If every person on earth acquired one silver ingot/coin and one gold ingot/coin that would suffice to bring the whole house of cards down. We are talking of an investment of US$50 per person at the most. Fifty Dollars!!!

If every single citizen in the West were to purchase one ingot or coin in silver and/or gold, that would deal a very serious blow to the major global banks. Take down the banks and you’ve paralyzed the political process.

If you really wanted to push the boat out there are other things you could do. Once again. These are so far all absolutely legal ways to put a very quick stop to the entire farce that is our political process.

Withdraw all your savings from the major global banks. Open accounts in smaller banks or cooperatives or just hold on to the cash. By withdrawing your savings you force banks !

to curtail their leveraged exposure.

WARNING!!!

These are very simple but lethally effective ways to put a stop to our governments and their shenanigans. But like everything in life, each action has an equal reaction.

Taking down the banks and paralyzing the political process is easy. In fact it is so easy most people cannot believe it is possible. But it is.

The downside of taking down the banks is that we’ll create dislocations in a myriad sectors of the economy and life in general. Things like public transport or trash collection might be terminated for example. Fuel deliveries might be disrupted. Road and bridge maintenance could be adversely affected. Pension funds might blow up.

Any of the above is possible and more.

However, there is a rationale for taking bitter medicine now rather than letting things plod along as they are.

By letting things plod along, not only are our social services and social safety nets already compromised but there is a more than reasonable certainty that our “leaders” are going to plunge us into a world war.

Essentially, as the monetary system is hitting the buffers and politics have become incestuous and corrupt, social expenditure must be curtailed. Curtailing social expenditure at the same time that the governing elite is caught neck deep in corruption will lead to social unrest and eventually to revolution.

But I guarantee that our “leaders” will not let revolution happen in the “developed civilized” West. Before social unrest morphs into revolution, our leaders will have packaged a nice war somewhere to fight an evil empire that ostensibly threatens our way of life.

The choice today is: bring down the political system legally and lets take the consequences of the subsequent dislocation that is sure to follow … or … plod along as we are doing today and let our “leaders” send our children to the slaughter along with countless and nameless children of parents in faraway lands.

A bon entendeur…

No joy in confirmation…

February 25, 2010

Greece, Spain, Latvia, California, the UK, Italy… it could be anyone.  It really does not matter. What matters is that this is the clearest indication yet that our monetary system has hit a brick wall; a mathematical brick wall that is enshrined in a monetary logic predicated on accelerating credit and money creation at rates that far exceed the rate of growth of the economy.

The rationale for the use of an unchecked fiat monetary system is well established. Fine. Now we have to deal with the political and social consequences of said system. Namely, when the monetary system hits the wall as it did in the 30s and again in the late 60s and again today, the result is always the same i.e. excess debt, gross industrial overcapacity thus rising unemployment, declining purchasing power,  implosion of asset values with the direct result of a collapse of state tax revenues.

Under these circumstances, rolling over debt becomes increasingly difficult till the moment it becomes impossible. Try this for size. Just in the current year 2010 the USA will have to roll over something in the region of US$450Billion. That’s just the USA.

If you cannot spot the problem, here it is. In a US$ based fiat monetary system predicated on floating exchange rates as we have today globally, sovereign currencies derive their value from the value of other currencies. Hence, sovereign currencies derive their value from other sovereigns buying each other’s sovereign debt.

$450Billion is pretty much a whole chunk of the entire global sovereign ability to buy debt. This means that in order to succeed, the US government must attract virtually the entirety of budgets of most sovereigns thus leaving no funds available for countries to buy any other country’s debt…. ergo… the floating exchange rate mechanism as contemplated by our current monetary system is broken…. kaput; dead; it is no more; it is pushing up daisies;

Where do we go from here?

If our politicians were a sober well meaning bunch, I’d say we have nothing to worry about. A bit of austerity for a few years and we’ll be on our way again.

But politicians being what they are and operating in a legal and political environment that is geared towards ensuring expediency over efficiency or intrinsic value, I say a world war is a lock-in.

