How the media is lying to you about economic recovery

[mick silver]

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STAFF NEWS & ANALYSIS
How the media is lying to you about economic recovery
By Daily Bell Staff - March 04, 2016



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The missing piece from the economic recovery has finally materialized. Median household income, adjusted for inflation, is now higher than it was before the recession that began at the end of 2007, according to new data published by Sentier Research. –Yahoo
So incomes are rising again. Presumably, this is supposed to mean that the “recovery” is becoming stronger in the US.
This economic propaganda comes in so many flavors that people may just surrender and accept what the media says. But they shouldn’t.
Incredibly, we have a system that seeks to create prosperity by fixing the price and volume of money. The idea is for central banks to keep printing money until the economy is properly “stimulated.”
It doesn’t work.
What is being left out of articles like the Yahoo story, above, is that monetary stimulation creates a sensation of economic progress but not the reality.
Monetary stimulation forces an overabundance of money (credit really) into places that are receptive to such money.
These places are speculative – real estate, the stock market, the art market, etc. They can absorb a lot of cash.
Credit flows much more slowly to the mainstream industrial sector. Thus central banking money printing tends to inflate speculative markets first. These, of course, become “asset bubbles.”
Eventually, the money spills out of asset bubbles into the larger economy and industrial activity tends to pick up.
As industrial activity picks up, the overabundance of money flows through the consumer sector as well.
People begin to believe, wrongly, that their employment seems a bit more secure and take advantage of the money coursing through the consumer economy to make purchases and take out loans.
All this happens toward the end of the cycle, though of course there are no hard and fast timelines.
Consumer speculation is surely a warning that a particular central-bank business cycle is reaching its conclusion.
Observing the mainstream media, we can see the warnings.
For instance, in late February, USA Today reported that “subprime auto loan delinquencies hit six-year high.”
This is certainly a resonant statistic given that subprime real estate helped trigger the massive crash of 2007-2008.
Subprime real estate is far less leveraged today than it was in the mid 2000s. But credit, like water, finds its own level during a sustained episode of money printing. And now the subprime auto-loan sector is inflating.
It’s been estimated that central banks have printed some US$100-200 trillion (no one really knows) in the past five or six years to shore up the current dysfunctional financial system.
Exposed to torrent of available money and credit, consumers are taking advantage to buy things they want or need but couldn’t usually afford.
We will see how long it lasts.

Reuters provides us another warning sign in a recent article entitled, “Home ‘flipping’ exceeds peaks in some hot U.S. housing markets.”
Here’s how it begins:

Home flipping – buying and reselling a home to make a quick buck – has risen in some hot U.S. housing markets, prompting concerns that local housing bubbles could be developing, according to a report published on Thursday.
The report by RealtyTrac found that home flipping in 12 active metropolitan areas last year was above a peak set in 2005, just two years before the U.S. mortgage market started to collapse, leading to a banking crisis and the Great Recession.
This kind of fervid real-estate speculation is another sign of economic overheating.
Nothing changes when it comes to central banking economies. The system seems deliberately designed to impoverish middle classes and, eventually, to cause whole countries to collapse.
The fundamental mechanism of central banking is price fixing of money (credit-based currency). Price fixing creates enormous, destructive distortions whenever it is tried and “money” is no exception.
Free-market economists are well aware that economies may rise or fall slightly depending on the level of activity. But the modern business cycle is to a free-market one what a tsunami is to a mild tide.
Just look at Brazil, which was the subject of worshipful business profiles throughout the first decade of the 2000s.
At the time, Brazil seemed to be making tremendous progress industrially but of course the real driving force of the economy was money printing.
And what has happened to Brazil? Here from Germany’s Deutsche Welle:

Brazil headed for worst recession in a century … Latin America’s biggest economy has reported its steepest annual decline in gross domestic product (GDP) since 1990, setting the country on course for its worst recession in at least a century.
According to government figures released Thursday, Brazil’s economy contracted by 3.8 percent in 2015 – the biggest annual fall since a 4.3-percent dip reported some 25 years ago.
Central bank economies are all subject to this sort of economic reversal to a greater or lesser degree, depending on the volume of circulating money and the timeline of its availability.
In the West, it has taken an enormous circulation of money to counteract what would otherwise have been a catastrophic descent into a powerful but brief depression.
By printing their tens and hundreds of trillions, central bankers have prolonged the pain and created an ongoing Great Recession that has lasted more than a half decade already.
It is very possible, as we have written, that the upcoming years will see an enormous struggle with “stagflation.” Asset classes will rise and fall against a backdrop of mounting price inflation as tens of trillions begin to circulate with more velocity.
This last happened in the 1970s but the crisis is so much more severe today and the amounts of currency in play are at this point beyond human comprehension.
The derivatives market alone is estimated to be in the area of one thousand trillion dollars.
Conclusion: Don’t fall into the trap of believing in a “recovery” in the US or the West. It’s just more mainstream (central banking) propaganda. Expect prices to climb, perhaps aggressively, and people to continue to struggle – perhaps to just survive. Please plan accordingly.

[mick silver]

