The UNFOLDING destruction of
the developed world's economies and financial/currency systems continues
apace. Public servants are trying to defy Mother Nature with the stroke of a
pen; she will not yield to this. Radical Marxist POLITICAL solutions to
practical problems are at the end of their collective ropes (double entendre
intended). You CANNOT store wealth in paper, PERIOD. Those who do will get
what they deserve: NOTHING. It has been and will be printed endlessly from
this point forward as Socialist government policies have destroyed wealth
creation and substituted Ponzi asset-backed economies in their place. Now
those economic models have reached their COLLECTIVE endpoints.
Economies based on models of
consuming wealth rather than producing wealth are DOOMED, and this is the
definition of the developed world. Switching back to the wealth-production
model used prior to 1971 in the developed world will be painful as our
leaders have FORGOTTEN what wealth-creating policies to implement and how to
do so.
The financial systems of the
world sit on TOXIC paper (government bonds and currencies) and they call them
assets and reserves - they are NOT, THEY ARE LIABILITIES! To see the enormity
of government debt in the biggest economies in the world look at this graphic
from www.demonocracy.info:
These are worthless checks
which can never be REDEEMED in the biggest check kiting scheme in history,
BAR NONE. They are backed by nothing, redeemable in nothing and PAY nothing
and called RISK FREE investments. This is a testament to George Orwell and
the financial illiteracy SPAWNED by PUBLIC SCHOOLS.
These financial and currency
systems are run by the Central Banks and public servants and prey upon their
citizen's wealth for redistribution to government dependents, elites, crony
capitalists and government employees. The whole fabric of developed-world
governments is PREYING on the private sector in one manner or another:
currency debasement; crony capitalism through oppressive regulation; and
taxation of virtually any activity in which a human engages, and they say
they are serving and protecting the public. THE END IS NEAR. They have preyed
on the private sector to the point that the goose is DEAD and can no longer
lay eggs.
Something-for-nothing
societies are like LOCUSTS searching for something for nothing; they will EAT
everything in the developed world right down to the roots including the seed
corn for next year's harvest and their children's future earnings (these are
morally and fiscally-bankrupt leaders and citizens). They are spending
tomorrow's income today and waiting for the bankruptcy to arrive.
They did this years ago in
Greece and in mainland Europe for that matter, they are doing it now in the
United States. Greece is a Socialist country; it produces next to nothing and
has driven wealth creation OUT OF THE COUNTRY. For generations, the people
have been taught that they are entitled to a greater standard of living than
they produce. Thirty percent of the WORKING population is made up of
GOVERNMENT EMPLOYEES (same as in the US). No bankruptcy will restart wealth
and income production. The people who are the real income producers left
decades ago at the point of a government confiscatory gun and they are NEVER
coming back.
the world would anyone start a
business in the United States when the Federal Government is DEDICATED to
confiscating any wealth they may produce, and with a President that is
running for office on the platform of demonizing success and telling people
that by supporting him they will be rewarded with all they need? Guaranteed
by government, just like the other $100 trillion worth of promises the
government has made but not paid for. The people who believe this are his
FOOLS; his promises can never be PAID except with increasingly WORTHLESS
coupons called US Dollars.
"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
GROWTH WILL NEVER RESUME as to
do so is to invite punishment and slavery to the WELFARE State. The
psychological destruction by the president's CLASS WARFARE rhetoric on
entrepreneurs and small businessmen cannot be underestimated; it will take
years to undo it.
TAXES are set to SKYROCKET in
the United States at the end of 2012 (further punishment for the prudent and
hard working) but no public servant dares bring up the subject because both
parties WANT the money to FUND their PREVIOUS policies of insolvency. Human
behavior is quite predictable with this recipe; IT IS A RECIPE for FAILURE
and to substitute for lack of growth and income they will PRINT the MONEY.
"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...
