Economic Laws Are Not Optional

image

Courtesy of Monty Pelerin @ Economic Noise:

Economic laws are not optional. They are like the laws of physics – inexorable!

Economic laws are less precise in terms of their timing and effects, only because they deal with human behavior rather than physical particles. Human beings alter their behavior to cope with changing conditions. Particles do not. Free will and the survival instinct make prediction, especially regarding timing, very different and difficult in the human realm. Nevertheless, the laws are immutable!

Long-time readers of this website know that no recovery is possible given past and current economic policies. Initially, it was argued by some that government intervention was necessary and would effect an economic recovery. By now, even the dullest of Keynesians know their policies failed. Yet they continue.

Why would failed policies continue? The political class argues for their continuance, but not on the basis of sound economics. Their arguments are motivated by political self-interest. The appearance of a recovery is more important for politicians facing another election or a legacy than the damage being done to the economy. Remember when the focus of the Clinton campaign against George H. W. Bush claimed that it was the worst economy in fifty years? That was not true, but it was effective.

Stopping the Federal Reserve juice threatens what remains of our economy. No one wants to be known as the “new Herbert Hoover,” although someone will inevitably be tarred with that association.

Early Warnings

This website began in September 2009 recognizing the futility of applied economic efforts to “cure” the problem. The very first post appeared on September 7, 2009 and was entitled No Exit From Economic Mess. To put matters into perspective, the government claimed the recession had ended in June of 2009. This economic lie was apparent to anyone who had a modicum of economic understanding or common sense. The more of the latter one possessed, the less of the former was required.

Over time I have come to believe that the two types of knowledge may now be incompatible — a sad commentary on how the economic profession has been hijacked by the political class. A good rule of thumb is to ignore any economist who is involved in politics. Unfortunately, with government grants, that includes much of the profession, including those never directly employed by government. Continue reading

Precious Metals In 2014

Yet another great article by Alisdair Macleod and courtesy of Goldmoney.com:

“Now the New Year reviving old desires
The thoughtful Soul to Solitude retires”
Rubaiyat of Omar Khayyam

It’s that time of year again; when we must turn our thoughts to the dangers and opportunities of the coming year. They are considerable and multi-faceted, but instead of being drawn into the futility of making forecasts I will only offer readers the barest of basics and focus on the corruption of currencies. My conclusion is the overwhelming danger is of currency destruction and that gold is central to their downfall.

As we enter 2014 mainstream economists relying on inaccurate statistics, many of which are not even relevant to a true understanding of our economic condition, seem convinced that the crises of recent years are now laid to rest. They swallow the line that unemployment is dropping to six or seven per cent, and that price inflation is subdued; but a deeper examination, unsubtly exposed by the work of John Williams of Shadowstats.com, shows these statistics to be false.

If we objectively assess the state of the labour markets in most welfare-driven economies the truth conforms to a continuing slump; and if we take a realistic view of price increases, including capital assets, price inflation may even be in double figures. The corruption of price inflation statistics in turn makes a mockery of GDP numbers, which realistically adjusted for price inflation are contracting.

This gloomy conclusion should come as no surprise to thoughtful souls in any era. These conditions are the logical outcome of the corruption of currencies. I have no doubt that if in 1920-23 the Weimar Republic used today’s statistical methodology government economists would be peddling the same conclusions as those of today. The error is to believe that expansion of money quantities is a cure-all for economic ills, and ignore the fact that it is actually a tax on the vast majority of people reducing both their earnings and savings.

This is the effect of unsound money, and with this in mind I devised a new monetary statistic in 2013 to quantify the drift away from sound money towards an increasing possibility of monetary collapse. The Fiat Money Quantity (FMQ) is constructed by taking account of all the steps by which gold, as proxy for sound money, has been absorbed over the last 170 years from private ownership by commercial banks and then subsequently by central banks, all rights of gold ownership being replaced by currency notes and deposits. The result for the US dollar, which as the world’s reserve currency is today’s gold’s substitute, is shown in Chart 1.

image

Continue reading

Why I Stopped Worrying And Learned To Love The Currency Collapse

We are on a monetary journey, trundling down the road fuelled by fiat and hope, hope that we will get to journeys end, all fit, healthy and wealthy. History and logic teaches us that a fiat experiment inevitably leads to failure, 300 years, 700 currencies, maximum life span 50 years. The inevitable will happen so raise a glass with friends and family, talk, share and enjoy, spend time wisely and appreciate every moment. Courtesy of Deflation Land:

Why I stopped worrying and learned to love the currency collapse

For the past 300 years, the historical pattern has been for the era marked by a century to continue into the following century by fourteen or fifteen years.