Stagflation Sweeps Canada, Threatens US
By Daily Bell Staff - February 22, 2016


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Retail sales in Canada fell 2.2% in December from November on a seasonally adjusted basis, but not adjusted for inflation, to C$43.2 billion … But just because retail demand is crummy doesn’t mean that retail prices can’t power higher. Stagflation comes to mind. Now happening before our very eyes. And forget deflation, however much central bankers bandy the term about like a cudgel to justify their monetary policies. -WolfeStreet
Central bankers are always warning about deflation when the real danger for consumers is inflation, and more specifically stagflation – a combination of price inflation and low growth or no growth.
We’ve long argued that stagflation is the reality of the US economy right now (http://www.thedailybell.com/news-analysis/36740/Stagflation-Cometh-Gold-Too/), even though no one reports on it.
Shadowstats, which provides government statistics without government censorship and tweaking, shows us that inflation has run 4-8 percent since 2012. During much of this period, the US economy has been in recession.
Eight percent inflation plus low or no growth? Sounds like stagflation to us.
Really, no one should be surprised.
The central bank has printed literally trillions of dollars, and though these may not have begun circulating aggressively, they will sooner or later.
We’ve never believed central bank’s wailing about deflation. Despite their claims, deflation is not bad for the economy. It’s not bad for us. It’s only bad for the government and banks.
Famous Austrian economist Murray Rothbard never much believed in deflation as a danger in the modern era.
After all, how could deflation be a threat in an environment where banks regularly print billions if not trillions of dollars?
While there may be a time lag, inflation is the inevitable consequence of printing. And now apparently, it’s hitting Canada.
Here’s more from the article excerpted above:
Retail sales dropped in nine of the 10 provinces and in all 3 territories. Only exception: tiny Prince Edward Island, where retails sales were flat.
… But then there’s inflation … Statistics Canada reported … that the Consumer Price Index jumped a hotter than expected 2.0% in January from a year ago, even though energy prices still plunged …. Inflation is now at the highest rate since 2011
Now, what are the implications for the US?

The Fed had supposedly planned four rate hikes for the US this year to dampen down growing price inflation. But market reaction to the first hike has been so bad that Janet Yellen herself has taken to making soothing noises about additional hikes.
In other words, it is just as likely that some form of additional quantitative easing is on the table.
The larger point is that the Fed and other central banks have printed too much money. Sooner or later that money or part of it begins to circulate and price inflation takes off.
Yellen and the rest of her crowd are certainly aware of this and no doubt it was a motivating factor in getting the first hike done.
But what about the next three? They sound fairly doubtful.
And what about the vaunted US recovery? In our view the whole construct of the US “recovery” was flawed.
The US has been in a recessionary environment since 2001 when the dollar began to move down against gold.
The Fed revved up the printing presses at that time and created a series of asset bubbles, including the great sub-prime bubble that collapsed in 2008.
Looking back we can see there really was no “recovery.” The economy was goosed in the 1990s and again in the early 2000s – and the resultant monetary debasement was so significant that the whole world was plunged into a quasi-depression.
It’s as if they want these serial crises, and perhaps they do. Each crisis brings the economic environment closer to a terminal breakdown.
And no doubt once it reaches that point, we’ll suddenly be exposed to elaborate plans for a more centralized monetary and banking system.
In the meantime, central banks have taken to buying gold and so have many Wall Street types.
What do they know? Obviously that price inflation is on the horizon. It’s the same thing that Janet Yellen knows.
And it’s something that YOU should take into account as well. The economy is not recovering. Deflation, going forward, is surely not going to be an issue.
Conclusion: What we’re looking at, just as in the 1970s, is stagflation. Then gold scaled the heights to $800 an ounce and silver traveled up to $50. Where precious metals could go this time is anyone’s guess. But if you own some, you may be happy to find out.

Posted in STAFF NEWS & ANALYSIS (http://www.thedailybell.com/category/news-analysis/)

[mick silver]

Chinese monetary bubble threatens to burst
By Daily Bell Staff - February 29, 2016


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Global finance officials promise to shore up sagging growth … Finance officials of the world’s biggest economies promised Saturday to use “all tools” to shore up sagging global growth and to avoid devaluing their currencies to boost exports … -AP
The just-held G20 meetings are being reported by the Western mainstream media with a “facts only” context. In fact, as usual, China’s problems are reported on gently, if at all.
It is China, after all, that holds the economic fate of the world in its hands. It is China that is fueling a lot of the international buying of real-estate, commodities and even consumer goods.
The US is supposedly headed back into recession and Europe never left. China is the biggest factor in world economic growth.
If China falls, so does the world. That’s why the Western mainstream media never reports the deepest and darkest truths about China.
But gradually China’s intractable troubles are showing themselves in ways that cannot be denied.
China’s stock markets have crashed repeatedly, and its growth slowed again in 2015 and is predicted to slow once more in 2016. Latin American trade, which has been substantive, has slumped by astonishing 50 percent. Trade with Brazil is down 60 percent!
But these sorts of statistics are still not as popular as the “Chinese miracle” theme. They are not being broadcast fully, even at a time when Western media is grappling with a stream of bad Chinese news.
Let’s look at a bit more of this AP article excerpted above to see how gently even the most dismaying Chinese news is handled.

Finance ministers and central bankers of the Group of 20 rich and developing countries tried to reassure jittery financial markets that the global economy is healthy, though they acknowledged in a statement that they “need to do more” to boost growth.
Soft enough? Now you need to quote domestic officials who can provide the appropriate spin such as China’s top economic official, Premier Li Keqiang, who said the following in a video message to the G20: “The Chinese economy has great potential, resilience and flexibility, and we will capitalize on such strengths.”
Let’s contrast this sort of reporting with an article that David Stockman wrote last year entitled, The Great China Ponzi – An Economic And Financial Trainwreck Which Will Rattle The World.


China is not a clone-in-the-making of America’s $18 trillion consume till you drop economy—-even if that model were stable and sustainable, which it is not … Its leaders are neither wise nor deft economic managers.
In fact, they are a bunch of communist party political hacks who have an iron grip on state power because China is a crude dictatorship. But their grasp of the fundamentals of economic law and sound finance cannot even be described as negligible; it’s non-existent.
Indeed, their reputation for savvy and successful economic management is an unadulterated Wall Street myth. The truth is, the 25 year growth boom in China is just a giant, credit-driven Ponzi scheme. Any fool can run a central bank printing press until it glows white hot.
At the end of the day, that’s all the Beijing suzerains of red capitalism have actually done. They have not created any of the rudiments of viable capitalism. There are no honest financial markets, no genuinely solvent banks, no market driven allocation of capital and no financial discipline which comes from the right to fail as well as succeed.
Harsh as this assessment is, it is close to our own. For nearly a decade, we’ve been writing that the Chinese miracle was merely monetary bubble. Of course China is a huge country with a huge population, so it takes a while to blow a bubble in China to the bursting point.
But that’s happening now. Stockman followed last year’s article on China’s Ponzi scheme with a new one published just a few days ago:

China is on the cusp of the greatest margin call in history. Once asset values start falling, its pyramids of debt will stand exposed to withering performance failures and melt-downs. Undoubtedly the regime will struggle to keep its printing press prosperity alive for another month or quarter, but the fractures are now gathering everywhere because the credit rampage has been too extreme and hideous. Maybe Zhejiang Xingrun Real Estate which went belly up last week is the final catalyst, but if not there are thousands more to come. Like Mao’s gun barrel, the printing press has a “sell by” date, too
Increased violence lurks just behind the façade of China’s success. As China’s financial situation grows more perilous, the central government will surely begin a process of blaming individual citizens – investors, industrialists and speculators – for the deteriorating economic environment.
In fact, from various reports, we can see this has already begun. If one believes that China is going to stabilize itself, one must also believe that the Chinese government is going to be able to turn the many millions that comprise China’s newly formed middle classes into “consumers.”
The idea, then, is that these Chinese should begin to mimic US consumer society. Yet surely some of these Chinese are related to individuals who only 60 years ago were being imprisoned for revealing Western influences in their thoughts or clothing.
Conclusion: No doubt, the pro-China propaganda of the past 20 years has enmeshed numerous Westerners in Chinese society and its economy. If you are one of them, you ought to be having second thoughts. If you can’t extricate yourself, at least try to reduce your exposure. And if you have none, keep it that way.

Posted in STAFF NEWS & ANALYSIS (http://www.thedailybell.com/category/news-analysis/)

[mick silver]

Obama’s $4.1 Trillion Budget Is Latest Sign of America’s Looming Collapse
By Daily Bell Staff - February 10, 2016


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Republicans have spent the entire Obama presidency engaging in acts of disrespect against this president, and the office that he has been twice elected to by a majority of the voters. By refusing to give his budget a hearing, House Republicans have moved beyond disrespect of the man and into disrespect of the office of the presidency. It looks like House Republicans are so afraid of the President's budget that they don't want the public to know what is in it. Hiding facts while disrespecting the presidency is the modern Republican way. House Republicans have revealed themselves to be cowards who are attached to a failed belief system. – PoliticusUSA
Yesterday President Obama announced a $4.1 TRILLION budget proposal for this year.
But for many in the mainstream media and even in the alternative media, it was business as usual.
The Wall Street Journal carried an editorial from Barack Obama explaining part of the budget. The Hill and other online political journals simply described the budget without providing any frame of reference regarding the US's larger, disastrous financial situation.
In the excerpt above, we can see that the leftist journal PoliticusUSA not only endorses the budget, but it actively goes on attack against House Republicans who want little or nothing to do with it.
The editors at PoliticusUSA may well believe that spending so much money is a virtue. But instead of attacking Republicans, they ought to be leveling their fire at the military-industrial complex – where a good deal of the money goes. Democrats defend the Pentagon these days as much as Republicans.
And one can ask, again, as always: Where is the astonishment? Where is the disbelief? This latest budget proposal breaks all possible records for any amount of money a government has spent anywhere, at any time in the history of the world.
A budget of this size is a complete fantasy. And while Americans are justifiably angry at the constant assault of so much federal insanity, this budget is treated by much of the mainstream media as if it were serious policy.
The federal government has made some $200 trillion in promises to its citizens – that means what it owes is far larger than the US$18.2 trillion that is commonly portrayed as the "national debt."

America has been hollowed out and what once was the industrial engine of the world has been turned into a faux-service economy.
"Social networks." Video games for your mobile phones. "Ad tech" companies that get consumers to click on links. That's what America exports to the world now.
Employment security is gone. Retirement security is gone.
Senior citizens, whose retirement income has been decimated by zero-bound interest rates, routinely go to back to work flipping burgers and tossing freedom fries.
Despite soothing employment numbers, the US is likely enmeshed in a Greater Depression.
And the remedies being advanced will actually only benefit the latest scam, which is the creation of "cashless" societies.
At nearly $19 trillion, the United States's debt is already out of control, and President Obama has just shown that he has no intention of pointing the country in a better direction.
When it all comes crashing down, you're going to be the one footing the bill.
Conclusion: Your income, your assets and your retirement savings are all at risk by being in this system.

Posted in STAFF NEWS & ANALYSIS (http://www.thedailybell.com/category/news-analysis/)

[mick silver]

US Politics of Price Fixing in a Crumbling Economy.By Daily Bell Staff - February 28, 2016


