Tag Archives: Federal Reserve

The US Economy Looks Good On Paper – Here’s Why It’s Actually A Disaster In Progress

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By Brandon Smith

Source: Alt-Market.us

One of my favorite false narratives floating around corporate media platforms has been the argument that the American people “just don’t seem to understand how good the economy really is right now.” If only they would look at the stats, they would realize that we are in the middle of a financial renaissance, right? It must be that people have been brainwashed by negative press from conservative sources…

I have to laugh at this claim because it’s a very common one throughout history – It’s an assertion made by almost every single political regime right before a major collapse. These people always say the same things, and when you study economics as long as I have you can’t help but throw up your hands and marvel at their dedication to the propaganda.

One example that comes to mind immediately is the delusional optimism of the “roaring” 1920s and the lead up to the Great Depression. At the time around 60% of the US population was living in poverty conditions (according to the metrics of the decade) earning less than $2000 a year. However, in the years after WWI ravaged Europe, America’s economic power was considered unrivaled.

The 1920s was an era of mass production and rampant consumerism but it was all fueled by easy access to debt, a condition which had not really existed before in America. It was this illusion of prosperity created by the unchecked application of credit that eventually led to the massive stock market bubble and the crash of 1929. This implosion, along with the Federal Reserve’s policy of raising interest rates into economic weakness, created a black hole in the US financial system for over a decade.

There are two primary tools that various failing regimes will always use to distort the true conditions of the economy: Debt and inflation. In the case of America today, we are experiencing BOTH problems simultaneously and this has made certain economic indicators appear healthy when they are, in fact, highly unstable. The average American knows this is the case because they see the effects daily. They see the damage to their wallets, to their buying power, in the jobs market and in their quality of life. This is why public faith in the economy has been stuck in the dregs since 2021.

The establishment can shove out-of-context stats in people’s faces, but they can’t force the populace to see a recovery that simply does not exist. Let’s go through a short list of the most faulty indicators and the real reasons why the fiscal picture is not as rosy as the media would like us to believe…

The “Miracle” Labor Market Recovery

In the case of the US labor market, we have a clear example of distortion through inflation. The $8 trillion+ dropped on the economy in the first 18 months of the pandemic response sent the system over the edge into stagflation land. Helicopter money has a habit of doing two things very well: Blowing up a bubble in stock markets and blowing up a bubble in retail. Hence, the massive rush by Americans to go out and buy, followed by the sudden labor shortage and the race to hire (mostly for low wage part-time jobs).

The problem with this “miracle” is that inflation leads to price explosions, which we have already experienced. The average American is spending around 30% more for goods, services and housing compared to what they were spending in 2020. This is what happens when you have too much fiat money chasing too few goods and limited production.

The jobs market looks great on paper, but the majority of jobs generated in the past few years are jobs that returned after the covid lockdowns ended (the same lockdowns Democrats tried to keep in place perpetually). The rest are jobs created through monetary stimulus, and then there is the issue of “immigrant jobs” and data that is revised to the negative months later.  I suspect we won’t ever hear the real stats unless Trump enters office in 2025.  Then the media discussion will focus intently on how terrible the labor market really is.

Part time low wage service sector jobs are not going to keep the country rolling for very long in a stagflation environment. The question is, what happens now that the stimulus punch bowl has been removed?

Just as we witnessed in the 1920s, Americans have turned to debt to make up for higher prices and stagnant wages by maxing out their credit cards to historic levels. With the central bank keeping interest rates high, the credit safety net will soon falter. This condition also goes for businesses; businesses that will soon jump headlong into mass layoffs when they realize the party is over.  It happened during the Great Depression and it will happen again today.

Stock Market Bonanza

We saw cracks in in the armor of the financial structure in 2023 with the spring banking crisis, and without the abrupt Federal Reserve backstop many more small and medium banks would have dropped dead. The weakness of US banks is offset by the relative strength of the US dollar, which lures in foreign investors hoping to protect their wealth using dollar denominated assets.

But something is amiss. Gold and Bitcoin have rocketed higher along with stocks and the dollar. This is the opposite of what’s supposed to happen. Gold and BC are supposed to be hedges against a weak dollar and weak equities, right? If global faith in the dollar and in stocks is so high, why are investors diving into protective assets like gold?

Again, as noted above, inflation distorts everything. Tens of trillions of extra dollars printed by the Fed are floating around and it’s no surprise that much of that cash is flooding into the stock market which simply pushes higher right along with prices on the shelf. But, gold and BC are telling us a more nuanced story about what’s really happening.

Right now, the US government is adding around $1 Trillion every 100 days to the national debt as the Fed holds rates higher to fight inflation.  Higher interest means exponential debt conditions, and this debt is going to crush America’s financial standing for global investors who will eventually ask HOW the US is going to handle that growing millstone? As I predicted years ago, the Fed has created a perfect Catch-22 scenario in which the US must either return to rampant inflation, or, face a debt breakdown. In either case, US dollar denominated assets will lose their appeal and stock markets will ultimately plummet.

Beyond this reality, stocks are not a leading indicator of anything, let alone the stability of the financial system. Stocks are a trailing indicator; they crash well after all the other warning signals have made it obvious that something is wrong. Average Americans, for good reason, do not care what stock markets have to say.

Healthy GDP Is A Complete Farce

Beyond the stock market, GDP is the most common out-of-context stat used by governments to convince the citizenry that all is well. It is yet another stat that is entirely manipulated by inflation. It is also manipulated by the way in which modern governments define “production and market value.”

GDP is primarily driven by spending. Meaning, the higher inflation goes, the higher prices go, and the higher GDP climbs (to a point). Eventually prices go too high, credit cards tap out and spending ceases. But, for a short time inflation makes GDP (as well as retail) look good.

Another factor that creates a bubble is the reality that government spending is actually included in the calculation of GDP. That’s right, every dollar of your tax money that the government wastes helps the establishment by propping up GDP numbers. This is why government spending increases will never stop – It’s too valuable for them to spend as a way to make the economy appear healthier than it is.

The Real Economy Is Eclipsing The Fake Economy

The bottom line is that Americans used to be able to ignore the warning signs because their bank accounts were not being directly affected. This is over. Now, every person in the country is dealing with a massive decline in buying power and higher prices across the board in all assets. Even the wealthy are seeing a compression to their profits and many are struggling to keep their businesses in the black.

The unfortunate truth is that the elections of 2024 will probably be the turning point at which the whole edifice comes tumbling down. Even if the public votes for change, the system is already broken and cannot be repaired without a complete overhaul. We have consistently avoided taking our medicine and our weaknesses have only accumulated.

People have lost faith in the economy because they have not faced this kind of uncertainty since the 1930s. Even the stagflation crisis of the 1970s will likely pale in comparison to what is about to happen. On the bright side, at least a large number of Americans are aware of the threat, as opposed to the 1920s when the vast majority of people were utterly conned by the government, the banks and the media into thinking all was well. Knowing is the first step to preparing.