Let me explain. Everyone knows that the 19th Century, its uprightness, its optimism and sense of purpose, the halcyon days of British Empire, came to an end with World War I, starting in 1914 and building to a nasty crescendo by 1916. The 20th Century had arrived, and it had some real horrors in store for us. Continue reading

The Terrible Future Of The Syrian War

I read this article by Brandon Smith of Alt-Market blog and it reinforces what I believe about the Syrian conflict. It is a proxy war and no one will win, it is clear aggression by the global elite to start a world war but we must not let them. Not only for our own salvation but the salvation of all men, woman and children who will be killed, maimed, misplaced, regardless of what side they support. We need to highlight the false information they are are perpetuating and hold these ignorant, narcissistic and sociopathic poor excuses for human beings to account.

I do not wish for my children or their children to inherit an earth in which we allowed a certain 1% faction of our own society to ruin and desecrate it. We are the 99% and it is time we awoke to take back our lives and our natural right to freedom, happiness and liberty. Regardless of race, religion, colour or creed we are one species and we need to work together to remove our shackles or we will commit our children to live a life of blatant slavery. I for one will not stand for this, I ask anyone who reads this to make the right decision and hold those in power to account because if we don not make a stand, we are letting ourselves and our future friends and families down.

Full Article:

The last war America fought openly through proxy was the Vietnam War. The idea was not necessarily “new”; General Smedley Butler’s exposé on his career as a conqueror-for-hire, titled War is a Racket, uncovered a long history of bloodshed by U.S. government and corporate interests in third world countries designed to destroy sovereign nations and plunder their resources. This was done through the use of mercenaries for hire, military men acting covertly or guerrilla forces with a pre-existing agenda supplied through back channels.

After our defeat in Vietnam, our government set forth on a program of private warfare. The “School of the Americas” was formed, also known as the School of Assassins, in Fort Benning, Georgia. The combat academy churned out some of the most unstable monsters in third world politics. The U.S. trained and conditioned agents for violent social change and military overthrow, who were then implanted around the world (mostly in Central and South America). These agents then initiated war fever in the name of cementing U.S. interests around the globe. Their horrifying methods were seen as a means to an end.

image

The sad and disturbing reality is that most wars fought by our country over the course of the past century have not been fought on principle. Instead, they have been fought for profit and for the consolidation of power and oligarchy.

Vietnam was a break in the tradition of secret puppet conflicts, sending the U.S. into the realm of openly admitted proxy. The establishment wanted the American people to know that we were supplying funding and weapons to the South Vietnamese nationalists, meddling in a civil war which had absolutely no bearing on U.S. international relations or domestic policy. The rationalization then was that America had to stop the spread of communism. Ironically, the communists of North Vietnam were a minimal threat compared to the elitist communists within our own borders sitting in positions of political power.

Ultimately, the Vietnam War had nothing to do with fighting communism, and everything to do with manipulating the public into accepting the concept of foreign intervention. That is to say, we were being conditioned to think of interventionism as a perfectly normal U.S. policy.

The war in Vietnam was achieved in stages. First, the U.S. aided then abandoned the government of Ngo Dinh Diem, who was assassinated during a military coup inspired partly by Diem’s despotic mistreatment of the Vietnamese populace. Money was then sent to cement the power of the military junta in the name of countering the rise of the communist North. Soon, weapons and heavy ordinance were being shipped to the South. Then, U.S. “advisors” were sent to train South Vietnamese soldiers.

Full intervention was successfully avoided by the John F. Kennedy Administration until his assassination, after which President Lyndon B. Johnson launched into a full-spectrum U.S. invasion which the mainstream referred to as a “police action.” This invasion was facilitated by the “Gulf of Tonkin event”, which is now openly admitted by officials of the day, including Robert McNamara, as a false flag incident entirely fabricated by the U.S. government in order to engineer a validation for outright war. Simultaneously, Chinese and Russian interests began supplying the North, though their involvement never officially led to boots on the ground.

I rehash this history because I think it is important to note that the Vietnam theatre seems to have been recycled in Syria today, though the cast of characters has been rearranged slightly. This time, the U.S. and Europe has supported the insurgency. The government of Bashar al-Assad has been cast as the “villain”. Russia and China are now playing the role of mediators and peacemakers, while the West now sends men like Senator John McCain to throw money and weapons into the hands of a rebellion permeated with members of Al Qaeda, who decapitate and eat the hearts of prisoners on video, and who, last time I checked, were supposedly our enemy.

