This Gold Slam Is A Massive Wealth Transfer From Our Pockets To The Banks [View article]
The only problem I have with fractional reserve banking is that the government sticks a gun to my head to force me to bail out those who are too reckless with their leverage while at the same time the central bank debases the currency I'm forced to use to benefit the same parties.
This Gold Slam Is A Massive Wealth Transfer From Our Pockets To The Banks [View article]
Opening an account at Vanguard is exactly what most savers do. Then they throw money into various funds each paycheck, and hope.
My point is that this is not the right way to invest or trade it today's manipulated markets. For instance, bond prices are at multigenerational highs. Do you think that's stopping savers from investing in bond mutual funds? What do you think will happen when interest rates inevitably rise?
Too tough for these unsophisticated savers, you'll say. They should've investigated what they were buying before they bought.
True, but what's more true is that they should've been able to get an honest, positive interest rate in a bank CD, because they're unsophisticated savers, not investors or speculators.
When a society represses it's savers, the outcome can't be good.
This Gold Slam Is A Massive Wealth Transfer From Our Pockets To The Banks [View article]
Thx.
Folks here need to remember that the vast majority of market participants are savers, not speculators or even investors. They're just regular folks going about their daily lives, working, raising their kids and trying to sock away a little bit for college or retirement.
These savers might refer to themselves as investors but few do the research necessary to justify the term. Few have the time. These savers are in the market because they're just savvy enough to understand that saving in a bank today provides a negative return.
To those proud of themselves for being on the right side of this clearly manipulated gold smack down - consider who is on the other side. Sure, there are annoying conspiracy theory goldbugs, but there are also grandmas and blue collar brother-in-laws just trying to protect their wealth.
In a functioning free market system, these savers provide much of the nation's capital. In today's manipulated markets, these savers are increasingly terrified. There is clearly no safe place to save.
I don't know what the consequences of all of this manipulation will be, but I do know that it can't be good.
This Gold Slam Is A Massive Wealth Transfer From Our Pockets To The Banks [View article]
Banks want to suppress the price of gold because it is a barometer of the strength of fiat. Banks make money primarily by being the beneficiaries of the fractional reserve fiat money system.
This Gold Slam Is A Massive Wealth Transfer From Our Pockets To The Banks [View article]
In today's US markets nothing is a store of value. Nothing.
When massive leverage can be used to manipulate any market without consequence, the saver using markets to protect wealth is helpless.
Savers are left to speculate, not on what might or might not be a good business or buy based on fundamentals, but on what the market manipulators might target next. Avoidance from getting fleeced is what is driving the aware saver today.
These fundamental truths are going to destroy this country unless they change. Unless people wake up to the importance to a growing economy of allowing people to safely save.
Chart of the Day: America's Small Tax Revenues [View article]
Bad link.
The problem isn't just revenue. Granted, Americans don't want to pay for the level of government they want, but during the boom, the government became bloated on easy credit, just as many corporations and individuals did. That's the nature of a boom.
We're now in a debt deflation and the bloated government needs to contact just as do underwater homeowners and TBTF banksters.
Chart of the Day: America's Small Tax Revenues [View article]
"This raises two questions. The first is why America’s taxes are so much lower than anybody else’s. Its system of government, after all, is a pretty standard democracy, so it’s not exactly baked in to the Constitution. The second question is why Americans don’t actually appreciate how low taxes are here."
Pretty simple, isn't it? Dollar = reserve currency = abnormally low interest rates on US government debt = reduced appreciation for the cost of debt among US taxpayers = no perceived need to raise taxes (or ACTUALLY reduce spending.)
In other words, we don't feel the pain because we're anesthetized.
This D vs R business is nonsense, as is blaming the politicians for this mess. Both parties like to spend, though the R's want to spend just a little less, and neither likes to raise taxes, though the D's don't mind asking a bit more of "the rich".
The truth is, the politicians of both stripes simply reflect what the voters want, and the voters don't want higher taxes but they do want their various goodies from the government. The collective "we" have exactly the government "we" asked for, "we" just don't want to pay for it.
The ONLY way deficit spending will ever stop is when those funding the deficit force it by demanding higher interest rates, or, in the event that the fed continues to monetize to keep interest rates low, confidence in the fiat dollar is eventually lost.
The Confidence Trick of Fiat Currency [View article]
Bluesky,
I respect your point of view. It is close to what mine was, pre 2008.
I stand partially corrected on the Dubya quote. He used the term "free market", not "capitalism", and was speaking not specifically of TARP, but more generally, of the range of extraordinary actions taken by his administration in the fall of 2008. But I'll ask you - is my interpretation so wrong? Here's a video. The quote is at the 1:40 mark.
