The Federal Reserve Is Setting Up Trump For A Recession, A Housing Crisis And A Stock Market Crash?


TheEconomicCollapse

How The Federal Reserve Is Setting Up Trump For A Recession, A Housing Crisis And A Stock Market Crash

By Michael Snyder

Most Americans do not understand this, but the truth is that the Federal Reserve has far more power over the U.S. economy than anyone else does, and that includes Donald Trump.  Politicians tend to get the credit or the blame for how the economy is performing, but in reality it is an unelected, unaccountable panel of central bankers that is running the show, and until something is done about the Fed our long-term economic problems will never be fixed.  For an extended analysis of this point, please see this article.  In this piece, I am going to explain why the Federal Reserve is currently setting the stage for a recession, a new housing crisis and a stock market crash, and if those things happen unfortunately it will be Donald Trump that will primarily get the blame.

On Wednesday, the Federal Reserve is expected to hike interest rates, and there is even the possibility that they will call for an acceleration of future rate hikes

Economists generally believe the central bank’s median estimate will continue to call for three quarter-point rate increases both this year and in 2018. But there’s some risk that gets pushed to four as inflation nears the Fed’s annual 2% target and business confidence keeps juicing markets in anticipation of President Trump’s plan to cut taxes and regulations.

During the Obama years, the Federal Reserve pushed interest rates all the way to the floor, and this artificially boosted the economy.  In a recent article, Gail Tverberg explained how this works…

With falling interest rates, monthly payments can be lower, even if prices of homes and cars rise. Thus, more people can afford homes and cars, and factories are less expensive to build. The whole economy is boosted by increased “demand” (really increased affordability) for high-priced goods, thanks to the lower monthly payments.

Asset prices, such as home prices and farm prices, can rise because the reduced interest rate for debt makes them more affordable to more buyers. Assets that people already own tend to inflate, making them feel richer. In fact, owners of assets such as homes can borrow part of the increased equity, giving them more spendable income for other things. This is part of what happened leading up to the financial crash of 2008.

But the opposite is also true.

When interest rates rise, borrowing money becomes more expensive and economic activity slows down.

For the Federal Reserve to raise interest rates right now is absolutely insane.  According to the Federal Reserve Bank of Atlanta’s most recent projection, GDP growth for the first quarter of 2017 is supposed to be an anemic 1.2 percent.  Personally, it wouldn’t surprise me at all if we actually ended up with a negative number for the first quarter.

As Donald Trump has explained in detail, the U.S. economy is a complete mess right now, and we are teetering on the brink of a new recession.

So why in the world would the Fed raise rates unless they wanted to hurt Donald Trump?

Raising rates also threatens to bring on a new housing crisis.  Interest rates were raised prior to the subprime mortgage meltdown in 2007 and 2008, and now we could see history repeat itself.  When rates go higher, it becomes significantly more difficult for families to afford mortgage payments

The rate on a 30-year fixed mortgage reached its all-time low in November 2012, at just 3.31%. As of this week, it was 4.21%, and by the end of 2018, it could go as high as 5.5%, forecasts Matthew Pointon, a property economist for Capital Economics.

He points out that for a homeowner with a $250,000 mortgage fixed at 3.8%, annual payments are $14,000. If that homeowner moved to a similarly-priced home but had a 5.5% rate, their annual payments would rise by $3,000 a year, to $17,000.

Of course stock investors do not like rising rates at all either.  Stocks tend to rise in low rate environments such as we have had for the past several years, and they tend to fall in high rate environments.

And according to CNBC, a “coming stock market correction” could be just around the corner…

Investors are in for a rude awakening about a coming stock market correction — most just don’t know it yet. No one knows when the crash will come or what will cause it — and no one can. But what’s worse for most investors is they have no clue how much they stand to lose when it inevitably happens.

“If you look at the market historically, we have had, on average, a crash about every eight to 10 years, and essentially the average loss is about 42 percent,” said Kendrick Wakeman, CEO of financial technology and investment analytics firm FinMason.

If stocks start to fall, how low could they ultimately go?

One technical analyst that has a stunning record of predicting short-term stock market declines in recent years is saying that the Dow could potentially drop “by more than 6,000 points to 14,800″

But if the technical stars collide, as one chartist predicts, the blue-chip gauge could soon plunge by more than 6,000 points to 14,800. That’s nearly 30% lower, based on Friday’s close.

Sandy Jadeja, chief market strategist at Master Trading Strategies, claims several predicted stock market crashes to his name — all of them called days, or even weeks, in advance. (He told CNBC viewers, for example, that the August 2015 “Flash Crash” was coming 18 days before it hit.) He’s also made prescient calls on gold and crude oil.

And he’s extremely concerned about what this year could bring for investors. “The timeline is rapidly approaching” for the next potential Dow meltdown, said Jadeja, who shares his techniques via workshops and seminars.

Most big stock market crashes tend to happen in the fall, and that is what I portray in my novel, but the truth is that they can literally happen at any time.  If you have not seen my recent rant about how ridiculously overvalued stocks are at this moment in history, you can find it right here.  Whether you want to call it a “crash”, a “correction”, or something else, the truth is that a major downturn is coming for stocks and the only question is when it will strike.