The problem starts with the inability of government to finance its requirements via tax revenue.  Thus government increasingly relies on the capital markets. As even the capital markets begin to show the strain, governments must curtail public spending.

http://cbs13.com/local/tracy.911.calls.2.1502690.html

Curtailing public spending brings you this:

http://news.sky.com/skynews/Home/World-News/Greece-Mass-Strike-Over-Tough-Economic-Measures-Sees-Country-Grind-To-A-Halt/Article/201002415558481?lpos=World_News_Second_Home_Page_Feature_Teaser_Region_0&lid=ARTICLE_15558481_Greece%3A_Mass_Strike_Over_Tough_Economic_Measures_Sees_Country_Grind_To_A_Halt_

http://www.businessweek.com/globalbiz/content/feb2010/gb20100224_114271.htm

http://www.independent.co.uk/news/world/europe/europes-winter-of-discontent-1908527.html

As you curtail public spending and as public anger rises, and as the shenanigans of the power elite keep coming to light(http://www.mcclatchydc.com/2010/02/24/88119/as-insurer-hiked-rates-39-executives.html

the public is sure to turn violent.

As the public turns violent, governments take the brunt of the violence and political control may be lost and anarchy and/or revolution ensue.

That’s the point at which governments must have done their homework well in advance and prepared a bogeyman somewhere off their shores so as to be able to, the moment come, turn the attention of the masses away from their own failings and the failings or our entire economic/social/political models.

Unemployment… (deflation at work)

January 1, 2010

… or employment… whichever measure you prefer, still not improving.

http://news.yahoo.com/s/ap/20091231/ap_on_bi_go_ec_fi/us_economy

Excerpts, emphasis added:

Thursday’s report illustrates the two different trends: first-time jobless claims are falling as layoffs ease, but the total number of people collecting unemployment checks is still rising. […] But the extensions are set to expire in February. That could mean as many as 1 million people would run out of unemployment aid in March, according to the National Employment Law Project, a nonprofit group. […] Fifteen million Americans are out of work, an increase of 3.8 million since the start of 2009. There are six unemployed people, on average, for each available job. And the so-called underemployment rate, counting part-time workers who want full-time jobs and laid-off workers who have given up their job hunt, stands at 17.2 percent.

The key here is that whichever way you slice it, unemployment/underemployment is still rising. Admittedly employment data is a lagging indicator but the key point here is that unemployment has not yet stabilized. Also, the Federal government has enacted legislation aimed at extending the period of unemployment benefits. Though noble the intent may be, it also masks the true picture of unemployment.

But, here is the kicker. Emergency Unemployment Compensation is a great concept. But extending it over and over again is putting strain on what effectively is already a horrible fiscal situation as brought about by declining tax revenue.

Declining tax revenue and rising unemployment is what deflationary depressions are made of.  If so far you should not have felt what are widely considered the common sense effects of deflation it is because till now the effects have logically been “confined” to the arcane world of finance. Just for kicks, try asking the major banks why they would rather not abide by mark-to-market accounting rules that are mandatory for every other business in the land. But, fear not, I bear good news. The effects of deflation at the street level may begin to show imminently anyway. Here is what I freely admit is still anecdotal evidence:

http://www.cbsnews.com/stories/2009/12/31/business/main6042878.shtml

Excerpt:

Colorado’s minimum wage will drop slightly in the new year – the first decrease in any state’s minimum wage since the federal minimum was adopted in 1938.”

Local, city and state finances are in a mess and in a bind. Cutting social expenditure is the only way to solve the budget crisis all states are facing. A $0.03 drop in the minimum wage does not even begin to address the degree to which wages, pension promises or public expenditure on infrastructure and services will have to be adjusted in order to balance budgets at state or federal level.

However, uncharacteristically for state employees, it appears that some may be seeing the light. Hat tip to Mike Shedlock for this find:

http://www.burlingtonfreepress.com/article/20091231/NEWS03/912310302/Vermont-state-employees-OK-pay-cut

Significant excerpt:

Unionized state employees overwhelmingly agreed to a 3 percent pay cut, voting to ratify a two-year contract that takes effect in July.”

You can read Mike Shedlock’s take here: http://globaleconomicanalysis.blogspot.com/2009/12/vermont-state-employees-union-votes-for.html

This is what 400 years of illuminism and the emergence of “reason” have come to

December 21, 2009

Not a surprise here. Just more confirmation of the end of the inflationary cycle where government is the largest actor in the economy and it seeks to perpetuate its existence by any means in spite of any legal or moral obligations as may prevail in society.

http://original.antiwar.com/fisher/2009/12/15/us-guantanamo-prisoners-not-persons/

Significant excerpts, emphasis added.

“The U.S. Circuit Court of Appeals in Washington, D.C., had ruled that government officials were immune from suit because at that time it was unclear whether abusing prisoners at Guantanamo was illegal. […] Finally, the circuit court found that, even if torture and religious abuse were illegal, defendants were immune under the Constitution because they could not have reasonably known that detainees at Guantanamo had any constitutional rights. […] Finally, the circuit court found that, even if torture and religious abuse were illegal, defendants were immune under the Constitution because they could not have reasonably known that detainees at Guantanamo had any constitutional rights.”