The process and escalation of the conflict has been very similar to our adventures in Southeast Asia. Money has been openly sent to the rebels. Weapons have likely been covertly sent (evidence suggests that this program was perhaps a part of the reason for the Benghazi incident and subsequent cover-up). Now, certain parties within the U.S., Israel, and the EU have suggested open armament of the insurgency, while destabilization of the region is blamed on Assad by the Western media. A false flag event seems to have already been fabricated in the form of a chemical weapons attack. Samples of a particular Sarin gas incident have allegedly been collected by French journalists from the La Monde newspaper, and have been supplied to the UN. The UN of course has identified the samples as Sarin and has immediately led the public to believe that the Syrian government was involved, though they have been forced to acknowledge that the insurgents may also have access to similar chemical weapons. My question is, who the hell is La Monde? Are we really supposed to believe that random embedded journalists with no agenda have supplied the UN with substantial proof of chemical weapons by the Assad regime? Where are these samples? Where were they taken? Where is the proof that they were taken during a combat incident? I smell an Iraqi setup special all over again…

In response to the accelerated armament of what many now consider an entirely fabricated revolution, Russia, Iran, and Lebanon have offered aid to Assad. Russia has supplied Syria with weaponry for years, though shipments have increased in recent months, including a new shipment of S-300 anti-aircraft missiles which has infuriated Israel (Israel has claimed it has no intention to escalate, even thought it has twice used airstrikes within Syria’s borders — their anger over S-300 shipments only shows that they intend to continue such aggression).

Iran has a longstanding mutual defense pact with Syria and has stated that any further direct incursions by the West will result in Iranian involvement (though I think it likely that they are already involved sending arms and advisors of their own). Lebanon has supplied actual ground troops to Assad through Hezbollah. They are aiding the Syrian army in what appears to be a successful campaign against the insurgency. Hezbollah was very effective in repelling an invasion by Israel in 2006, causing the United Nations to step in to provide face-saving resolutions and an excuse for Israeli retreat. I believe their involvement in Syria will be a game changer.

I have been writing and warning about Syria’s potential as a catalyst for an expanded global war for years, long before most people had ever heard of Assad, and much of what I have predicted in the past is now coming true. Whether you believe the Assad regime is good or evil, it is important to realize that our government’s involvement in the region has nothing to do with Assad. This conflict is about setting off chain reactions in the Middle East, and, perhaps, even triggering a world war. You can read more about this in my article “Syria And Iran Dominos Lead To World War.”

Using Vietnam and other proxy wars as a reference, here is how I believe the war in Syria is likely to progress over the coming months:

Heavy weapons will be supplied to the insurgency, including anti-aircraft weapons, leading to increased casualties, especially civilian casualties.

Assad will respond with expanded and deadly airstrikes and ground troops will advance with the aid of Hezbollah.

Iran will begin openly supplying arms, and step up covert supplies of advisors and ground troops.

Russia will increase arms shipments even further, including anti-ship, anti-tank and anti-aircraft missiles in order to dissuade U.S. and Israeli interests from sending their own forces into the area.

Syrian insurgents will begin losing ground quickly. The UN will offer to “mediate” a ceasefire, but this will only be designed to allow the insurgents time to regroup, and for the U.S., EU and Israel to position themselves for attack.

The UN ceasefire talks will be a wash, if they even take place. Israel will begin regular airstrikes in the name of stopping Iran and Hezbollah from interfering in the war, or to stop them from obtaining “chemical weapons.” The strikes will be aimed at Syrian military facilities and Syrian infrastructure. There will be many civilian casualties.

Syria will respond with ground to air and ground to ground missiles. Israeli cities will see far more precise targeting than the scud missiles used by Iraq during Gulf I and Gulf II. Civilian deaths will be much higher than expected, despite common claims that Israeli missile defenses are the most advanced in the world (Israel has never faced the threat of advanced Russian missile systems).

A no-fly zone will be announced over Syria, enforced by U.S. and Israeli planes, along with anti-aircraft batteries.

A violent attack will take place in Israel, likely against a civilian population center (I would not be surprised if chemical weapons are involved). The attack will be blamed on the Assad government, or affiliated allies. It might be a real attack or it might be a false flag. In either case, the result will be the commitment of Israeli ground troops.

I think it highly probable that Israel will be the first Western country to invade Syria. However, their involvement will immediately draw a declaration of war from Iran, and, increased ship movements from Russia, which maintains a strategic naval base off the coast of Tartus.

Israel will be swallowed up in a strategic quandary, and will demand U.S. military action. The U.S. will supply that action. Combat will spread into cross-border battles in countries not directly engaged in the fight (as it did in Cambodia during Vietnam).
China will respond with economic retaliation, dumping the U.S. dollar as the world reserve currency. Russia will respond by reducing petro-product exports to Europe and staging a massive naval presence in the region. From this point, all bets are off…
Now, the temptation here is for one to immediately take sides and to look at this conflict through the lens of “East vs. West.” This would be a mistake. The Syrian government has in the past acted in tyrannical fashion (though much of the latest accusations appear to be propaganda designed to lure the American public into rallying around another war).

