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Bill Bonner

Bill Bonner

Bill Bonner founded Agora, Inc in 1978. It has since grown into one of the largest independent newsletter publishing companies in the world. He has also written three New York Times bestselling books, Financial Reckoning Day, Empire of Debt and Mobs, Messiahs and Markets. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities.

Articles by Bill Bonner

What Went Wrong With the 21st Century?

August 11, 2017

Fools and Rascals

And it’s time, time, time
And it’s time, time, time
It’s time, time, time that you love
And it’s time, time, time…
– Tom  Waits

[embedded content]
Tom Waits rasps about time
POITOU, FRANCE – “So how much did you make last night?”
“We made about $15,000,” came the reply from our eldest son, a keen cryptocurrency investor.
“Bitcoin briefly pierced the $3,500 mark – an all-time high. The market cap of the entire crypto market shot up, too… with daily trading volume also rising.
“And remember, this is still a tiny market. Most people don’t own any crypto-currencies. Most people don’t even know what crypto-currencies are. The whole market is only one sixty-fifth the size of the entire gold market.

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How Dumb Is the Fed?

July 15, 2017

Bent and Distorted
POITOU, FRANCE – This morning, we are wondering: How dumb is the Fed?
The question was prompted by this comment by former Fed insider Chris Whalen at The Institutional Risk Analyst blog.

[O]ur message to the folks in Jackson Hole this week [at the annual central banker meeting there] is that the end of the Fed’s reckless experiment in social engineering via QE and near-zero interest rates will end in tears.
“Momentum” stocks like Tesla, to paraphrase our friend Dani Hughes on CNBC last week, will adjust and the mother of all rotations into bonds and defensive stocks will ensue. We must wonder aloud if Chair Yellen and her colleagues on the FOMC fully understand what they have done to the US

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The Fed Will Blink

May 2, 2017

Honest Profession
GUALFIN, ARGENTINA – The Dow rose 174 points on Thursday. And Treasury Secretary Steve Mnuchin said we’d have a new tax system by the end of the year.
Animal spirits were restless. But which animals? Dumb oxes? Or wily foxes? Probably both.
But what caught our attention were the central bankers strutting across the yard and crowing with such numbskull cackles that even barnyard animals would be embarrassed by them. There was a time when central banking was an honest profession.

Dow Jones Industrial Average Index, Daily, Sep 2016 – May 2017(see more posts on Dow Jones Industrial Average, )Since Thursday there have been two additional very spirited up days with large gaps – this is very rare in the DJIA, particularly from such a high level after a ~240% rally since the lows made 8 years ago… it continues to feel like a blow-off (and it happens against the backdrop of a sharp slowdown in money supply growth). – Click to enlarge
Central bankers provided financing for the government. They backed the banking system, too, by holding savings as reserves, which they lent to solvent member banks in emergencies. They were tight-lipped, tight-laced, and tightwads. Their role was to say “no” more often than “yes.

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Central Banks Have a $13 Trillion Problem

April 24, 2017

Paycheck to Paycheck
GUALFIN, ARGENTINA – The Dow was down 118 points on Wednesday. It should have been down a lot more. Of course, markets know more than we do. And maybe this market knows something that makes sense of these high prices. What we see are reasons to sell, not reasons to buy.
Nearly half of all American families live “paycheck to paycheck,” say researchers. Without borrowing, 46% couldn’t raise $400 to cover an emergency. This is at least part of the reason why retail sales dropped for the second month in a row in March. Despite seven years of economic “recovery,” millions of Americans don’t have much money.
According to Census Bureau figures, 110 million Americans receive benefits from means-tested federal programs – food stamps, disability, and the like. And according to the Bureau of Labor Statistics, about 125 million Americans have full-time work (with another roughly 112 million without jobs).