And when things start to get bad, most of the blame will be dumped on Trump, but it won’t primarily be his fault.

It was the Federal Reserve that created this massive financial bubble, and they will also be responsible for popping it.  Hopefully we can get the American people to understand how these things really work so that accountability for what is coming can be placed where it belongs.

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President #Trump: Replace The Dollar With Gold As The Global Currency To Make America Great Again


Forbes

Inside President Trump’s otherwise “standard Trump stump speech” at CPAC was nestled what might be a most intriguing observation:

Global cooperation, dealing with other countries, getting along with other countries is good, it’s very important. But there is no such thing as a global anthem, a global currency or a global flag. This is the United States of America that I’m representing.

There’s a keen insight in there that could, just maybe, transform our lives, America, and the world. No “global currency?”  Was this, with the poetic observation that “there is no such thing as a global anthem…or a global flag,” just a trope? Or could it contain a political portent with potential high impact on world financial markets?  Let’s drill down.

As it happens, there is a global currency.

It’s called the “U.S. dollar.”

Most international trade is priced in dollars. The Bretton Woods international monetary system invested the dollar, which then was defined as and (internationally) was legally convertible to gold at $35/oz, with global currency status.  France’s then-finance minister, later its president, Valéry  Giscard d’Estaing, called the “reserve currency” status of the dollar — its status, along with gold, as global currency — an “exorbitant privilege.”

By this d’Estaing was alluding to the fact, as summarized at Wikipedia, that “As American economist Barry Eichengreen summarized: ‘It costs only a few cents for the Bureau of Engraving and Printing to produce a $100 bill, but other countries had to pony up $100 of actual goods in order to obtain one.'” That privilege, which made great sense during the period immediately after World War II, became a curse.

In 1971 President Nixon, under the influence of his Svengali-like Treasury Secretary John Connally, “suspend[ed] temporarily the convertibility of the dollar into gold.” That closure proved durable instead of temporary. The dollar became, and remains, the world’s global currency.

What had been an “exorbitant privilege” devolved into an exorbitant liability. As my former professional colleague John D. Mueller, of the Ethics and Public Policy Center, formerly Rep. Jack Kemp’s chief economist, writing in the Wall Street Journal in Trump’s Real Trade Problem Is Money recently and astutely observed:

a monetary system based on a reserve currency is unsustainable, since foreign official dollar reserves (for example) are acquired and must be repaid in goods. In other words, the increase in official dollar reserves equals the net exports of the rest of the world, which means it must also equal U.S. international payments deficits—an unsustainable situation.

In other words, if President Trump wishes to address America’s merchandise trade deficit (balanced to perfection, of course, by a capital accounts surplus) he will find that allowing the dollar to be used as the global currency is the real snake in the economic woodpile.  The dollar’s burden as the international reserve currency, not currency manipulation by our trading partners or bad treaties, is the true villain in the ongoing melodrama of crummy job creation.

Mueller’s Wall Street Journal column enumerates the three options open to President Trump:

First, muddle along under the current “dollar standard,” a position supported by resigned foreigners and some nostalgic Americans—among them Bryan Riley and William Wilson at the Heritage Foundation, and James Pethokoukis at the American Enterprise Institute.

Second, turn the International Monetary Fund into a world central bank issuing paper (e.g., special drawing rights) reserves—as proposed in 1943 by Keynes, since the 1960s by Robert A. Mundell, and in 2009 by Zhou Xiaochuan, governor of the People’s Bank of China. Drawbacks: This kind of standard is highly political and the allocation of special drawing rights essentially arbitrary, since the IMF produces no goods.

Third, adopt a modernized international gold standard, as proposed in the 1960s by Rueff and in 1984 by his protégé Lewis E. Lehrman …and then-Rep. Jack Kemp.

To “muddle along” would, of course, be entirely antithetical to Trump’s promise to Make America Great Again. It would destroy his crucial commitment to get the economy growing at 3%+ — vastly faster than it has for the past 17 years  — which also happens to be the recipe for robust job creation and upward income mobility for workers. It also is the essential ingredient for balancing the federal budget while rebuilding our infrastructure and military.

To turn the IMF into a world central bank would, of course, be anathema to Trump’s economic nationalism. To subordinate the dollar to the IMF’s SDR would be equivalent to lowering Old Glory and replacing the American flag with the flag of the United Nations on every flagpole in America. Unthinkable under a Trump administration.

That leaves the third option, to “adopt a modernized international gold standard, as proposed in the 1960s by Rueff and in 1984 by his protégé Lewis E. Lehrman … and then-Rep. Jack Kemp” (whose eponymous foundation I advise). To this one should add, as Forbes.com contributor Nathan Lewis has shrewdly observed, the removal of tax and regulatory barriers to the use of gold as currency.

As I have repeatedly observed Donald Trump shows a strong affinity for gold. He has also shown a keen intuitive grasp of  how the gold standard was crucial to having made America great:

Donald Trump: “We used to have a very, very solid country because it was based on a gold standard,” he told WMUR television in New Hampshire in March last year. But he said it would be tough to bring it back because “we don’t have the gold. Other places have the gold.”

