"Pay what you owe and you'll know what you own."
~Benj. Franklin

Seeking Answers in an Upside Down World.

Established - 1994

(Caveat Emptor)

News and opinion from all over the political universe. 

Much of it to be taken with several grains of salt.

April 17th, 2021

The Editor

      "Will the new commander-in-chief deter America’s enemies Iran and North Korea—and keep China and Russia from absorbing their neighbors? Joe Biden, and those around him, seem determined to upset the peace they inherited."
                            ~Victor Davis Hansen

There's no question about itEisenhower was right when he warned about the military-industrial complex.  The winds of WAR have begun to stir.  The United States is looking for a way out of its economic dilemma and resorting to a wartime social footing might help  - as it did in the early 1940s.  The economy had slipped back into depression territory in the last of the '30s and World War II changed everything.  We remember well the tenor of the times...the victory gardens, gas rationing, food rationing, constant bond sales (borrowing) in which the acculmuated federal government  debt rose from $43 billion in 1940 to  nearly $259 billion by war's end.  Factories hummed, producing war materiel, and unemployment plummeted as young Americans were drafted into the military. 

              Subsequent wars, such as South Korea, Iraq, Viet Nam, Afghanistan, et al, did not have the same feeling as WW2 because government had llearned how to pay for civilian social programs and war costs by debauching the currency. (Inflation.) 

               Victor Davis Hansen examines the possibility of war as a solution to our present problems:  HOW TO START A WAR

Another take on GOLD VS. BITCOIN
     Alisdair Macleod is also following the gold versus bitcoin debate: 

    "A reminder why there will always will be sound money and why bitcoin cannot fill that role.

          "With bitcoin’s price still rising and expected to rise even more, there has been a growing belief in cryptocurrency circles that it will replace unbacked government currencies when they eventually fail.

       "The assumptions behind this conclusion are naïve, exposing hardly any knowledge in what qualities are needed for sound money. This article agrees that current events are accelerating the path towards fiat destruction, and that historical precedents point to their eventual replacement with a sounder form of money. But what that money will be is decided when governments lose control over their fiat; and the public, its users, through free markets will set the monetary agenda."  FUTURE MONEY

       Mr. Macleod writes at length on this stubject, but the thoroughness and detail of his afticle are worth the time of the casual reader who is developing curiosity about future money.  What is "money" anyway?  Surely the government's fiat currency must fail as its supply is inflated beyond imagination.  Also, bitcoin and the other crypto fiat currencies have not been labeled a legal tender by governments.  They are primarily a speculative investment by the rich.  Macleod argues in favor of the sound money of the U.S. Constitution.

U.S. Propaganda
    Anybody notice how confusing life has become?  It's like people of all points of view have megaphones and are screaming at us through them.  And as if that weren't enough fraudsters gang up on us via our telephones and email.  How do we consumers sort out the truth amid the din? 

    For example:  The official line today is that price inflation (CPI) is running at 1.7 percent on an annual basis.  Yet a quick tour of the grocery aisles will show that prices are rising at a faster rate than that - anywhere from 4 to 8 percent. The Federal Reserve is comfortable with its policies concerning the Consumer Price Index and vows to hold interest rates low or at zero until general prices rise at a more rapid rate.  This is a disaster for retirees whose life savings earn next to nothing. It's not unusual to hear that retirees sometimes "outlive their resources." 

     We borrowed a Federal Reserve graph from blogger Charles Hugh Smith to demonstrate the more than 70 years track of one of the several financial episodes it follows.  The graph is the Fed's...the notations are Mr. Smith's. 

    We and the Missus were married in 1948,  about the zero mark in the above graph.  We have experienced 11 official periods of recession and are now entering our 12th. 
The graph shows the astonishing increase in margin accounts at financial brokers and dealers.  Buying financial assets on margin can be profitable as long as the economy expands, but once a bubble is created, and bursts, paying off the debt margins can lead to ruin. 

       The propagandists are not interested in the facts....just their version of "justice".  They seem to be on the fast track right now.

