Fiat Currency Definition, Bubble, and why it is destined to fail?

Posted on January 27, 2021 by Martin Dorman

Fiat Currency: Instruments of Mass Destruction

We are entering a new paradigm; get used to forever QE, though it will be given other names along the journey to make it appear more palatable. The US and by default worldwide debt is set to soar to preposterous levels; if a national debt of almost $22 trillion is shocking to some; imagine how they will feel when the debt soars to $100 trillion. Market Update Feb 28, 2019

If you shook your head vigorously when you read the above statement, print it and put it somewhere, you can easily access and then review it a few years from today. You will be unpleasantly surprised to see how much the situation has changed; the masses are not paying any attention to the national debt.

Central bankers have become very adept at deflating a nation’s currency while maintaining the illusion all is well. This is achieved by subsidising key industries, using a basket of goods that (and the sectors these goods originate from are usually the one’s receiving massive subsidies) paint a false picture regarding inflation and most importantly, they control the media. Let’s briefly look at some of these subjects today.

The press and the crowd effect

Any student of history can spot a pattern that goes back to ancient times; the powers that be knew that the key to controlling the masses was to control the news outlets. In the old days that meant having control of the gossipers, as time passed on, the name gossiper was replaced with the term reporter. Today’s reporters are only concerned with the number of eyeballs they can attract to a given story; it does not help that the people that hire them also encourage this behaviour. The press is the most potent weapon available; it can destroy a person even if he is 100% innocent. Mass media’s sole function is to manipulate the masses; think about it mass media is not for the observer or for the critical thinker; it’s for cows who are begging to be led to the slaughterhouse, hence the term mass media. If you want to have a good idea of what is really going on; you will read several sources that are not widely referenced by the masses and then use that (collective) data to paint a picture.

Elias Canetti’s view on crowd behaviour is spot on:

It is only in a crowd that man can become free of this fear of being touched. That is the only situation in which the fear changes into its opposite. The crowd he needs is the dense crowd, in which body is pressed to body; a crowd, too, whose psychical constitution is also dense, or compact, so that he no longer notices who it is that presses against him. As soon as a man has surrendered himself to the crowd, he ceases to fear its touch.

That is the mass mindset for you, individuals feel great when they all share a common theme and a so-called common goal, but nature clearly states that everyone cannot win and that there has to be a loser or losers for every winner as it depends on how much the winner takes home. 10 losers might be needed to fund one big winner. Teamwork never pays off except for the person that is pushing the concept of teamwork. Misery loves company; how rare it is to find a group that is happily sharing positive stories; bragging does not constitute a positive development, in fact, it is usually a sign of mental instability.

Subsidising goods

The idea here is to keep critical products at prices that appear to be reasonable. If essential items become too expensive to purchase, the crowd will scream. However, if they have access to reasonably priced education via public schools and colleges, access to affordable food and other basic necessities, then one can create the illusion that inflation is not an issue. So when we state that inflation is a non-event, we are using the Fed’s distorted figures to make this point. In reality, inflation is a massive problem. Just look at the cost of housing, which includes buying or renting, one can easily see that inflation is an enormous problem. Another area is medicine; anyone with a brain can see that inflation in the medical sector is alive and thriving.

Getting the mass to believe old newspapers (your paper money) is real money

In this area, they have been incredibly successful; very few of today’s young generation even understands the concept of hard cash or what constitutes real money. They assume fiat is real and they are now embracing digital forms of fiat such as Bitcoin. This means that the central bankers are now in a position to inflate the money supply beyond the wildest dreams of their predecessors. There will be a day of reckoning but those waiting for that day will probably see their day of reckoning first. Until the masses start to doubt Fiat money, nothing will change; the masses are showing no signs of resisting Fiat. So no matter what the hard money expert’s spout, their knowledge is useless for nothing will happen until the masses reject Fiat. Just like the stock market is unlikely to crash until the Masses embrace this bull market.

Emotions govern everything, and if you can identify the emotion driving the masses, you can profit from almost any situation.