Trump’s comment to GQ: “Bringing back the gold standard would be very hard to do, but boy, would it be wonderful. We’d have a standard on which to base our money.”

Trump has been misled to believe that “we don’t have the gold. Other places have the gold.” In fact, the United States, Germany, and the IMF together have about as much gold as the rest of the world combined and America has well more than Germany and the IMF combined. [Note: This column has been updated to clarify that the United States has well more gold than Germany and the IMF combined but not, as originally stated, more than twice as much.]

We have the gold. Bringing back the gold standard would not be very hard to do.

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Spain Sets Massive Precedent – Charges Its Central Bankers in Court


TheMillenniumReport

Claire Bernish

First, Iceland, and now Spain has taken on the Big Bankers responsible for financial calamity, as the country’s highest national court charged the former head of Spain’s central bank, a market regulator, and five other banking officials over a failed bank leading to the loss of millions of euros for smaller investors.

This, of course, markedly departs from the mammoth taxpayer giveaway — commonly referred to as the bailout — approved by the U.S. government ostensively to “save” the Big Banks and, albeit unstated, allow the enormous institutions to continue bilking customers without the slightest fear of penalty.

Errant bankers and financiers, it would seem, typically manage to either evade actually being charged, or escape hefty fines and time behind bars.

Spain’s Supreme Court last year ruled “serious inaccuracies” in information about the listing led investors to back Bankia in error, thus the bank has since paid out millions of euros in compensation.

But Spanish authorities could not abide the telling findings of a yearslong investigation into the failed listing, as Wolf Street explains,

“As part of the epic, multi-year criminal investigation into the doomed IPO of Spain’s frankenbank Bankia – which had been assembled from the festering corpses of seven already defunct saving banks – Spain’s national court called to testify six current and former directors of the Bank of Spain, including its former governor, Miguel Ángel Fernández Ordóñez, and its former deputy governor (and current head of the Bank of International Settlements’ Financial Stability Institute), Fernando Restoy. It also summoned for questioning Julio Segura, the former president of Spain’s financial markets regulator, the CNMV [National Securities Market Commission] (the Spanish equivalent of the SEC in the US).

“The six central bankers and one financial regulator stand accused of authorizing the public launch of Bankia in 2011 despite repeated warnings from the Bank of Spain’s own team of inspectors that the banking group was ‘unviable.’”

As AFP reports, “The National Court validated conclusions made by prosecutors who concluded that when ‘an unviable entity has been listed on the stock market, its administrators or auditor should not shoulder all the responsibility.’”

Specifics of the charges have not yet been made apparent, but as The Economist reports:

“The court is questioning why they allowed Bankia to sell shares in an initial public offering in 2011, less than a year before Bankia’s portfolio of bad mortgage loans forced the government to seize control of it. It said there was evidence the regulators had ‘full and thorough knowledge’ of Bankia’s plight. After its nationalisation, it went on to report a €19.2bn ($24.7bn) loss for 2012, the largest in Spanish corporate history.”

Internal emails and documents played a crucial role in ultimately bringing the central banking officials to task for the failure of Bankia — inspectors bringing issues to the attention of superiors were allegedly ignored. One email cited by the Economist came from an inspector who warned Bankia was “a money-losing machine,” for which an IPO would not solve.

Another report, deemed “devastating by the court,” saw an inspector advise Bankia to seek a private buyer rather than proceed with the listing.

An inquiry into “the participation of other players, such as officials in the central bank,” was also urged by the National Court.

As the Economist points out, Spanish judges are generally reluctant to sentence first-time financial criminals to prison; though five Novacaixagalicia executives had five-year suspended sentences — levied for embezzlement in 2015 — abruptly enforced in January.

Meanwhile, taxpayers in the United States have yet to see Big Bankers criminally responsible for the financial ruin of so many Americans brought to any semblance of justice for their wrongdoing.

 

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The Best Way for Economists to Stay Relevant Today Is to Go Out of Business


TheDailyBell

By Daily Bell Staff – January 11, 2017

How Economists Can Stay Relevant Under Trump … Economists are going to have to approach things a bit differently if they want to stay relevant in the Trump age. Political economy research is going to become more important. Some humility wouldn’t hurt. And they should look someplace other than the federal government to test their ideas.  This is what I took away from this past weekend’s American Economic Association’s annual conference, where I heard a panel with five Nobel-winning economists on the topic of “Where is the world economy headed?” – Bloomberg

God willing, they can’t. Economics, as a profession is part of central banking. Almost no economics, with the exception of Austrian economics rejects central banking.

But economics as a part of central banking includes price fixing. Whenever central bankers meet they fix short term interest rates as a matter of course. Short term rates then influence longer term rates.

Price fixing itself is not endorsed by economics. It is a contradiction because economics as a profession seeking to create an environment where economics can go to work effectively. Every price fix tears down the functioning of economics.