Dow Jones Industrial Average Index, September 2016 – May 2017(see more posts on Dow Jones Industrial Average, ) – Click to enlarge
That means there are only 125 million people in full-time jobs supporting the whole kit and caboodle of the U.S. economy, with a total population of 323 million. At that rate, each full-time worker supports about 2.

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Farewell, Welfare State

February 25, 2017

Impossible Bills
BALTIMORE – The tweet was never sent and never received:  “Lying Otto von Bismarck set us up for bankruptcy! What was he thinking? Sad!!” Instead, Mr. Trump said last weekend that, far from trying to curb the promises and cut the costs of the welfare state, he was nearly ready to unveil a plan to replace Obamacare with something better: a plan that would provide “insurance for everybody.”
The “iron chancellor” Otto von Bismarck, wearing the type of helmet one shouldn’t leave lying around on a chair. Bismarck was responsible for the unification of Germany, which he achieved by engineering several wars as prime minister and foreign minister of Prussia. Prussia waged war against Denmark, Austria and France, and defeated all of them. Bismarck then unified the independent German states, city-states, bishoprics and principalities partly by annexation and partly by negotiation. Once Germany was unified, he was appointed “chancellor of the empire”. It was as though he was finally promoted to a post beyond his competence, in line with the Peter principle. First he embarked on the so-called Kulturkampf, aiming to undermine the power of the Catholic Church. The Church fought back by entering into a powerful political alliance with the Center Party.

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Is an Inflation Comeback in the Works?

February 24, 2017

Exterminating Angel
LOVINGSTON, VIRGINIA – Amid all the sound and fury of the Trump news cycle, hardly anyone noticed. There is a specter haunting this economy. It is the specter of inflation…
Bloomberg has the report:
The U.S. cost of living increased in January by the most since February 2013, led by higher costs for gasoline and other goods and services that indicate inflation is gathering momentum. The consumer-price index rose a larger-than-forecast 0.6% after a 0.3% gain in December, Labor Department figures showed Wednesday. Compared with the same month last year, costs paid by Americans for goods and services rose 2.5%, the most since March 2012.
French investment bank Natixis makes a related observation:
The return of inflation in the euro zone with the rise in the oil price will drive the European Central Bank to give up QE […] Our estimate is that an end to QE would raise interest rates by 110 basis points.
Wait – inflation is what the Fed has been looking for. And the latest numbers reveal it may have already reached the Fed’s target of 2%. If you’ll recall, the Fed set itself two targets: Unemployment would have to fall below 5%. And inflation would have to rise above 2%. Reaching those two targets would prove that the economy was healthy enough to allow the Fed to raise rates.

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Trump’s Trade Catastrophe?

January 15, 2017

“Trade Cheaters”
It is worse than “voodoo economics,” says former Treasury Secretary Larry Summers. It is the “economic equivalent of creationism.” Wait a minute –  Larry Summers is wrong about almost everything. Could he be right about this?
Summers is referring to the paper written by two members of Trump’s trade team: his pick for secretary of commerce, billionaire investor Wilbur Ross, and the director of Trump’s new National Trade Council, Ph.D. economist Peter Navarro.
It calls for a turn away from free trade and toward managed trade – or what is vaguely described as “fair” trade. Colleague Karim Rahemtulla, on an investment scouting trip in India and China, sends this note:
“I met with a factory owner in China. He pays his workers 2,000 renminbi a month, about US$300. He thinks it’s too expensive and is now opening factories in Vietnam and Cambodia, where he can pay half of what he’s paying just outside Shanghai.
In India, I saw two ads in the newspaper. One was for call center workers with a college degree as a requirement. The pay range was between 9,000 rupees (US$132) and 15,000 rupees (US$220) a month. The other ad was for a chartered accountant with three years’ experience for the Nehru Foundation – a big Indian NGO. The pay for that was 29,000 rupees per month, about US$426.

