No Matter How Bad It Gets, Some Will Always Love Monopoly Central Banking

[mick silver]

http://www.thedailybell.com/wp-content/uploads/2016/04/central-banking-dollars.jpgNo Matter How Bad It Gets, Some Will Always Love Monopoly Central Banking

By Daily Bell Staff - April 27, 2016


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Why the world needs more U.S. government debt … Are government-imposed restrictions holding back the U.S. economy? In a way, yes: The federal government is causing great harm by failing to issue enough debt. The U.S. generates more income than any other country, and will keep doing so for many years to come. The federal government can generate a lot of revenue by taxing this income — a power that puts it in a unique position to issue the kind of extremely safe bonds that are in great demand among the world’s investors. How is the U.S. government wielding its power? Not well. -Bloomberg
Hard on the heels of the Federal Reserve’s latest decision to leave rates alone, we discover this Bloomberg opinion article explaining why the US government ought to issue more debt.
Of course, this echoes Alexander Hamilton’s statement that “a national debt, if it is not excessive, will be to us a national blessing.”
However, it certainly runs counter to free-market economics. The Austrian model is one that emphasizes the individual’s “human action” – his or her ability to live without the manifold supports of modern government.
This is one reason Austrian economics is not popular with the public bureaucracy, the Western monetary and industrial elite – and their representatives in academia.
Bloomberg is run by Michael Bloomberg who probably qualifies as a double elite threat: He is a businessman but given his eponymous news network, he is a kind of associate Federal Reserve member. Bloomberg, the network, produces a steady stream of pro-central bank propaganda.
Calling for the issuance of more debt as this editorial does is not quite the same as endorsing the modern program of central banking. But it might as well be.
Central banks buy a good deal of public debt – and it’s not usually corporate debt either. In fact, the modern state is inextricably wedded to monopoly central banking.
And the US is indeed in the fortunate position of being able to print loads of debt because the dollar is yet in demand.
More:

The yield on a 20-year inflation-protected Treasury bond, at just over 0.5 percent, is nearly two full percentage points lower than it was 10 years ago.
This means that the price is near record highs, suggesting that the U.S. government’s supply of such safe investments is falling far short of demand. In other words, we’re starving the world of desperately needed financial safety.
The debt the US government issues should be used to “invest in infrastructure,” and to cut taxes or both, according to the editorial.

That’s an interesting statement given that modern central banking actually allows us to do away with taxes. Modern central banks could certainly fund government operations directly.

Instead, political forces have imposed artificial constraints on debt — constraints that punish savers, choke off economic growth and could sow the seeds of the next financial crisis.
The author of this editorial is Narayana Kocherlakota, who predictably enough served as president of the Federal Reserve Bank of Minneapolis from 2009 through 2015.
For people with such backgrounds, every public budget looks like a nail and every debt-based issuance seems a hammer.
How exactly, Kocherlakota arrives at the idea that the US is a place of ultimate investment safety is a mystery to us.
Total US indebtedness probably approaches $200 trillion – yes trillion with a “T.” Unrestrained issuance of credit has virtually bankrupted US citizens.
Wall Street’s involvement with derivatives is surely in excess of $500 trillion and perhaps a $1,000 trillion.
It just came out the other day that close to 50 percent of the general public don’t even have enough savings to fund a $400 trip to the emergency room.
There are upwards of a million who reportedly live on $2 a day, which mimics the worst poverty of third-world countries.
Economies wound round monetary elites inevitably discover that those elites grow wealthy, in aggregate, at the expense of everyone else.
The idea that a public debt, administered by a few on behalf of the many, is a blessing of any sort is yet another faux paradigm. Giving any single group control of value and volume of money is a terrible mistake.
Unfortunately, from earliest times in the US, the country has had proponents of monetary elitism. It is a mistake to think they will ever be vanquished, regardless of the growing debasement and misery that monopoly central banking predictably inflict.
Conclusion: The way to counter the pernicious effects of this cursed system is to minimize your contact with its most egregious effects. Stay out of debt, place a portion of your savings in money metals and try to make a living in a trade not directly exposed to the financial sector. Good luck.