More:

One lesson of Trump’s election is that technocracy — the idea that wise, expert leaders should steer policy for the good of all — is out of favor. Economists may still be the toast of the American and British elite, but that elite has been sidelined by a populist wave.

Free trade, although not the most important issue facing the country, was a hugely symbolic battle. The elite, supported by the vast majority of the econ profession, took the virtues of free trade as a given; the general public disagreed vehemently with the expert consensus.

The eventual victory of the populists has caused many economists to question whether the public will listen to them again in their lifetimes.

This is another reason why economics should severely restrain itself as a profession. (And possibly go out business.) Economics has encouraged technocracy, the regime of the few making decisions for the many.

Economics is the study of the discipline of work and as such does not include statements and proscriptions encouraging a small handful of people to make economic policy.

Economics as a matter of course should back the free market. The free market IS economics. When economics backs something other than the free market, it is not backing functional economics anymore. It is backing something else.

Technocracy is also a price fix and a very obnoxious one. When just a few make economic decisions for the many, the fabric of economics is increasingly threadbare. The best economics encourages a wide variety of financial actors to make decisions in their own enlightened self-interest.

Economics is all about freedom but modern economics is all about restricting freedom and choosing who can make economic decisions for others. This is exactly the reverse of what it should be.

Ultimately economics is not much needed as a profession because it is proactive. It tries to tell government and corporations what to do to make business and profits better but in doing so only makes the economic climate worse.

We don’t need more economic advice and nostrums. We need fewer economics and certainly fewer economic proscriptions that encourage people to “do” things beyond buying and selling.

The best thing that economics could do in the modern era is to shrink itself drastically and return to a science advocating free market solutions. It should advocate as little government as possible and the greatest amount of self-determination for the most people possible.

Conclusion:  If it did this, It would become a real profession again, albeit a smaller one, surviving in the nooks and crannies of academia. But that is where it should be.


Related

The Sad State of the Economics Profession

 

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The False Economic Recovery Narrative Will Die In 2017


This is the first posting of 2017 for this blog. Have been observing the same old BS of last year flowing through this year, what with all the #FakeNews getting more and more rampant. This is the kind of news I wish to see and post from now on…


Alt.Market.Com

Yes, the narrative of the “new normal” has been around for so long now that many people have simply grown used to it. The assumption is that the fiscal “new normal” has become the fiscal “normal,” and though the fundamentals continue to strain under the weight of poor global demand and historic debt levitated by extraneous fiat stimulus, the masses feel far less fear than is warranted. Hey, why should they? We’ve managed around eight years skating on thin ice, why shouldn’t we expect eight more years of the same?

The banking elites have done the job they set out to do, which was to drive the economy to the very edge of the financial cliff, and then keep it suspended there until the general public became comfortable living next door to the abyss.

Why do this? Well, the greater dynamic at play here is something the average person will not understand or refuses to examine — economics today is about mass psychology. The economy is a tool, or a weapon, by which international financiers can influence the public mind and the emotions of the mob. In order to grasp the mechanics of economics it is not enough to deal in statistics and trade principles; one must also grasp human behavior and how it is manipulated. One must acknowledge that in economics we witness the transmutation of societies by word and by force, by chaos and by order. Economics is alchemy.

The globalists (in their twisted view) seek to change lead into gold, and just as in alchemy, these elements are a metaphor for psychological evolution. For the globalists, social engineering is a form of witchcraft; they see it as creation, or a grand form of architecture.

But it is not creation. The globalists are incapable of such art because true art requires wisdom and empathy. All they know is how to deconstruct existing systems generated by nature and free men and rearrange the shattered pieces into something more oppressive and ultimately less interesting than what existed before. Give the internationalists a Mona Lisa and they will shred it, reconstitute it and regurgitate a paint by numbers coloring book.

The globalists only know how to turn gold into lead.

If you do not understand the reality of globalist influence in markets and the nature of economics as a weapon; if you actually believe that the economy operates purely on some kind of free-roaming free market principles, then you will never be able to wrap your head around the otherwise absurd behavior of our financial structure.

The psychology of fiscal “recovery” is a vital tool for change and for developing false dichotomies. For example, I recently came across this article from the pervasive propaganda hub of Bloomberg. In it, Bloomberg outlines a story we are by now very used to hearing from the mainstream — that the presidential era of Barack Obama has left the economy of the U.S. in particular in “far better shape” as he leaves office than when he entered office.

Now, anyone who has been reading my analysis for at least the past six months (if not the past ten years) knows exactly what I think about the current state of the economy and what is likely to happen in the near future. For those new to my position, here is a very quick summary along with linked evidence supporting my claims:

From the 1990’s leading into the year 2007, the Federal Reserve engineered a massive debt and derivatives bubble through the use of artificially low interest rates in the housing market. Alan Greenspan, the presiding Fed chairman at the time, openly admitted in interviews that the central bank KNEW an irrational bubble had formed, but claims they assumed the negative factors would “wash out.” This is a constant meme set forward by the Fed — that they were essentially too stupid to foresee a collapse of the bubble they knew they had created. They prefer that the public believes that the Fed was “incompetent” rather than deliberately destructive.