Central bankers have suddenly changed their chant

What is remarkable is the speed at which central bankers changed their tune and how equally fast and without question, the masses accepted this change.

Nobody is objecting to QE, 10 years ago, they made a big noise, but now the populace at large believes it is a necessity. Let’s start off with the quote we posted by Clarida in the last update, for it clearly tells us that the Fed is not going to stop supporting the stock market, but in fact, it will take even more drastic measures to help the markets in the future. Let the contents slowly sink in, and you will understand why Central bankers will not stop deflating the currency until the masses scream bloody murder and by then it will be too late.

Clarida acknowledged no doubts. He said that radical monetary policy has worked, that it will continue to work, and that it may well become more radical. He contended that low-interest rates are here to stay and that new policy “tools” must be sharpened and kept at the ready.

U.S. inflation forecasts decline, supporting rate-hike holiday

The survey of consumer expectations, published on Monday, is one of the Fed’s price gauges as it weighs the need for rate rises. It showed one- and three-year ahead inflation expectations were down 0.2 percentage points to 2.8 percent last month, with sharp declines in expected medical care expenses. Both the one- and three-year gauges had been roughly unchanged since April 2018.

Stable and low inflation is one of the main reasons that the U.S. central bank, having raised interest rates four times last year, is now taking a wait-and-see approach to any more tightening in 2019.

The New York Fed’s survey found that consumers expected tame inflation despite also forecasting their own wages would rise. Average one-year earnings growth expectations increased to 2.5 percent last month, from 2.4 percent the month before. Consumers also forecast a lower likelihood that unemployment will rise. Economists are debating whether rising wages and low unemployment figures still translate into higher inflation as orthodox economic theory assumes. Full Story

ECB holds interest rates steady to curb Eurozone slowdown

Policymakers at the European Central Bank on Thursday announced a new round of cheap loans to banks and said record low-interest rates would remain unchanged “at least through the end of 2019.”

Previously, the bank had indicated that the earliest rate hike would come in the fall. The measures aim to allay fears of a eurozone slowdown spurred by uncertainty over Brexit, a US-China trade war, and threats by Washington to impose tariffs on European auto imports.

“We’re coming out of, and maybe we still are in a period of, continued weakness and pervasive uncertainty,” ECB chief Mario Draghi told reporters in Frankfurt.

“Our decisions certainly increase the resilience of the eurozone economy,” he added. “But can they address the factors that are weighing on the economy in the rest of the word? They cannot.”

Carsten Brzeski, the chief economist at the bank ING Germany, said the measures came surprisingly early.

“It is clearly an attempt to stay ahead of the curve,” he said. “Any next step from here to tackle a severe downswing of the economy would now require unprecedented measure. Full Story

Global economy: Why central bankers blinked

The wariness descending over leading central banks is a jarring contrast to the buoyant mood this time last year. At the gathering of business and political leaders in Davos, Switzerland in January 2018, optimism was simmering, with one survey of bosses putting confidence at its highest for six years. The IMF hailed the broadest synchronised global upsurge since the start of the decade, with 120 economies enjoying a pick-up in growth.

An update from the IMF last month bemoaned the “backdrop of weakening financial market sentiment, trade policy uncertainty, and concerns about China’s outlook”. Growth in advanced economies will slow from an estimated 2.3 per cent in 2018 to 2 per cent in 2019 and 1.7 per cent in 2020, it said. Global manufacturing activity is at a two-and-a-half year low.

“You are getting a much more sober assessment of global growth,” says Mohamed El-Erian, chief economic adviser at Allianz.

What has gone wrong? The sea change reflects, in part, a realisation that policymakers became overly bullish last year, says Mr El-Erian. The Fed, in particular, over-reached by signalling four increases in interest rates for 2018 when the global economy was still fragile, he says. Its new-found caution is providing “air cover” for other central banks to mark down their own rate expectations. Full Story

What do these headlines indicate?