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A Trade Deal Trump Cannot Improve

January 7, 2017

Worst in Class
BALTIMORE – People can believe whatever they want. But sooner or later, real life intervenes. We just like to see the looks on their faces when it does. By that measure, 2017 may be our best year ever. Rarely have so many people believed so many impossible things.

Alice laughed. “There’s no use trying,” she said: “one can’t believe impossible things.” “I daresay you haven’t had much practice,” said the Queen. “When I was your age, I always did it for half-an-hour a day. Why, sometimes I’ve believed as many as six impossible things before breakfast.”

Image credit: Disney – Click to enlarge
Automaker General Motors (GM) used to have an assembly plant in East Baltimore. Then one Friday in May 2005, at 4:30 in the afternoon, the last Chevrolet Astro van rolled off the assembly line at the Broening Highway General Motors Plant.
Some eyes misted up. Some were angry. Some laughed. The van hadn’t been updated in 20 years. It was widely seen as a safety hazard and voted “worst in its class” by the experts.
Peter Morici, a professor of business at the University of Maryland, summed up GM’s problem to a reporter for The Baltimore Sun:
“If you sell an inferior product and you expect a premium price, you’re going to go out of business.

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How You Become a Crony

December 31, 2016

Trump Bump
BALTIMORE – Who’s the biggest winner so far? “Government Sachs!” Fortune magazine reports that the winningest person since Trump’s election is Goldman Sachs CEO Lloyd Blankfein. Goldman’s stock price is back to where it was just before the last crash in 2008. And Blankfein is back in high cotton, too; his holdings in the firm have gained $140 million in the last four weeks.
Donald Trump pledged to take the elite down a notch. So far, they’re going in the opposite direction.  Worldwide, they’re up about $4.4 trillion, as their stocks have soared in the “Trump Bump.”
Many of America’s best investors – including Carl Icahn and Ray Dalio – think this is just the beginning. And with some of the nation’s most successful moneymen at his side, including a former Goldman guy in the Treasury, many people are betting that Trump will bring a sustained boom.
We’ve been looking at crony capitalism. Our hypothesis is that it is funded by the feds’ fake money and enabled by their regulations.  So far, we’ve looked at ex-Goldman banker Steven Mnuchin, Trump’s pick for secretary of the Treasury.
While he was making a fortune at Goldman, a major Main Street company, Sears was turned into a Wall Street victim. Its stock is down quite a bit. And it is expected to declare bankruptcy in a few months.

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Fake News? It’s All Fake!

December 29, 2016

Barbarous Huns

Life is one long struggle in the dark.
– Lucretius

BALTIMORE – In January of this year, the Empire Herald reported that a “meth-addled couple” had eaten a homeless man in New York City’s Central Park. Later, Now8News reported that a can of cookie dough had “exploded in a woman’s vagina”; the woman was alleged to be shoplifting.

The fellows depicted above certainly mesh perfectly with the image of meth-addled cannibals conjured by our imagination… A few interesting questions regarding this event remain unanswered to this day. Did they marinate their meal? Fill it with stuffing? What were their wine and salad choices? Was their dinner roasted on a spit, cooked in a jungle wok the traditional way, or were these pale gourmets connoisseurs of wino tartare?
Tueasday’s big news: Russia’s ambassador to Turkey was shot and killed. The assailant looked a lot like a 21st-century version of Gavrilo Princip, who lit the fuse for World War I by assassinating Archduke Franz Ferdinand, heir to the Austro-Hungarian throne, in Bosnia. By the time it was over, 16 million people were dead…
We are writing a series on things that people think they know, but which ain’t so…  popular ideas that are wrong, dumb, or misconstrued, which is practically all of them.