WRT your suggestion that the gold standard was not perfect, I completely agree. But all that really matters, if we are considering rather or not to return to it, is whether it was superior to the current fiat system. I maintain that, with all it's faults and blemishes, it was far superior than the current system.
Gold restrains unsustainable credit expansion in ways that fiat does not. Yes, it does inhibit government expansion, and I suppose whether you consider that a good thing or a bad depends on your view of the role of government in society. Personally, I believe that government is too large, and much too aggressive, and that the fact that fiat allows governments to wage war more easily than gold is a plus for gold, not fiat.
WRT your observation that, were it not for actions taken by the Fed and treasury in 2008 that there would have been a global meltdown, I partially agree. Indeed, there would have been failures, and they would have been substantial, but of a "global meltdown" I am not convinced. But I have to ask you this. Are you defending the idea that banks, insurance companies, and large businesses that take great risks in pursuit of enormous profit should always be bailed out by government? Because that's where we are! The moral hazard created by the actions of the Fed and treasury are real. Our largest banks and who knows how many other large corporations now operate with the understanding that they will be protected from failure, regardless of their level of risk taking. This, I maintain, is a serious problem. And this problem only exists because of fiat currency, because the bailouts would not have occurred but for the existence of the fiat dollar. There would have been failures, but there should have been, and would have been in a system of commodity money.
But regardless of one's position on the bailouts, of greatest importance is to understand that the 2008 financial crisis was a direct result of our fiat monetary system. The bailouts would not even be at issue were it not for the crisis in the first place! And the crisis was born of an over extension of credit, a condition make possible, indeed a bubble blown to epic proportions, by the fiat monetary system.
Finally, in answer to your last question, I don't claim to know what should replace the fiat system. I suspect that a gold standard would be superior, but all I claim to know for a fact is that the fiat system is fundamentally flawed. But, rather than picking something to install as a new (or old) system in place of the current one, I say, let's allow the market to decide! We can easily determine the market preference by repealing the legal tender laws and capital gains taxes. The market would then freely choose the best money, or monies.
The Confidence Trick of Fiat Currency [View article]
Prior to 2008 I believed, like Keynes and Friedman, that the fiat monetary system could be expertly managed by monetary authorities, and done so fairly. My confidence was misplaced. I now understand that the fiat monetary system itself is fundamentally flawed.
In 2008, responding to critics of TARP, Dubya said that he had to abandon capitalism in order to save it. But what has now become plainly obvious is that he was saving a financial system that provides for, as the author puts it, "the few who can line their pockets at the expense of the life, liberty and prosperity of the greater many."
How did this system evolve, and how was it able to be saved? Fiat money. In fact, the entire world is now dealing with the fundamental failure of our fiat monetary systems. The debt ceiling debate here, the Euro problems, the Chinese inflation, and even the middle east uprisings, are all symptoms of fiat monetary system failings. The 2008 financial crisis itself was merely a symptom of monetary system failure.
Fiat money allows us to fool ourselves into thinking that we can have more now than we can ever actually pay for. Combined with fractional reserve banking it allows the expansion of credit well beyond levels that are sustainable. It is from this fundamentally flawed system that the financial crisis itself was born.
Sure, TARP, TALF and all of the other actions taken by governments and central banks to save the system were possible only because we have a fiat monetary system. But what was saved, and at what cost?
What was saved was our crony capitalist system that rewards those who know how to play the game. The cost is being born by the many, which includes salt of the earth financially unsophisticated folks like my father-in-law, who toiled in a factory for forty years, provided for his family, and squirreled away a small nest egg that is now being essentially slowly stolen from him via the monetary inflation that was created to save the crony system.
But hey, maybe he and Mom can avoid having to eat cat food to survive since they do have Social Security. Of course, that check will be buying less and less, thanks to the CPI adjustment in the debt ceiling deal that will be passed shortly. That'd be the same debt ceiling deal that is simply the aftermath of the actions that were necessary to save the system in the first place.
The bottom line is that humans aren't capable of managing a fiat monetary system expertly and fairly. Humans need the constraints placed on us by commodity money.
As much as we'd like to think we're smart enough and good enough to handle fiat money, we're not.
The Confidence Trick of Fiat Currency [View article]
That's my point. Measuring fiat against fiat merely measures how one currency was managed versus, in this case, a basket of other currencies.
In the context of the author's original perceptions, measuring fiat against fiat is in large part just a measure of how successful one confidence trick has been versus another.