The low rates fueled a machine of mortgage backed securities and derivatives based on trillions of dollars in loans to people that had no ability or no intention of ever paying them back. The Fed had aid in this program from the ratings agencies, which labeled obviously toxic debt as AAA for years, and the SEC, which refused to investigate any legitimate claims of asset manipulation and ill intent. This corrupt behavior on the part of the SEC was showcased in the testimony of SEC whistle blower Gary J. Aguirre, who warned of dangerous debt pools and manipulation within the banking industry in 2006 before the derivatives collapse and also warned that the SEC interfered with any investigation attempts into the problem.

This led to the well known “Great Recession” triggered in 2007/2008. The Fed along with numerous other central banks around the world had conjured a crisis and then offered their own solution to that crisis. Namely, the solution of massive fiat stimulus programs purchasing toxic debt, treasury bonds, corporate stocks and anything else that wasn’t nailed down.

The “bailouts” and quantitative easing projects, however, were actually cover for a far larger program of untold trillions in overnight loans to corporations, domestic and foreign.  A never-ending river of dollars created out of thin air and pumped into companies for near zero interest. It was these free overnight loans that allowed international conglomerates to sidestep the monstrous black hole of derivatives debt they were circling and purchase their own stocks through stock buybacks, thus reducing the number of existing stocks on the exchanges and artificially boosting the price of the remaining stocks. This caused stock markets to skyrocket from near death to historic highs.

In the meantime, government bureaucracy has worked tirelessly to manipulate statistics to falsely reflect an overall recovery. The stock market is much easier to manipulate than the fundamentals, so, the fundamentals must be misrepresented.  While some numbers slip through the cracks and issues of true supply and demand continue, the vast majority of the populace has little clue that the collapse of 2008 never actually stopped, it was just shifted into a state of slow motion.

The Fed’s low interest rates, specifically on overnight loans, has allowed the economy to sputter along for eight years, and has greatly enriched the top .01% in the process. But now, their strategy is changing.

The problem is that stimulus has a shelf life, and while certain stats can be skewed and the stock market can be inflated for a time, eventually, consequences must be accepted in the real economy for attempting to defy gravity for so long.

The initial collapse was designed to foster an even greater event. Without the derivatives bubble, the central bankers never could have convinced the masses to accept the idea of a fiat stimulus bubble which would eventually put the dollar at risk, along with the overall U.S economy. Taking the brunt of the 2008 crash would have been painful, but not insurmountable. But with eight more years and tens of trillions in added debt along with increased geopolitical tensions and an equities bubble for the ages, the scale of the final stage of collapse will be truly unprecedented.

The purpose of this final event will be to generate so much chaos and desperation that the public will be compelled to search for extraordinary solutions. The globalists will be ready with those solutions, including those they have openly outlined decades in advance in publications like The Economist.

The end game? The formation of a single monetary and economic authority under the management of the International Monetary Fund, and the establishment of a single global currency using the IMF’s Special Drawing Rights as a “bridge” for locking national currencies into a harmonized exchange rate until they eventually become pointless, interchangeable and replaceable.

The problem is, the globalists cannot possibly initiate this end game in a vacuum, otherwise, they would take the blame for the inevitable collateral damage to people’s lives as their “great global reset” is undertaken. The globalists need a scapegoat.

Enter Donald Trump, the Brexit Referendum, and the rise of “populist” movements. For the entire first half of 2016, globalists were “warning” non-stop that a rise in populism (conservatives and sovereignty champions) would result in international financial catastrophe. It was as if they KNEW that the Brexit would succeed and that Donald Trump would win the election…

This has been my position for the past half year — that globalists were planning to allow conservative and sovereignty movements to take the reins of power, that they would allow the passage of the Brexit and the rise of Trump, just before they pull the plug on the system’s life support. The Federal Reserve in particular has already launched the final phase by beginning a series of rate hikes which will remove the safety net of free and cheap overnight loans to companies, thereby sabotaging equities markets. I specifically warned about this over a year ago when most analysts were stating that negative rates and QE4 were “just around the corner.”

And this is where we are today. As noted above, Bloomberg writes an interesting bit of propaganda starting with a bit of truth. Here’s the beginning quote from their article:

“Research suggests factors beyond the control of any U.S. president, not their actual policies, set the course of the economy. Yet with voters, President-Elect Donald Trump will secure much of the praise or blame when it comes to the impact of his agenda over the next four years.”

The recovery narrative from 2008 to today was imperative to the globalist’s greater agenda. For a considerable portion of the public must be made to believe that under a socialist and decidedly globalist president (Barack Obama) the general trend in the economy was positive and that “things were getting better.” The rise of conservative movements today sets the stage for the final collapse and the IMF’s great reset, in which conservatives and sovereignty activists will be blamed, whether there is any evidence of culpability or not, for the crash that the globalists have spent the better part of two decades setting in motion.

After the dust has settled, the argument will be that the world was “on course” before the Brexit, before Trump and before populism. The argument will be that globalism was working and conservatives screwed it up with their selfish nationalist endeavors. After the final crash and perhaps numerous deaths from poverty and violence, the argument will be that the only conceivable solution must be a return to globalism in an extreme form; or total global centralization, so that such a tragedy will never happen again.