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Bill Anderson is a professor of economics at Frostburg State University in Frostburg, Maryland. His Ph.D. in economics is from Auburn University, and he serves as an associate scholar with the Mises Institute. He has published numerous articles and papers on economics and political economy, including articles in The Independent Review, Reason Magazine, The Free Market, The Freeman, Public Choice, The American Journal of Economics and Sociology, Quarterly Journal of Austrian Economics, and others. He is also a frequent contributor to LewRockwell.com.
The Daily Bell: Let’s jump right in. What attracted you to Austrian economics?
Bill Anderson: A friend named William Peterson gave me some copies of The Freeman in 1980 and those publications introduced me to Austrian Economics. I went to the Austrian seminar at FEE in August 1981 and by then had a good sense of what Austrian thinking was about. I liked Austrian thinking because, one, it was logic-based and also is based upon solid assumptions, two, it appeals to people like me who are very intuitive in their thinking, and, three, it provides an excellent framework for looking both at what actually happens within an economy and why there are policy blunders.
The Daily Bell: Do you think the field is growing? It still seems to “blacked out” by the dominant Keynesian economic paradigm in academia.
Bill Anderson: Absolutely, it is growing. No, it does not have the ear of the mainstream, but keep in mind that, contra Paul Krugman, the only real arguments against it either are straw man arguments or the academics simply engage in power plays where they keep Austrian-leaning people off their faculties and out of their journals. It is funny that a truly awful paradigm like Keynesianism has so much sway even though it is thoroughly fraudulent.
The Daily Bell: Looking back at the past 10 years of Keynesian economics can you comment on how effective it’s been? For us, it simply doesn’t seem to work. The idea that printing money can stimulate the economy seems to have been disproven by events in the past decade.
Bill Anderson: Again, contra Krugman, the past 20 years have been a massive experiment in Keynesian economics, as the Federal Reserve System has been THE economic “experiment” run by the Clinton, Bush, and Obama administrations. What have we seen? We have seen two major bubbles, the stock bubble of the late 1990s and the infamous housing bubble that still affects us today. The eight years of the Barack Obama administration have been Keynesian years, including the suppression of interest rates, massive spending by government, a number of wars (to help promote “aggregate demand”) and other “stimulus” measures. Yet, we see the candidates of the Democratic Party running against the economy even though the sitting president is a Democrat. That should tell us SOMETHING about these Keynesian years.
The Daily Bell: Isn’t it true that printing causes asset bubbles and economic distortion? How could people ever think that printing money could somehow “stimulate” the industrial economy in a healthy way?
Bill Anderson: People will believe a lot of things that are not true. In our present situation, we have seen massive money creation done ostensibly to increase consumer spending, yet we see retail outfits going bankrupt, closing stores, and trying to survive. This follows the Austrian paradigm nicely. Austrians don’t see economic downturns as the result of a loss of “aggregate demand,” but rather the result of massive malivestments in capital going toward capital goods and projects that cannot be economically sustained. Interestingly, the last group that gets hit is the retail sector, and we are seeing signs of major upheaval there.
The Daily Bell: How is it possible that economics professors agree that printing money using government force is anything but price fixing – when price fixing is always an economic distortion?
Bill Anderson: Again, people believe lots of things that aren’t true. Keynesians believe that we have unemployment because aggregate demand is not enough to keep all resources employed, thus the “idle resources” that need continuous doses of new spending in order to become employed AND stay employed. They never ask why those resources became unemployed in the first place; they simply claim people stopped spending, and that an economy needs people constantly spending so that the inventories can be drawn down. After inventories are drawn down, there are more orders to fill the shelves, and then people repeat the process. As you can see, to Keynesians, an economy is a mechanistic activity in which people essentially dig a hole, fill it up, and then dig again, repeating the process into infinity.
The Daily Bell: It’s really insane. How does Keynesianism survive academically when it is a logical fallacy?
Bill Anderson: How do lots of things survive intellectually? As long as there is a constituency for Keynesian thinking, there will be Keynesianism. By the way, Keynesianism is not just popular with academics, but also, of course, with politicians, for they can be seen as heroes when, in fact, they are political spendthrifts. Think about it. Austrian economics says that in a downturn, more government spending increases economic burdens on most people and the best way to handle it is for politicians to stop or slow down their spending, permit resources to “line up” and be directed to their highest-valued uses, and to allow for the necessary readjustments to happen.
What self-respecting politician can accept that? Do nothing? That sounds like a non-response. People are hurting, so politicians must direct resources toward those people. They spend the money, are better off, and the politicians can take credit for making people well off again. What isn’t said is that such actions actually will delay the economic recovery and when it occurs, will not be as effective as it would have been had the government backed off. This is the classic situation of what Frederic Bastiat called “the seen and the unseen.”
The Daily Bell: You’ve looked at a lot of politicians in this upcoming presidential race to determine their economics. Can you comment on some of them? You know a lot about Sanders for instance – you wrote an article on him.
Bill Anderson: There is not much to say. Republicans believe they can cut tax rates and cut domestic spending while simultaneously expanding the wartime powers of the state. They make government bigger and more expansive and powerful all the while speaking out against “big government.” Democrats, on the other hand, believe they can make it unprofitable for entrepreneurs and business firms to invest in capital, force up real business costs, and out of this will come a cornucopia of new wealth. The Democrats also seem to believe that one can tax capital and wealthy people into near oblivion, but investors, owners of capital, and business owners will not change anything they do even while government is confiscating most of their assets. This isn’t economic policy; it is delusion.
The Daily Bell: How about Hillary? Does she have a coherent economic philosophy?
Bill Anderson: Hillary Clinton probably understands the real issues as well as anyone else running, but she has to mollify the hard left in her party. Furthermore, she is much more comfortable in an authoritarian role, and she seems to believe (like Donald Trump) that government can coerce the economy into long-term prosperity. The issues are quite simple. Have sound money so that the value of money can be stable over time, which is vital to trade, keep taxes low (or, better yet, nonexistent), and give entrepreneurs and business owners the opportunities to invest in capital goods and direct economic activity in the proper direction of consumers. Yet, not one Democrat is advocating anything close to this.
The Daily Bell: Let’s look at Republicans. Are Republicans Keynesian as well? Do they understand the simplest element of free-markets, which is that government interference is price fixing?
Bill Anderson: Yes, the Republicans have embraced Keynesian. Bush was a Keynesian, and certainly these newcomers into the party believe that government spending over time will boost the overall economy. With so many Republicans running against free trade and espousing economic nationalism, their economic views pretty much coincide with those on the other side of the aisle.
The Daily Bell: This is a fundamental point. How can government be justified economically?
Bill Anderson: You have hit on a dirty secret of government. There is no such thing as “neutral” government, and governments either engage in outright price fixing or indirect price fixing, but they definitely engage in massive price fixing. The governments we have now in the long run hinder the economy, and in a big way.
The Daily Bell: OK, more bad news: How would you characterize Obama’s economics?
Bill Anderson: Obama’s economics are based upon directing investments toward equities, suppressing real savings, and forcing up business costs. Policies based on artificially forcing up equity prices will benefit people in line to receive the returns to equity, but the diversion of resources away from more productive uses will suppress the incomes of lower-income people who depend upon a productive economy for employment. Raising business costs also suppresses economic opportunities.