The Confidence Trick of Fiat Currency [View article]
What's so wrong with declining prices? Would you rather spend $2,500 on 64K PCs, like we did back in the 80's, or $600 on far superior products?
Wouldn't declining prices spur saving? Doesn't an increase in saving lead to an increase in capital? Doesn't increased capital tend to lead to an increase in productive capacity? Doesn't increased production make improve human lives?
Gold: The Fear Bubble Bursts [View article]
More likely they'll stay out of the market altogether.
This Gold Slam Is A Massive Wealth Transfer From Our Pockets To The Banks [View article]
This Gold Slam Is A Massive Wealth Transfer From Our Pockets To The Banks [View article]
My point is that this is not the right way to invest or trade it today's manipulated markets. For instance, bond prices are at multigenerational highs. Do you think that's stopping savers from investing in bond mutual funds? What do you think will happen when interest rates inevitably rise?
Too tough for these unsophisticated savers, you'll say. They should've investigated what they were buying before they bought.
True, but what's more true is that they should've been able to get an honest, positive interest rate in a bank CD, because they're unsophisticated savers, not investors or speculators.
When a society represses it's savers, the outcome can't be good.
This Gold Slam Is A Massive Wealth Transfer From Our Pockets To The Banks [View article]
Folks here need to remember that the vast majority of market participants are savers, not speculators or even investors. They're just regular folks going about their daily lives, working, raising their kids and trying to sock away a little bit for college or retirement.
These savers might refer to themselves as investors but few do the research necessary to justify the term. Few have the time.
These savers are in the market because they're just savvy enough to understand that saving in a bank today provides a negative return.
To those proud of themselves for being on the right side of this clearly manipulated gold smack down - consider who is on the other side. Sure, there are annoying conspiracy theory goldbugs, but there are also grandmas and blue collar brother-in-laws just trying to protect their wealth.
In a functioning free market system, these savers provide much of the nation's capital. In today's manipulated markets, these savers are increasingly terrified. There is clearly no safe place to save.
I don't know what the consequences of all of this manipulation will be, but I do know that it can't be good.
This Gold Slam Is A Massive Wealth Transfer From Our Pockets To The Banks [View article]
This Gold Slam Is A Massive Wealth Transfer From Our Pockets To The Banks [View article]
When massive leverage can be used to manipulate any market without consequence, the saver using markets to protect wealth is helpless.
Savers are left to speculate, not on what might or might not be a good business or buy based on fundamentals, but on what the market manipulators might target next. Avoidance from getting fleeced is what is driving the aware saver today.
These fundamental truths are going to destroy this country unless they change. Unless people wake up to the importance to a growing economy of allowing people to safely save.
BERNANKE PLEDGES TO SCREW YOUR GRANDMOTHER FOR AT LEAST TWO MORE YEARS [View instapost]
The systematic raping of financially unsophisticated savers and helpless retirees on fixed incomes infuriates me too.
Chart of the Day: America's Small Tax Revenues [View article]
The problem isn't just revenue. Granted, Americans don't want to pay for the level of government they want, but during the boom, the government became bloated on easy credit, just as many corporations and individuals did. That's the nature of a boom.
We're now in a debt deflation and the bloated government needs to contact just as do underwater homeowners and TBTF banksters.
Chart of the Day: America's Small Tax Revenues [View article]
Pretty simple, isn't it? Dollar = reserve currency = abnormally low interest rates on US government debt = reduced appreciation for the cost of debt among US taxpayers = no perceived need to raise taxes (or ACTUALLY reduce spending.)
In other words, we don't feel the pain because we're anesthetized.
How We Got Into This Fine Mess [View article]
The truth is, the politicians of both stripes simply reflect what the voters want, and the voters don't want higher taxes but they do want their various goodies from the government. The collective "we" have exactly the government "we" asked for, "we" just don't want to pay for it.
The ONLY way deficit spending will ever stop is when those funding the deficit force it by demanding higher interest rates, or, in the event that the fed continues to monetize to keep interest rates low, confidence in the fiat dollar is eventually lost.
The Confidence Trick of Fiat Currency [View article]
I respect your point of view. It is close to what mine was, pre 2008.
I stand partially corrected on the Dubya quote. He used the term "free market", not "capitalism", and was speaking not specifically of TARP, but more generally, of the range of extraordinary actions taken by his administration in the fall of 2008. But I'll ask you - is my interpretation so wrong? Here's a video. The quote is at the 1:40 mark.
tv.breitbart.com/bush-.../
WRT your suggestion that the gold standard was not perfect, I completely agree. But all that really matters, if we are considering rather or not to return to it, is whether it was superior to the current fiat system. I maintain that, with all it's faults and blemishes, it was far superior than the current system.