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The Reign of Bubble Finance

December 20, 2016

Financialization Genius
BALTIMORE – When we left you last time, we were in the middle of describing the crooked hind leg of crony capitalism. We used billionaire businessman Wilbur Ross – Donald Trump’s pick for the Department of Commerce – for illustration purposes. Not that there is anything wrong with Mr. Ross. He plays the game, just as everyone else does. He’s particularly good at it.
But today, we’ll look at another Olympian money man – the chairman of Trump’s new Strategic and Policy Forum and private equity magnate, Stephen Schwarzman.
We remind readers that we are criticizing neither Mr. Schwarzman nor Mr. Trump. We’re just trying to understand how it works. Then we’ll take a guess about where it will lead.
Also on Mr. Trump’s new advisory board – which is supposed to help the president-elect bring jobs back to America – is former General Electric CEO Jack Welch.´Welch could provide an equally rich illustration of the “financialization” trend. He took a Main Street manufacturing and engineering firm – one of the most admired in the world – and turned it into a bubble-finance company.

The steel magnate in his command center. He is one of a number of particularly alert entrepreneurs who were able to make the most of the bubble era ushered in by Nixon’s adoption of the confetti money system.

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Good Money and Bad Money

November 26, 2016

Confidence Gets a Boost
Payrolls figures are rising. Stocks rose to new records. As we laid out recently, a better jobs picture should lead the Fed to raise rates. This should cause canny investors to dump stocks.

Canny investors at work (an old, but good one…)

Cartoon via Pension Pulse – Click to enlarge
But the stock market paid no attention. It follows logic of its own. Headlines told us that last Friday’s report “boosted confidence” and sent the Dow up 191 points.
Wait – what about the Fed?
Now, with unemployment dropping and the economy appearing to finally recover,  isn’t it time to go “back to normal” with interest rate policy? Won’t that mean that today’s stock prices – resting on the brittle reed of super-low rates and buybacks – will collapse?
Maybe. But investors seem to have realized that, as we’ve been saying, the Fed will never normalize interest rates. It operates a fake economy, with fake money, and fake interest rates, and fake statistics, too.
And now, there is no retreat. The bridges have been burned. The ships have been sunk. The return address has been lost. Now, the Fed is so deep into make-believe, the shock of reality would be too much for it. It is like a crazy person you try to protect from the truth:

“Don’t worry about it, Uncle Frank. Ronald Reagan will win again.

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Too Early for “Inflation Bets”?

November 23, 2016

The Trump Trade
After 35 years of waiting… so many false signals… so often deceived… so often disappointed… bond bears gathered on rooftops as though awaiting the Second Coming. Many times, investors have said to themselves, “This is it! This is the end of the Great Bull Market in Bonds!”
And then, at the appointed hour, expecting the rapture… they took the leap of faith only to come crashing down on the rocks below. In 2008, in 2012, in 2014 –  Each time, the market made fools of them.
Now, weary, wary and nearly broke, they make their bets as though they were setting an explosive charge at a federal building. “Bond rout accelerates as Trump stimulus vow spurs inflation bets”, reports the Financial Times.

Bonds Long TermThe long bond’s long cycle – red rectangles indicate when the post 1980 bull market was held to be “over” or “over for sure” or “100% over”, etc. We have repeatedly seen bear percentages close to or even exceeding 90% in the Barron’s “smart money” poll over the years. There can be no doubt that Donald Trump’s election has boosted inflation expectations in the short term – but will the momentum persist? – Click to enlarge
More than $1 trillion has been clipped from global bond values in the last week.

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The Fed’s “Hothouse” Is in Danger

November 14, 2016

$8 Trillion Transfer
RHINEBECK, New York – It is a beautiful autumnal day here in upstate New York. The trees are red, brown, and yellow. Squirrels hop across the lawn, collecting their nuts. Unseasonably warm the last few days, rain showers are moving in from across the Hudson, driven by a chilly wind.
But today, we talk about money. After all, that’s our beat here at the Diary. Money. Money. Money. We’ve seen how the feds created fake money after ditching the Bretton Woods gold-backed money system in 1971.
And we’ve seen how this fake money perverted, distorted, and corrupted our economy, our government, and even our family lives. We pause here to recall how it even dodged the Constitution.
“Money matters” are supposed to be decided by the people’s representatives in the House, and then discussed and approved by the Senate. After all, it’s voters’ money.
But the Fed – without so much as a by-your-leave or a thank-you note – took it upon itself to decide the fate of more than $8 trillion. That is a rough estimate of the amount not paid to savers over the last eight years as a result of the Fed’s ultra-low interest rate policy.