Economic Earthquake Ahead? The Cracks Are Spreading Fast

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By Brandon Smith

Source: The Burning Platform

One of my favorite false narratives floating around corporate media platforms has been the argument that the American people “just don’t seem to understand how good the economy really is right now.” If only they would look at the stats, they would realize that we are in the middle of a financial renaissance, right? It must be that people have been brainwashed by negative press from conservative sources…

I have to laugh at this notion because it’s a very common one throughout history – it’s an assertion made by almost every single political regime right before a major collapse. These people always say the same things, and when you study economics as long as I have you can’t help but throw up your hands and marvel at their dedication to the propaganda.

One example that comes to mind immediately is the delusional optimism of the “roaring” 1920s and the lead up to the Great Depression. At the time around 60% of the U.S. population was living in poverty conditions (according to the metrics of the decade) earning less than $2000 a year. However, in the years after WWI ravaged Europe, America’s economic power was considered unrivaled.

The 1920s was an era of mass production and rampant consumerism but it was all fueled by easy access to debt, a condition which had not really existed before in America. It was this illusion of prosperity created by the unchecked application of credit that eventually led to the massive stock market bubble and the crash of 1929. This implosion, along with the Federal Reserve’s policy of raising interest rates into economic weakness, created a black hole in the U.S. financial system for over a decade.

There are two primary tools that various failing regimes will often use to distort the true conditions of the economy: Debt and inflation. In the case of America today, we are experiencing BOTH problems simultaneously and this has made certain economic indicators appear healthy when they are, in fact, highly unstable. The average American knows this is the case because they see the effects everyday. They see the damage to their wallets, to their buying power, in the jobs market and in their quality of life. This is why public faith in the economy has been stuck in the dregs since 2021.

The establishment can flash out-of-context stats in people’s faces, but they can’t force the populace to see a recovery that simply does not exist. Let’s go through a short list of the most faulty indicators and the real reasons why the fiscal picture is not a rosy as the media would like us to believe…

The “miracle” labor market recovery

In the case of the U.S. labor market, we have a clear example of distortion through inflation. The $8 trillion+ dropped on the economy in the first 18 months of the pandemic response sent the system over the edge into stagflation land. Helicopter money has a habit of doing two things very well: Blowing up a bubble in stock markets and blowing up a bubble in retail. Hence, the massive rush by Americans to go out and buy, followed by the sudden labor shortage and the race to hire (mostly for low wage part-time jobs).

The problem with this “miracle” is that inflation leads to price explosions, which we have already experienced. The average American is spending around 30% more for goods, services and housing compared to what they were spending in 2020. This is what happens when you have too much money chasing too few goods and limited production.

The jobs market looks great on paper, but the majority of jobs generated in the past few years are jobs that returned after the covid lockdowns ended. The rest are jobs created through monetary stimulus and the artificial retail rush. Part time low wage service sector jobs are not going to keep the country rolling for very long in a stagflation environment. The question is, what happens now that the stimulus punch bowl has been removed?

Just as we witnessed in the 1920s, Americans have turned to debt to make up for higher prices and stagnant wages by maxing out their credit cards. With the central bank keeping interest rates high, the credit safety net will soon falter. This condition also goes for businesses; the same businesses that will jump headlong into mass layoffs when they realize the party is over. It happened during the Great Depression and it will happen again today.

Cracks in the foundation

We saw cracks in the narrative of the financial structure in 2023 with the banking crisis, and without the Federal Reserve backstop policy many more small and medium banks would have dropped dead. The weakness of U.S. banks is offset by the relative strength of the U.S. dollar, which lures in foreign investors hoping to protect their wealth using dollar denominated assets.

But something is amiss. Gold and bitcoin have rocketed higher along with economically sensitive assets and the dollar. This is the opposite of what’s supposed to happen. Gold and BTC are supposed to be hedges against a weak dollar and a weak economy, right? If global faith in the dollar and in the U.S. economy is so high, why are investors diving into protective assets like gold?

Again, as noted above, inflation distorts everything.

Tens of trillions of extra dollars printed by the Fed are floating around and it’s no surprise that much of that cash is flooding into the economy which simply pushes higher right along with prices on the shelf. But, gold and bitcoin are telling us a more honest story about what’s really happening.

Right now, the U.S. government is adding around $600 billion per month to the national debt as the Fed holds rates higher to fight inflation. This debt is going to crush America’s financial standing for global investors who will eventually ask HOW the U.S. is going to handle that growing millstone? As I predicted years ago, the Fed has created a perfect Catch-22 scenario in which the U.S. must either return to rampant inflation, or, face a debt crisis. In either case, U.S. dollar-denominated assets will lose their appeal and their prices will plummet.

“Healthy” GDP is a complete farce

GDP is the most common out-of-context stat used by governments to convince the citizenry that all is well. It is yet another stat that is entirely manipulated by inflation. It is also manipulated by the way in which modern governments define “economic activity.”

GDP is primarily driven by spending. Meaning, the higher inflation goes, the higher prices go, and the higher GDP climbs (to a point). Eventually prices go too high, credit cards tap out and spending ceases. But, for a short time inflation makes GDP (as well as retail sales) look good.

Another factor that creates a bubble is the fact that government spending is actually included in the calculation of GDP. That’s right, every dollar of your tax money that the government wastes helps the establishment by propping up GDP numbers. This is why government spending increases will never stop – It’s too valuable for them to spend as a way to make the economy appear healthier than it is.

The REAL economy is eclipsing the fake economy

The bottom line is that Americans used to be able to ignore the warning signs because their bank accounts were not being directly affected. This is over. Now, every person in the country is dealing with a massive decline in buying power and higher prices across the board on everything – from food and fuel to housing and financial assets alike. Even the wealthy are seeing a compression to their profit and many are struggling to keep their businesses in the black.

The unfortunate truth is that the elections of 2024 will probably be the turning point at which the whole edifice comes tumbling down. Even if the public votes for change, the system is already broken and cannot be repaired without a complete overhaul.

We have consistently avoided taking our medicine and our disease has gotten worse and worse.

People have lost faith in the economy because they have not faced this kind of uncertainty since the 1930s. Even the stagflation crisis of the 1970s will likely pale in comparison to what is about to happen. On the bright side, at least a large number of Americans are aware of the threat, as opposed to the 1920s when the vast majority of people were utterly conned by the government, the banks and the media into thinking all was well. Knowing is the first step to preparing.

The second step is securing your own financial future – that’s where physical precious metals can play a role. Diversifying your savings with inflation-resistant, uninflatable assets whose intrinsic value doesn’t rely on a counterparty’s promise to pay adds resilience to your savings. That’s the main reason physical gold and silver have been the safe haven store-of-value assets of choice for centuries (among both the elite and the everyday citizen).

Global Economic War Is Coming And The Threat To The US Dollar Is Real

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By Brandon Smith

Source: Alt-Market.us

In a recent statement posted to social media, Tucker Carlson explained succinctly his many reasons for traveling to Russia to interview President Vladimir Putin. His decision, mired in an avalanche of outrage from leftist media talking heads and a multitude of western politicians, was inspired by Carlson’s concern that Americans have been misdirected by corporate propaganda leaving the public completely uneducated on the war in Ukraine and what tensions with the East might lead to.