Bloomberg helps to set up the scenario, by claiming that Trump is “inheriting” a stable and improving economy compared to the economy that Barack Obama inherited:

“While today’s economy is a mixed bag by historical standards, one thing is clear: Obama has left Trump a 2016 economy in a better state, by many measures, than when he was first elected president in 2008 in the middle of the worst downturn since the Great Depression.”

Of course, Bloomberg fails to mention that the standards and statistics by which they measure economic “improvement” are entirely fraudulent.

For example, real GDP is at -2 percent, not +2 percent as Bloomberg claims, when one calculates for distortions such as government spending, which is counted towards GDP even though government does not actually produce anything. Government can only steal productivity from citizens and reassign that wealth elsewhere.

Bloomberg also cites a vastly improved unemployment rate. They once again refuse to bring up the fact that over 95 MILLION Americans are no longer counted as unemployed by the Bureau of Labor Statistics because they have been jobless for so long they do not qualify to be included on the rolls. This lie of reduced unemployment has been pervasive through the entirety of the Obama Administration.

Bloomberg then mentions a greatly improved housing market that Trump will enjoy when he takes office. They certainly do not include the fact that pending home sales are now plummeting and home ownership rates in the U.S. are so low you have to go back to 1965 to match them.   They do not mention that the majority of the boost in home sales during Obama’s two terms was due to corporations like Blackstone buying up distressed mortgages and turning the homes into rentals. The housing market is NOT being supported by individuals and families seeking home ownership, but corporations snatching up real estate on the cheap and driving up prices.  Wall Street is now America’s landlord.

And there you have it. The globalist setup continues with mainstream outlets telling Americans that the economy is in ascension as Trump and populists move into positions of power, when in truth the economy is as dire as it ever was if not worse off. To add to the theater, Donald Trump has ventured to take credit for the sharp rise in stocks and the impression of improving economic stats.  In one of his latest tweets just after Christmas, he had this to say:

“The world was gloomy before I won – there was no hope. Now the market is up nearly 10% and Christmas spending is over a trillion dollars!”

Now, if you know anything about the true fiscal situation, you would think this statement is a severely idiotic move by Trump.  No incoming president with any sense would try to take credit for the largest equities bubble in history.  But, take credit is essentially what he did.  That said, if you ALSO understand that the globalist narrative is engineered so that conservatives take the blame for the coming crash, AND if you believe that Trump is knowingly participating in this narrative (as I now do after he lied about “draining the swamp” and front loaded his cabinet with banking elites), then Trump’s statement makes perfect sense.  Trump is playing the role of a future bumbling villain, the populist maniac who gets too big for his britches and brings disaster down on people’s heads.

The false recovery narrative will indeed die in 2017, and it will be because the globalists WANT it to die while nationalists are at the helm. This is perhaps the biggest con game in recent history; with conservatives as the fall guy and the rest of the public as the gullible mark. One can only hope that we can educate enough people on this scenario to make a difference before it is too late.

 

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What Would Actually Happen If All Debt Was Erased?


TheEventChronicle

 

The Invention of Debt

What you may not know is that debt arose recently on the human stage. Throughout more than 99% of our history we have not even had a concept for debt. (The interested reader can pick up David Graeber’s excellent book Debt: The First 5000 Years for full story.)

Anthropological studies of hunter-gatherer societies reveal that there were no barter systems, no currencies to use for money, and — in the absence of these cultural artifacts — there was no debt. With all the great variation cross cultures one might expect from ethnographic research, the anthropologists found that some tribal communities engaged in “gift economies” where status arises from how generous a person is who has acquired wealth, while others have remained egalitarian and non-hierarchical for thousands of years by sharing their food and materials based on the principles of “from each as they are able, to each as they need.”

This belies the great misunderstanding about communism that treats it as a state-centric governing system, when in truth it is the foundational sentiment of any community that builds upon the trust and good will of social relations between people who know and depend upon one another — a condition that has held for all hunter-gatherer societies throughout our long 200,000 year history as a species.

Pick up an economics textbook at random and you will find a classic (and false) “just so” story about the need for barter systems to have money. They all go something like this: Steve has potatoes and needs some shoes. Bob has shoes but does not need any potatoes. They are unable to directly exchange goods due to this mismatch of need, and so must introduce a money system to preserve the value of currency across multiple exchanges that enable Steve to sell his potatoes to Sue and acquire money that he can then use to pay Bob for a pair of shoes. What this simple narrative conceals is the broad evidence from ancient cultures studied by anthropologists that no such problem arises in this way.

What really happens is that a warring society has arisen somewhere (to get a sense of how this happens, read my article about psychopaths and agrarian city states) and is in a mode of conquest. When this burgeoning empire conquers new land, the ruler imposes a system of taxation on the local populace to pay for the costs of war. This imposition of scarcity, by extracting resources from the local population to be hoarded by the warrior chieftain, is what leads to the emergence of barter systems and — in some instances — the introduction of a money system by the ruler.

