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  • Bank profitability,,, Hierarchy of need

    The productive loop of the economy has NO NEED of currency expansion above and beyond the level of expansion created by increased productivity.
    Monetary inflation is strictly the province of bankers. The same is true for the State. It too must depend on currency expansion. Here is an article that lays out the current situation.

    BOJ Offers To Buy Unlimited JGBs After Yields Surge, USDJPY Tumbles
    So, their central bank offers to buy government bonds without limit.
    "the BOJ is set to launch a full-scale investigation to mitigate the side effects of its yield-curve control policy on bank profitability and government bond trading, "
    " Deutsche Bank complaining vocally about the ECB's policies) similar concerns have spread in Japan where both banks and pension funds have been agitating for at least some yield curve steepening to increase NIM and support bank profitability."
    "another factor that is likely playing a key role is the ongoing decline in BOJ bond purchases, which both the bond and FX markets have so far been sternly ignoring."
    The private sector refuses to buy all that stinky paper.

    Here is a chart of 10 year yields around the world.
    So, as Powell raises rates he sucks capital away from the R.O.W. He endangers domestic U.S. debt with the higher rates. At the same time, he sucks in capital to U.S. markets. The 10 year interest rate is the battering ram that Powell uses to clobber The ECB and BOJ and PBOC. It also has a big effect on States like India and Turkey. Armstrong tells us that the U.S. bond market will be the last to collapse. This is quite a gamble.

    Armstrong again, "Do not put equities in the same boat with bonds. The ship is sinking, but that is concerned with debt – not equity. Keep in mind that the collapse of a financial system has historically unfolded to different degrees."
    That was before instant instant communication and instant capital transfer.
    "n order for tangible assets like stocks, gold, art, antiquities, etc. to survive, the fundamental infrastructure must survive. That means there must be ample food for gold to have any value whatsoever. So you must stop short of the Mad Max event for anything tangible to have a safe haven value."
    "he typical scenario painted by the doomsday crowd involves the German hyperinflation. However, that did not wipe out the structure of surrounding countries. This mean all tangible assets retained value because they could still be sold elsewhere."
    The single currency area of the EU guarantees universal European collapse. American States has a single currency also.

    "Therefore, if we are only talking about a reset of the world financial system, then tangible assets retain value that becomes translated into the new currency. Hence, equities will survive, government debt and currency will not. Only going all the way to a Mad Max event would everything lose value except food. Not even gold survives for trade comes to an end."
    This is NOT true. Government debt and currency will die in the default cascade. Look at the many previous collapses. The hierarchy of needs starts with air, water and food. It moves up and includes dirt and seeds. From there it MAY move up to some level of luxuries. A basic shelter, tools and weapons. Remember that the collapse will erase a higher percentage of the wealth of the rich than it will erase of the poor.

    If our energy intensive farming system fails, you will trade your Renoir for a bushel of rutabagas. It is only excess wealth that allows the production and sale of "An Orange Balloon Dog Sold for $58.4M"
    If we slip down to the bottom of the hierarchy of needs, very few people will have the skills to survive. A global currency reset seems unavoidable.
    When it all vanishes in a puff of smoke, what fraction of the hierarchy of needs will still be in demand?

    " If everyone understands that we CAN SURVIVE this with society mostly intact ONLY IF WE UNDERSTAND what and how things unfold, then we have options once the crash and burn comes. We can stop short of a Mad Max event by understanding history, which is our road map to the future."
    "The civil unrest we have beginning today post-Trump is intended to overthrow Trump and Obama has remained in Washington, which NO PRESIDENT has ever done. "
    SIDE NOTE, Obama Ex National Intel Director Says Barry Is
    Behind The Entire Russian 'Witch Hunt'

    "Hence, this is a battle shaping up for the future; the final conflict over Marxism, which began with the fall of Communism in 1989. This final battle began 26 years from 1989.95."

    7/23 Disaster For Theresa May: Brits Overwhelmingly Reject New Brexit Plan – ZH
    7/23 Australia’s version of the subprime mortgage crisis arrives – SMH
    7/23 Emerging markets at mercy of falling Yuan as currency war looms – Bloomberg

    The currency war is just a war of confidence. The Chinese print to feed the dragon. America raises interest rates to starve the dragon.


    • Speedbumps, pensions

      Gresham's Law states that a bad currency will drive a good currency into hiding. Here is a perfect example. The Cook Islands produced a note that has gold in it. It is obvious that people will save it and put it aside. No fiat currency can compete with a currency of tangible value. This causes constant deflation of the circulating money supply.
      Alt.Wedding For Gold Note | Thom Calandra's TCR Network
      Fiat currency is fine if it isn't over-printed.

      "ALL of this debt requires US bond yields to continue to fall. Put another way, in order for this massive debt bubble to be maintained the bond markets must make it continuously cheaper/ easier for the US to pay/ service its debts."
      "As you can see, the yield on the 10-Year US Treasury has broken above its long-term trendline… in the WRONG direction. This chart is telling us that it has become more expensive for the US to issue/service its debts."
      Powell is raising interest rates to draw in fleeing capital. The above article shows the flip side of the effects of trying to draw in new capital. As the ten-year bond goes up, it becomes more expensive for everybody to service debts. America has the only printing press that turns out dollars. I suppose that Powell expects China to blow fitst,,, before America.