Understand, this is a win-win proposition for Obama and the Democrats. They can practice Keynesianism but then express outrage that “free markets” are making the rich richer and the poor poorer. This is a bottomless well for Democrats, and they exploit their self-created opportunities very well.
The Daily Bell: How can Republicans support legislative solutions when they inevitably lead to price fixing, which in turn to leads to economic displacement, inter-mediation, wastefulness and ultimately economic disasters?
Bill Anderson: They shouldn’t, but they do. I will say that Republicans get more negative press when the economy goes bad than do Democrats. That is because most mainstream journalists are Progressives and the vast majority of them identify with Democrats, so they are going to feel safer and more comfortable with a Democrat in power. However, when Republicans either promote or back unsound policies, they really do deserve to be called out for it.
The Daily Bell: Let’s look at some specific Republicans and their policies How about Rubio? Is he economic literate? Does he want less government interference? Where is he best and worst?
Bill Anderson: First of all, I’m more familiar with the Democrats and their policies, having written on both Hillary Clinton and Bernie Sanders. That being said, no one left in this election seems to be economically literate. I mean that.
The Daily Bell: How about Cruz?
Bill Anderson: I don’t know much about him, to be honest. I think he is promoting some good ideas like regulatory reform, sound money, and lower taxes, but there seems to be a huge gulf between Republican promises and Republican governance. And whatever wartime foreign policy initiatives Cruz would bring about would all-but-negate any positive things his administration might do on the economy.
The Daily Bell: OK, how about Trump? Is Trump in any sense laissez faire?
Bill Anderson: I have no idea what Trump is at the present time. He does campaign as an economic nationalist, which is troubling to me. He also promotes an aggressive foreign policy that would be hugely expensive.
The Daily Bell: Like most businessmen, Trump always seemed to be willing to use whatever was available to achieve his goals. He wasn’t much motivated by theoretical considerations. Do you think he will make a good president? He reminds us of Mussolini.
Bill Anderson: Yeah, and Mussolini didn’t even make the trains run on time. Americans seem to believe that if only they could have the government being “run” by a successful or at least semi-successful businessman, that he would be able to get things done and to make the government operate efficiently. This is a pipe dream because governments are not about profit-and-loss, as are Mr. Trump’s organizations. Furthermore, Americans seem to believe that a “successful” businessman would simply use coercion or naked force to make people do what is necessary to make the government “great again.”
The Daily Bell: This presidential election is a mess. The candidates are so bad and the process so maladroit that we think this might be the last time it’s possible to seriously project this kind of system. Your thoughts?
Bill Anderson: It is a mess. I’m afraid we are going to have to muddle through and hope that no one gives us the government we supposedly choose through our votes.
The Daily Bell: If the idea of regulatory democracy is no longer believed in by the electorate, where does the US go from here?
Bill Anderson: That is a good question. How long before we see street fighting like what occurred in post-World War I Germany and Austria, or see pro-government militia and regular soldiers go house to house and shoot people like what we now see in Venezuela? This is not an idle question. It CAN happen here.
The Daily Bell: We think there are similar problems with central banks. People don’t believe in the system anymore. Without belief or support, systems rupture and fail. Where do we go from here? Where does our economics go from here?
Bill Anderson: People may say they are angry at the Fed, but most cannot articulate WHY they are angry. Most of my colleagues support the Fed, as they believe economic downturns are a natural consequence of free markets, and that we need to Fed to serve as a backstop against the “excesses” of capitalism. So, they may believe that the Fed is being “mismanaged,” but they also cling to the belief that the Fed can be reformed. Americans are terribly misinformed about the Fed and the real damage it does.
Part of this intellectual disconnect is that Americans have been taught all of their lives that in the late 1800s, the USA was on its way to perdition — and then the Progressives entered the scene. They produced reform after reform, gave us the income tax, created the Federal Reserve System, empowered labor unions, and generally made life better for all. This is what all of the American History books teach, it is what they read in the media, and are told on television. Americans are NOT taught that the Progressives hated individual rights and wanted to repeal the Bill of Rights, or at least neuter the rights of Americans. The Federal Reserve System was set up to bail out banks that engaged in questionable activities or overreached with their loan portfolios. Progressives gave us the Jim Crow laws, Prohibition, and forced sterilization of so-called idiots. They were True Believers in the pseudo-science of Eugenics and backed off only after Hitler made Eugenics a bad word.
The Progressives also promoted America’s entry into World War I and enthusiastically backed all of the economic controls that were imposed so that the USA could direct its entire economy toward the war effort. This was not “progress” by any stretch of the imagination; it was a huge backward step into despotism. The sad thing is that most Americans are convinced that if government were not regulating nearly every aspect of their lives and if the Fed were not creating money by the fistfuls, their lives would be a living hell. It is illogical thinking, to be sure, but that is where we are.
The Daily Bell: Should people pitch in to “fix” the system or is what’s going on so large and unstoppable that people ought to look out for themselves and their family’s first and foremost?
Bill Anderson: Entrepreneurs still need to do what they always do, and at least they will help negate some of the damage that government is doing. Likewise, people need to live their own lives as best they can and not look to the government to save them. Granted, many people cannot do that or they find that while they may want nothing to do with the state and its powers, the government always seems to find them.
The Daily Bell: Good points, thanks. Any other issues you want to mention?
Bill Anderson: Thanks for the opportunity. I hope your readers enjoy the interview.
The Daily Bell: Some great information. They should.

Posted in EXCLUSIVE INTERVIEW (http://www.thedailybell.com/category/exclusive-interviews/)

[mick silver]

Central Bank Economists: Bad Central Bank Policy Is INCREASING Inequality
Source: Washington's Blog (http://www.washingtonsblog.com/2016/03/central-bank-economists-bad-central-bank-policy-increasing-inequality.html)

While the leaders (http://www.brookings.edu/blogs/ben-bernanke/posts/2015/06/01-monetary-policy-and-inequality) of the Fed (http://www.huffingtonpost.com/entry/janet-yellen-income-inequality_us_55fc61b4e4b0fde8b0ce2d39) and other (http://www.marketwatch.com/story/draghi-hits-back-at-argument-qe-fuels-inequality-2015-05-14) central banks claim that their extraordinary monetary policies haven’t significantly increased inequality, economists with the world’s most prestigious financial agency, the Bank of International Settlements – known as “the Central Banks’ Central Bank” – just released a report showing otherwise.
BIS notes (http://www.bis.org/publ/qtrpdf/r_qt1603f.htm):