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The Point of War Is Not to Win

October 30, 2016

Newfangled “Stimulus”
In time, everything goes away. We are confident, for example, that it won’t be too long before the market cracks (please don’t hold us to this forecast, but don’t forget if it turns out to be correct!).
U.S. corporate profits are falling. GDP is sinking. Productivity has slumped for the longest period since the 1970s. And going by the CAPE ratio, which looks at stock prices relative to the past 10 years of earnings, only three times in the last 100 years (in 1929, 2000, and 2007) have stocks been this expensive.
The crack, when it comes, will produce new demands of fiscal stimulus and money from helicopters. Just to keep our terms straight, fiscal stimulus comes from government borrowing and spending. It shows up in the deficit.
“Helicopter money” is spending directly financed by central bank money creation. It happens without a single dollar being added to the deficit. They are very similar; what matters is how they are financed.
When it comes, the next recession will provoke calls for spending on infrastructure projects. These will be accompanied by estimates of how much the projects will return.
The numbers are pure nonsense. Without a real cost of capital and a way to price the output or figure out the profit from a project, all the calculations are fiction.

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The Point of War Is Not to Win

October 30, 2016

Newfangled “Stimulus”
In time, everything goes away. We are confident, for example, that it won’t be too long before the market cracks (please don’t hold us to this forecast, but don’t forget if it turns out to be correct!).
U.S. corporate profits are falling. GDP is sinking. Productivity has slumped for the longest period since the 1970s. And going by the CAPE ratio, which looks at stock prices relative to the past 10 years of earnings, only three times in the last 100 years (in 1929, 2000, and 2007) have stocks been this expensive.
The crack, when it comes, will produce new demands of fiscal stimulus and money from helicopters. Just to keep our terms straight, fiscal stimulus comes from government borrowing and spending. It shows up in the deficit.
“Helicopter money” is spending directly financed by central bank money creation. It happens without a single dollar being added to the deficit. They are very similar; what matters is how they are financed.
When it comes, the next recession will provoke calls for spending on infrastructure projects. These will be accompanied by estimates of how much the projects will return.
The numbers are pure nonsense. Without a real cost of capital and a way to price the output or figure out the profit from a project, all the calculations are fiction.

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Governments Will Lose Their War on the Markets

October 25, 2016

Dirty War
DELRAY BEACH, Florida – The markets continue to dawdle. Not much conviction in either direction. We’ve already looked at the War on Poverty, the War on Drugs and the War on Terror.
So let’s move on –  using our new lens to look at another of the feds’ fake wars. No war was ever officially declared against the markets. But for four decades the feds conducted covert operations – a dirty war in which they’ve tried to mislead, obstruct, and suppress market forces.
They used fake money, fake savings, and fake interest rates to confuse investors, businesses, and consumers. They didn’t say so directly, but their purpose was to give out false signals so that people would change their behavior.
“Demand” was too weak, they said. What to do about it? They flooded the system with phony savings (credit). Price signals were distorted. Credit limits seemed to disappear. Debt limits were eased.
Then, in 2008, the war turned hot, with the feds actively and overtly holding down interest rates to push up stock and bond prices. In response to the crisis they caused – by encouraging too much debt in the housing sector – they claimed that the “free market” had failed. They were just responding to the “emergency,” they said.

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Evacuate or Die…

October 12, 2016

Escaping the Hurricane
BALTIMORE – Last week, we got a peek at the End of the World. As Hurricane Matthew approached the coast of Florida, a panic set in. Gas stations ran out of fuel. Stores ran out of food. Banks ran out of cash.