These stories confirm that we were on the right track when we stated that the Fed had no intention of pushing rates too high for the past 24 months. We pointed to the reaction from the bond markets, Baltic dry index, the world economy, etc.; these indicators showed that this rate hike scheme was nothing but a game of smoke and mirrors. This manipulation of the money supply is going to affect the stock markets dramatically; every single expert that refuses to adapt will be flung under the bus; there will be no exceptions.

The markets will experience many corrections ranging from wild to mild, but almost all of them will prove to be buying opportunities unless the trend changes. If one takes a look at the megatrend (megatrends are ultra-long term trends) then every back-breaking correction has to be embraced; however, by employing human emotion as a timing indicator, we can determine the optimum time to jump in and out of the markets.

Easy Money altering Market Dynamics

Such vast amounts of money sloshing around can alter the picture dramatically; what should happen in most cases does not. Under normal circumstances, precious metals should have soared to the moon, inflation should have been rampant, commodities (in general), should have risen in value. The housing sector should have tanked as rates would have risen in an inflationary environment, hundreds of business should have filed for bankruptcy, the stock market should have experienced another back-breaking correction, and the list of woes goes on. But almost none of the above has occurred, which clearly indicates that the old tools economists and financial experts are relying on are practically useless.

Random Quotes About Fiat Currency

“Growth for the sake of growth,” says Edward Abbey, “is the ideology of the cancer cell.”

“Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist.” economist Kenneth, Boulding

“If corporations are indeed ‘persons,’,” David Niose writes in Psychology Today, “their mental condition can accurately be described as pathologic

Interesting article on how Fiat destroys cultures

https://mises.org/wire/how-fiat-money-destroys-culture

Fiat Currency Helps Foster Chaos

Be prepared for the unprepared and remember everything can change but human emotions never do; 90% of humans are wired to do the exactly the same thing at precisely the wrong moment, ensuring that the maximum amount of damage will be inflicted by their ill-planned actions. If you can identify the emotion driving the masses, it is not too hard to find a way to stay out of harm’s way.

However, every problem ranging from declining moral standards, corrupt politicians, surge in wars, political polarisation, and a host of other terrible factors, can in some way be attributed to FIAT Money. As the money supply increases, the situation will continue to deteriorate. Freedom levels have to be curtailed the more a nation debases its currency and nowhere will this been seen more clearly in the US. Think about how much freedom we have lost since 911 and how the national debt soared after it.

Taking things are a step further

This 2-hour movie is an excellent starting point as to why the Top Players go out of their way to control the masses. The idea has always been to target the next generation at the earliest age possible, and with the passage of time, these guys are getting better and better at this game. This video covers a lot more than this concept, hence the length, it definitely makes for an interesting watch.

Final Parting Thoughts on Fiat Currency

Never wear your emotions on your sleeves; observe and use the data to formulate a plan. If one is part of the emotional chaos, one cannot see or hear anything other than the picture they are being directed to examine. Only a calm mind can see what is going on. You have a millisecond to question the emotion that is about to take over; will you examine it and in doing so open a new door, or will you allow it to take over and lead you astray. Insanity is doing the same thing over and over again and hoping for a new outcome. New outcomes come from new actions, not hope; change the angle of perception and in doing so change the outcome.

Courtesy of Tactical Investor

USA Debt To GDP Means Nothing To Bonds and Stocks

Posted on January 23, 2021 by Martin Dorman

USA Debt To GDP Means Nothing To Bonds & Stocks

Strangely and (possibly) sadly, bonds and the equities markets seem to be paying no heed to the ever-growing debt, which has just surpassed the $22 trillion mark.

US Debt To GDP; Is Anyone Paying Attention To It

Bonds are looking for any reason to mount a long term rally, after being held hostage to the Fake threat of inflation. A very desperate Fed t is trying to maintain the illusion that the USD is the strongest currency in the world. This was achieved by shoring up interest rates even though the data (yes we know its manipulated but since it has been always been manipulated it should be used fairly in raising and lowering rates) since the onset has indicated that inflation is a non-event.

