Fighting to Lose

BALTIMORE – Where are we now? Dow down 296 points on Tuesday – or just under 2%. Cruz and Clinton win the Iowa caucuses. Oil is back below $30. An election has been described as two wolves and one lamb voting on what to have for dinner.

 

Sheep-On-Voting-For-a-Lion-Or-a-Wolf-On-Election-DayWe’re going to make a difference on election day! Or maybe not…

 

Actually, there was never any doubt about what was on the menu. An election is really when the wolves scrap over who gets the choicest pieces. To bring new readers fully into the picture… It doesn’t matter who won in Iowa. Major policies are not determined by the voters but by the more or less permanent elite who run the government, aka the “Deep State.”

The Fed is an instrument of the Deep State, not of the people. This sounds conspiratorial. But it doesn’t require any hidden agenda or secret handshakes. Most people want power, money, and status. If you can get control over the government – the only institution that can steal and kill, legally – you’ve got it made. That’s why so much money is spent trying to get elected or to influence public policy.

The U.S. presidential campaign has seen surprisingly strong showings from two “outsiders”: Donald Trump and Bernie Sanders. Why? As former Congressional staffer turned Deep State whistleblower Mike Lofgren recently told Bonner & Partners Investor Network editor Chris Lowe, it’s because each in his own way warns voters about the wolves. The insiders, according to Trump and Sanders, are predatory and incompetent.

 

2016-Presidential-Election11Bernie and the Donald – voters like them because they are seen as the anti-establishment choices. The press decries them as “populists” and “nutcases”, which means they must be doing something right. As an aside, the European press is completely apoplectic over Trump, to our unending amusement.

 

But the Deep State is more predatory and less incompetent than it appears. It fights wars, for example, not to win them… but to lose them. The War on Poverty has been going on for more than 50 years. Still no sign of victory. But it has financed countless careers and retirements of government operatives.

 

BG-war-on-poverty-50-years-chart-1-825The resounding “success” of the so-called “war on poverty” – click to enlarge.

 

The War on Drugs has raised profit margins for the drug dealers… and for the drug fighters too. But the public has suffered higher levels of violence and billions of dollars in prisons and crime-fighting costs.

Likewise, there are more terrorists now than when the War on Terror was announced – after trillions of dollars were spent and millions of people were killed. The more the U.S. bombs, drones, and bullies… the more people join the fight against it.

 

orwellGeorge Orwell recognized the principle in 1949 already – these wars were never meant to be won. This is also why we already know that the “war on terror” will never end – and it is one of the greatest threats to individual liberty yet.

 

The Long Emergency

Why fight wars you intend to lose? Because it suits the Deep State. The wars are just a way of marshaling support for a transfer of wealth and power from fly-over states to the suburbs of Washington, D.C. and New York. That is to say from the public… to the elite. Which brings us back to our beat: money.

When the 2008 financial meltdown came along, the Fed announced what was effectively another war: the War on the Credit Cycle. In a fiat money world, consenting adults are no longer able to set the price of credit. So, the Fed does it for them.

And after 2008, the Fed decided to take the “emergency” measure of dropping short-term interest rates to zero to try to stimulate the economy. But like so many other government programs, it was an intentional failure.

 

Labor Force Participation vs. FF rateLabor force participation rate vs. federal funds rate – yet another boondoggle in a long list of intentional failures – click to enlarge.

 

With the labor participation rate now at its lowest level ever, the typical American man is more likely to be unemployed today than at any time in history. The rich have gotten richer; the poor have gotten poorer. (No wonder Trump and Sanders are doing so well!)

And after eight years of the most extravagant stimulus efforts in history, in the last quarter, the U.S. economy grew by just 0.7% – “stall speed” in other words. That too looks like incompetence. But it was really another predatory measure.

By evaporating interest rates, the Fed transferred trillions of dollars from savers on Main Street to the speculators on Wall Street. The bankers got their bonuses. Mission accomplished!