      "Pension funds themselves have not been immune from the problem and are facing a financial crisis of their own. Per the OECD, the group’s 20 largest nations are facing a $78 trillion deficit in funding for public pensions. Even private pensions are not safe, with funds in the US only meeting 82% of their current obligations while gazing down a $3 trillion deficit."
      The breakdown of the nuclear family meant that the old folks have to be supported with money rather than familial support. Private saving for retirement just didn't happen. The reset will be a disaster for anyone who can't go out and work.

      A couple of years ago in Germany, demonstrators in the street were yelling, "Merkel to Siberia, Putin to Berlin. " Expressing their dis-satisfaction with Frau Merkel.
      Kunstler proposes that America trade Trump for Putin to have somebody respectable leading America.
      Russia Attacked Us - Kunstler

      "Nixon and Kissinger ensured that all energy, and in consequence all other commodities, would continue to be priced in dollars. Global demand for dollars was assured, and the banking system of correspondent nostro accounts meant that all the world’s trade was settled in New York through the mighty American banks."
      "Updated for today’s monetary system, this is precisely how the American government finances itself. Instead of printing notes, it is the expansion of bank credit, issued by banks licenced by the government with this purpose in mind, that ends up being subscribed for government bonds. "

      "Von Mises reported that throughout the monetary collapse, until only the final months, there persists a general belief that the collapse in the currency would soon end, there always being a shortage of it. "
      "it is not beyond the bounds of possibility for the dollar to initially lose between a third and a half of its purchasing power against a basket of commodities, and a similar amount against the yuan, which is likely to be managed by the Chinese to retain its purchasing power. It will be in the interests of the Chinese authorities to promote the yuan as a sounder currency than the dollar "
      ALL currencies eventually crash. Gold will return after it's short vacation on the sidelines.

      Understanding gold,

      7/24 BOJ grapples with the difficult side effects of easy money – Nikkei Asian Review


      • Canadian debt

        7/24 Southern California home sales crash, a warning sign to the nation – CNBC
        7/24 The low-priced home shortage continues – CNBC
        7/24 Less than 20% of apartments are affordable for middle-income black renters – MW

        The builders built McMansions for everybody,,,, regardless of income.
        Public pension survey, Overpromising has crippled public pensions. A 50-state survey | Wirepoints

        Canada, China, Hong Kong Top BIS Worry List on Banking Crisis Risk story
        11/29/2017 Canadian Households Most Debt-Heavy in the World story
        11/17/2017 Canadians Paying Dearly for Their Housing story
        11/09/2017 When Canadian Homeowners Walk Away From Negative Equity, Taxpayers at Risk

        You Canadians are quite optimistic, Eh ?

        "With more than $2 trillion in outstanding Canadian consumer debt today and flat wages, even using ‘creative’ financing, discretionary consumption had to hit the end of the cash flow tether."
        Good article,,, lotsa money,
        CIA agent John Abbotsford stated “We run the Afghan opium trade.”


        • More speed bumps

          US Lawmakers to Introduce Bill to Sanction Russia's Sovereign Debt
          It's only 6% of gdp ? Their stock market is doing great.
          Germany, France, Italy become biggest foreign investors in Moscow's economy
          U.S. sovereign debt is about 120% of gdp but, who really knows?
          7/25 As Russia dumps its Treasuries, here’s what it’s buying – Zero Hedge
          Dollar detox: Russia's gold reserves near 2000 tons to set historic ...

          Sanctioning Russian sovereign debt won't have any effect. Maybe that was the way that it was planned.

          BRICS launches practical dialogue on mutual payments in national currencies
          You get the idea that Trump is trying to de-globalize with his sanctions.
          Most In US Support Latest Trump-Putin Summit
          I guess that the tweet is mightier than the pen.

          7/25 Tech stocks set to crater on Thursday on Facebook’s biggest drop ever – CNBC
          7/25 Facebook tanks on earnings miss – TechCrunch

          But, but, but, the FANGS are the irrepressible darlings.
          Busting balls, 7/25 Trump secures concessions from Europeans to avoid trade war – CNBC
          7/25 $12 billion: Trump bails out farmers hurt by tariffs – CNBC
          Back in the '30s, all the farmers were going broke and losing their farms to the banks. Congress looked into this and figured out that there would be a HUGE national disaster if the banks took the farms.
          7/25 Two giant US pension funds admit there’s a BIG problem – Sovereign Man No doubt.

          NOBODY wants to take a good look at derivatives.

          7/25 Trade war will launch bitcoin as the new gold – Forbes Yeah, right
          7/25 Venezuela’s inflation to reach 1 million percent – Bloomberg
          Trump incidentally side-swiped NATO and blew them out of the water.