Russia is just as restrictive an oligarchy as the U.S. or the EU. China’s society is a communist nightmare state and the average globalist’s aspiration for what they want America to become one day. Iran has many oppressive policies and is certainly not the kind of country I would ever want to live in. The Syrian insurgency is a mixture of immoral and unprincipled death squads and paid covert wet-work agents. The U.S. government is immorally supplying the cash and weapons for them to operate in the name of fighting the same kind of tyranny that is being instituting here at home.

The point is, there are no “good guys” in this story. There are no heroes; only the insiders, the outsiders, and the general public. It has been the habit of the public to ignore most past proxy wars and then flip on the patriotism switch during the rare occasions that American troops are actually deployed. Given time for adequate contemplation (as well as significant American losses), the citizenry eventually turns sour against the paradigm and demands a change. This time, however, there may be no time for such contemplation. I believe that any forward ground action in Syria on the part of the U.S. or Israel will result in a very fast moving global war.

Such a war would seem like insanity, but it serves a vital purpose for certain special interests. It would provide perfect cover for a global economic crash which is about to occur anyway, except in the midst of war, international bankers can divert blame away from themselves. It would provide a rationalization for overt domestic security and the reduction of civil liberties in the name of public safety. It would allow an excuse for a government crackdown on activist groups, who can be labeled “traitors” who aid the enemy simply by speaking ill of government policy. It would give credence to the ideology of globalization and centralized governance. The elites could claim that sovereignty must be erased and all nations must come together under a single banner so that such a “terrible catastrophe” will never happen again.

The war in Syria will not be about Syria. It will not be about the freedom of the people. It will not be about dethroning Assad or establishing democracy. It will not be about defusing violence in the region. Syria will not be the target; we will be the target — our society, our rights, our nation.

America is in the middle of the most insidious consolidation of power in history and Syria is merely a stepping stone in the game. If we cannot maintain our vigilance and allow ourselves to be sucked into the proxy war façade, the elites will get their global conflict with little to no home opposition. The globalists will win, and everyone else lose.

UK’s Current Debt Based Economic System

The current economic model is a debt based system using fractional reserve banking and fiat currency. What does that mean and what does it look like?

Money is created almost exclusivley by commercial banks who create the money supply through debt, this is called fractional reserve banking. By issuing more debt and loans they increase the money supply but only keep a fraction of the paper money in reserve. The majority of money now is digital money…numbers on a screen.

Currency is termed fiat because it is intrinsically worthless and derives it value from confidence in the currency only. The alternative would be to have a gold or silver backed currency.

image

I’ll explain fractional reserve banking by giving an example:

Imagine you deposit £100 into Bank A. Assuming a 10% fractional reserve ratio, Bank A then takes 10 percent of it, £10, and sets it aside as reserves and then loans out the remaining 90 percent, or £90. At this point there is actually a total of £190 in the system, not £100. The bank has loaned out £90, kept £10 in reserve, and substituted a newly created £90 IOU claim for the depositor which charges interest and is a profit loan for the bank. At this point Bank A still holds £100 reserves on its books, but £90 of those reserves are soon going to be needed to satisfy the loan recipient. The loan recipient soon spends the £90. The receiver of the £90 then deposits it into Bank B. Bank B demands £90 to be delivered from Bank A to Bank B.

Bank B is now in the same situation as Bank A started with, except it has a deposit of £90 instead of £100. Similar to Bank A, Bank B sets aside 10 percent of that £90, or £9, as reserves and lends out the remaining £81 thus creating £81 of IOUs to its depositors. As the process continues, more electronic number money is created.

Fractional reserve banking and its effects on the money supply have reaching consequences for the business cycle, monetary inflation, price inflation and interest rates. What disturbs me is that the banks are creating and benefiting from the interest generated from creating new money, rather than the UK itself. Should we as a country not issue the money and charge the banks for the privilege?

A study by Huber and Robertson ‘Creating New Money‘ (2000) suggested that the loss to the government of allowing commercial banks to create money was in the order of £49bn per annum. Plus the cost of servicing the national debt, at £32bn per annum and the cost of stimulating a recovery during recession after inevitable recession, runs to hundreds of billions, if not trillions.

What does our debt based system look like compared to other countries and is it working?

image

The UK as a country is no longer in control of its finances. We have a GDP/Debt ratio of over 900% and with bank debt over 600% of GDP. Our financial sector is disgustingly over-leveraged, couple that with close to zero percent interest rates which allows banks to speculate for free. They take riskier and riskier bets and its the UK public who pick up the tab if it all goes wrong! Iceland had a debt to GDP ratio of 1000% before it collapsed.

We need to be in charge of our currency, move on from a debt based currency and return to sound economic principles. The system hasn’t failed, its just coming to its logical conclusion and history has plenty of examples how this will play out.