There is no subtler, no surer means of overturning the existing basis of
society than to debauch the currency. The process engages all the hidden
forces of economic law on the side of destruction, and does it in a manner
which not one man in a million is able to diagnose." ~ John Maynard
Keynes
Bonds and currencies are the
epicenter of the crisis and this OUTCOME was set in stone at Bretton Woods II
on August 15th, 1971: Money and credit creation out of thin air which is a
mechanism for redistributing wealth, in addition to runaway, LEVIATHAN
government that has resulted in the Socialist-Marxist command economies we
now inhabit. Now the commanders in Washington DC, Brussels and Berlin know
only one policy: Bury them some more under thousands of new laws, taxes and
regulations.
Now the bills are coming due
and they are un-payable and inextinguishable as REAL wealth and income
generation have gone the way of the DODO bird. So it's Hi Ho, Hi Ho off to
the printing press the Socialists will go, pretending to pay money back using
worthless coupons they call money printed out of thin air. They are fools as
are the people that support them.
"When the people find
that they can vote themselves money that will herald the end of the Republic.
This constitution in time will fail, as all such efforts do. And it will fail
because of the corruption of the people, in a general sense." ~ Benjamin
Franklin
With a printing press they are
stealing purchasing power right out of the bank accounts of the private
sector: companies, retirees, pension funds, institutions. These innocents
that have full faith in the dollar will soon understand the US Government is
not GOD, but rather has now become the devil in disguise and is sending
present and future generations to DEBTOR'S hell just like the people in
GREECE.
Economic activity, employment,
inflation and GDP reports are nothing but a cruel hoax to fool the masses
(this will be covered in a future edition, new information indicates the US
economy is smaller by 10% or more than OFFICIALLY reported). The mainstream
media is misdirecting the anger of the middle class from those who destroy
wealth towards those who produce it. They are driving what's left of
private-sector growth into hibernation because to create wealth is to invite
attacks on oneself for having the temerity to work hard and succeed. This is
cannibalism of the worst sort at the hands of government and their
something-for-nothing constituents.
Capitalism is dead in the
lands of its birth, with socialist dictatorships doing what they always do as
their economies DIE from their deadly embrace. Misery-spread-widely is and
WILL BE the order of the day as will a shrinking economic pie, taken from the
most productive and redistributed to their supporters. As wealth and income
creation cease Marxist Socialists turn to printing presses.
"The democracy will cease
to exist when you take away from those who are willing to work and give to
those who would not." ~ Thomas Jefferson
OB@M@care is nothing more than
taking healthcare from those that have and pay for it and transferring it to
those that don't. Rationing and mandates are just the beginning as Washington
writes rulebooks for your physician to follow. Here's a peek: Billing
codes under the new healthcare law are going from 18,000 to 140,000. This
is going into effect in January 2013, just after the election.
Why is no one talking about this? Telling the public about this OBSCENITY...
It will never be repealed.
Can you say ABSURD and
unworkable? It is only the beginning. Dodd Frank is nothing more than 2,400
pages of political corruption, the nationalization and politicization of the
BANKING industry and the allocation of credit. It transfers liability from
the nineteen TOO-BIG-TO-FAIL banks to the public who are their DUPES.
Wealth generation in the
developed world is a statistical illusion courtesy of the LAWMAKERS and their
bureaucrats who rule over us. Public servants are bought and paid for by the
Crony Capitalists and Banksters who are their masters to the chagrin of a
public who has placed their faith and futures in their hands.
Since my last missive several
weeks ago money printing has been the order of the day as Japan and the UK
have thrown approximately $200+ billion and the US Congress added over 10% to
the $1.3 trillion deficit and sent the bill to future generations when it
recently wrote an NSF check of $150+ billion to extend the social security
tax cut and extend unemployment benefits as more and more people are
impoverished by the policies of leviathan government. $350+ billion all told
-- small change by today's measures. Several Bank of England directors voted
for 50% MORE money printing. The next tranche is BAKED in the CAKE.
The chosen one is
padding his constituency of government dependents prior to his reelection
efforts and executing the Cloward Piven Strategy for collapsing the US
economy with a deft touch that befuddles and frustrates those with the last
vestiges of common sense. Lawmakers vote for something-for-nothing or be
demonized as cruel hearted for not spending money THEY DON'T HAVE.