          Merkel produced a feeble retaliation that was probably just what Trump wanted.

          The "art of the deal" is the art of manipulation.


          • The cost of the military (in)security complex

            Most of you are aware that John Perkins wrote "Diary of an Economic Hit Man in 2004 about how the various international jackals go around raping the world. He later wrote an updated version where he claimed that 'they" were going after the biggest prise, America.
            "The objective of US intelligence is to suck all remaining wealth out of the US and its allies and pocket as much of it as possible while pretending to defend it from phantom aggressors by squandering nonexistent (borrowed) financial resources on ineffective and overpriced military operations and weapons systems."
            "The total cost of wars so far this century for the US is reported to be $4,575,610,429,593. Divided by the 138,313,155 Americans who file tax returns (whether they actually pay any tax is too subtle a question), it works out to just over $33,000 per taxpayer."

            "The 16 US intelligence agencies have a combined budget of $66.8 billion, and that seems like a lot until you realize how supremely efficient they are: their “mistakes” have cost the country close to 70 times their budget. At a staffing level of over 200,000 employees, each of them has cost the US taxpayer close to $23 million, on average. That number is totally out of the ballpark! The energy sector has the highest earnings per employee, at around $1.8 million per. Valero Energy stands out at $7.6 million per. At $23 million per, the US intelligence community has been doing three times better than Valero."

            "Another hypothesis, and a far more plausible one, is that the US intelligence community has been doing a wonderful job of bankrupting the country and driving it toward financial, economic and political collapse by forcing it to engage in an endless series of expensive and futile conflicts—the largest single continuous act of grand larceny the world has ever known. "
            This would be a mega blob state organization.


            • Wouldn't post, had to break it up

              The possibility of A hard Brexit is starting to cause a bit of panic.
              "The path ahead narrows to a binary option: the status quo either enters a crisis that can no longer be pushed forward with financial trickery or another systemic "save" emerges by 2024 - 2025"
              Good article.
              oftwominds-Charles Hugh Smith: When Long-Brewing Instability Finally Reaches Crisis

              7/26 China can’t count on consumers to get through trade war – Nikkei
              No kidding. All of a sudden, wages become important. China and India set the ceiling on wages. Viet-Nam, et al reinforced the ceiling.
              Robby the robot is pressing down from above.
              7/26 Here’s why Pakistan faces economic crisis, no matter who wins election – MW
              Pakistan, like the Philippines has too high a birth rate and, too low an education rate.
              7/26 Prepare for a Chinese maxi-devaluation – Daily Reckoning
              Yes, Krakatoa in Beijing.
              7/26 The Fed is on a collision course – Daily Reckoning
              Did I mention that Powell was bring the ship-of-state up to ramming speed?

              7/26 Did China start a currency war against the dollar? – Ken Rapoza
              The short answer is, NO! The R.O.W. is in an economic war against Imperial America centered in Langley.


              • Deflation by evaporation,,, FB,,, The Great Alignment

                My post just got zapped. I'm leaving Saturday
                morning so, There will be a few days interruption. Current posts will be abbreviated.
                Saudi Arabia Halts Oil Shipments through key waterway after attack on tanker
                I've always claimed that the oil passages will be closed by the insurance companies demanding higher rates.
                Top US Shale Oil Fields Decline Rate Reaches New Record...Half Million Barrels Per Day
                A NEW record

                Why EU Unlikely To Become 'Massive Buyer Of US LNG'
                We charge 30% more.
                Turkish Lira Plunges After Trump, Pence Threaten 'Large Sanctions' If Pastor Not Released
                The Lira is crashing any way. We're just attacking because they plan to buy Russian weapons.
                'Plague Of Rats' Heading To Britain Lets hope that they infest the House of Lords.

                Facebook Loses $150 Billion - 20% Of Value - In 2 Hours Over Growth Slowdown Projection
                Zuckerberg Loses 16 Billion In 5 Minutes As FB Shares Crater - Big Stockholder Calls For His Head

                EVERYTHING is controlled by confidence. Nobody came in and stole $16 billion. We will see huge deflation of valuations. Many of these devaluations will be based on a loss of confidence in future business. This will be the source of our coming "deflation".

                Dem Congressman Intros Bill To Stop Trump From Using Office To Enrich Himself & Family
                That's UN-AMERICAN v
                Feds Spending Watchdog Site Riddled With Errors
                I'm SHOCKED , I tell you,,, shocked.
                7/27 These American states are drowning in ‘irretrievable’ debt – Fox
                So, it's no longer" unpayable", it is now irretrievable.
                7/26 ECB sticks with promise to end stimulus despite growth wobble – Reuters
                This means the death of Italian banks.
                7/26 Yuan tumbles as China rages against Washington’s “extortion”, “demonization” – ZH
                America has the only dollar printing press. The emerging markets have $13 trillion in dollar-denominated debt. We have apparently shut off this press.