Our simulation suggests that wealth inequality has risen since the Great Financial Crisis. While low interest rates and rising bond prices have had a negligible impact on wealth inequality, rising equity prices have been a key driver of inequality …. Monetary policy may have added to inequality to the extent that it has boosted equity prices.
***
Inequality is back in the international economic policy debate. Evidence of a growing dispersion of income and wealth within major advanced and emerging market economies (EMEs) has sparked discussions about its economic consequences. Although there is no consensus on the relationship between inequality and growth, there are concerns that rising inequality may become a serious economic headwind. [Right (http://www.washingtonsblog.com/2013/09/whos-who-of-prominent-economists-and-investors-say-that-runaway-inequality-harms-the-economy.html).]
***
Moreover, the faster rise in remuneration at the very top of the income distribution relative to wage growth in the lower percentiles has been linked both to the rapid growth of the financial sector since the 1980s [correct (http://www.washingtonsblog.com/2015/02/top-economists-large-financial-sector-hurts-economy.html)] and to changes in the social norms that contribute to the determination of executive pay (Piketty (2014)).
***
The share of securities holdings, equity in particular, tends to be even higher at the top 5% or 1% of the distribution. [Obviously (http://www.washingtonsblog.com/2013/02/economic-leaders-pay-lip-service-to-decreasing-inequality-while-pushing-policies-which-increase-it.html).]
Conversely, housing accounts for a higher share in the lowest net wealth quintile, for which low net wealth is in many cases a reflection of high levels of mortgage debt. In a number of cases, net wealth is negative, suggesting that liabilities, in the form of mortgage, consumer and other debt, exceed assets.
***
Unconventional monetary policies might have had the most significant effects on the dynamics of wealth inequality through changes in equity returns and house prices. The evidence suggests that unconventional policies had a relatively strong and immediate effect on equity prices (see eg Rogers et al (2014)). As investors reshuffle their portfolios away from assets being purchased by the central bank towards other, potentially riskier, assets, the equity risk premium should decline, boosting equity prices further. And a low interest rate environment is likely to have encouraged a search for yield.
***
Monetary policy may affect household wealth through different channels. Interest rate changes directly affect the valuation of both financial assets (eg equities and bonds) and real estate as well as the cost of leverage. Conventional easing of monetary policy by lowering short-term interest rates tends to boost asset prices. This works through a lowering of the discount rates applied to future income flows from these assets, and possibly by raising profit expectations and/or reducing risk premia.
Indeed, boosting stock prices has been the Fed and other central banks’ main focus (http://www.washingtonsblog.com/2016/01/high-level-federal-reserve-official-fed-intentionally-front-loaded-enormous-stock-market-rally-order-create-wealth-effect.html).
In addition, it has been thoroughly documented that quantitative easing. It’s been known for some time that quantitative easing (QE) increases inequality (http://www.washingtonsblog.com/2013/02/economic-leaders-pay-lip-service-to-decreasing-inequality-while-pushing-policies-which-increase-it.html) (and see this (http://www.zerohedge.com/news/2013-09-25/stephen-roach-inequality-and-feds-treacherous-endgame) and this (http://sevenpillarsinstitute.org/news/economics/does-quantitative-easing-contribute-to-income-inequality).) Many economists have said that QE quantitative easing benefits the rich, and hurts the little guy (http://www.washingtonsblog.com/2012/12/quantitative-easing-benefits-the-super-elite-and-hurts-the-little-guy-and-the-american-economy.html). 3 academic studies (http://www.washingtonsblog.com/2013/10/3-academic-studies-show-that-quantitative-easing-doesnt-help-the-economy.html) – and the architect of Japan’s quantitative easing program (http://www.washingtonsblog.com/2013/10/architect-of-japanese-quantitative-easing-policy-says-qe-harms-the-economy-in-the-long-run-and-that-the-fed-is-stuck-in-a-qe-trap.html) – all say that QE isn’t helping the American economy.
Negative interest rates – another increasingly widespread form of extraordinary monetary policy – may increase inequality as well. For example, economist Katie Evans (http://www.smf.co.uk/staff/katie-evans/) notes (http://www.justmortgagebrokers.co.uk/blog/prospect-negative-interest-rates/):

Negative interest rates could increase inequality. While the experiences of countries who have tried negative rates suggest it wouldn’t lead to a boom in mortgage lending, the cost of borrowing would remain at rock bottom for those who could afford to do so. Those with substantial incomes and existing assets could borrow cheaply and invest in assets like property. Those on lower incomes, meanwhile, would find it even harder to save for a deposit and see house prices rising further out of reach.
Indeed, negative interest rates motivate consumers to hoard cash (https://www.google.com/search?q=%22negative+interest+rates%22+hoard+cash&ie=utf-8&oe=utf-8), rather than spend or invest it, putting in even further behind those who have enough to freely invest.
Other recent central bank policy is also a main driver (http://www.washingtonsblog.com/2014/04/gaping-hole-pikettys-inequality-book.html) of inequality (http://www.washingtonsblog.com/2013/09/bad-government-policy-has-created-the-worst-inequality-in-world-history-and-it-is-destroying-our-economy.html). And see this (http://www.washingtonsblog.com/2016/01/loophole-allows-banks-not-companies-create-money-thin-air.html).

Postscript: Surprisingly – given the arcane nature of central bank policy – the natives are getting restless (http://www.washingtonsblog.com/2015/01/poll-people-world-blame-bad-government-policy-runaway-inequality.html).