The elephant in the room…

December 20, 2009

Remember that the US$ is the world’s reserve currency and that we are running a floating exchange fiat monetary system.

Hat tip to Karl Denninger for the chart: http://www.market-ticker.org/archives/1752-There-Is-No-Way-Out-Of-This-Box…..html

https://i0.wp.com/www.market-ticker.org/uploads/Dec2009/credit-all.png

tic, toc… tic, toc…

December 14, 2009

Food stamps

http://www.bloomberg.com/apps/news?pid=20601012&sid=aFbqGE.lEdi0

Main stream media on deflation

November 20, 2009

http://www.bloomberg.com/apps/news?pid=20601068&sid=ame31IjWda6w

Here is a concept that is commonly misunderstood. From the article:

A sustained price drop might set off a chain reaction in which lower profits force employers to pare wages and payrolls. That would erode consumer demand, exacerbating wage cuts and firings.

A sustained price drop only reduces nominal revenue. Consequently, wages will have to be pared back.

Good.

But why would lower prices engender lower consumption? If prices and wages drop simultaneously, on a relative basis there would be no change to consumption.

The problem is debt.

Deflation reduces the nominal value of commercial revenues and wages. However, debt and debt service amounts remain at the same value as when they were first generated.

Government finances suffer the same fate. Deflation brings about reduced tax collection and  the bankruptcy of government.

So unless someone somewhere does not find a way to restart the credit markets and inflation at rates approximating anything like the period 2000/2007 Western governments are bankrupt with no possibility to postpone the day of reckoning.

War it is then.

Deflation at work…

November 17, 2009

http://detnews.com/article/20091117/METRO/911170327/1409/METRO/Silverdome-sale-price-disappoints

Nearly 35 years after taxpayers spent $55.7 million building the Pontiac Silverdome and a year after a $20 million sale fell through, city officials have sold the arena once called the most desirable property in Oakland County. […]  The price: $583,000. […] We had hoped it would have brought more, but now the city can be freed of its upkeep and get it back on the tax rolls,

This is what deflation does. It reduces nominal wealth thus it reduces overall revenue streams and so it reduces tax revenue. As nominal wealth declines, entities can no longer expand outstanding debt due to diminished collateral. As revenue declines, entities can no longer expand debt and/or service existing debt and must lay off workers. As tax revenue falls, local governments have to lay off and curtail public spending.

Allowing banks to disregard mark-to-market accounting rules aims to avoid just this type of situation in the hope to buy time.

But inflation has a limit. If that were not the case, then you would expect some degree of direct correlation between inflation and GDP progression. But that is not the case. Since 1980 government and household debt expanded by 1200% to $26Trillion but GDP only expanded by 100% to $14Trillion. Thus inflation conforms to the law of diminishing returns.

From the inception of the modern Dollar in 1913 inflation proved to be a barrier almost immediately in 1929. Subsequently, by declaring convertibility to gold but not allowing anyone to check the quantities of the metal in storage, the USA were free to pretty much print whatever amount of money they wanted. Till the late 60s when the situation was fairly similar to where we are today.

By the early 70s it was decided to abrogate the monetary agreement that had been in force since WWII in favor of floating exchange rates meaning that now Europe too was on a fiat monetary system. Thus inflation could now be pushed into the new vacuum of the European markets. Then came globalization effectively allowing us to push inflation into the last remaining markets and the Euro that allowed us to inject a further dose of inflation in Euroland. Thus till very recently, inflation could come to the rescue of governments by decreasing nominal debt outstanding.

There are no more markets of any consequence that we can bring in on the inflationary gig. Thus my contention that we’ve reached the end of the inflationary cycle.

Industrial capacity and debt obligations are at historic highs. Interest rates, savings and capacity utilisation are at historic lows.

Why would gargantuan spending by governments to add even more industrial and commercial capacity solve anything?

Incidentally. Gargantuan government spending guarantees prolonged deflation because increased taxes will erode spending, hiring and investment. Therefore, if anything, spending of this magnitude only serves to delay the eventual recovery.

So, buying time may be a viable strategy if and when inflation has room to run. I think inflation can no longer be expanded at this point and that a gradual contraction in prices, wages and asset values is with us for some years to come.

The trouble is that the existence of government if predicated on inflation. No inflation = the bankruptcy of government.

Can a Western government declare bankruptcy?

 

 

Civil unrest… tic, toc… tic, toc…

November 17, 2009

Countdown to global conflict…

http://southbendtribune.com/article/20091117/News01/911170329/1130