                Reportedly, The Great Alignment is on schedule.
                "ANSWER: What these people who also tout gold will rise and nothing else fail to understand, is when confidence in government collapses, EVERYTHING rises. The Great Alignment appears to be on schedule."
                I have to take issue with this. I'm not going to hold my breath waiting for wages to rise. If everything rises but wages, the working man will be much poorer.

                Rothschild Bank Under Criminal Investigation For Money Laundering ...
                There seems to be a lot of investigation of people who were formerly untouchable.
                Someone at B of A has a little side business,


                • Large mixed bag

                  There is no possible way that I can catch up for time missed in Oregon.
                  I'll post some links with a heading for the subject.
                  A big bond fund suspended redemptions.
                  The pension funds seem to have a $5 trillion shortfall.
                  Philly looking for tax money to cure mismanagement.

                  Chicago is as crooked as you might expect.
                  The corporate tax cuts are a last hail mary.
                  A timeline of the disintegration of the Euro.
                  Greek debt is back in the news.

                  It appears that Uncle Sam needs a lot of extra money after he drastically cut taxes.
                  John Hussman famously lost a LOT of his clients money from mis-calculating.
                  "A moment’s thought should make it clear that valuation extremes like 1929, 2000, 2007 and today could never have emerged unless the market was able to entirely shrug off less extreme valuations along the way. When investors have the speculative bit in their teeth, as they did through the majority of the period between 2009 and 2017, valuations may exert very little effect on market outcomes, even for fairly extended segments of the market cycle. "
                  "Historically, regardless of other market conditions, one could adopt a negative market outlook once those syndromes emerged. Not this time. Not in the face of zero interest rates. Not in the face of post-election enthusiasm. This time, there was no such thing as “too much” or “too extreme.” One had to wait for market internals to deteriorate explicitly before adopting a negative market outlook."

                  "But valuations are not enough. It’s extreme valuation, coupled with deteriorating or divergent market internals (signaling a subtle shift toward risk-aversion among investors) that opens up a potential trap door."
                  "As I did in 2000 and 2007, I mean these figures seriously – not as hyperbole, but based on outcomes that would be historically standard, normal, and commonplace given current valuation extremes. At present, we project market losses over the completion of this cycle on the order of -64% for the S&P 500 Index, -57% for the Nasdaq 100 Index, -68% for the Russell 2000 Index, and nearly -69% for the Dow Jones Industrial Average."
                  "Presently, we expect a passive portfolio mix to underperform the return on risk-free Treasury bills over the coming 12-year period, "
                  YES, but, Armstrong said that Treasury debt is going to completely crash going into 2020. Keep in mind that ALL sovereign debt eventually crashes. In the interim , it is considered risk-free.
                  "Put simply, despite long-term economic growth, the real return on stocks can be zero or negative for very extended periods of time when measured from a valuation extreme like today "
                  Excellent article.

                  Chinese oil-futures contracts.
                  The FAANG stocks are turning ugly.
                  The corporatocracy.
                  The new aristocracy. The 9.9%


                  • Markets floundering, revolution in Italy

                    "I have a rather simple Bubble definition: "A self-reinforcing but inevitably unsustainable inflation."
                    "China's central bank injected Rmb502bn ($74bn) into its banking system on Monday to help fortify a weakening domestic economy"
                    "Italy's Target2 liabilities rose $16.3 billion during June to a record $481 billion, with a two-month gain of almost $55 billion. It's worth noting that Italy's liabilities surged from about zero in mid-2011 to $289 billion at the height of the European crisis back in August 2012"
                    The article talks about fragility in the Italian banking system. The Italian GOV is getting ready to blow the banking system to smithereens in it's search for taxes.
                    Revolution in 2020,

                    "Amazon, Netflix and Microsoft together this year are responsible for 71 percent of S&P 500 returns and for 78 percent of Nasdaq 100 returns.

                    The three stocks make up 35 percent, 21 percent and 15 percent of S&P 500 returns, respectively, while making up 41 percent, 21 percent and 15 percent of Nasdaq 100 returns."
                    Investors know that the stock indices are a pile of hot steaming BS. They don't seem to care. Investors know that 95 million are NOT in the labor force. They just read the 3.9% unemployment numbers and, go with that.
                    The interest-rate death spiral,

                    8/03 “Buffett indicator” says stock market primed for crash – Economic Collapse
                    8/03 Number of Americans living in their vehicles “explodes” – Economic Collapse
                    8/03 The Trump administration is headed for a gigantic debt headache – CNBC\
                    8/02 This ‘prophet of doom’ predicts stock market will plunge more than 50% – CNBC
                    8/03 Venezuela’s Maduro admits socialist model has failed – Zero Hedge

                    I guess that 1 million percent inflation is a pretty good indicator.


                    • Borrowing money like there is no tomorrow

                      Armstrong, "This is why low rates in Europe have FAILED to stimulate demand when people lack confidence in the future, they will NOT borrow at any rate. Expectations of profit MUST exceed the level of interest rate before people will borrow. They function differently than governments which are addicted to debt and borrows all the time with no cyclical expectation."
                      Government has NO plan to repay what it borrows. It acts like a 10 year old with an unlimited credit card.

