Saturday, July 30, 2016

Richard Duncan's Solution to our Current Worldwide Debt Crisis

Richard Duncan is an interesting fellow.  His eyesight seems 20/20 when it comes to analyzing how we got where we are today.  Yet his solution is unthinkable to me.

If you are curious, please listen to this hour-long interview.  It will get you thinking and you will learn a lot about many aspects of today's economic conundrum. However, in my opinion, Mr. Duncan errs in believing that it is possible to stave off catastrophe.

Here is the interview:

Richard Duncan interview

He is basically recommending that the developed world throw gasoline on the fire of fiat money creation.  He says we must maintain the current level of world GDP through enormous debt creation (i.e. more QEs) and through government investment in infrastructure and technological projects. By doing this he hopes that the resulting advances will somehow allow us to avoid a worldwide crisis that would take the form of either a world war or a global depression like none we have ever seen.

His solution completely flies against all of my own economic theories–indeed against common sense itself. He sounds to me like Louis XV with his "après moi le déluge" (after me the deluge).

[Thanks to Wikipedia]
Surely, these credit/debt bubbles must burst. I believe that the longer we put it off, the worse it will be, and that we've already gotten to the stage where the war or depression or both are inevitable.

Yet he seems to think catastrophe can be staved off, and that the politicians will try this because they have no other choice. About that he is surely right, but is he right that the times have changed and we must modify our thinking? Or is this just putting off judgment day?

Please let me have your thoughts.

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Friday, February 12, 2016

Fiat Money Versus Gold

Thanks to

No one can deny that current markets are scary, so I have opined in an article at Seeking Alpha. 

We all share the malaise as this unfolds in front of our eyes.

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Monday, December 07, 2015

Hubris at Its Best - Central Bankers

In last weekend's Wall Street Journal I read yet another ridiculous statement by a member of that elite group called Central Bankers.  They make me chuckle every time they open their mouth. 

How many times do we have to hear that Madame Yellen or Monsieur Draghi has everything under complete control?  Take this for example from the latter:

"There is no doubt that if we had to intensify the use of our instruments to ensure that we achieve our price stability mandate, we would."

Right.  All Europe's economy needs is a little tweak here and a little monetary push there.  Especially after Japan and the U.S. have done this so "successfully"–which, by the way, was after completely missing the Great Recession even when it was staring them in the face. 

In fact the U.S. has been so "successful" that now they can't figure out when and how to turn it off. 

I can't help but wonder about the ending of this charade.  So I allowed my imagination to wander.  Here's the result.  (Click on the image for a larger version.)

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Tuesday, November 03, 2015

Fed Dots - Tea Leaves By Another Name? or alternatively, The Dot Plot Thickens

My previous post mentions tea leaves as a way for the Fed to determine policy.  I bet you thought I was kidding.  Well, watch this video to see what Fed-watchers are watching.  And just in case you're wondering, it's not a comedy sketch.

[Screen capture from Bloomberg]
[Thanks to J.B. for the neat alternate headline.]


Tuesday, October 27, 2015

Advice for Ms. Yellen

I looked at the first page of the Wall Street Journal today, there to find an article about our favorite gurus, the Federal Reserve Board.  Most market players are predicting that the Federal Reserve Board will do nothing this year about interest rates.

The article contains a really fascinating exchange between William Dudley, president of the New York Fed bank, and John Taylor, an economist of extraordinary common sense, judging from the exchange:

Dudley:  "I don't really understand what is unclear right now."

Taylor:  "Are you kidding?  No one know what you are doing."

In fact, I would conjecture that the Board itself does not know what it is doing.

Therefore, I suggest that Ms. Yellen and her co-gurus take counsel from the following page:


Surely reading tea leaves will be more accurate than relying on the pseudoscience of econometrics.


Wednesday, January 21, 2015

Why Gold Is Still Attractive As A Hedge

If you'd like to read a Gadfly's opinion about holding gold-related investments, please read this article at Seeking Alpha.  Thanks.

[Image from Wikipedia]


Tuesday, January 20, 2015

I have just finished one of the best books I've read in a very long time.  It is this:

Investing Freedom: How the English Speaking Peoples Made the Modern World by Daniel Hannan
Click on the line above to get it from Amazon.  Excellent read.

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A Talk on C..S. Lewis

David Theroux of the Independent Institute asks me to post to his keynote talk at a conference in San Antonio, TX, on August 2, 2014.  I'm happy to oblige.  The title is:

"C.S. Lewis on Mere Liberty and the Evils of Statism"


Click Here

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Tuesday, December 30, 2014

The Fed's Game of Monetary Inflating and How to Put an End to It

[Thanks to for the image.]

History has shown unequivocally that you don't want to monkey with money and credit.

This is the cogent warning recently issued by Doug Noland at Prudent Bear. He is referring to the monetary shenanigans of the central banks around the world, the most egregious of which is our very own central bank, the Federal Reserve.