We await the next big CENTRAL
BANK cannon firing next week when Mario "BOOM BOOM" Draghli fires
the next installment of the European Central Banks' long term repo operation
(LTRO). Some project it as high as 1 trillion euros. No matter, it is only
the next installment in a never-ending story of the moral and fiscal
bankruptcy of the developed world. Trillions and trillions are left to be
printed as the bonds going bad were used for CONSUMPTION rather than
self-liquidating investment.
The LTRO is VERY toxic, as is
the SMP program while the ECB INSERTS itself above all other creditors
thereby SUBORDINATING them. Over seven trillion dollars' worth of sovereign
debt must roll in 2012; how many institutional investors, pension funds or
insurance companies will choose not to ROLL? Many are prohibited from buying
or holding subordinated debt, but the question is do they recognize this?
The Bond and Currency Markets
are the epicenter of the global-financial crisis and it will not end until
they BLOW UP. Currencies in today's world are nothing more than BONDS in
DISGUISE, as semi-REAL money CEASED to EXIST in general circulation at
Bretton Woods II in August 1971. Bonds are nothing more than IOU's
denominated in IOU's. If one creditor doesn't get you the other one will!
A price revolution is unfolding
like a tsunami ready to strike shore. When it hits you don't want to be in
its path or you may perish as those poor people in Japan did. The Tsunami is
growing in size and magnitude as I shall illustrate. When it hits is another
story, but the timeframes are accelerating as public servants, banksters and
crony capitalists try to print and borrow their way to solvency. They will
fail as all others have done in the past, throughout history, but not being
students of history THEY WILL TRY...
Austrian economics are
extremely predictive, to which my long time readers will attest. The longer
this takes to unfold, the more prepared you can become. Thank God for a
poorly-informed public, as the day they understand what is transpiring is the
day the NUCLEAR financial bombs GO OFF. The CONFIDENCE game will end on that
day! The day when the public's eyes cease to glaze over is the day you must
have your final preparations in place. When the Baby boomers pull into the
retirement station they will be greeted by the greatest bankruptcy in history
and their retirement plans will VANISH as their wealth stored in paper
VAPORIZES at the hands of the people holding the financial system monopolies.
This is history repeating on an inconceivable scale. Will it be crisis or an
opportunity for YOU?
This is the greatest
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When properly
measured and adjusted for inflation, the economies of the developed world are
no longer growing and haven't done so since 1998. Subtract government
spending which is errantly counted as growth and we see the private sector
hasn't grown for an equally long period. Take a look at this chart from John
Mauldin and Rob Arnott (research affliates):
When adjusted for real
inflation, private-sector growth has been in FREEFALL since 1998; the public
has been impoverished by unsound money and runaway inflation. This chart uses
official inflation numbers so the reality is MUCH worse. Think about it, debt
in the developed world is up 300%+ but private-sector income is ZERO.
Government doesn't create wealth which can service debt. All debt, public and
private, is serviced by private-sector growth and tax receipts.
Over $15 trillion have been
printed and borrowed since 2008 and there is ZERO growth to show for it
throughout the developed world. The money has been consumed in transfer
payments to government dependents and has funded the further expansion of
government. The consumption economies -- where growth is measured in how much
more you can consume than you produce and pay for it with borrowing -- is
failing. Ponzi finance is at the end of the road. Consumption is not wealth
production, not in the public or private sector.
US Federal debt is up over 50%
since 2008 and its angle of ascent is going VERTICAL:
This picture is echoed
throughout the developed world. These illustrations are extremely predictive
when applied to the gold price (perfectly correlated) in context with deficit
spending as this chart illustrates:
The exponential rise in gold
is dead ahead as debt creation and printing presses accelerate. Notice that
the last 2.3 trillion dollar debt increase has NOT been PRICED IN.
Gold has been in a ten-year BULL market (no market has outperformed in that
timeframe). Bull markets DO NOT end with a whimper; they end with a BANG.