                      "The mother of all credit crises is coming to China with over a quarter-trillion dollars owed by insolvent banks and state-owned enterprises, not to mention off-the-books liabilities of provincial governments, wealth management products and developers of white elephant infrastructure projects."
                      About that Dragon;
                      A Record 18% Of China's GDP Goes To Debt Service

                      Canada is squeezing the taxpayer even harder.
                      8/03 Britain’s borrowing binge continues as Brexit looms – Independent
                      Congress Passes $716 Billion 'Defense' Bill For 2019

                      Yep, you max out your credit card when it becomes apparent that you can never pay back the debt.

                      8/03 Ministers accused of lying about Brexit – Independent
                      I'm SHOCKED, I tell you,,, shocked
                      8/03 “Buffett indicator” says stock market primed for crash – Economic Collpase
                      John Hussman fell for this one. It takes more than extreme valuations to bring on a crash. He came to the conclusion that extreme valuations MUST be coupled to a fall in investor confidence to finally crash the bubble. Since the CBs have been buying up everything in sight, the markets retain a picture of confidence. FED GOV continues to report totally BS labor and growth statistics and, the investors lap it up.
                      Eventually, fear will overcome greed. Meanwhile, FED GOV needs to borrow $1.3 trillion to buy another boatload of confidence.

                      The CB in Japan threw all caution to the wind and, eventually bought up 70% of exchange traded funds. They had been expecting enormous price inflation to go along with all the money creation. This did not happen. All the quantity of money theorists found that their theories just didn't work out. The money is stuck in the upper loop and does not cause much price inflation in the lower loop.
                      In about 500 years, somebody will "discover" that an economy can not have much price inflation when wages are static and the population is falling. Asset inflation is related to money printing. Price inflation is related to an increase in wages and consumptive power.
                      The low-wage economies have set a concrete ceiling on wages. They have impoverished their best customers and everybody is stuck on the bottom.
                      Just as no State can have a gold-convertible currency, no economic regime can afford to raise wages.

                      The blob state is millions of bureaucrats that are determined to keep their paychecks rolling in. NO tax is too high,,, no fine is too exorbitant. They have descended on Europe like a plague of locusts.


                      • Bringing back trust, one block at a time.

                        The future is closing in on us and, I want to try to show you a glimpse of what is coming. British bankers started WW III (Churchill).
                        The Bretton Woods agreement was an attempt to forestall a new war later on driven by economic problems. Regrettable, Bretton woods depended on the honestly of politicians. For centuries, GOLD was the governor that kept sovereign States from super-inflating their sovereign bond market to initiate wars. They always had to go off the gold standard to have a protracted war. The gold standard is gone and, perpetual war is here,,, for now. The Automatic Earth has a very good article on emerging trends that will shape the future.
                        We have new tools for economic management now. Most of the early problems with diverse national currencies can by laid to rest with computers. I'm going to print most of the article and insert comments where necessary.

                        Over the last year or two there’s been discussion about the U.S. Federal spending moving beyond $4 TRILLION dollars, and whether a $1+ trillion dollar annual deficit, on top of a $20 Trillion national debt – Federal only – is sustainable. It isn’t.
                        what will we replace it with when it very soon doesn’t? Historically gold.
                        Because at a time of broken promises — real goods, commodities that can be seen, touched, and used – are the tangible proof of wealth, requiring no trust, and from which the human trust system of paper and letters of credit can be rebuilt.

                        Before WWI, the world was on the gold standard. This had variations, exceptions, corruptions, but on the whole there was gold in the back that was fronted by paper promises issued by private banks. The paper moved, the promises were delivered by telegraph and telephone, and the gold remained in the vaults. It was only when men felt unsure of the truth of the promise they could and did demand delivery, called the bluff, and the bank did – or ominously didn’t – deliver the gold, and thereby keep the paper system in line with reality, with real wealth, and with the economy. This method kept men and nations honest, mostly.

                        they began to cheat, double-counting the gold on their books to relieve the pressure. And so the non-gold system began.
                        The inflation was shown to be a fraud supported by the highest powers in government and finance, and the real economy withdrew their lack of trust until the matter was fixed
                        To have assurity of access to that oil — and not run afoul of the U.S. military – they (Saudi)needed to keep a substantial portion of their national accounts in US$, or more technically U.S. Treasury debt, sparking not just the ability, but the REQUIREMENT of a massive U.S. deficit.
                        The volumes of US$ grew to trillions while the gold component withered to billions, yet still the Saudis banked billions in gold before it was recently stolen from their Swiss accounts

                        Because there is still no trust between nations and billionaires who have a long history of cheating each other. The gold-in-hand safety valve existed to retain some trust, however distant, in the now-digital system.
                        Apart from the Iraq war, the price of oil has been stable for 50 years. In 1950, two silver dimes would buy a gallon of gas. In 2018 two silver dimes are worth $2.22, or the price of a gallon of gas, minus the new taxes. Meanwhile the US$ value has dropped steadily:

                        If the old currency burns as predicted 30 years ago, what next? Will it be replaced by a gold coin or a “zero” coin, chained under the fleur-de-lis? It would seem the new currency must be trusted, which is the original problem, must be a replacement in trade, and must be large enough to handle what are now multi-billion trade and multi-trillion Forex flows. Is the answer gold? Well yes…and no. Certainly China thinks so:
                        The transactional currency can never be used as a a store-of-value.