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[mick silver]

Quantitative Easing Benefits the Super-Elite … And Hurts the Little Guy and the American EconomyPosted on December 13, 2012 (http://www.washingtonsblog.com/2012/12/quantitative-easing-benefits-the-super-elite-and-hurts-the-little-guy-and-the-american-economy.html) by WashingtonsBlog (http://www.washingtonsblog.com/author/washingtonsblog)
Quantitatitve Easing Is Not “Liberal” EconomicsThe Fed has just announced its fourth round of “quantitative easing” (http://www.usnews.com/news/articles/2012/12/12/fed-adds-qe4-drops-date-guidance).
While the mainstream financial press pretends that quantitative easing is a “liberal” economic policy, nothing could be further from the truth.
As we’ve repeatedly explained, quantitative easing is a bailout for the super-rich (http://www.washingtonsblog.com/2012/09/the-fed-is-expected-to-launch-qe3-next-week.html), at the expense of the little guy (http://www.washingtonsblog.com/2012/04/forget-competing-theories-about-quantitative-easy-what-do-the-facts-show.html). It increases inequality (http://www.guardian.co.uk/business/2011/aug/14/quantitative-easing-riots) and fails to stimulate (http://www.aier.org/article/2485-downside-monetary-easing) the economy. (And it destroys the savings of retirees.)
Indeed, Fed boss Ben Bernanke knew 24 years ago (http://www.washingtonsblog.com/2010/10/bernanke-knew-back-in-1988-that-quantitative-easing-doesnt-work.html) that quantitative easing doesn’t help.
Forbes’ Lawrence Hunter explains (http://www.forbes.com/sites/lawrencehunter/2012/10/29/are-federal-reserve-regulated-banks-laundering-dirty-money/):

The Federal Reserve … operates its own financial Laundromat for troubled, in some cases criminal banks. The Fed’s loan laundry and downscale resale consignment shop first takes in the wash by purchasing non-performing, and therefore largely worthless financial assets (loans and loan-backed securities) to remove them from the books of private banks. (Another variant is for the Fed to swap the banks’ bad paper at face value for federal debt instruments, which replaces the banks’ non-performing assets having little, if any, resale value, with safe, interest-paying and highly marketable assets.). The Fed then launders the loans by reselling them back to the same group of banks at a fraction (10 percent or less) of the face-value price it paid the banks for them. Once the banks repurchase the spiffed up dirty loan laundry, it not only has turned a nifty 90-percent-or-more profit on the turn around, it also has a new asset it can put back into the stream of financial commerce at a price reflective of its true value.

The Fed is a perfect vehicle to transform bad assets into good. It is weakly overseen without an independent audit and thus is able to intermediate the transformation of bad, illiquid assets into money (and near money) and then back again into valuable financial assets, all done secretly and anonymously. Unlike the polite, don’t-ask-don’t-tell fiction of private hedge-fund money laundering, however, the Fed says outright, “Don’t ask, because we aren’t telling,” even when asked again (http://www.youtube.com/watch?v=UQWz6avF1YE) and again (http://www.youtube.com/watch?v=oxuqmPyKqcs&feature=related).
Immediately after the 2008 financial meltdown, the Fed laundered more than $2 trillion in worthless assets held on the balance sheets of private banks. According to a watered-down 2011 audit (http://www.scribd.com/doc/60553686/GAO-Fed-Investigation#outer) of the Fed by the Government Accountability Office (GAO), there have been $16 trillion in Fed bailouts to banks and corporations around the world since the financial meltdown in 2008. Since that report, Bloomberg has reported on an additional $9 trillion in secret, off-balance-sheet Fed transactions that the central bank refuses to discuss (http://revolutionpac.com/articles/who-got-9-trillion-in-off-balance-sheet-fed-asset-purchases). Now, Ben Bernanke (http://www.forbes.com/profile/ben-bernanke/) is ginning up assembly-line washing machines at the Fed with QE∞ to spin an opened-ended, $40-billion-monthly cleansing campaign to purchase worthless mortgage backed securities from banks at face value, which could run (http://www.federalreserve.gov/releases/h8/current/) to an additional $1.3 trillion loan laundering accompanied by downscale resales.
Indeed, the Fed:


Gave huge bailouts to foreign banks (http://www.washingtonsblog.com/2011/06/ron-paul-one-third-of-fed-bailout-loans-and-essentially-100-of-ny-fed-loans-went-to-foreign-banks.html), including Gaddafi’s Libyan bank, the Arab Banking Corp. of Bahrain, and the Banks of Bavaria, Korea and Mexico (http://www.washingtonsblog.com/2011/10/the-fed-bails-out-gaddafis-libyan-bank-arab-banking-corp-of-bahrain-banks-of-bavaria-korea-and-mexico-but-shafts-america.html);



Bailed out hedge funds, McDonald’s and Harley-Davidson (http://www.washingtonsblog.com/2010/12/fed-data-shows-foreign-banks-huge-beneficiaries-of-emergency-lending-programs-hedge-funds-mcdonald%E2%80%99s-harley-davidson-and-others-also-bailed-out.html)



Threw money at “several billionaires and tens of multi-millionaires” (http://www.washingtonsblog.com/2011/10/the-fed-bails-out-gaddafis-libyan-bank-arab-banking-corp-of-bahrain-banks-of-bavaria-korea-and-mexico-but-shafts-america.html), including Christy Mack, the wife of Morgan Stanley’s John Mack, billionaire businessman H. Wayne Huizenga, and Michael Dell, co-founder of Dell Computer (http://www.washingtonsblog.com/2012/07/fed-independence-is-a-scam-and-no-reason-to-prevent-a-full-audit.html#), hedge fund manager John Paulson and private equity honcho J. Christopher Flowers

Hunter continues:

QE∞ is no mere financial Laundromat; it is a full-service loan laundry and downscale resale facility that not only cleans the banks’ balance sheets but also sterilizes the entire operation to prevent it from producing immediate price inflation. It illustrates the way the Fed’s loan laundry and downscale resale facility works:
After the Fed buys (at face value) and resells (at pennies on the dollar) the bad mortgage-backed securities with newly minted electronic digits that it places into the banks’ Federal Reserve accounts, it then sterilizes the entire operation to prevent the new money from transmitting the dread inflation virus. The Fed does so by, in effect, quarantining inside the banking system the new toxic money used to launder the dirty loans. [I’ve explained the mechanism (http://www.washingtonsblog.com/2010/11/the-fed-is-saying-one-thing-but-doing-something-very-different.html) for the Fed’s action before.] To affect this quarantine, the Fed wields both a carrot and a stick to keep this newly minted digital money from seeping out into the economy through new loans and igniting inflation: It pays the bank interest on its Fed reserves as long as the bank keeps the funds on deposit at the Fed (the carrot); and it tightens reserve requirements by raising the amount of money the bank must keep on deposit at the Federal Reserve (the stick).
There are much better ways (http://www.washingtonsblog.com/2009/09/steve-keen-out-thinks-larry-summers.html) to stimulate the economy, but the Fed is only interested in maintaining the status quo (http://www.youtube.com/watch?feature=player_embedded&v=Q7uJIjSO-a4) for its owners (http://www.washingtonsblog.com/2011/07/the-federal-reserve-admits-that-its-12-banks-are-private-not-government-entities.html). And see this (http://www.washingtonsblog.com/2012/07/fed-independence-is-a-scam-and-no-reason-to-prevent-a-full-audit.html).

[mick silver]

Hillary Clinton’s Destruction of Emails Was a Federal Crime → (http://www.washingtonsblog.com/2016/03/hillary-clintons-destruction-emails-federal-crime.html)
Cheap Oil, the U.S. Dollar and the Deep StatePosted on March 10, 2016 (http://www.washingtonsblog.com/2016/03/cheap-oil-u-s-dollar-deep-state.html) by Charles Hugh Smith (http://www.washingtonsblog.com/author/charles-hugh-smith)
That oil fell off a cliff once the U.S. dollar (USD) began its liftoff in mid-2014 is, well, interesting. Causation, correlation or coincidence? There are a variety of opinions on this, as there should be. What we do know is the soaring USD blew up a bunch of carry trades that borrowed money denominated in USD and invested the cash in emerging markets paying much higher yields. Here’s WTIC oil:
http://www.oftwominds.com/photos2016/WTIC3-16a.png
And here’s the USD Index:
http://www.oftwominds.com/photos2016/USD3-16a.png
We also know the Saudis announced that the kingdom would pump every barrel it could “to maintain market share,” which is generally understood to mean crush competitors such as Russia and U.S. shale producers.
We also know that storage facilities are almost full up (Oil Fundamentals Could Cause Oil Prices To Fall, Fast! (http://www.zerohedge.com/news/2016-03-08/oil-fundamentals-could-cause-oil-prices-fall-fast)).
We also know that global growth is slowing, so demand could weaken sharply going forward.
And lastly, we know that many oil exporters are heavily dependent on oil revenues to fund their oligarchy/monarchy/ruling elites, their military and their vast social welfare programs, which keep the restive masses from overthrowing the oligarchy, etc.
Here is the U.S., heavily indebted producers must pump or die, as they need every dime of revenue to service their vast debts.
If we add all this up– carry trades blowing up, weakening demand and heavy pressures to maintain production–we get a perfect set-up for a continued decline in oil.

Many observers are expecting the Federal Reserve to pull out all the stops to weaken the dollar. They think this because a strong dollar hurts U.S. exports. If oil and the USD are indeed correlated, a weaker dollar would trigger a boost in oil prices–a welcome “saved by the bell” for indebted U.S. producers, and the bankers who lent tens of billions of dollars to them.
If you glance at the above chart of the dollar index, you’ll note the Bollinger Bands are tightening. This usually presages a big move up or down. We don’t know which way the USD will move, but since it’s in a Bull market, we might surmise the move will be a continuation of the current trend, i.e. up.
Technically, a 20% gain to the 120 level would be quite typical of a long-term uptrend.
What would an additional 20% gain in the USD do to oil? If the correlation holds (and perhaps it won’t–there are no guarantees), it would very likely crush oil to new and breathtaking lows. Analyst Art Berman recently suggested a target of $16.50/barrel, and this corresponds rather neatly with USD at 120 (a 20% gain).
Lower oil prices are not an unalloyed “win” for the U.S. The U.S. energy sector is getting pummeled, and soon its lenders will start booking staggering losses. The decline in petrodollars also means there is less demand for U.S. Treasuries from oil exporters.
Enter the U.S. Deep State, which is only marginally interested in Wall Street bankers’ losses or petrodollar recycling into Treasuries. Global hegemony ultimately rests on issuing the reserve currency in size, and the sheer magnitude of financial resources that can be brought to bear to do what is viewed as necessary.
The collapse in oil has led to an unprecedented transfer of wealth from producers to consumers. Oil exporters (the number of which is diminishing, as populations and domestic consumption levels soar throughout the oil-producing world) have far fewer USD to spend on military adventures, social welfare, the tallest buildings in the world, and so on.
If global bankers wise up (and they are smart gals/guys), lending to oil producers is about to dry up like the proverbial mist in Death Valley. Why loan money to someone with $35/barrel oil in the ground if oil is heading to $20 or lower?
Who goes broke/goes home/is overthrown at sustained $20/barrel oil? You can make your own list, but it pretty much includes every oil exporter.
So who wins in a scenario in which the USD gains another 20% and pins oil to new, sustained lows? Consumers, of course, but as Zero Hedge and others have explained, this windfall isn’t leading to robust consumer spending. Rather, households are saving the proceeds, hunkering down in the recessionary winds they see rising.
The U.S. oil sector will take some serious lumps, along with every other producer. We can anticipate huge writedowns of uncollectible debt, bankruptcies, and all the other collateral damage (pun intended) of a bust.
But who is left relatively unscathed in terms of financial power and hegemony? The U.S. Should the USD soar another 20%, China would be forced to devalue its currency, causing massive capital flows out of China and an immediate loss of trillions of dollars of purchasing power for all who hold yuan/RMB. Not much of a win there.
All this is to suggest that those expecting a major weakening in the USD to push oil higher shouldn’t hold their breath awaiting this outcome. Maybe the USD will weaken 20%, but why would it do so when every other central bank is weakening its currency? Wouldn’t it make much more sense to drain wealth and geopolitical leverage from oil exporters?
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