A satellite image of hurricane Matthew taken on October 4. He didn’t look very friendly.

Image via twitter.com – Click to enlarge
“Evacuate or die,” we were told. Not wanting to do either, we rented a car and drove to Maryland.
“We’ll just stay where we are,” we had proposed to the building manager.
“You can’t do that. We’re going to shut down the building. You have to leave.”

Hurricane Matthew makes landfall in Daytona Beach, Fla.

Photo credit: Luis Rodriguez / weather.com – Click to enlarge
We dreaded the idea of driving anywhere. The roads would be packed. It would be a nightmare. As it turned out, route 95 was clear all the way from Palm Beach to Richmond, where we spent the night.

Matthew says hello to Rocky Mount, NC.

Photo credit: Thomas Babb / The News & Observer via AP – Click to enlarge
We drove north in light traffic on Thursday, as convoys of electric utility trucks made their way in the opposite direction. But skirting the coast in northern Florida, Georgia, and South Carolina, we saw the disaster beneath us.

A drowned church in Nichols, SC.

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The Dying Middle Class

October 5, 2016

Largest Theft in History
As expected, Ms. Yellen smiled last week, announcing no change to the Fed’s extraordinary policies. For the last eight years, she has been aiding and abetting the largest theft in history.
Thanks to ZIRP (zero-interest-rate policy) and QE (quantitative easing), every year, about $300 billion is transferred from largely middle-class savers to largely better-off speculators, financial asset owners, and the biggest borrowers during that period – corporations and the government.
The financial press, nevertheless, finds something vaguely heroic about enabling the grandest larceny ever. Bloomberg:
“Federal Reserve Chair Janet Yellen braved mounting opposition inside and outside the U.S. central bank and delayed an interest-rate increase again to give the economy more room to run.”

Asset valuations are not outside of historical norms, particularly if one disregards the past 5,000 years. Cartoon by Bob Rich
The U.S. economy is barely limping along. As we noted last week, when you adjust nominal GDP growth by a more accurate measure of inflation – David Stockman’s “Flyover CPI” – you see that the economy is actually in recession.

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Credit Crisis in Waiting

October 3, 2016

Clowns in the Coliseum
DUBLIN – The presidential debate began long after our bedtime, here in Ireland. So we got up this morning, rubbed our eyes, and watched the highlights. “Lowlights” is perhaps a better way to describe it: two rascals making public spectacles of themselves, arguing about things that mostly don’t matter… posing, posturing, pretending.
If we had our druthers, both candidates would lose. That is unlikely. So, the show goes on. The press reports that Hillary “won.” We’re not so sure. She seemed calm. Sensible. Composed.
She’s a master of the “facts.” She’s smart. She also knows how the game is played; she’s lived at public expense almost all her life and intends to continue to do so. Trouble is, a substantial segment of the adult population is fed up with the game she’s playing.
They’re the “invisible Americans” who have been swindled by the system… sent to fight fake wars they were never meant to win… the people whose jobs were shipped abroad… whose savings were robbed of their interest income by the Fed’s phony rates… and whose children’s futures have been impoverished by the fake economy.
They’d rather vote for an orangutan than for Hillary. The simians had too much self-respect to enter politics, so the Republicans ended up with Donald Trump. Poor Donald.