                        A 9-fold increase in ability versus 20,000-fold increase in promises. Sounds like someone won’t get paid. And you know what bankers and economists call that?
                        Default. Massive, system ending default, the size of WWI or the Great Depression. That’s how fiat standards end.
                        $3 Trillion in gold. Now that’s “official” gold and we already showed that “official” Chinese gold is 4,000 tonnes when it may be as high as 30,000 tonnes, but the principle is the same: gold is wildly smaller than the needs of the financial system. Or is it? In previous financial inflations…which I just showed we have had since 1971, in 20,000x scale…gold simply rose until it became the right size.
                        FOFOA shows good logic to believe that gold will eventually settle in to a price that has the equivalent purchasing power of $55,000 an ounce.

                        It’s perfectly simple. Gold rises 20,000 times or however much it must to re-back the system. It always has before, even in 1979 when the price rocketed from $35 to $880 where US debt to gold holdings ratio stabilized at a very reasonable 10:1…the classic level of fractional reserve trust. If China officially owns 5,000 tonnes, and Russia 2,000, with the west also 15,000 collectively, we have 22,000 tonnes over what BusinessInsider says is $160 Trillion in assets, and you get $7.27B/tonne or $226,000/oz.
                        Not that simple but, go on.

                        With 40 years of inflation and very little comparative rise in gold, why shouldn’t it catch up as it did in 1979? So gold will rise and we’ll have a $200,000 gold standard? That’s what will happen?

                        Not so fast. We COULD have a gold standard, and China, Russia and other major nations appear ready to do so if necessary, but remember we didn’t return to the gold standard last time either.
                        Gold backed sovereign bonds, NOT currency. Remember, it is inflation of the bond market that is utilized to finance wars, not currency inflation.

                        The two problems in the original chart are trust and price. The price must restore a connection between reality -real value and real production- and price; and the “reserve currency”, the medium of exchange, must be a trusted agent or method.
                        Today the mass of trade is in goods to and from China. But China isn’t large enough, deep enough, or trusted enough to be the new world currency. And why should they? The reserve currency is what just hollowed out and bankrupted the United States: they would just be imitating our faults. We’d also be moving from one untrusted, unbacked currency to another, and history says that doesn’t happen.

                        China demands not US Treasuries in NY as collateral to ship goods as presently, and not Yuan bonds, but gold bullion posted in their hot new Shanghai market, which allows physical delivery on demand. This bullion never moves as collateral, but is simply posted by one party then released on delivery.

                        Even though Shanghai is a “third party” allowing delivery, who’s to say they will be tomorrow? The banks are notorious for “hypothecating”, doubling, tripling the gold on their books with accounting fraud backed by the full faith and credibility of governments, and no one’s in the mood for trusting the Chinese any more than Wells Fargo or DeutscheBank. That would drop us back to a hard gold standard, a $220,000 price, a halt to world trade, and possible world war we were trying to avoid. We need an accounting method that is better trusted and can’t be gamed. How to fix it?

                        An original audit, adjusted for receipts and deliveries is all we need. Which is where we add the blockchain. With it, Shanghai cannot double the gold on their books like Europe did in 1922 or the CME does today, marking it both received and loaned, because the blockchain only allows one position, one state at a time.
                        Gold assayed and entered by refiner is tagged to a kilo, and you can follow that kilo bar through the system, not with double counts and vanishing, ever-changing serial numbers as the Federal Reserve and the GLD ETF showed.

                        What will happen to the Dollar? It will still exist, but in some new, revised form. But the US$ today is transferring 3% of the nation’s wealth from the poor to the rich via inflation. Do we really want to keep it?
                        The dollar will be our national currency, still diluted and still referring to the real currency: gold, the attached Trade Note, and its crypto accounting.

                        Jim Willie, "the emerging Systemic Lehman Event in a global financial crisis during the climax global breakdown underway, as nothing was resolved since 2008 while all major sovereign bonds have turned subprime and many banking systems in ruins, the gradual installation & implementation of the Gold Standard from the many substantial Eastern endeavors, where the United States must source the gold for a new gold-backed currency with the ongoing concurrent risk from the $600 billion trade deficit, which must be eliminated, "
                        "Three requirements stand as critical in establishing the Gold Standard for the USDollar. They will be extremely difficult to implement and to satisfy. Several giant treasure troves of gold are coming to the fore. They can potentially alter the global financial setting in a significant way."
                        GOLDEN JACKASS.COM - The Golden Jackass Knows Gold, Currencies & Bonds"

                        The whole system is expected to blow. We live in a multi-polar world, NOT a post WW II world. America will NOT be dictating the shape of future world finance. There will be NO move to a gold trade note and / or gold backed sovereign bonds until it all comes crashing down. The current lock on finance held by the FED will NOT go quietly into the night.
                        Bretton Woods depended on trust in politicians. The world will NOT make that mistake again.
                        One (blockchain) to rule them all.