I agree. In fact, I don’t think the majority of Americans have a clue what the real consequences of a global war with Russia and its allies would look like. Even if the conflict never resulted in shots fired and stayed confined to the realm of economic warfare, the US and most of Europe would be devastated by the effects.

Carlson specifically mentioned dangers to the status of the US dollar, and I suspect this comment probably mystified a great number of people. Most of the population cannot fathom the idea of a US dollar implosion set in motion by a foreign dump of the greenback as the world reserve currency. They really do believe the dollar is invincible.

The most delusional people are, unfortunately, those within mainstream economic circles. They just can’t seem to grasp that the west is in the midst of financial collapse already, and war would accelerate the effects to levels not seen since the Great Depression.

I have been warning about this outcome for many years. I think I have made my position clear in the past; I suspect the conflict between east and west has been carefully engineered over the course of a decade or more, and Russia is not innocent in this affair.

Russia has consistently collaborated with globalist institutions including the International Monetary Fund in the effort to create a new “global reserve currency system.” In other words, the interests of Russia and the globalists do indeed intersect in a number of ways and the war in Ukraine has not necessarily changed that.  Time Magazine even complained last year about the IMF issuing positive reports about Russia’s economy – They thought the organization was going to repeat the false NATO narrative that Russia was in the midst of fiscal implosion.  Instead, the IMF essentially praised Russia’s resiliency in the face of sanctions.

As I noted in 2014 in my article ‘False East/West Paradigm Hides Rise Of Global Currency’ in reference to the burgeoning war with Ukraine.

“I would remind pro-Putin cheerleaders that Putin and the Kremlin first pushed for the IMF to take control of the Ukrainian economy, and the IMF is now demanding that Ukraine fight Russia in exchange for financial support. This might seem like irony to more foolhardy observers; but to those who are aware of the false East/West paradigm, it is all the part of a greater plan for consolidation of power.”

I also argued that:

“I have warned for quite some time that the development of East/West tensions would be used as a cover for a collapse of the dollar system. I have warned that among the American media this collapse would be blamed on an Eastern dump of foreign exchange reserves and treasuries, resulting in a global domino-effect ending U.S. world reserve status.”

From the moment Ukrainian President Viktor Yanukovych was deposed (many argue that this was done with the help of western intel agencies) the agenda for WWIII was set in motion. Both sides seemed to create the circumstances by which a conflagration was unavoidable.

Russia, strangely, supported the intervention of the IMF to secure Ukraine’s economy. The IMF then asserted that Ukraine would have to fight Russia to keep control of the Donbas or risk losing the financial aid that was keeping the country alive. Is this irony, or is there something else going on here?

NATO started arming Ukraine, and Ukraine used those arms to slaughter civilians in the Donbas. The eastern population wanted to join with Russia, and Ukraine had no intention of allowing this (IMF funding was on the line). In the meantime, the government began openly discussing the official inclusion of Ukraine into NATO. Russia then invaded, taking the Donbas. Now the entire region is a powder keg and both sides are ready to light the fuse.

But let’s look at this situation as if there was no globalist involvement in facilitating the crisis, just for a moment as an exercise in critical thinking…

If I had to pick a side that is “more right” in their position, it would have to be Russia, but not for the reasons many leftists might imagine when conservatives defend Russia.  The bottom line is that the left blindly follows establishment dictates while the rest of us are at least willing to look at the situation from both sides (which is the same thing Tucker Carlson is doing, and he’s being accused of treason for it).

Imagine if China was working to create a military alliance with Mexico with the potential for the Chinese military to stage long range weapons and soldiers on the American southern border? Imagine the chaos that this would cause in the US (maybe they would finally secure the border)? That’s what Russia was facing with Ukraine. Hell, America almost initiated global nuclear war when the Soviets staged missiles in Cuba in 1962. Military operations so close to the borders of major national powers are not a joke.

This was exact rationale for the war on Ukraine cited by Putin in his discussion with Tucker Carlson, and it makes sense.  Again, if we look at the events without the prospect of globalist interference.  But what if we start to consider who benefits the most from this war?

I certainly don’t trust Putin, but that doesn’t negate the Orwellian behavior of European and American political leaders. There is something going on here beyond the typical mechanisms of geopolitical brinkmanship. The conflict has wide ranging consequences and only serves the goals of a select group of elites.  I suspect elements of both Russia and NATO governments are either knowingly or unwittingly serving these interests.

It is undeniable. It is a verifiable reality – Many of our political leaders and elitist institutions are corrupt beyond comprehension. They are seeking an authoritarian reformation, a “great economic reset” and they are triggering multiple conflicts around the world. We saw the mask come off during covid. These people are not merely misguided; they are monsters, and they are hungry. It’s not beyond them to conjure a worldwide calamity and sacrifice the west like a goat on the altar to get the total centralization they desire.

The East/West paradigm plays into this plan perfectly. The BRICS nations are poised to drop the dollar as world reserve; some have already done so in bilateral trade. Make no mistake, if the conflict in Ukraine (and other parts of the world like Syria or Iran) continues to escalate nations like China will move to dump their dollar holdings just as Russia did. As the largest importer/exporter in the world, many countries would follow China’s lead and shift into a basket of currencies instead of the dollar for international trade.

What does this mean?

The dollar, which has been hyperinflated through more than a decade of Federal Reserve QE money printing, has continued to remain stable only because it is the world reserve and the petro-currency. Foreign banks hold trillions in US currency in overseas coffers for this very reason. With the loss of reserve status, an endless river of dollars will then flood back into the US as foreign investors diversify away from the Fed note. Result? Massive inflationary collapse.

This is what’s at stake. This is what Tucker Carlson was referring to, and far too many in America just don’t get it. Globalists benefit because this is what they have been working towards for decades – The deconstruction of US society and the economy so that the “old world order” can be replaced with their “new world order” of Central Bank Digital Currencies.  An IMF one-world currency basket and a host of other highly unpleasant socialist changes would swiftly follow.

The BRICS might be working with the IMF because they see the dethroning of the dollar as an opportunity to gain greater influence over international trade.  Or, maybe they are controlled opposition and they are scrambling for a seat at the NWO table.  In the end, the fall of the dollar would be a watershed moment for the formation of a global currency system.

And the best part for globalists is, they will be seen as the “heroes” when it’s all over. They spent the better part of the last century setting up America for economic failure through their devaluation of the dollar and the creation of a national debt trap. The system was going to break anyway, but now they can divert all blame to war and the “arrogance of nation states” and then come to the rescue with their dystopian digital money.

An east/west conflict opens the door to the Great Reset.  It is, in a lot of ways, the core of the Reset.  Everything in the new world order agenda relies on it.  Right now, the only thing holding back the tide is the public’s general refusal to fight. No one is interested in going overseas to die in a meaningless battle for Ukraine (Zelensky is truly delusional if he thinks Americans will shed blood in his trenches – Even a draft would be an utter failure). No one is interested in starting WWIII, whether it be nuclear or just economic.