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Politics and Violence

October 2, 2016

Preposterous Lies
Elizabeth received a strange letter from her congressman. “We have to be on guard against our enemies… and not be afraid to name them.” A brave, forthright stand? But wait, he didn’t name the enemies.
That left us wondering: Who are our enemies? Muslims, Jews, Arabs… Russians, Iranians, North Koreans… capitalists, the Deep State, Yankees… liberals, conservatives?
And what does he mean by “our”? A politician’s enemies are more likely to be our friends than our enemies. Our most dangerous enemies could be the feds themselves! But people love simple and preposterous lies. They much prefer them to the truth. Truth is elusive. Difficult to discover. Infinitely nuanced. Hard to hold onto.
Each tiny bit of truth comes at a high price: A love lost. A marriage ruined. A business bankrupt. Money wasted. And a sorry soul burning on some ash pit in Hell. Nor does truth make you feel good. Like a magnifying mirror, it shows blemishes. You squirm in your seat when you see it. Often, you want to turn off the lights.
Not so with myth. It comes right over to you, fawns over you, airbrushes your photo, and Botoxes your face. It flatters you with weak light and strong angles. It pretends you are the noble master and it is merely the humble slave… willing to do your bidding.

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A Different Candidate?

September 27, 2016

French for Trump
OUZILLY, France – There are two ways you can destroy a country: pull down its money or build up its military. Usually, they go hand in hand – one hand ruining the economic body, the other attacking the soul.
“I would vote for Trump.”
The remark last came from an unlikely source. The French press treats Trump like a clown or a con artist. Until last night, we had not encountered a single Frenchman with a favorable view of the Republican candidate. We usually sink in our chair when the conversation turns to U.S. politics.
“Are you voting for Hillary?” they ask, assuming the answer is surely yes.
“No,” we say.
Then we get a look of deep suspicion. “You mean you are voting for Trump?”
“Not either,” we reply. Then we have some explaining to do.
“I don’t want to encourage them,” we begin. The conversation generally goes downhill from there. But last night, it was our companion who had some explaining to do – not so much to us, but to our other open-mouthed guests:
“Trump is a guy who has made a career in the real world. He knows something about how an economy actually works. Yes, of course, he appears vulgar and ignorant. But that’s because he understands how the press actually works.
“He has built a public persona to capture media attention.

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Great Causes, a Sea of Debt and the 2017 Recession

September 25, 2016

Great Cause
NORMANDY, FRANCE – We continue our work with the bomb squad. Myth disposal is dangerous work: People love their myths more than they love life itself. They may kill for money. But they die for their religions, their governments, their clans… and their ideas.
Some people think that even an idea as abstract as “freedom of speech” is worth dying for. It was Voltaire who said: “I disapprove of what you say, but I will defend to the death your right to say it.”
Most people jump onboard the train of a Great Cause with enthusiasm and conviction. But many have the good sense to hop off quietly before their lives are in real danger. We suspect that Mr. Voltaire would have done the same.

Famous French hippie and author Voltaire. He wears the same sardonic grin in every painting, whether he’s depicted at a young or an old age, doesn’t matter. His real name was François-Marie Arouet; he adopted the pen name Voltaire (one of 178 different ones he used) after spending 11 months incarcerated in a windowless cell in the Bastille, following the publication of a satirical verse in which he insinuated that the French regent practiced incest with his own daughter.

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Don’t Bet on Deflation Lasting Forever

September 24, 2016

More Mumbo-Jumbo
OUZILLY, France – Imagine the poor economist without a sense of humor. How he must suffer! This week was to be dominated by central banks. Two big ones – the Bank of Japan (BoJ) and the Fed – were to make important policy announcements.

The BoJ’s chief lunatic Haruhiko Kuroda with one of his famous diagrams. How can this not work? It looks so neat!
Photo credit: Yuya Shino / Reuters

The speculators placed their bets, front-running the news, and sat on the edge of their chairs. This week, the BoJ came out with more mumbo-jumbo. “Yield curve control,” it promised. The central bank says it will target a 0% yield on 10-year Japanese government bonds.
It added that it would continue buying the nation’s stocks (by way of exchange-traded funds) and charging a negative interest rate of 0.1% on the accounts banks keep with it.
Japan’s stock market crashed in 1989. Since then, the no-luck Japanese have had sluggish growth, recession, and on-again/off-again deflation. For more than a quarter-century, the gears of Japan, Inc. have turned slowly. And not for lack of trying.
The government spent hundreds of trillions of yen on “infrastructure” projects in an attempt to “jump start” the economy with fiscal stimulus.