                        • Originally posted by Danny B View Post
                          The future is closing in on us and

                          The whole system is expected to blow.

                          The current lock on finance held by the FED will NOT go quietly into the night.
                          I wonder how much extra cash will be in hand after pedophiles in Rome
                          have all of their assets taken away and put into US banks, oh and the rest
                          the people in the mob, ISIS and more get their's ceased?

                          We are talking trillions. The USA has declared marshal law on serious
                          human rights violator WW. The corruption in congress and all forms
                          of govt are wealthy thru trafficking.

                          Time is up, time to pay up and the banking system will return to a more
                          stable system.


                          • The very small future of the banking industry

                            Most of the banking system is just going to disappear. It is inefficient and archaic. Something like Blockbuster
                            Banking was invented to get around some bottlenecks.
                            "Coincidence of wants is the reason that money is so important in an economic system. Or rather, I should say money is important because it is rare to have a coincidence of wants. Coincidence of wants occurs when two people have goods or services that they want to trade with one another."
                            Enter the computer.
                            The Exploding Business of Bartering - Harvard Business Review
                            Sep 12, 2012 - Companies are bartering everything from cars to jet fuel to legal services. ...
                            Banks were used to store excess wealth and put it to work in the form of loans. They long ago left this behind. After the default cascade, nominal paper wealth will be reduced by at least 90%.

                            SS graph,
                            FED GOV interest payments,
                            Reportedly, Powell is trying to slowly deflate the bubble.
                            Just wait until China and the Eurozone hit the wall.

                            8/05 Fed accelerates QE unwind – Wolf Street
                            8/05 Pensions running out of solutions — who foots the bill? – Birch Gold
                            8/04 US multiple jobholders soar 453,000, highest since 1999 – ZH

                            Everybody is selling tacos out of the back of their car.
                            8/04 Americans’ real earnings slump most since 2012 – Zero Hedge
                            8/05 “Totally freaked out” Brazilian elite fleeing bloodshed and chaos – Zero Hedge

                            Give it time and, you won't have to travel to Brazil to see this chaos.

                            "Before Keynes there were macro considerations, which were firmly grounded in human action, the personal preferences and choices exercised by individuals in the context of their own earnings and profits. In order to give a role to the state, Keynes had to get away from human action and devise a positive management role for central planners. "
                            It took a while but, that idea is blowing up.
                            "With sound money, that is money that is gold, or substitutes that are fully backed by physical gold, human behaviour is self-correcting through the price mechanism,"
                            The State doesn't want any "correcting".


                            • Exporting unemployment

                              We think that America is falling apart. Foreigners like Brazilians want to come here because everything is great. The same is true for the U.S. dollar. It looks great compared to all the rest. Capital flight keeps pushing the dollar higher. As the dollar goes up, employment falls. Trump wants a weaker dollar but, the markets have other ideas. At the core of everything, a weaker currency exports unemployment. A.I. and robotics are chipping away at job niches and the State is desperate to hold on to whatever jobs are still left. At the same time, we have a falling population of consumers and an enormous SKILLS GAP.
                              There is no solution for efficiency and, automation will continue to chip away at employment. The coming crash of FED GOV in 2020 will put millions on the street who depended on the State to provide make-work to keep them behind a desk. For the time being, every State is trying to export unemployment.

                              Kunstler, "In case you are mystified as to why a considerable portion of the public is disgusted with the news media, it is as simple as this: they appear to be an instrument of that permanent government bureaucracy, doing its bidding, defending its criminal mischief, and covering up its dishonesty. Proof of that is the media’s conspicuous inattention to the now well-documented political depravity in another arm of the Intel Community, the FBI — a much more compelling story of villainy than 13 Russian Facebook trolls and the alleged (still unproven) hacking of the DNC.

                              Donald Trump, aka the Golden Golem of Greatness, may be an unappetizing and embarrassing president. But is the Deep State ready to start a world war just to shove him offstage? Or burn down the constitution? While CNN stands by with Jeri-cans of gasoline?"
                              Light It Up? - Kunstler


                              • Who knows how much money is going where?

                                Interest rates are the big bugaboo right now. Trump wants them held down. Remember that low interest rates wipe out, investment funds, pension funds, insurance funds, savers AND banks. There is a good reason that ZIRP is "never" done. It is just too destructive. Like drinking cheap tequila, the follow-up pain just isn't worth the high. Trump needs to keep in mind that bond buyers will go on strike if they feel that interest rates are too low.