   "George Floyd died in police custody after a corner store clerk reported he had used a fake $20 bill, a nonviolent offense so low-level that police don't usually take people to jail for it. Now, as the trial over his death continues to unfold, criminal justice reform experts and diversity specialists are hoping the case will prompt retailers—from small businesses to major chains—to reassess how they treat Black and other minority customers and how they can handle loss prevention cases more equitably. Retailers, they point out, are on the front lines of racial justice in their own stores."  ~Minneapolis Star Tribune

              How times change!  When this country was young the penalty for passing counterfeit money was death.  Now the social "experts" regard passimg counterfeit currency to be a "non-violent offense so  low-level that police don't usually take people to jail"  for attempting to cheat merchants with a fake $20.00 note. 

               In other words, it's OK to forgive stealing if the offendfing customer is thought to be among the "deserving poor."  

                But who, exactly, makes these legal distinctions?  And is it fair?
< Whatever happened to the old rule declaring we are all equal under the law? When, for example, did the national counterfeit currency laws  become modified to state that  "racial justice" should be practiced by merchants when they are offered a fake piece of paper currency? 

   Trying to pass counterfeit bills is flat-out theft and store clerks could personally be held liable if they spot obvious counterfeit currency and fail to report it.

           *  *  *  *  *  *  *   *  *

    In all the current talk of multi-trillion-dollar public debt you will rarely find a headline quoting a quadrillion dollar figure.

       Writing from Switzerland Egon von Greyerz examines the fall of Archegos, the financial firm whose decline has made headlines lately. This article may help readers understand the certain danger that playing in the derivatives market can produce. Von Greyerz reminds us that derivatives are not the ASSET. They merely derive their value from the asset.

"Trillion Here. . .a Trillion There."

      "During 2020, the federal government provided a total of $3.2 trillion of Covid relief, starting with a mere $8.3 billion, then adding $104 billion, then adding $2.2 trillion, and finishing off the year with another $900 billion.

     "We’re now three months into 2021, and the federal government has provided yet another $1.9 trillion in Covid relief; and, the Biden administration has just asked for $2 trillion for infrastructure." 

      Clifford Theis, economist with the American Institute of Economic Research is reminded of the late Sen. Everett Dirkson, a long-serving Minority Leader of the Republicans in the U.S. Senate,  famously quoted as saying a billion here, a billion there, and soon we’re talking real money. That was back in 1969. At the time, a billion dollars was about one-tenth of 1 percent of GDP.  And, to make it clear to the average reader, we add that $1 billion is 1,000 million dollars.  It takes 1,000 billion to equal $1 trillion. 

          Mr. Theis does a good job of explaining the immensity of the impact of continuous monetary inflation since Mr. Dirkson's "a billion here" remark of more more than a half century ago:   A TRILLION HERE...A TRILLION THERE

U.S. debt now exceeds the gross domestic product for the first time since World War II.
Conservative writer Pat Buchanan thinks President Biden wants to emulate FDR and LBJ.

   The truth is most Americans are content to trust the federal and state governments for their financial aupport if the economic going gets difficult. That's why the voting majority chose the Sanders-Warren "New Deal" government expansion  presently being promoted by Mr. Biden and Vice President Harris.

     The $1.9 billion stimulus bill was quite easily passed by Congress.  The politicos are now being asked to approve $2.3 trillion to "improve infrastructure" and pay for several other big-ticket programs.  Folks, that's $4.2 trillion - most which has to be borrowed into existance  and paid for, we are told, by an increase in corporate taxes and even A nationwide Value Added Tax (VAT). 

      Mr. Biden's plan calls for a heap of new spending, such as 300,000 million dollars to care for the elderly and disabled.  Another 621,000 million dollars would pay for surace transportation. It's a long listwhich  appears to be generating some headwind from the GOP members as well as some Democrats. 

     But here's Pat Buchanan's take on the subject: "REMAKING AMERICA


<We worry about debt - -
...but most of us don't have the words to describe it.
J. Howard Kunstler has the words. 
    "Debt only works in the youthful growth phases of economic pulsation, when the prospect of being paid back is statistically favorable. Now in the elder de-growth phase, the prospect of paying back debts, or even servicing the interest, is statistically dismal. The amount of racked-up debt worldwide has entered the realm of the laughable. So, the roughly twenty-year experiment in Central Bank credit magic, as a replacement for true capital formation, has come to its grievous end."  DO YOU BELIEVE IN MAGIC?