I think the establishment’s outrage over Tucker Carlson interviewing Putin is based on their fear that western audiences are already skeptical of the motives behind the conflict and an unfiltered discussion on the war might galvanize this feeling.  The notion of war is becoming harder and harder for the establishment to sell.

This, however, does not negate the ability of NATO or Russia in expanding the crisis beyond Ukraine into other regions or into financial subterfuge (again, keep your eyes on Syria and Iran). Ultimately, they want us to choose sides, but only from the list of sides they approve. Liberty minded groups in the west need to choose our OWN side and fight for our own interests. It can’t be about NATO vs Russia, it has to be about free people vs the globalists. This is the only way these disaster events will ever end.

When Shelter Becomes a Speculative Asset, Society Unravels

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By Charles Hugh Smith

Source: Of Two Minds

Does anyone really believe that the renunciation of massive, sustained stimulus of speculation in housing would leave housing valuations unchanged because valuations are solely the result of “shortages”?

Let’s begin by stipulating that speculation (i.e. gambling) is part of human nature. The role of regulations and policy is to limit the damage that gambling inevitably inflicts when “sure things” cliff-dive into losses.

In other words, where the speculative frenzy and money flows matters. When the South Sea Bubble expanded circa 1713-1720, this flood tide of speculative capital did not distort the cost of shelter and bread in England; it was limited to a purely financial marketplace of shares in the company. When the bubble imploded in 1720, the losses fell mostly on wealthy investors like Isaac Newton.

The same can be said of the speculative mania of the dot-com era: the bubble and collapse were limited to the tech sector and those participating in the sector and the speculative frenzy. The cost of rent and bread did not double due to the speculative bubble’s inflation or bursting.

In contrast, when speculation floods into shelter / housing, it fatally distorts the cost of housing non-speculators must pay. I say fatally because shelter, along with food, energy and water (the FEW resources), are essential to life. These are not discretionary things we can decide not to have. When the price of essentials soars due to speculation that only rewards the speculators at the expense of non-speculators, the fuse of social disorder is lit.

Anyone who believes policies that encourage the wealthy to hoard housing to the point that the bottom 80% (or the bottom 95% in some areas) cannot afford to buy a home are just peachy is overdosing Delusionol. The social consequences are severe and uncontainable once the worm turns.

Exhibit #1 in Shelter Becoming a Speculative Asset is a modest house in the San Francisco Bay Area that sold for $135,000 in mid-1996. By modest I mean small, old, and on a small lot in a neighborhood of other small lots and homes. (A screenshot of the Zillow history is below.)

Today the home’s value is estimated to be about ten times higher: $1.35 million. Let’s do some basic math to understand just how distorted this market has become.

The median household income in 1996 was about $39,000. For a house costing $135,000, this represents 3.5 ratio of income to housing, well within the traditional ratio of 4 to 1 (4 X income = cost of the home).

Median household income has almost doubled to $75,000, roughly in line with inflation according to the Bureau of Labor Statistics. According to the BLS, the house that cost $135,000 in July 1996 would now cost $264,000 when adjusted for inflation, and the $39,000 median income would be $76,000.

Let’s say the house appreciated above the rate of inflation to $300,000 today. That’s still within the 4 to 1 ratio of income to house cost (4 X $75,000 = $300,000.) So even though the house rose 2.2X in cost, it would still be affordable to a median household.

At a value of $1.35 million, a household would need to make $337,500 annually–an income that is in the top 5% of households–to buy the house today. In other words, an income that is 4.5 times the median household income is the minimum needed to buy this modest house.

The house is now worth 4.5 times what it would have been worth if it had appreciated well above inflation.

The conventional argument holds that this four-fold increase in housing costs is due solely to a shortage of housing. Let’s consider some data before concluding this is the only dynamic in play.

Chart #1: Case Shiller housing index: this chart shows two massive housing bubbles in the past 20 years.

Chart #2: Federal Reserve’s purchases of mortgage backed securities (MBS) to goose the housing market. The “housing shortage” argument claims the unprecedented Fed purchases of trillions of dollars of MBS is not correlated to the housing bubble, but this claim makes no sense: dropping mortgage rates to unprecedented lows while soaking up trillions of dollars in securitized mortgages was like injecting speculative crack cocaine into the housing market. Gosh, how did we survive without the Fed buying $2.5 trillion in mortgages?

Chart #3: the current housing bubble compared to the 2000-2006 housing bubble: today’s bubble is even more extreme than housing bubble #1.

Chart #4: housing per capita (per person) has reached a new high: if there’s such a severe shortage of housing, how can the housing per capita be at an all-time high? Population rose 4 million in the past 4 years while 5 million housing units were added–plus a pig-in-a-python of housing in the pipeline.

Chart #5: household net worth is $50 trillion above trend, the direct result of massive monetary and fiscal stimulus. Tens of trillions of dollars were borrowed into existence and pumped into so-called risk assets–assets such as housing that the wealthy buy for speculative appreciation.

Chart #6: total debt–private and public–soared from $20 trillion in 1996 to $95 trillion now. Is it merely coincidental that this is $55 trillion above the trendline of inflation, which would have placed total debt at $40 trillion today?

Chart #7: net worth of the top 1% households, which soared from 23% of all net worth to 32%: this 9% gain in the percentage of all household net worth represents a gain of $14 trillion above and beyond the $28.7 trillion in gains registered by the 23% they owned in 1990.

1990 total net worth: $21 trillion, 23% = $4.8 trillion; 2023 total net worth: $146 trillion, 23% = $33.5 trillion; $33.5 trillion – $4.8 trillion = $28.7 trillion.

This unprecedented bubble in housing valuations is due not to shortages but to decades of massive financial stimulus that incentivized speculative capital to flood into housing as a low-risk way to skim stupendous gains for creating zero gains in productivity. If you doubt this, then run this scenario and tell us what happens:

The Fed dumps its entire portfolio of mortgage backed securities and stipulates it will never buy any again. It also renounces all the other stimulus gimmicks that incentivized expansions of debt and speculation.

Does anyone really believe that the renunciation of massive, sustained stimulus of speculation in housing would leave housing valuations unchanged because valuations are solely the result of “shortages”? If so, there’s a little shack under the Brooklyn Bridge I’ll let you have for a couple of million. I’m sure the Airbnb rent will mint you millions.

“Bidenomics” Is A Fraud Based On Deliberately Misrepresented Stats

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By Brandon Smith

Source: Alt-Market.us

Economic issues are some of the most politically abused issues often because the data politicians exploit is easy to present out of context. The vast majority of the public doesn’t spend their time immersed in the intricacies of monetary policy, unemployment stats and the processes of inflation vs deflation. They hear a soundbite on the news or social media once in a while, assume it must be true and then go on with their day.