The Fed appears to be operating like an insane person that is convinced his left toe is talking to him. However, most central bankers are not taking the same path, and some emerging nations are only raising rates because they are being forced to in order to defend their currency against a stronger dollar.

A monthly close above 147 will most likely push bonds to the 152-154 ranges with an overshoot as high as 159.00. The long term outlook for interest rates is negative; in other words, rates are heading lower and savers are going to be punished again.

Global Currency War

When the Fed started its rate hiking program we stated in our view the premise behind this move was to make the US dollar the most attractive currency in the world in the midst of the global currency war that has been taking place for over a decade. In this race to the bottom, the idea is to finish last. The US continues to rack up huge debts, and in order to continue doing this, it is currency has to look attractive.

When it starts to lower rates again and it will be forced to do so, it will be starting from a very high point, and as it lowers rates, other developed nations will be forced to follow suit; you ask why? Nations want to have a competitive advantage when it comes to exports. China and Germany understand that better than most nations.

Germany abuses the EU

Germany has in essence been abusing the EU via the Euro: it has found a way to raise its exports to levels it would never have been in a position to do so under the German Mark. If it were using the “Mark“, it is currency would be 20% higher and its exports would be nowhere near current levels. So it seems that US Debt To GDP ratio is something nobody cares about or no one is paying attention too; at least that is what the top players appear to be doing.

For the astute investor that is paying attention to the US Debt To GDP ratio, the best way to protect your assests is to view stock market crashes as buying opportunities. Until fiat is eliminated the Fed will always intervene and prop the market up again and therefore market crashes provide the smart player with a chance to purchase top rated companies at a huge discount.

Why the US can afford a stronger currency

The US is not an export-dependent market so it can afford to have a currency that is valued slightly higher, than most. As the US will be starting from an advantageous position, it is currency will still be attractive relative to other major currencies, even when it starts to lower rates. Most nations economies are export dependent so as the US lowers rates they will be forced to do so in kind, which effectively means that the USD will maintain its position as one of the most attractive currencies out there. It is a splendid plan, but the Fed has to be careful that it does not overplay its hand.

As we stated not too long ago, worldwide debt is soaring; in 2017 it stood at $233 trillion. So what is another trillion here or there; it is already so high that collectively the world’s nations will never be in a position to pay it back.

BOE all Bark and no Bite

The BOE would not be making statements that amount to the ramblings of an insane person if everything was going according to plan; they keep hinting that they are going to raise rates again, but the August rate hike could end up being the last, and they might be forced to make a U-turn. The Brexit chaos has already affected economic activity in Britain, and the once robust housing sector is grinding to a halt. House sales fell to their weakest level in five years. The BOE would have to be extremely daft to raise rates in such an environment.

EU playing game of Cat and Mouse

They have done nothing. One minute they state they are ready to raise rates, the next minute they cite new issues that call for more caution. Here is the latest from Draghi:

“We need to monitor these trade risks very carefully over the coming months,” Draghi said. “However, we still see the overall risks to the growth outlook as broadly balanced, in large part because the underlying drivers of domestic demand remain in place.” Full story

In other words, Draghi is saying; we will state that there is a need for a rate hike, but we will not do anything about it because the outlook is quite terrible

Japan, on the other hand, cannot afford a very strong currency

The Boj hs continued to huff and puff but other than that they have done nothing and it will be hard pressed to do anything. Interest rates were left untouched at -0.1% citing

The central bank also revised down inflation forecasts again, saying that the momentum toward achieving the price stability target of 2 percent is not sufficiently firm despite years of massive monetary easing. Interest Rate in Japan averaged 2.81 percent from 1972 until 2018, reaching an all time high of 9 percent in December of 1973 and a record low of -0.10 percent in January of 2016.