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

[mick silver]

http://www.thedailybell.com/wp-content/uploads/2016/04/Fed-Eccles-Building.jpgThe Committee That Controls the World Meets Today

By Grayson Schultze - April 26, 2016


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For the next two days, the Committee that controls the world will be huddled in the ivory tower known as the Eccles Building in D.C. There, ten people will tediously examine the data, look at the forecasts, and weigh options for an economy with a GDP of $17 trillion, a population approaching 320 million, and an official national debt of over $19 trillion.
This committee with unlimited, unquestioned authority will arbitrarily decide the course of the most important piece that ties the economy together: the U.S. dollar.
And as the U.S. dollar is the world’s reserve currency, by fixing interest rates they are effectively determining global monetary policy.
This group is the 10-person Federal Open Markets Committee (FOMC). Comprised of unelected bureaucrats, the April 26-27 meeting is the third get-together out of the eight scheduled for 2016.
Forget the ongoing NHL and NBA playoffs. The real show is there in D.C. at the intersection of Constitution Avenue and 20th Street, the Fed’s headquarters. There are sure to be some gamesmanship and fireworks – at least for the policy wonks among us.
Last week New York Fed President William Dudley, a permanent member of the FOMC and unmistakably the third most powerful Fed member behind chair Janet Yellen and vice-chair Stanley Fischer, made the case for a cautious approach to raising interest rates in this April meeting.
Caution in an interest rate rise is just the word used by Yellen last month following the FOMC’s second yearly meeting of 2016. But at April’s meeting within the Fed’s ranks there may be dissension at approaching hikes with caution. Minutes from the March meeting showed that vice-chair Fischer sees inflation as firming up – a case for an interest rate hike.
Also in Fischer’s corner, another case for raising rates is the recent performance of both the Dow Jones Industrial Average and S&P 500. Since the last FOMC meeting in mid-March, the markets are up 3.6% and 2.9%, respectively.
That said, stock markets are just one piece of the data-dependent FOMC. The U.S.’s rate of inflation, unemployment, including Yellen’s favorite, the Job Openings and Labor Turnovers Survey (JOLTS), and the potential for economic growth in the face of “headwinds”, another favorite reference – these are all on the table for debate.
While there may be a disagreement on the data, there will not be any disagreement on the methodology for understanding the data and thereby the economy. Because, despite what the committee members believe, they’re not economists. They’re statisticians.

Keynesian central planning will be at work. Like a mechanical engineer plugs data into an equation to better understand forces and stresses or a chemist uses a formula’s constants for testing of independent variables, the FOMC will take a supposedly scientific approach. They’ll reduce human action to numbers and plug this into a model. As if the subjective valuations and sometimes illogical decisions of humans can be perfectly captured in an aggregate model.
Unfortunately, while the discovery process will be a farce, the implications of the flawed Keynesian modeling will be very real. Regardless of the FOMC’s decision to retain the Fed Funds target rate at 0.25-0.50% or bump it up by another ¼ of a percent, money supply growth will continue. This translates into even greater misallocations of capital as this larger money pool translates into lower interest rates at both the producer and consumer levels.
Two things are likely. One, capital misallocation will continue. And two, it’s doubtful that the FOMC will hike rates in this April meeting. The Fed members are just too data-dependent, not fully convinced of the so-called U.S. “recovery.”
Many economists are pointing to June as the first rate hike. But that’s also not a lock, as the U.S. Presidential race heats up and the ever so politicized Fed will do their master’s bidding to not upset markets.
The greatest danger will be that the Fed waits. And then waits. And then inflation well above their 2% target kicks in, forcing their hand to raise rates.
If this is the case, the great market winners of 2016 will be gold and silver. Already we’re seeing this, as gold ticked up $5.00 and silver traded sideways in advance of the FOMC meeting on April 25th.
This will not be the case later in 2016. More money chasing the same amount of metal means, naturally, higher prices. We’d encourage readers to get into these metals now before the wise overlords at the FOMC cause them to skyrocket.
After all, the committee that controls the world is unable to control what matters to us all the most: individual action.

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