After more than 15 years of almost continuous and increasingly profligate money-credit creation, the Fed is now approaching the moment of truth. In the next few months it will have to put its actions where its mouth is regarding the interest rates under its control.

Up to now, Fed Chairman Janet Yellen has been very good at what we could call the Open-Market Charade. While sounding profoundly straightforward and direct, she actually has bested Alan Greenspan at the art of Fedspeak: talking in soothingly erudite phrases, all the while saying nothing in particular.

But no matter what she says now, the Fed's predicament is clear: It must soon choose between allowing the target rate to climb, which will squeeze the necks of already precarious emerging markets, or keeping the rate low and in the process risking re-devaluation of the dollar and/or blowing even more bubbles in stocks, junk bonds, global derivatives, emerging market currencies, and selected real estate.

The inflated bubbles are right in front of our noses. For example, some condos in the West Los Angeles area have now re-attained their all time highs of 2007, and bankrupt ski resort developments have pulled the shovels out of the trash heap and are at it again. And by the way, that price inflation you're looking for? It's already in the high cost of meat, sugar, poultry and eggs, which have climbed 8.3 percent this year, and in dairy that has climbed 5.6 percent. [Source] Butter has doubled since mid-2013. [Source]

The moment the Fed governors choose the former, i.e. increasing the rates, the music will stop and everyone will head for a chair. Usually in this game there is only one empty chair and hence only one loser, but this time there are far fewer chairs and far too many players. If the music stops watch carefully what will happen to countries like Argentina and Russia. Then watch what will happen to the derivatives and other more speculative markets as investors scramble for seats.

For more on the possibilities under this scenario, see this article about the carry trade, also heavily involved in the derivatives market; see also this David Wessel article about a possible global financial crisis due to a rising dollar.

On the other hand, if the Fed chooses the latter route and delays rate normalization, it may succeed in holding off the moment of truth for a few more months while the music continues and stock market speculators continue their merry dance. At the same time, America's fixed-income recipients will have no choice but to reach for their handkerchiefs again to mourn a further loss of purchasing power. (Already in 2012, the reported that seniors have lost 34 percent of their purchasing power since 2000.)

The old and the weak are always the first losers during the exaggerated business cycles caused by fiat-money monetary interference, and Oh My, what enormous and distorted cycles they have become. (See this study from the American Institute for Economic Research on the changing nature of business cycles.) Who are the winners? Debtors, and speculators most of whom are debtors. The biggest debtors of all are governments and financial institutions-who just happen to be co-appointers of their accomplice Fed governors.

What artifice makes this game possible? It is the fiat nature of global currencies. (Read Steve Forbes's latest book for more on this.) What is the solution? We must elect politicians who will free gold from its tax shackles. What shackles?

An act of Congress in 1974 and a legal decision in 1977 already permit the holding of and transacting in gold. (See the text of the 1974 law here and a discussion of the court case permitting gold clauses in contracts.) The only thing preventing gold from playing its traditional role as money is the fact that all gold transactions are taxed, whether it be through sales taxes or capital gains taxes.

Why are they taxed? Because back in the 1970's Congress classified gold as a commodity, kind of like copper or wheat. Why did Congress do this? Because the crafty politicians knew that by doing so the commodity-taxation protocol would immediately take the gold-as-money option off the table. This is what forces us all to accept unsafe fiat "money" instead of the real thing.

Without that handicap, we would not accept it unilaterally. Remove the taxation and gold would become money again. It would find its true exchange rate relative to all currencies (which today would probably be higher than its current $1,200 an ounce). Soon enough, someone would set up a system of international exchange based on gold. The metal would find itself at the center of a new worldwide system of exchange and value storage. Such a system would be much more solid and much more widely accepted than Bitcoin or other alternatives. Call it Bitgold, maybe? And by the way, reinstatement of a proper gold standard is probably not even necessary. Let the markets work out the particulars.

This is not just fanciful thinking. States such as Arizona, Texas, and Utah are discussing the use of gold as legal tender. Highly stable gold would eventually replace highly unstable fiat money, and trillions of dollars and yen and euros, currently wasted on chasing a quick profit and fulfilling the dreams of politicians (and causing worldwide recessions), would be turned back to their rightful purposes: fomenting enterprise, creating jobs, and raising standards of living across the globe. And most important, this new gold-based monetary system would deprive our central money manipulators of the world's most corrupting, devastating, unconstitutional, and destructive monopoly power.

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Tuesday, May 27, 2014

Time to Put the QE Genie Back In Its Bottle

Price inflation seems to be right around the corner, if it isn't already here, which means that the Federal Reserve may soon have to put their QE genie back in its bottle.  At least that's my hope, for the sake of our children's future.

[Thanks to for the image.]

The only problem is:  The economy isn't cooperating.  Employment figures, never mind the full-time work force, are stubbornly refusing to increase.  Jobs are not appearing as hoped.  And GDP is not up to expectations.

Hence, the Fed will be faced with a quandary.  And I can't wait to see what happens.  Please click on this link for some further thoughts on the subject.

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