Now let's look at what's in
the PIPELINE as illustrated by the combined Central Bank balance sheets of
the 8 biggest Central Banks, below:
This is up over $2 trillion
since this graph was created at the end of November. The average money
creation is now almost $500 billion a quarter, that ½ of the TARP in 2008.
The money to prop the financial system and fund the welfare states is
spiraling out of control. Since 2006 this measure is up MORE than 200% and
NOTHING has been solved. NOTHING. If that Central Bank balance sheet chart
didn't scare the pants off you, the next one will. This is a picture of
global money supply in the last two years; it has increased 20%, hitting new
highs:
This is MONEY PRINTING. The
insolvencies are multiple times greater than in 2006; Billions of new,
unfunded promises have been made. How many Trillions are left to be created
(I believe at least $30 Trillion). Do you really think you can store wealth
in paper currencies and bonds after seeing these two charts?
The Question is: When will
consumer prices adjust to REFLECT the debasement and loss of purchasing
power? How much will your cash and bonds be worth in purchasing power when
they reflect this graph? The next question is: How much more balance sheet
EXPANSION will occur to SAVE the BANKSTERS and feed the WELFARE states? We
will have the answer to all these questions. Now let's look at the future
UNFUNDED welfare state promises:
Japan is not shown, but its
debt-to-GDP is already over 200%; ½ is due this year and unfunded liabilities
are more than likely right in line with these other countries. Keep in mind
these economies DO NOT GROW (correctly adjusted for inflation and minus
government growth, called production), they have HUGE and growing structural
BARRIERS to growth erected to protect Crony Capitalists from competition and
reward the latest crops of campaign donors, they have tax systems that PUNISH
wealth creation, entitlements which are on auto pilot, and populations and
their representatives which REFUSE to act prudently.
The Federal Reserve under
Project Twist is still monetizing most of the new treasury issuance, as this
table outlines:
The Chinese and Russians are
dumping treasuries at a rapid rate seeing the upcoming train wreck and trying
to get off the train, as this chart illustrates (courtesy of www.zerohedge.com):
Notice how the Federal
Reserve, the Bank of Japan and the Bank of England are monetizing US debt and
increasing their reserves? They call them assets, but how can that be when
both the bonds they bought and the money they printed to buy them were
PRINTED OUT OF THIN AIR? It is an illusion. For the most part, all three
economies are barely growing and running MASSIVE deficits for government
spending, which they report as GDP.
In order to put in perspective
what has been done by the Federal Government in Washington, in addition to
the present and FUTURE destination of money printing and the debt requires
that we look at a recent debt clock (www.usdebtclock.org,
as of Feb 23, 2012):
This is ugly, but at the
current rate of DEFICIT spending, at the next presidential election in
November 2016 the bills will have LEAPT to:
Image courtesy of www.ZEROHEDGE.com
A breathtaking leap of almost
60%, after 60% growth in the president's first four years. Of course, don't
forget that the paper in which you store your wealth will have LOST
an equivalent amount of purchasing power; yet the federal government REFUSES
to cut spending. These numbers DO NOT INCLUDE future BAILOUTS of the
financial system, Fannie Mae, Freddie Mac, FHA, unfunded government pensions,
and state and municipal insolvencies which will be TRILLIONS & TRILLIONS
more.
Alan Greenspan, before he
breathed the contaminated air of Washington DC, wrote this about gold in
1966:
The abandonment of the gold
standard made it possible for the welfare statists to use the banking system
as a means to an unlimited expansion of credit. They have created paper
reserves in the form of government bonds which - through a complex series of
steps - the banks accept in place of tangible assets and treat as if they
were an actual deposit, i.e., the equivalent of what was formerly a deposit
of gold.
The holder of a government
bond or of a bank deposit created by paper reserves believes that he has a
valid claim on a real asset. But the fact is that there are now more claims
outstanding than real assets.
The law of supply and demand
is not to be conned. As the supply of money (of claims) increases relative to
the supply of tangible assets in the economy, prices must eventually rise.