This is how economic crisis events always seem to take the population by surprise – The establishment tells people all is well and no one questions the narrative in the face of numerous warning signs. Sometimes, the populace continues to believe that everything is fine despite the financial framework burning down around them, all because the “experts” continue to convince them that recovery is “right around the corner.”

There are numerous incentives for government officials and mainstream economists to mislead the citizenry with tales of imminent prosperity in the midst of instability. Primarily, the goal is to keep the middle-class population as docile as possible so that they don’t revolt until it’s too late (the middle class being predominantly conservative, and the greatest threat to any corrupt regime). Understand that economics is the root of power, and economic perception is the key to influencing the masses.

Hidden Indicators And Rampant Money Printing

The reality is that the US was hurtling towards stagflationary disaster ever since the crash of 2008, when Barack Obama and Joe Biden (with the help of the Federal Reserve) oversaw the near doubling of the national debt from $10 trillion to almost $20 trillion – The most egregious abuse of monetary policy that the US had ever seen.

And, keep in mind this was only the officially reported cash. Because of pressure brought by people like Ron Paul in 2011, the government was forced to pursue a limited audit of the Federal Reserve bailouts at that time. This revealed at least $16 trillion created from nothing by the Fed to prop up the failing system.

In 2006, right before the derivatives collapse, the Federal Reserve conveniently and abruptly ended their M3 money supply report. They now only report the M2 money supply, which does not include the vast assets held in corporate coffers, large time deposits in banks, institutional money market funds, short-term repurchase agreements (repo), and larger liquid assets. It was as if they knew an inflationary event was about to take place and they needed to obscure the evidence.

In other words, in economics there is the “official government data” and then there is the REAL data, which is sometimes so hidden it is impossible to quantify.

Even if we only go by the M2 report, the money supply skyrocketed starting in 2020, and rose exponentially through 2021 and 2022 – It jumped by 40% in only two years. This is why the cost of most necessities has risen 25% or more.

I’m sure most readers have noticed that inflation is not going away despite Joe Biden’s claims that he has “cut inflation in half” under his “Bidenomics” plan. This is because inflation is cumulative. The CPI might fluctuate, but the effects of inflation remain as prices tend to increase and stay high perpetually.

There Is No Such Thing As “Bidenomics”

The supposed financial progress that Biden is trying to take credit for has nothing to do with Biden’s policies. Not a thing. Unless, of course, you count market manipulation as a positive.

For example, the reduction in CPI is directly related to the continuous interest rate hikes of the Federal Reserve, which Biden has zero control over. The Fed is autonomous and makes its decisions independent of the White House or government. This is a fact openly admitted by former chairman Alan Greenspan. When the fed raises rates, debt becomes more expensive, lending slows down and thus the economy slows down.

One of the only ways that Biden can influence CPI is through artificial deflation of energy prices. The Biden Administration has been dumping US strategic oil reserves on the market for the past year as a means to suppress oil prices, thereby directly and indirectly keeping the CPI numbers down. This is not progress, it’s economic fraud.

The misuse of stats extends to other sectors, such as Biden’s attempt to take credit for the recent reduction in the US deficit. Again, this has nothing to do with Biden; the Fed’s interest rate hikes make it more expensive for the government to take on debt, therefore, debt spending drops.

It’s also not a situation that signals a recovery in the economy – The Fed continues to hike rates supposedly to stall inflation, but higher rates in a debt heavy environment lead to inevitable deflationary upheaval. As I predicted a year ago, the Fed is continuing to increase interest rates until this happens.

Employment Miracle Or Employment Scam?

This issue has been brought up by many analysts but I’ll touch on it again here because Biden is relentless in his falsehoods when it comes to employment data. FACT: 72% of all “new jobs” Biden takes credit for were originally lost during the pandemic lockdowns. The very lockdowns which Democrats avidly enforced and tried to keep in place perpetually. You can’t take credit for “creating” jobs that you are responsible for destroying.

In terms of higher labor demand, the pressure is in low wage service sector jobs and these are the majority of jobs added since Biden took office. And, this rush into retail/service was purchased with $8 trillion+ in covid stimulus cash along with a moratorium on rent and student loan payments. That much extra money in circulation buys at least a few years of consumer spending, propping up jobs numbers.

Throughout history, such gains from inflationary actions and government interventions are always short term, and they always end with a dramatic plunge in employment once the effects subside.

Biden’s Fake Manufacturing Boom

Biden has recently touted a jump in US manufacturing as the latest achievement of Bidenomics, but like every other claim he makes, you have to look at the context. These are not free market manufacturing facilities built according to market demand. Rather, Biden is pumping billions of taxpayer dollars into green tech, once again artificially engineering a “manufacturing boom” through government subsidies for products that have limited demand.

Biden wants to rig the demand, too, by enforcing climate laws which make gas, oil and coal sources too expensive and solar panels and wind turbines cheaper by comparison. For example, Biden is increasing costs for oil and gas exploration on federal lands, while greatly lowering the prices for building solar farms on federal lands. In other words, the government uses your money to create factories for green tech and then creates laws which force people to use that green tech.

In the meantime, Joe’s manufacturing “boom” paid for with tax dollars also comes at the cost of America’s oil, gas and coal industries, not to mention less energy freedom for the general public. It’s socialism, not a revolution in domestic manufacturing.

For Biden, The Key Is To Create As Many Government Cash Injections As Possible Until 2025

You want to know why Democrats are so angry that the Supreme Court blocked Biden’s plan to make taxpayers cover student loan debts? It’s not because they care about naive college kids who paid too much money for garbage degrees – It’s because student debt relief would immediately add trillions more in spending in the short term to the US economy.

An interesting side effect of the college loan moratorium is the surprising credit boost – As soon as college loan payments were put on hold, millions of former students had their credit ratings increase by default. Meaning, they could now hike their credit limits and spend MORE money they don’t have. It’s an incredibly sneaky way to artificially prop up the system WITHOUT using direct stimulus measures that rely on the central bank. This false boost will disappear by October of this year.

Biden’s constant attempts to introduce infrastructure programs are another way the government can create the illusion of recovery by using debt spending as a means to mitigate the signals of greater fiscal decline. Without Fed stimulus it’s the only option Biden has, and as rates rise it becomes costly.

The bottom line is this – The US economy is on a short timetable as long as the Fed continues to raise interest rates into weakness as a means to suppress inflation. As we witnessed in the spring, higher rates are already breaking the back of mid-tier banks across the western world and the Fed’s backstop funds are only enough to stall the debt crisis for a time. I continue to predict that once the Fed Funds Rate is raised to 6% or more, we will once again see a banking calamity similar to the 2008 crash, but this time if the Fed steps in with a bailout hyperinflation will be the immediate result.

Bidenomics is a sham in every respect. Anything that could be considered an economic improvement is due to the Federal Reserve playing the odds with interest rates. A massive 40% increase in the money supply sure helps in obscuring fiscal weakness as well. Luckily, nearly 60% of Americans in recent polls say they aren’t buying the Bidenomics fairytale – They see the dangers around them every day.