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Get Ready for a New Crisis – in Corporate Debt

September 18, 2016

[unable to retrieve full-text content]OUZILLY, France – We’re going back to basics here at the Diary. We’re getting everyone on the same page… learning together… connecting the dots… trying to figure out what is going on. We made a breakthrough when we identified the source of so many of today’s bizarre and grotesque trends. It’s the money – the new post-1971 dollar. This new dollar is green. You can buy things with it.

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Janet Yellen’s Shame

September 18, 2016

[unable to retrieve full-text content]n honest capitalism, you do what you can to get other people to voluntarily give you money. This usually involves providing goods or services they think are worth the price. You may get a little wild and crazy from time to time, but you are always called to order by your customers.

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Follow the Money

September 15, 2016

A Small and Lonely Group
PARIS – It’s back to Europe. Back to school. Back to work. Let’s begin by bringing new readers into the discussion… and by reminding old readers (and ourselves) where we stand.
US economic growth: average annual GDP growth over time spans ranging from 120 to 10 years (left hand side) and the 20 year moving average of annual GDP growth since 1967. Note that the bump in the 70 year average is actually distorted by the output growth boost recorded during WW2 (the charts were made in 2009) – which is actually a prime example of how useless GDP can be as a measure of prosperity. Nevertheless, it is serviceable for the illustration of long term economic growth trends. Exponential credit expansion since the adoption of the pure fiat money system, the associated relentless growth of the welfare/warfare state and persistent declines in average economic growth rates have been going hand in hand, which is no coincidence.

US GDP Growth(see more posts on U.S. Gross Domestic Product, )US GDP Growth – click to enlarge.
As a Diary reader, you join a small and lonely group. But we know something others don’t. We understand the real cause of our economic malaise.

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Cash Bans and the Next Crisis

September 15, 2016

Criminalizing Cash
Money sometimes goes “full politics”. Take poor Kenneth Rogoff at Harvard. He wants a dollar with a voter registration card, a U.S. flag on its windshield, and a handgun in its belt – the kind of money that supports the Establishment and votes for Hillary.
Writing last month in the Wall Street Journal under the headline “The Sinister Side of Cash”, he noted that:
“Paper currency, especially large notes such as the U.S. $100 bill, facilitate crime: racketeering, extortion, money laundering, drug and human trafficking, the corruption of public officials, not to mention terrorism.”

Kenneth Rogoff(see more posts on Kenneth Rogoff, )Kenneth Rogoff
Etatiste tool Kenneth Rogoff, whose authoritarian jeremiads against cash currency we have first discussed and criticized in 2014 in “Meet Kenneth Rogoff, Unreconstructed Statist”. As Hans-Hermann Hoppe once noted: “Intellectuals are now typically public employees, even if they work for nominally private institutions or foundations. Almost completely protected from the vagaries of consumer demand (“tenured”), their number has dramatically increased and their compensation is on average far above their genuine market value. At the same time the quality of their intellectual output has constantly fallen.

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How is Real Wealth Created?

September 8, 2016

[unable to retrieve full-text content]An Abrupt Drop. Let’s turn back to our regular beat: the U.S. economy and its capital markets. We’ve been warning that the Fed would never make any substantial increase to interest rates. Not willingly, at least. Each time Fed chief Janet Yellen opens her mouth, out comes a hint that more rate hikes might be coming.

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How Does It All End? Part II

September 3, 2016

[unable to retrieve full-text content]Low Rates Forever, Nothing much is happening in the money world. The press reports that traders are hanging loose, wondering what dumb thing the Fed will do next. Rumor has it that it may decide to raise rates in September, or maybe November… or maybe not at all.

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