Thus the earnings saved by the productive members of the society lose value
in terms of goods. When the economy's books are finally balanced, one finds
that this loss in value represents the goods purchased by the government for
welfare or other purposes with the money proceeds of the government bonds
financed by bank credit expansion.
In the absence of the gold
standard, there is no way to protect savings from confiscation through
inflation. There is no safe store of value. If there were, the government
would have to make its holding illegal, as was done in the case gold. If
everyone decided, for example, to convert all his bank deposits to silver or
copper or any other good, and thereafter declined to accept checks as payment
for goods, bank deposits would lose their purchasing power and government -
created bank credit would be worthless as a claim as goods. The financial
policy of the welfare state requires that there be no way for the owners of
wealth to protect themselves.
"This is the shabby
secret of the welfare statists' tirades against gold. Deficit spending is
simply a scheme for the "hidden" confiscation of wealth. Gold
stands in the way of this insidious process. It stands as a protector of
property rights." ~ Alan Greenspan, Gold and Economic Freedom, 1966
Thank you Bert Dohmen and his
outstanding Wellington Letter (I highly recommend it) for this wonderful
quote which sums up quite nicely how wealth cannot be stored in paper.
Greenspan recognized it 50+ years ago when he was a close associate of Ayn
Rand. As Federal Reserve chairman he was the perpetrator of it.
In closing: This is not Doom
and Gloom; it is the reality of the situation. In Fact it is the greatest
opportunity in history. Furthermore, you know about it and can arrange your
affairs to profit from it. Huge opportunities are presented to YOU. If you
store your wealth in paper and government bonds you may want to consider
changing your plans as there is no escape from the final denouement.
Bonds and currencies are
classic Austrian Mal-investments just waiting to fall to their real value,
their value before regulatory favoritism - in other words, before the
leverage used to purchase them and that has driven them to these levels,
combined with a GLUT of paper money that has been printed to BUY THEM. They must
decline to provide a real return in excess of 10.5% after real,
as measured by www.shadowstats.com
Would you like to turn this
into an opportunity? If you are an investor who wants to diversify your
portfolio into Absolute-Return Alternative Investments and have me help you
repair your paper money so it resists debasement by the printing press, CLICK HERE and I will
give you a call (http://www.TraderView.com/portfolio/).
A number of questions come to
mind: The first question is when will the BOMB.... er, Bond Market crash as
investors WAKE UP to the reality of the paper assets in which they attempt to
store their wealth? What prices will Gold, commodities and natural resources
rise to reflect past and future monetization? How much of your gains are
nothing more than your assets RE-PRICING to reflect the lower purchasing
power of what they are denominated in? Answer: most of them. How much of
their value is the result of the leverage used to purchase them? How much
will you lose if your paper assets LOSE 90% of their value?
In the Eurozone, United
kingdom, Japan, Switzerland and all countries which hold dollars as reserves
get a double dose of debasement, 1st from the Federal Reserve debasement of
their reserve holdings (approximately 60% of Central Bank reserves are US
DOLLARS), then again from their respective Central Banks as they debase and
carry out quantitative easing. The dollar will be the last to fall as
everything is a derivative of the dollar. Also keep in mind that the dollar,
as the world's reserve currency, is the only currency in the world which both
the shorts and the longs do not want it to fall. The shorts are printing it
endlessly and the longs are trying to store wealth in it. Bond auctions will
NEVER fail as success lays just a phone call away to another Central Bank
writing worthless checks to buy worthless bonds.
The confiscation of purchasing
power Greenspan spoke of is now almost COMPLETE, the final stretch run to
worthlessness will be MAYHEM run wild. People DO NOT KNOW what money is, how
it must function to be a store of value, and move purchasing power through
time and space. Currencies DON'T FLOAT they just SINK at DIFFERENT rates.
Repeat after me: PAPER is
POISON, PAPER is poison. It is the final BUBBLE. Don't miss the next issue of
TedBits 2012 Outlook, subscriptions are free at www.traderview.com/subscribe/
. If you missed part one I urge you to read it. Thank you.
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