The covid event was a catalyst that revealed all the weaknesses of the US system that many of us in alternative economics have been warning about for years. And now it seems as if the establishment is trying to drag things along for just a little while longer. The reason why is up for speculation, but the fact remains that a broken structure cannot be propped up with stop gaps. I’m doubtful that Biden will be able to ride the wave created by covid stimulus until the end of 2024. Something has to give.

The Two Causes of the Coming Great Depression

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By Charles Hugh Smith

Source: Of Two Minds

There are two approaches to analyzing a situation:

1. Choose the desired outcome–generally the one that doesn’t require any major changes, sacrifices or downward mobility
2. Identify the initial conditions and systemic dynamics and then follow these to a conclusion back-tested by comparisons with historical outcomes.

Our default setting as humans is 1: select the outcome we want and then find whatever bits and pieces supports that conclusion. Cherry-pick data, draw false analogies–the field is wide open.

This is why we get so upset when our “analysis” is challenged: we’re forced to ask what happens to us if our desired outcome doesn’t transpire, and since the answer might be something less than optimal, we violently reject any data or analogies that conflict with our carefully curated “analysis.”

A great deal of what passes for analysis today is cherry-picked bits and pieces that support a happy story of endlessly expanding prosperity–AI, fusion, etc.–with no mention of limits, constraints, costs or worst-case outcomes rather than best-case outcomes.

Let’s start with an historical analogy most reject: the Great Depression of 1929 to 1942. The conventional account claims that the Depression was the result of a “Federal Reserve policy error”: the Fed tightened credit when it should have loosened it.

This is nonsense. What actually happened was credit expanded rapidly in the Roaring 1920s, which is why they were Roaring. Farmers could borrow money to buy prairie land to put under the plow, speculators could borrow $9 on margin to play the stock market with $1 in cash, and so on.

In other words, what happened was a gigantic credit bubble inflated that pushed stocks and other assets to unsustainable heights of over-valuation, valuations based on the Roaring 20s expansion of credit and consumption continuing forever.

But all bubbles pop, and so the weather changed for the worse and newly plowed prairie turned into a Dust Bowl, wiping out heavily leveraged farmers. Since there was no federal bank deposit guarantee (no FDIC), the bankruptcies of overleveraged borrowers wiped out thousands of small banks, wiping out the savings of prudent depositors.

So even prudent savers got wiped out in the crash of the credit bubble.

Stock speculators gambling on margin (i.e. borrowed money) were quickly wiped out, and the selling became self-reinforcing, accelerating the cascading crash.

The real policy error was protecting the wealthy who owned the debt from a debt-clearing write-down. The wealthy own debt, the non-wealthy owe debt. When the debt is defaulted on, the lender / owner of the debt has to absorb the loss. The debtor is freed of the burden. In a debt-clearing event driven by defaults, insolvencies and bankruptcies, the wealthy are the losers and the debtors are freed of the burden of debt.

Various programs were implemented to stave off the consequences of default, as if pushing losses into the future would somehow enable the credit bubble to reinflate. That’s not how it works: the financial system is like a forest, and if the dead wood of bad debt piles up and isn’t allowed to burn, then the forest cannot foster new growth.

Economies that refuse to accept the wealth destruction that results from credit bubbles popping stagnate. This is the story of Japan from 1990 to the present: the status quo in Japan refused to accept the losses, hiding bad debt (i.e. non-performing loans) behind artifices such as new loans that covered the interest due, listing the non-performing loans in “zombie” categories, i.e. as assets that were still on the books at full value even though they were essentially worthless, and so on.

The net result was 33 years of stagnation and social decay as young people gave up on owning homes and having families.

Now the US has inflated another “debt super-cycle” credit bubble that has pushed assets into over-valuation. Once again the goal is to avoid handing the wealthy owners of all this debt the enormous losses that must be accepted to clear the dead wood of bad debt, money lent to borrowers and projects that were not creditworthy except in a bubble.

The lesson the status quo took from the Great Depression is to cover up private-sector over-valuations and bad debts with vast expansions of credit via the Federal Reserve and the federal government. Please look at these four charts below:
1. total credit (TCMDO)
2. the Federal Reserve balance sheet (2 charts)
3. federal debt

All are in visibly unsustainable parabolic ascents.

Predictably, the status quo will refuse to accept the necessity of clearing the dead wood and accepting the trillions of dollars in losses that will accrue to those who own the unpayable debts.

Consider CRE, commercial real estate. Office towers are now worth one-third of their pre-pandemic valuations, the valuations on which their mortgages were based. There is no way these properties can be magically restored to their previous over-valuation. Massive losses must be accepted by the owners of the debt. If those losses make them insolvent, so be it. That is unacceptable in a system geared to protect the wealthy at all costs.

But bubbles pop anyway, regardless of policy tweaks. Consider these stock market charts of the Roaring 20s and the Great Depression and the present (below). The similarity is remarkable–possibly even eerie.

The big difference between the Great Depression of the 1930s and the Depression we’re entering is the world still had enormous reserves of resources to tap and a (by today’s standards) modest population in the resource-consuming developed nations.

Recall that a developed-world consumer uses up to 100 times more energy and resources than a poor person in a rural undeveloped nation. Recycling a few bottles doesn’t change this.

This means the planet’s “savings account” of abundant, cheap-to-access resources has been depleted. Yes, there is still oil and copper, etc., but it’s of far lower quality and much harder to get now. The rich ores have been mined and the shallow super-giant oil fields have all been tapped long ago. Now the Saudis must pump stupendous quantities of seawater into their oil wells to maintain production. All these technologies consume vast quantities of energy.

The inevitable result is the energy efficiency–how much energy is required to access, process and transport the energy–has plummeted even as consumption has soared.

The outcome many hope for is some new miraculously cheap and abundant sources of energy such as fusion. But fusion is far more complicated and tricky than pumping oil, and oil is a high-energy-density fuel that can be stored rather easily. All the electricity generated by various technologies can’t be stored easily or cheaply, and so the happy story is that a new miraculous battery technology is just around the corner.

But batteries are also complicated and resource-dense, so they’ll always be as expensive as the materials needed to fabricate them. There will never be “low-cost” batteries if the materials needed to make them are scarce and expensive to dig out of the ground, process and transport.

So the policy choices are simple: either protect the wealthy from write-downs of bad debt and the collapse of asset bubbles and usher in decades of stagnation, or force the wealthy to take the losses and clear away the dead wood.

But either choice will be constrained by the reality that humanity has already drained the easy-to-get “savings account” of global resources.

I get emails from readers who say things like “mining techniques are far more efficient now.” That’s fine, but most of these new mines are often thousands of kilometers away from railways or seaports, and thousands of kilometers away from the processing plants that turn the ore into useful metals.

Recall the enormity of the cost and effort required to build a single two-lane highway thousands of kilometers to a new mine, and the oceans of diesel fuel needed to power the mining equipment and trucks hauling the ore to railways or seaports. Recall the immense amounts of energy required to smelt / process these ores, and the near-zero percentage of lithium-ion batteries that are currently being recycled.