In the absence of war and conquest, hunter-gatherer societies do not spontaneously create barter systems. Instead they share more or less equally within their tribe and only trade with other tribes through highly ritualized and often conflict-ridden exchanges that take place when two tribes come together for a brief interaction. The pathway that does lead to the emergence of barter systems takes place in agrarian societies where some kind of accounting system has been created to track debts. And from these accounting systems we do find that debt is present.

So where does debt come from if it isn’t naturally a part of human societies? Again it is the imposition of scarcity by the ruling class — designed to extract and hoard wealth in the hands of a powerful elite — that creates the notion of debt. Does this sound familiar in today’s context? Many countries were “modernized” throughout the 20th Century by introducing market systems that structure debt into the economies of newly founded nations. These nations now must pay tributes — in the form of interest payments — to external banks that extract wealth from the poor countries and hoard it in the coffers of wealthy countries.

Stated plainly, debt is created when a powerful group of people impose scarcity upon another group of people who have been conquered. This is the root cause of poverty. It is the destabilizing force of unequal societies that breeds civil unrest and revolution. Thus the need for Hebrew kings to introduce Jubilee. They knew that a revolution might cause the people to rise up and clear their own debts, while also uprooting the monarchy from power. In order to preserve their power base, they would routinely erase the debt and start again.

A Note About Debt and Moral Accounting

The astute reader may already be asking, “What does this story about the creation of debt say about the religious use of moral accounting?” You may have noticed that all the world religions have at their core a transactional relationship between God and humans — where each person owes a debt to their creator and must pay it either by relinquishing sin from their lives or by returning to their maker upon death.

This economic transaction frame for moral accounting is not present in all human societies. Those hunter-gatherer tribes practicing the ethic of distribution based on need have no concept for trading an eye-for-an-eye. Nor do they see a gift as something to be repaid, expressing disgust at the insult of treating their generosity in such a transactional manner.

Instead what anthropologists have found is that debt-based morality is only present in societies that already have accounting systems and also engage routinely in barter and monetary exchange. In other words, this moral accounting system is a product of war and conquest and not a natural part of human society. So the next time you feel a debt to one of your friends, society, or your maker it may help to keep this in mind.

What Would It Mean to Erase All Debt?

We are living in a time when too many of our financial resources are allocated to non-productive activities — principally the accumulation of wealth by “making money with money” and a myopic focus on economic activities that service our massive debts. This is why people work at jobs they hate. It is why investments are not being made in renewable energy, public education, the arts, health care, or the eradication of poverty. We have built a massive financial house of cards on debt — with money itself coming into being when loans are taken out, a pool that grows exponentially due to the interest that accompanies it — and so we are not able to bring consumer culture to an end or focus our creative talents on planetary sustainability.

By the way, this is exactly what my friends at /The Rules are trying to address in their global mobilization effort.

So if we were to erase all debt, the 7 billion people alive today could focus on their passions. We could all come together to address global threats — be they resource-based like the scarcity of fresh water or peaking of global oil production; or cultural like the loss of spiritual meaning in the secularization of society or the soullessness of employment drudgery that comes from working long hours at a mind-numbing job.

What comes to my mind is the way cities try to implement broad solutions to address economic development, transportation, resource management, social justice, and environmental concerns. They must operate within constrained budgets that keep draining further without a clear end in sight. I imagine what would be possible if everyone was able to set out on their own intellectual and experiential journeys without the fear of a debt-collector coming to their door. How then would the peoples of this world choose to live out their lives?

Perhaps you have your own dreams of a better world for you and your loved ones. What comes to mind for you? This is not merely an academic question, by the way, because we each participate in the social realities that are lent our beliefs, our actions, and our obligations. If we were to collectively decide that our debts are no more, they would cease to exist.

This is because what we take to be real in many respects becomes so as a self-fulfilling prophesy. We each have the power to be accountants — defining “the real” by choosing what to measure and imbuing it with significance. In this way, the Gross Domestic Product was claimed as an economic alter for measuring the progress of civilization in the 20th Century. Perhaps in the 21st we will replace it with Gross National Happiness or some other novel metric for capturing the essence of our values and purpose as a civilization on this Earth.

Watch the video below:


Joe Brewer is co-founder and research director of Culture2 Inc., a culture design lab for social good. He is a former fellow of the Rockridge Institute, a think tank founded by George Lakoff to analyze political discourse for the progressive movement.

Source: Common Dreams
Via: Conscious Life News

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There’s no such thing as “the economy.”


FEE

A Rising Stock Market Does Not Signal Economic Health

The headlines tell us that the Dow Jones is up around 1,000 points since Donald Trump won the election on November 8th. The conventional wisdom is that this shows how much confidence people have in Trump’s ability to generate a healthy American economy. The argument is that if people are willing to buy stock in American firms, this indicates their belief that those firms will see improving profits over the next few years. They then draw the conclusion that more profitable firms indicate a healthier American economy.

Although this argument is correct about stock prices reflecting an increasing belief in the profitability of US firms, it makes a major error in assuming that profitable firms necessarily mean a better economy.