Gold restrains unsustainable credit expansion in ways that fiat does not. Yes, it does inhibit government expansion, and I suppose whether you consider that a good thing or a bad depends on your view of the role of government in society. Personally, I believe that government is too large, and much too aggressive, and that the fact that fiat allows governments to wage war more easily than gold is a plus for gold, not fiat.
WRT your observation that, were it not for actions taken by the Fed and treasury in 2008 that there would have been a global meltdown, I partially agree. Indeed, there would have been failures, and they would have been substantial, but of a "global meltdown" I am not convinced. But I have to ask you this. Are you defending the idea that banks, insurance companies, and large businesses that take great risks in pursuit of enormous profit should always be bailed out by government? Because that's where we are! The moral hazard created by the actions of the Fed and treasury are real. Our largest banks and who knows how many other large corporations now operate with the understanding that they will be protected from failure, regardless of their level of risk taking. This, I maintain, is a serious problem. And this problem only exists because of fiat currency, because the bailouts would not have occurred but for the existence of the fiat dollar. There would have been failures, but there should have been, and would have been in a system of commodity money.
But regardless of one's position on the bailouts, of greatest importance is to understand that the 2008 financial crisis was a direct result of our fiat monetary system. The bailouts would not even be at issue were it not for the crisis in the first place! And the crisis was born of an over extension of credit, a condition make possible, indeed a bubble blown to epic proportions, by the fiat monetary system.
Finally, in answer to your last question, I don't claim to know what should replace the fiat system. I suspect that a gold standard would be superior, but all I claim to know for a fact is that the fiat system is fundamentally flawed. But, rather than picking something to install as a new (or old) system in place of the current one, I say, let's allow the market to decide! We can easily determine the market preference by repealing the legal tender laws and capital gains taxes. The market would then freely choose the best money, or monies.
The Confidence Trick of Fiat Currency [View article]
In 2008, responding to critics of TARP, Dubya said that he had to abandon capitalism in order to save it. But what has now become plainly obvious is that he was saving a financial system that provides for, as the author puts it, "the few who can line their pockets at the expense of the life, liberty and prosperity of the greater many."
How did this system evolve, and how was it able to be saved? Fiat money. In fact, the entire world is now dealing with the fundamental failure of our fiat monetary systems. The debt ceiling debate here, the Euro problems, the Chinese inflation, and even the middle east uprisings, are all symptoms of fiat monetary system failings. The 2008 financial crisis itself was merely a symptom of monetary system failure.
Fiat money allows us to fool ourselves into thinking that we can have more now than we can ever actually pay for. Combined with fractional reserve banking it allows the expansion of credit well beyond levels that are sustainable. It is from this fundamentally flawed system that the financial crisis itself was born.
Sure, TARP, TALF and all of the other actions taken by governments and central banks to save the system were possible only because we have a fiat monetary system. But what was saved, and at what cost?
What was saved was our crony capitalist system that rewards those who know how to play the game. The cost is being born by the many, which includes salt of the earth financially unsophisticated folks like my father-in-law, who toiled in a factory for forty years, provided for his family, and squirreled away a small nest egg that is now being essentially slowly stolen from him via the monetary inflation that was created to save the crony system.
But hey, maybe he and Mom can avoid having to eat cat food to survive since they do have Social Security. Of course, that check will be buying less and less, thanks to the CPI adjustment in the debt ceiling deal that will be passed shortly. That'd be the same debt ceiling deal that is simply the aftermath of the actions that were necessary to save the system in the first place.
The bottom line is that humans aren't capable of managing a fiat monetary system expertly and fairly. Humans need the constraints placed on us by commodity money.
As much as we'd like to think we're smart enough and good enough to handle fiat money, we're not.
The Confidence Trick of Fiat Currency [View article]
In the context of the author's original perceptions, measuring fiat against fiat is in large part just a measure of how successful one confidence trick has been versus another.
The Confidence Trick of Fiat Currency [View article]
Despite our debt problems, there is still a world-wide confidence that our government will make good on it's debt obligations.
But... is the emperor wearing clothes?
The Confidence Trick of Fiat Currency [View article]
Wouldn't declining prices spur saving? Doesn't an increase in saving lead to an increase in capital? Doesn't increased capital tend to lead to an increase in productive capacity? Doesn't increased production make improve human lives?