. . .but if the electricity fails how about WAMPUM? 

     The late newsletter publisher, Vern Myers, predicted a sharp deflation 40 years ago - but he failed to realize the government could and would resort to extremes of currency creation, aided and abetted by the growing use of electronic digital data transfers.  As long as the world demands U.S. dollars for trading purposes, and overlooks the fact that modern dollars are little more than IOUs, price inflation will reign. But the day will come when reality will prevail and the people will demand a more trustworthy currency than now circulates as "money".

      They should consider wampumpeag.  Also known as warmpum or peag.  It was an actual circulating currency among Native Americans who lived along Long Island Sound.  The carefully tooled and polished beads were also prized as a kind of jewelry arranged in a decorative way on belts.  they came in two colors, black and white.  The white ones were made of the ends of periwinkle shells while the black ones were made out of the black part of a clam shell.  The finished black peag (wampum) were twice as valuable as the white ones.  The beads were used as money by the natives and were adopted by colonists as a barter currency to augment foriegn coin, which was in short supply.

     Alas, the clever colonists ruined wampum as a medium of exchange by introducing high tech into their manufacture.  By the use of modern machines they were able to create wampum faster and in greater quantity than the native artisans.  The result, of course, was wampum inflation.  The Europeans never understood that it was SCARCITY that gave wampum their purchasing power. 

Were you around in the 1970s?
For a time price inflation roared in double digits.
    To put the brakes on rapidly rising prices the interest rates rose sharply. That cooled the borrowing that fueled the inflation and by the time Ronald Reagan got into office the inflation monster peaked at 13.5 percent. By 1986 Fed Chairman Paul Volcker's tough interest policy had driven the inflation rate down to 1.9 percent! An annual CPI like that everyone agreed they could live with. 

    Don't look now, but inflation is rearing its ugly potential for double digits once more. It has been relatively tame since we and the Misses were married in 1948.  In fact, the CPI dipped slightly into negative terriory only twice in the 73 years since...1949 and 1953. But it is accurate to say we have lived most of our lives in the age of inflation.

    The Federal Reserve is doing its level best to keep inflation advancing at theannual rate of 2 percent or so. The national government is frantically borrowing vast sums of cash in exchange for its bonds and other IOUs. The administration now talks of imposing taxes to help pay for the borrowing, but the spend and tax approach has never been partiularly popular with Americans.

    What are the chances of a DEFLATIONARY episode? 

                 Historical note: Prior to the Civil War the US got along with national debt of about $90 million (1862)  By 1867 the federal government was almost $3 billion in debt. It stayed under $2 billion from 1883 until 1917. By 1919 the debt had climbed to more than $25 billion! (War is costly.) These borrowed billions helped make the 192Os "roar." But the financial bubbles burst in the autumn of 1929 creating a wretched presidency for Herbert Hoover, who took office in March, 1929.

                        Franklin Roosevelt overwhelmed Hoover in the 1932 election, called in the people's gold in 1933 and promptly devalued the U.S. dollar in terms of gold - which Americans would not be allowed to possess again for more than forty years.  Borrowing continued to rise in the 1930s and the economic depression persisted. By the time the nation got into World War Two its annual deficit was nearly $50 billion.  But the borrowing went into overdrive when war dragged on. The federal debt had piled up to $259 billion by 1945...122.75 percent of GDP.

                        There were a few years in which the national government ran budget surpluses, but the debt pile grew until it reached $995 billion in 1981. Converted into millions that's 995 thousand million. Still quite a lot of money - - even today. 

                                  The debt pile began to be measured in trillions in 1982. By 1995 the accumulated debt was $4.9 trillion! 

      Politicians have chosen to ignore the debt accumlation. The Treasury Department says it is presently more than $28 trillion,  A Sword of Damocles swings over our heads and something ought to be done about it. But he main objective is to make voters happy....and voters have no wish to cough up the thousands of dollars per capita to pay down this towering national debt. The voting majority knows very well the politians will never ask them to pay back the debt. They'd be run out of office at the next election.

                         So - what happens? Can't the debt be declared null and void and just disappear? No - not without wrecking the lives of all those investors in the US and around the world who have invested in all those IOUs in the belief government will make good on its word to redeem them.