Batteries are difficult to recycle because they’re not manufactured to be recycled, and they’re not manufactured to be recycled because that would raise costs considerably, reducing profits.

So on the present course, the idea is to manufacture billions of batteries, throw them all in the landfill in 10 years, and then mine enough minerals to build another couple billion batteries and then repeat the cycle of throwing them away in 10 years forever.

That isn’t realistic, so the status quo will have to adjust to this unwelcome reality.

This is why I keep writing books about relocalizing, degrowth, using less rather than more to yield a higher level of well-being. The resource “savings account” won’t support fantasies of endlessly expanding consumption of hard-to-get resources.

But the status quo has much to unlearn, and it seems the only pathway to a new understanding is a Great Depression that won’t end with a new expansion of credit because the resources required for that new expansion simply won’t be available or affordable.

Reducing our exposure to avoidable risks is a key strategy of Self-Reliance.

US Empire of Debt Headed for Collapse

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By Pepe Escobar

Source: The Unz Review

Prof. Michael Hudson’s new book, The Collapse of Antiquity: Greece and Rome as Civilization’s Oligarchic Turning Point is a seminal event in this Year of Living Dangerously when, to paraphrase Gramsci, the old geopolitical and geoeconomic order is dying and the new one is being born at breakneck speed.

Prof. Hudson’s main thesis is absolutely devastating: he sets out to prove that economic/financial practices in Ancient Greece and Rome – the pillars of Western Civilization – set the stage for what is happening today right in front of our eyes: an empire reduced to a rentier economy, collapsing from within.

And that brings us to the common denominator in every single Western financial system: it’s all about debt, inevitably growing by compound interest.

Ay, there’s the rub: before Greece and Rome, we had nearly 3,000 years of civilizations across West Asia doing exactly the opposite.

These kingdoms all knew about the importance of canceling debts. Otherwise their subjects would fall into bondage; lose their land to a bunch of foreclosing creditors; and these would usually try to overthrow the ruling power.

Aristotle succinctly framed it: “Under democracy, creditors begin to make loans and the debtors can’t pay and the creditors get more and more money, and they end up turning a democracy into an oligarchy, and then the oligarchy makes itself hereditary, and you have an aristocracy.”

Prof. Hudson sharply explains what happens when creditors take over and “reduce all the rest of the economy to bondage”: it’s what’s called today “austerity” or “debt deflation”.

So “what’s happening in the banking crisis today is that debts grow faster than the economy can pay. And so when the interest rates finally began to be raised by the Federal Reserve, this caused a crisis for the banks.”

Prof. Hudson also proposes an expanded formulation: “The emergence of financial and landholding oligarchies made debt peonage and bondage permanent, supported by a pro-creditor legal and social philosophy that distinguishes Western civilization from what went before. Today it would be called neoliberalism.”

Then he sets out to explain, in excruciating detail, how this state of affairs was solidified in Antiquity in the course of over 5 centuries. One can hear the contemporary echoes of “violent suppression of popular revolts” and “targeted assassination of leaders” seeking to cancel debts and “redistribute land to smallholders who have lost it to large landowners”.

The verdict is merciless: “What impoverished the population of the Roman Empire” bequeathed a “creditor-based body of legal principles to the modern world”.

Predatory oligarchies and “Oriental Despotism”

Prof Hudson develops a devastating critique of the “social darwinist philosophy of economic determinism”: a “self-congratulatory perspective” has led to “today’s institutions of individualism and security of credit and property contracts (favoring creditor claims over debtors, and landlord rights over those of tenants) being traced back to classical antiquity as “positive evolutionary developments, moving civilization away from ‘Oriental Despotism’”.

All that is a myth. Reality was a completely different story, with Rome’s extremely predatory oligarchies waging “five centuries of war to deprive populations of liberty, blocking popular opposition to harsh pro-creditor laws and the monopolization of the land into latifundia estates”.

So Rome in fact behaved very much like a “failed state”, with “generals, governors, tax collectors, moneylenders and carpet beggars” squeezing out silver and gold “in the form of military loot, tribute and usury from Asia Minor, Greece and Egypt.” And yet this Roman wasteland approach has been lavishly depicted in the modern West as bringing a French-style mission civilisatrice to the barbarians – while carrying the proverbial white man’s burden.

Prof. Hudson shows how Greek and Roman economies actually “ended in austerity and collapsed after having privatized credit and land in the hands of rentier oligarchies”. Does that ring a – contemporary – bell?

Arguably the central nexus of his argument is here:

“Rome’s law of contracts established the fundamental principle of Western legal philosophy giving creditor claims priority over the property of debtors – euphemized today as ‘security of property rights’. Public expenditure on social welfare was minimized – what today’s political ideology calls leaving matters to ‘the market’. It was a market that kept citizens of Rome and its Empire dependent for basic needs on wealthy patrons and moneylenders – and for bread and circuses, on the public dole and on games paid for by political candidates, who often themselves borrowed from wealthy oligarchs to finance their campaigns.”

Any similarity with the current system led by the Hegemon is not mere coincidence. Hudson: “These pro-rentier ideas, policies and principles are those that today’s Westernized world is following. That is what makes Roman history so relevant to today’s economies suffering similar economic and political strains.”

Prof. Hudson reminds us that Rome’s own historians – Livy, Sallust, Appian, Plutarch, Dionysius of Halicarnassus, among others – “emphasized the subjugation of citizens to debt bondage”. Even the Delphic Oracle in Greece, as well as poets and philosophers, warned against creditor greed. Socrates and the Stoics warned that “wealth addiction and its money-love was the major threat to social harmony and hence to society.”

And that brings us to how this criticism was completely expunged from Western historiography. “Very few classicists”, Hudson notes, follow Rome’s own historians describing how these debt struggles and land grabs were “mainly responsible for the Republic’s Decline and Fall.”

Hudson also reminds us that the barbarians were always at the gate of the Empire: Rome, in fact, was “weakened from within”, by “century after century of oligarchic excess.”

So this is the lesson we should all draw from Greece and Rome: creditor oligarchies “seek to monopolize income and land in predatory ways and bring prosperity and growth to a halt.” Plutarch was already into it: “The greed of creditors brings neither enjoyment nor profit to them, and ruins those whom they wrong. They do not till the fields which they take from their debtors, nor do they live in their houses after evicting them.”

Beware of pleonexia

It would be impossible to fully examine so many precious as jade offerings constantly enriching the main narrative. Here are just a few nuggets (And there will be more: Prof. Hudson told me, “I’m working on the sequel now, picking up with the Crusades.”)

Prof. Hudson reminds us how money matters, debt and interest came to the Aegean and Mediterranean from West Asia, by traders from Syria and the Levant, around 8th century B.C. But “with no tradition of debt cancellation and land redistribution to restrain personal wealth seeking, Greek and Italian chieftains, warlords and what some classicists have called mafiosi [ by the way, Northern European scholars, not Italians) imposed absentee land ownership over dependent labor.”