 

26.11.09-Martin-Rowson-on-005Not another bonus… then again …

 

A Miracle-Gro Economy

But now, the Fed has put its “credibility on the line,” reported the Financial Times.

That was a shocker; we didn’t think the Fed had any credibility left. But there it was, sitting on the line between higher rates and lower ones.

The PhDs running the Fed are no fools. They know they have not entirely defeated the credit cycle. They only hope to manage it. They know, too, that there are contractions as well as expansions… bear markets as well as bull markets… winter as well as summer.

The idea of raising rates was to get in position before the weather turned cold again. They would need to cut rates again to fight the next downturn. So, last December, the Fed put its credibility on the line. It announced a program of gradual increases that was supposed to bring the short-term interest rates back into their normal range by 2019.

 

rate_hike_cartoon_11.05.2015_largeWhat could possibly happen?

 

Last year, we argued that this was not going to come to pass as planned. The weird and wonderful plants of the Bubble Epoch had been raised in a hothouse with Miracle-Gro sprinklers on 24/7. Now, the Fed was proposing to shut off the spigots!

Surely this would trigger the very crisis the Fed hoped to avoid. That was always the problem with the “data dependent” path Ms. Yellen announced. If your course depends on numbers rather than principles, you are bound to see some numbers you don’t like. Then you have to react.

And the only possible reaction for the Fed is to reverse course. Besides, its main mission is to protect the Deep State’s finances – the flow of real wealth from you to it. And now we find the world’s elite – the Deep State financiers and economists – planning, explaining, and preparing the world for a U-turn.

 

No_rate_hike_cartoon_09.17.205An uncanny sense of timing…

 

Last week, for instance, the Wall Street Journal reported that the Fed was “having second thoughts about hiking rates three or four times this year.”

And yesterday, the Financial Times called Ms. Yellen’s plan to return to normal a “rate rush.”

“Few believe [the Fed] will stick to its plan for more increases this year,” it continued.

Count us among the non-believers.

 

Charts by: Heritage Foundation, St. Louis Federal Reserve Research

 

Chart and image captions by PT

 

The above article originally appeared at the Diary of a Rogue Economist, written for Bonner & Partners. Bill Bonner founded Agora, Inc in 1978. It has since grown into one of the largest independent newsletter publishing companies in the world. He has also written three New York Times bestselling books, Financial Reckoning Day, Empire of Debt and Mobs, Messiahs and Markets.

 

 
 

Emigrate While You Can... Learn More

 
 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke

   
 