The Economy Isn’t A Thing

First, it’s important to understand that phrases like “a healthier economy” are themselves problematic. The “economy” is not the thing we should be concerned about. In fact, in some fundamental sense there’s no such thing as “the economy.” As Russ Roberts and John Papola memorably put it in the music video “Fight of the Century:”

The economy’s not a car.
There’s no engine to stall.
No experts can fix it.
There’s no “it” at all.
The economy is us

Things are not “good/bad for the economy.” They are good or bad for the people who comprise the market process, specifically in our capacity as consumers. All the economy amounts to is people engaging exchanges in order to better satisfy their wants. What we should care about is whether or not people are able to better satisfy those wants.

And “better satisfy” here means not just more and better goods and services, but at cheaper prices too. Lower prices mean that consumers have income left over to purchase goods they otherwise couldn’t, enabling them to better satisfy their wants by satisfying more of them.

Distorted Signals

In a genuinely free market, the profitability of firms is a good reflection of their ability to better satisfy the wants of consumers. Our willingness to pay for their goods and services reflects the fact that we receive value from those products, so their profits are at least a general signal of having created that value and satisfied consumer wants.

In fact, consumers get much more value out of most innovations than is reflected in the profits of firms. A famous study by economist William Nordhaus estimated that profits made up only about 2.2% of the total benefits created by innovations. If you doubt this, ask yourself how much it would take for you to give up your smartphone and its connectivity. Then multiply that by all of the smartphone users in the world. Then compare that to the profits made off smartphones. The total value to consumers will dwarf the profits of smartphone producers.

However, when markets aren’t free, profits do not necessarily reflect value creation. Firms who profit through privileges, protections, and subsidies from governments demonstrate that they are able to please political actors, not that they can deliver value to consumers by better satisfying their wants. The profits of cab companies with monopoly licenses reflect their ability to foreclose competition, not the quality of the services they provide.

In a world of this sort of crony capitalism, profits are de-linked from a connection with consumers and we cannot say with confidence that any given firm’s profits reflect value creation.

Notice though that such firms might still be profitable! In a world of cronyism, many firms will do very well, especially to the extent that they have connections with those in power, or are willing to do what they are told in order to curry such favor. To the extent that cronyism will make many firms profitable, that would be reflected in rising stock prices and stock indexes.

That, I would argue, is precisely what we’re seeing today as Trump takes power.

The Trump Effect

Trump’s economic nationalism and cronyism will surely enrich a number of American firms. Tariffs on imported cars, for example, might well improve the profitability of US car manufacturers. The same would go for steel or agricultural products. Firms like Carrier that are willing to exercise political clout, or roll over in the face of demands or threats from various levels of government, could see their profits rise as a result of new government-granted privileges. The record-setting Dow Jones sure could be right that the profit stream for many US firms will increase under Trump.

But don’t confuse that profitability with improved economic well-being. Trump’s policies may well enrich many firms, but they will impoverish the average American. We are not better off having to pay more for domestically produced goods thanks to a 35% tariff on imports. We are not better off when firms are given tax breaks or direct subsidies to keep their production in the US where labor or other inputs are more expensive, raising the costs of those goods and increasing our $20 trillion dollar national debt.

We are not better off when firms have to meet the conditions set by a strongman before he will “allow” them to operate in the US, which only serves to reorient the economy away from pleasing consumers to pleasing Trump.

This sort of cronyism and discretionary use of power turns the positive sum social cooperation of the market into a negative sum battle among firms to curry favoritism and power from the state. Entrepreneurial energy that could have brought forth innovative technologies and cheaper, better goods and services is diverted to seeking profits through what Ayn Rand so memorably called the “aristocracy of pull.”

This diversion of entrepreneurship will have profound long-term effects, as it severs the link between profit-seeking and satisfying consumer wants. Profits will be seen as the reward for knowing the right people and how best to curry favor from them, not from innovation and efficiency.

And when profits become about favoritism not value-creation, the moral case for the market, or what’s left of it anyway, disappears as well. Profits can at least in principle be justified in terms of their link with consumer want satisfaction and the creation of value. As profits become increasingly arbitrary, even those firms who continue to create value will have a harder time justifying their profits. This loss of confidence in the ethical basis of the market will erode support for truly competitive markets even more, even as profits for many might increase.

Don’t be fooled. The Trump rally is not a sign of economic health, but of what quite likely will be harm to all Americans through higher prices, fewer choices, and a reduction in entrepreneurial innovation.

Profits and rising stock prices in truly free markets reflect real value creation and want satisfaction. Profits and rising stock prices in a system of economic nationalism and cronyism reflect the satisfaction of the desires of those with political power. Firms and political actors might win more power and influence, but average Americans, many of whom voted Trump and his crew into office, will be the big losers.


Steven Horwitz is the Charles A. Dana Professor of Economics at St. Lawrence University and the author of Hayek’s Modern Family: Classical Liberalism and the Evolution of Social Institutions. He is spending the 2016-17 academic year as a Visiting Scholar at the John H. Schnatter Institute for Entrepreneurship and Free Enterprise at Ball State University.

He is a member of the FEE Faculty Network.

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