The inflation forecast for the fiscal year ending March 2019 was lowered to 0.9 percent from 1.1 percent previously estimated. Also, the central bank now expects inflation to average 1.4 percent for fiscal 2019 (vs 1.5 percent) and 1.5 percent for fiscal 2020 (vs 1.6 percent). Full Story

Interesting development on the weekly and Monthly charts

We have a very interesting development; under normal circumstances when the weekly and monthly charts are trading in the oversold ranges, the ensuing move up is almost always huge. Utilities typically don’t fare well in a rising rate environment, but the MACD’s on the Monthly charts of the Dow utilities are also very close to experiencing a bullish crossover; we have several strong factors indicating that rates should drift lower. The only thing that could delay this trend is a stubborn Fed. Mass psychology states that one should focus on investments that the masses are either ignoring or unaware off. Hardly anyone is aware of the stealth bull market that is taking place in the bond arena.

Courtesy of Tactical Investor

Random views on USA Debt To GDP

The National Debt Explained

The national debt level of the United States is a measure of how much the U.S. government owes its creditors. Since the government almost always spends more than it takes in, the national debt continues to rise. As of January 3, 2019, the national debt stands at $21.974 trillion, according to the U.S. Treasury Dept. It has increased 10 percent since President Trump took office in January of 2017. Under President Obama, the national debt increased 100 percent, from $10 trillion to $20 trillion.
It is easy to understand why people (beyond politicians and economists) are starting to pay close attention to the issue these days. Unfortunately, the manner in which the debt level is explained to the public is usually pretty obscure. Couple this problem with the fact that many individuals do not understand how the national debt level affects their daily lives, and you have a centerpiece for discussion — and confusion.
National Debt vs. Budget Deficits
First, it’s important to understand what the difference is between the federal government’s annual budget deficit (or fiscal deficit) and the outstanding federal debt (or the national public debt, the official accounting term). Full Story

What Is the National Debt in 2019 and What Does It Actually Mean?

If there is one thing you take from this article, one single fact worth pulling out, it’s this: The national debt has no analogy to personal finances. There is absolutely no national credit card, no tab for some other nation to “call in,” each American does not “owe” $42,998.12.
It is a borderline disservice to our readers even linking to that last source because none of this exists. It’s fake, fantastical and make-believe. These ideas come from the fiscal version of Narnia, where economists do battle against rational hobgoblins wielding enchanted slide rules. If you ever find yourself comparing the national debt to a household checkbook, step back through the nearest wardrobe. Hard. Repeatedly.
Good. Now that’s out of the way.
Note: All numbers are accurate and current at time of writing.
What Is the National Debt?
The national debt is the full measure of currently issued government securities. When the government’s combined public and internal obligations exceed its total revenue, it issues securities such as bonds, notes and bills which add to the national debt.
The U.S. Gross National Debt is approximately $21.9 trillion. This debt comes in two forms: intra-governmental and public. Full Story

Why the $22 trillion national debt doesn’t matter – here’s what you should worry about instead

The U.S. federal government’s debt load hit another milestone this month: It’s now a record US$22 trillion in nominal terms.
That’s $67,000 for every man, woman and child living in the U.S., and it’s up $2 trillion since President Donald Trump took office in 2017. For comparison, U.S. debt is more than the total size of the United States’ $20 trillion economy and equivalent to the gross domestic products of China, Japan and Germany combined.
This hefty sum is a reflection of the large annual budget deficits that the federal government has run, pretty much continuously, since 1931. Prior to that, surpluses were much more common, apart from the years following the Civil War.
With another round of anxiety-causing debt-ceiling debates likely to return in the coming months, like other economists, I believe it is worth asking whether we should even care about the size of government debt.
Default isn’t imminent
First of all, it’s important to note current U.S. debt levels do not indicate any risk of imminent default.
As long as the U.S. federal government remains an “ongoing concern” – fiscal institutions are strong and effective, taxing authority is maintained and the long-run productive capacity of the nation’s economy is secure – there is no economic reason to fear default on the nation’s debt. Political reasons, such as debt-ceiling mischief, are another matter. Full Story

EU and Bank protection – Bank earnings and buybacks – Trump’s Fed chair nominee

Posted on January 11, 2021 by Martin Dorman

EU weakens plan on bank protection, risks ECB clash on bad loans

The European Commission proposed on Wednesday watered-down measures to help guard European Union banks against future crises, after two years of fruitless talks among the 28 EU states on more ambitious plans. The new proposals were designed to win over Germany, the EU’s largest economy and the staunchest opponent of sharing banking risks among EU states, but the German banking lobby quickly dismissed them.