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • Gold Sector: Positioning and Sentiment
      A Case of Botched Timing, But... When last we wrote about the gold sector in mid February, we discussed historical patterns in the HUI following breaches of its 200-day moving average from below. Given that we expected such a breach to occur relatively soon, the post turned out to be rather ill-timed. Luckily we always advise readers that we are not exactly Nostradamus (occasionally our timing is a bit better). Below is a chart of the HUI Index depicting the action since the January...
  • India: The next Pakistan?
      India’s Rapid Degradation This is Part XI of a series of articles (the most recent of which is linked here) in which I have provided regular updates on what started as the demonetization of 86% of India's currency. The story of demonetization and the ensuing developments were merely a vehicle for me to explore Indian institutions, culture and society.   The Modimobile is making the rounds amid a flower shower. [PT] Photo credit: PTI Photo   Tribal cultures face...
  • The Long Run Economics of Debt Based Stimulus
      Onward vs. Upward Something both unwanted and unexpected has tormented western economies in the 21st century.  Gross domestic product (GDP) has moderated onward while government debt has spiked upward.  Orthodox economists continue to be flummoxed by what has transpired.   What happened to the miracle? The Keynesian wet dream of an unfettered fiat debt money system has been realized, and debt has been duly expanded at every opportunity.  Although the fat lady has so far only...
  • March to Default
      Style Over Substance “May you live in interesting times,” says the ancient Chinese curse.  No doubt about it, we live in interesting times.  Hardly a day goes by that we’re not aghast and astounded by a series of grotesque caricatures of the world as at devolves towards vulgarity. Just this week, for instance, U.S. Representative Maxine Waters tweeted, “Get ready for impeachment.”   Well, Maxine Waters is obviously right – impeaching the president is an urgent...
  • Welcome to Totalitarian America, President Trump!
      Trump vs. the Deep State If there had been any doubt that the land of the free and home of the brave is now a totalitarian society, the revelations that its Chief Executive Officer has been spied upon while campaigning for that office and during his brief tenure as president should now be allayed.   Image adapted from the cover of “Deep State #5” - depicting an assassin from the future   President Trump joins the very crowded list of opponents of the American...
  • Searching for Truth
      Heresy or Truth? RANCHO SANTANA, NICARAGUA – In the fifth century, Christian scholars counted 88 different heresies. Arianism. Eutychianism. Nestorianism. If there was a way to “offend” God, they had a name for it. One group of “heretics” argued that there was no such thing as “original sin.” Another denied the trinity. And another claimed Jesus was not divine. Which one had the truth?   Depiction of the first Council of Ephesus in 431 AD, convened by Emperor...
  • Why the 21st Century Sucks - Turtles All the Way Down
      A Truly Sucky Century BALTIMORE – What an awful century! Worst we’ve ever seen. Household incomes are down. Employment is down, with 7 million people in the U.S. of working age without jobs. Productivity growth is down. GDP growth is down – to only about 0.5% per capita last year. Even life expectancies are down. Drug overdoses are up. Suicides are up. One out of every eight children lives in a family getting food stamps. One of out every eight adults takes psychoactive drugs...
  • Gold and the Fed's Looming Rate Hike in March
      Long Term Technical Backdrop Constructive After a challenging Q4 in 2016 in the context of rising bond yields and a stronger US dollar, gold seems to be getting its shine back in Q1. The technical picture is beginning to look a little more constructive and the “reflation trade”, spurred on further by expectations of higher infrastructure spending and tax cuts in the US, has thus far also benefited gold. From a technical perspective, there are indications that the low at $1045.40,...
  • The Unstable Empire – A Campfire Tale
      Campfire Tale   Caesar: The Ides of March are come. Soothsayer: Ay, Caesar, but not gone. — Julius Caesar, Shakespeare   GRANADA, NICARAGUA – Today, we stop the horses and circle the wagons. For 19 years, we have been rolling along, exploring, discovering. We began with the assumption that we didn’t “know” anything - so we kept our eyes open. Now we know even less.   Famous people who knew nothing and were not shy to admit it: Sergeant Schultz...
  • Off the Beaten Path in Mesoamerica
      Greeted by Rooster There’s an endearing quality to a steadfast rooster call at the crack of dawn when overheard from a warm country farmhouse.  There’s a reassuring charm that comes with the committed gallinaceous greeting of daybreak that’s particularly suited to a rural ambiance.  The allure of a morning cock-a-doodle-doo somehow falls flat in all other settings.   Good morning everyone! Before meteorological forecasts were available on TV and smart phones, people...
  • Why Silver Went Down – Precious Metals Supply and Demand
      Rumor-Mongering vs. Data The question on the lips of everyone who plans to exchange his metal for dollars—widely thought to be money—is why did silver go down? The price of silver in dollar terms dropped from about 18 bucks to about 17, or about 5 percent.   Reportedly silver was already assassinated in the late 19th century... so last week they must have assassinated its corpse. [PT] Illustration taken from 'Coin's Financial School'   The facile answer is...
  • Systematic Trading - Unwrapping the Onion
      Lumpy but Robust   [ed note: this article has originally appeared at the Evil Speculator and was written by trader and ES contributor Scott. We provide a link to Scott's past articles below this post for readers who want to get more familiar with his ideas and/or any unusual terminology used in this article]   One continual theme in my trading is that every time I think I have it figured out, I get punched in the face by an unexpected problem. The tendency is to go more...

Austrian Theory and Investment

Support Acting Man

Own physical gold and silver outside a bank

Archive

j9TJzzN

350x200

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com