This economic polarization kept constantly worsening. Solon did cancel debts in Athens in the late 6th century – but there was no land redistribution. Athens’ monetary reserves came mainly from silver mines – which built the navy that defeated the Persians at Salamis. Pericles may have boosted democracy, but the eventful defeat facing Sparta in the Peloponnesian War (431-404 B.C.) opened the gates to a heavy debt-addicted oligarchy.

All of us who studied Plato and Aristotle in college may remember how they framed the whole problem in the context of pleonexia (“wealth addiction”) – which inevitably leads to predatory and “socially injurious” practices. In Plato’s Republic, Socrates proposes that only non-wealthy managers should be appointed to govern society – so they would not be hostages of hubris and greed.

The problem with Rome is that no written narratives survived. The standard stories were written only after the Republic had collapsed. The Second Punic War against Carthage (218-201 B.C.) is particularly intriguing, considering its contemporary Pentagon overtones: Prof. Hudson reminds us how military contractors engaged in large-scale fraud and fiercely blocked the Senate from prosecuting them.

Prof. Hudson shows how that “also became an occasion for endowing the wealthiest families with public land when the Rome state treated their ostensibly patriotic donations of jewelry and money to aid the war effort as retroactive public debts subject to repayment”.

After Rome defeated Carthage, the glitzy set wanted their money back. But the only asset left to the state was land in Campania, south of Rome. The wealthy families lobbied the Senate and gobbled up the whole lot.

With Caesar, that was the last chance for the working classes to get a fair deal. In the first half of the 1st century B.C. he did sponsor a bankruptcy law, writing down debts. But there was no widespread debt cancellation. Caesar being so moderate did not prevent the Senate oligarchs from whacking him, “fearing that he might use his popularity to ‘seek kingship’” and go for way more popular reforms.

After Octavian’s triumph and his designation by the Senate as Princeps and Augustus in 27 B.C., the Senate became just a ceremonial elite. Prof Hudson summarizes it in one sentence: “The Western Empire fell apart when there was no more land for the taking and no more monetary bullion to loot.” Once again, one should feel free to draw parallels with the current plight of the Hegemon.

Time to “uplift all labor”

In one of our immensely engaging email exchanges, Prof. Hudson remarked how he “immediately had a thought” on a parallel to 1848. I wrote in the Russian business paper Vedomosti: “After all, that turned out to be a limited bourgeois revolution. It was against the rentier landlord class and bankers – but was as yet a far cry from being pro-labor. The great revolutionary act of industrial capitalism was indeed to free economies from the feudal legacy of absentee landlordship and predatory banking — but it too fell back as the rentier classes made a comeback under finance capitalism.”

And that brings us to what he considers “the great test for today’s split”: “Whether it is merely for countries to free themselves from US/NATO control of their natural resources and infrastructure — which can be done by taxing natural-resource rent (thereby taxing away the capital flight by foreign investors who have privatized their natural resources). The great test will be whether countries in the new Global Majority will seek to uplift all labor, as China’s socialism is aiming to do.”

It’s no wonder “socialism with Chinese characteristics” spooks the Hegemon creditor oligarchy to the point they are even risking a Hot War. What’s certain is that the road to Sovereignty, across the Global South, will have to be revolutionary: “Independence from U.S. control is the Westphalian reforms of 1648 — the doctrine of non-interference in the affairs of other states. A rent tax is a key element of independence — the 1848 tax reforms. How soon will the modern 1917 take place?”

Let Plato and Aristotle weigh in: as soon as humanly possible.

The Impending Economic Collapse – A Cause of Current Conflict

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By Phil Butler

Source: New Eastern Outlook

Brazil’s Luiz Inacio Lula da Silva has called on BRICS nations to create an alternative to replace the dollar in foreign trade. Other experts suggest President Joe Biden’s policies will destroy America’s middle class for good. The news comes when China and Russia strengthen ties with Brazil and Latin America. Brazil’s leader questioned the institution of the U.S. dollar as the world’s trade currency in the first place and asked why each country could not trade in its currency.

This brings to the forefront the historical moment when the gold standard was abolished in favor of the current system. When President Richard Nixon moved to abolish the gold standard as a commitment mechanism, his administration ushered in decades of relative volatility and made hard currency.

The exchange of gold was severely curtailed through the Bretton Woods international monetary agreement of 1944. When the International Monetary Fund was established, the U.S. Dollar became the most potent currency in the world. Initially, the role of the IMF was only to assist with international transactions, but as we see today, that institution has far overstepped its original purpose. Today, the IMF is a leverage arm for the United States and a few European nations to fund countries/regimes that align with its policy. The U.S., for instance, has an almost 20% share of contributions to the fund.

The primary purpose of remaining off the gold standard is that the government can print money endlessly, with two primary goals. First, a massive defense budget and needless proxy wars would not be possible if the United States were on the gold standard. Secondly, the people who control the central banks cannot extract interest on national debts that are currently out of control. So, the fiat currency supposedly backed by the “full faith and credit” of the government, the dollar, is worth what lying politicians and finance ministers say it is.

One look at the worldwide bond market reveals a disturbing imbalance. The U.S., which now has over $51 trillion in outstanding debt, has borrowed more to finance wars and programs than China, Japan, Germany, Italy, France, the U.K., and Canada combined. The American taxpayer is responsible for almost 40% of all the foreign debt in the world. And the outlook for the short and long-term future could be better.

President Joe Biden wants to borrow even more when his administration conducts a proxy war against Russia in Ukraine. With billions flowing into Europe’s most corrupt country, Americans are on the precipice of an economic catastrophe not seen since the Great Depression.

According to the Bipartisan Policy Center in Washington and the Congressional Budget Office, the government will no longer be able to pay everyone — including bondholders, Social Security recipients, and federal employees — sometime this summer or early this fall. A New York Times report from late March outlines the situation. But the problem is far worse than many experts suggest. No matter which way lawmakers move, the U.S. has almost insurmountable fiscal issues. The ramifications will be dire whether or not they raise the debt limit. And if the BRICS countries go off the dollar as a trade currency… Well.

Many experts predict that American greenbacks won’t be worth the printed paper if the world stops using the U.S. dollar as its world currency reserve. Moreover, if the dollar loses its value significantly, every American who owes a credit card loan or a home mortgage will find it ten times harder to pay off those debts.

To make matters worse, millions of jobs will be sacrificed for the Federal Reserve to get any financial stability. Analysis from RSM International shows that the central banks must “induce” a recession to get America’s economic situation in check. And the dollar being made useless by the larger world community was not a factor in their analysis.

The bottom line is if we were still on the gold standard, this would be fine. The gold standard reduced the risks of such economic crises and recessions. Income levels were higher when we were on the bullion-backed system. More importantly, the gold standard created hard limits on printing money and limiting military spending. For more intuition on this, this Barron’s report reveals how our current failing system came into being. The information also serves as a crystal ball for what will happen.

As confidence in the dollar wanes and U.S. policy overseas gets more aggressive toward BRICS nations and others, the tipping point of the American hegemony draws closer.