The proposals could also slow the European Central Bank’s plans to reduce the exposure of banks to bad loans. Shares of Italian banks rose, since they would face big losses if the EU mandated they quickly unload bad debts [nL8N1MM4Q8].

The Commission proposal would reduce the sharing of banking risks and set strict conditions that states must meet before their banks gain access to safety nets funded at the EU level. Those changes were intended to placate Germany, whose departing finance minister, Wolfgang Schaeuble, repeatedly argued that sharing risks meant richer German banks would prop up weaker banks in other EU countries. His successor may be equally dubious. Full Story

Sounds familiar; it’s an early signal informing us that something similar is set to take place in the US but on a much larger scale. To get the masses to embrace this Bull Market, the era of easy money has to be brought back. So a variation of liar loans is set to debut in the future.

Bank earnings: ‘lower for longer’ means buybacks will continue

When big banks kick off the third-quarter earnings season next week, a familiar theme is likely to dominate: it’s hard to make money in a lower-for-longer world. Analysts expect banks to report tepid growth in nearly all their business lines, from mortgage originations to investment banking to lending, and most of the good news story is likely to come from a practice that’s often considered a sign that companies are out of ideas: issuing debt to buy back stock.

J.P. Morgan Chase & Co. JPM, -0.37% kicks off earnings season Thursday, followed that day by Citigroup Inc. C, -0.06% On Friday, Bank of America Corp. BAC, -0.37% reports, followed by Wells Fargo & Co. WFC, -0.27%

“Results are likely to be tepid due to very weak loan growth, modest increase in net interest margins, and weak capital markets related trends,” somewhat offset by lower expenses and better-performing loans, wrote J.P. Morgan analyst Vivek Juneja in a note Friday. “On average, most of the (quarter-over-quarter) EPS growth in 3Q is likely to be led by share buybacks at our banks,” Juneja added. Full Story

Very few will spot the main point in this story; banks are admitting that this recovery is bogus and that the only way to maintain the illusion of all is well is to take on more debt to buy their shares and in doing magically boost EPS. Share buybacks are set to soar again, and we suspect that before this bull keels over, that the total amount of funds put aside for Dividends and share buybacks will soar to $2 trillion over a 12 month period.

Trump Pick for Fed’s Bank Regulation Chief Wins Senate Confirmation

Randy Quarles, a Bush-era regulator whom Democrats criticized for not doing enough to prevent the 2008 financial crisis, has been confirmed by the U.S. Senate to lead the Federal Reserve’s oversight of Wall Street.

The 60-year-old won approval to join the central bank’s board of governors in a 65-32 vote on Thursday, Oct. 5, as well as approval to serve as vice chairman of banking supervision. The decisions followed a split recommendation from the chamber’s banking committee in early September and came just in time to prevent the panel from shrinking to less than half its full complement of seven members when Vice Chairman Stanley Fischer leaves mid-month.

All of the governors are members of the bank’s 12-person Federal Open Market Committee that sets monetary policy, so the excess vacancies would have shifted the balance of power even further toward the five regional Fed presidents who serve on the panel, as well as heightened uncertainty about the pace of interest-rate adjustments.

Even so, Quarles’ portfolio as head of the Fed’s regulatory programs, handled on a de facto basis by Governor Daniel Tarullo before his departure earlier this year, is vastly different from that of the 73-year-old Fischer, a monetary policy expert. Among his responsibilities will be overseeing annual stress tests designed to ensure that the largest U.S. banks have sufficient capital to withstand an economic crisis. Full Story

The dominoes are all falling place; the argument we put forward almost one year ago that Dodd-Frank would either be gutted out or eliminated is gaining traction. If Trump replaces Yellen with a dovish leaning person, then its game over for Dodd-Frank and the market will have the fuel necessary to soar to stupendous levels.

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