                                The Quantity of money theorists / believers are having a hard time.
                                "Abe rode to power in December 2012 by promising muscular leadership, and by selling voters the idea that Japan’s demographics didn’t have to be its destiny: An aging, shrinking population is no reason to accept a smaller economy every year."
                                "April 2013, Kuroda has expanded the central bank’s holdings of government bonds and bills to 48 percent of outstanding securities, from just 12 percent. He has also made the BOJ one of the top 10 shareholders in 40 percent of Japanese publicly traded companies, "
                                "A year and a half of that experiment — not to mention more than 20 years of zero interest rates preceding it — has gone nowhere. "

                                " What’s required is a public-sector push to replace all physical cash with a national digital currency."
                                "A state-backed digital currency would make it easier for the BOJ and the finance ministry to run “helicopter money” experiments. The BOJ would create new electronic money and give it to the government against a perpetual bond sold by the finance ministry to the monetary authority. 1 The ministry would then credit the electronic money to people’s bank accounts with the proviso that every month that the gift is saved — and not spent — its value will go down by, say, one-twelfth of 1 percent."
                                "The BOJ could eventually make helicopter money its main policy tool,"

                                Jun 4, 2018 - Japan's population is shrinking by more than 1000 people per day.
                                How Japan's ageing population is shrinking GDP | Financial Times
                                Feces-for-brains planners have overlooked the problem of babies.

                                Good article from the Mises institute.
                                "some of the borrowed money is simply not included in the deficit. For example, in fiscal year 2016, they claimed a deficit of $587 billion even though the total debt increased $1,422 billion "
                                " They hide some of the deficit by simply declaring that some of the increased debt is not part of the deficit."
                                "The Treasury Department with their Daily Treasury Statements (DTS) gives us an accounting of all deposits into and withdrawals from federal government accounts. The DTS shows that withdrawals more than tripled from $4,036 billion in FY 1998 to $12,995 billion in FY 2017. "

                                If we define spending as total withdrawals from government accounts, then FY 2017 spending was $12,995 billion and government spending is 67% of GDP.
                                "That’s right. The federal government paid $8.43 trillion in debt redemption payments in FY 2017. That’s ten times the Social Security Benefits paid out ($842 billion). Not counting these payments when reporting government spending is the chief reason that federal spending is reported to be 20.5% of GDP."
                                "However we must recognize that debt payments are a form of government spending and the fact that the feds must finance this spending. Due to the principal payments on the debt, 77% of federal spending is financed by borrowing."
                                Ah yes, about those tax cuts.

                                "Government spending is 67% of GDP."
                                "federal spending is reported to be 20.5% of GDP."
                                Now you see why interest rates must be held down. The bond buyers will run away when they perceive that federal debt is too high to service.
                                8/06 Jamie Dimon warns of 5% Treasury yields – Bloomberg
                                8/06 Bankruptcy booms among older Americans – New York Times
                                8/07 Vanished wealth: Baby boomers filing for bankruptcy in droves – ZH

                                "Nearly half of Americans say their expenses are equal to or greater than their income.
                                That leaves 60% of Americans who spend about equal to their income (38%) or who spend more than their income (18%)."
                                I know guys who spent $70,000 on a pickup truck they didn't need. No tears for them.

                                8/07 Banks ease lending standards just as loan bubble shows signs of bursting – ZH
                                The default party will be much bigger this way.

                                "The net result is whatever actual "growth" has occurred (removing the illusory growth that accounts for much of the GDP "growth" this decade) has flowed almost exclusively to the top of the wealth-power pyramid (see chart below)."
                                That GDP growth seems to have been accomplished with GOV money, "Government spending is 67% of GDP."
                                The U.S. Government To Fork Out A Half Trillion To Service Its Debt In 2018
                                "bogus "growth" story without question because that story is the linchpin of the entire status quo: if it's revealed as inaccurate, i.e. statistical sleight of hand, the whole idea that "growth" can effortlessly fund all future obligations goes up in flames."
                                8/06 U.S. bond market takes looming Treasuries deluge in stride – Reuters
                                It seems likely that US GOV is doing the buying. According to Armstrong, the flames will hold off until 2020.

                                "6. The core constituencies of politicians are government employees and contractors, as these interest groups are funded by the government, which is nominally managed by elected officials and their appointees. Nobody's more generous (or demanding) than those feeding directly at the government trough. (By "contractors" I mean the vast array of Corporate America cartels that feed off government spending: defense, Big Pharma, Higher Education, etc.)"
                                Hegel would love this arrangement.
                                "Once the asset bubbles pop, the illusion that "taxing the rich" will pay for all the obligations pops along with the bubble. "
                                "That 20% is an interesting threshold, as once federal tax burdens rise above 20%, the higher taxes trigger a recession which then crushes tax revenues."
                                Good article, oftwominds-Charles Hugh Smith: We'll Pay All Those Future Obligations by Impoverishing Everyone (How to Destroy Our Currency In One Easy Lesson)

                                In 2008, America stopped believing in the American Dream – Frank Rich, NY Mag
                                Facebook wants to "friend" your bank account,
                                Facebook Asking Major US Banks To Share Users' Financial Data