Premium Archives
by
charleshughsmith
Executive Summary
- Crisis intervention as policy = bad decision-making
- Why politics will defer dealing with the big problems, even though that will make them even bigger
- Why more taxes are in your future
- The criticality of increasing our alternatives — without our agitation, the government will appropriate from us while claiming "there's no other option"
If you have not yet read Part 1: Things Are Unraveling At An Accelerating Rate available free to all readers, please click here to read it first.
In Part 1, we examined how the dynamic of lowering interest rates to boost debt-based consumption inevitably leads to debt saturation and lower consumption. It also generates instability and rising systemic risks. As the returns on the central bank tricks of lowering interest rates and encouraging borrowing diminish, the resulting unraveling is speeding up.
There is another core dynamic at work: TINA, there is no alternative.
When There Is No Choice, Bad Policies Abound
In this week’s podcast with Chris (What To Expect From The Fourth Turning We're Now In), guest Neil Howe noted that crisis intervention is the result of authorities “feeling they had no other choice,” a.k.a. TINA. In this frame of mind, the eventual consequences of crisis intervention policies are ignored in the pressing desperation to make the financial and political pain of crisis go away.
As policymakers around the world soon discovered, TINA policies are habit-forming. Since they had no choice but to bail out the parasitic, dysfunctional banking sector, and goose debt-based consumption with cash for clunkers, mass purchases of mortgages, etc., they also had no choice but to continue these interventions, lest the desired result—expanding consumption and a rising stock market—falter.
Substituting crisis intervention for long-term constructive policies leads to bad policies, for the simple reason that…
The Coming Age Of Confiscation
PREVIEW by charleshughsmithExecutive Summary
- Crisis intervention as policy = bad decision-making
- Why politics will defer dealing with the big problems, even though that will make them even bigger
- Why more taxes are in your future
- The criticality of increasing our alternatives — without our agitation, the government will appropriate from us while claiming "there's no other option"
If you have not yet read Part 1: Things Are Unraveling At An Accelerating Rate available free to all readers, please click here to read it first.
In Part 1, we examined how the dynamic of lowering interest rates to boost debt-based consumption inevitably leads to debt saturation and lower consumption. It also generates instability and rising systemic risks. As the returns on the central bank tricks of lowering interest rates and encouraging borrowing diminish, the resulting unraveling is speeding up.
There is another core dynamic at work: TINA, there is no alternative.
When There Is No Choice, Bad Policies Abound
In this week’s podcast with Chris (What To Expect From The Fourth Turning We're Now In), guest Neil Howe noted that crisis intervention is the result of authorities “feeling they had no other choice,” a.k.a. TINA. In this frame of mind, the eventual consequences of crisis intervention policies are ignored in the pressing desperation to make the financial and political pain of crisis go away.
As policymakers around the world soon discovered, TINA policies are habit-forming. Since they had no choice but to bail out the parasitic, dysfunctional banking sector, and goose debt-based consumption with cash for clunkers, mass purchases of mortgages, etc., they also had no choice but to continue these interventions, lest the desired result—expanding consumption and a rising stock market—falter.
Substituting crisis intervention for long-term constructive policies leads to bad policies, for the simple reason that…
by
Brian Pretti
by
Chris Martenson
One of the models of the future that I favor is the Ka-Poom theory put out by Erik Jansen of iTulip.com back in 1999.
Basically it states that the end of a bubble era begins with a sharp deflationary event (the ‘Ka’ part of the title), but ends in a highly inflationary blow-off, (the ‘Poom’).
It’s a one-two punch. Down then up.
First The Fall…
PREVIEW by Chris MartensonOne of the models of the future that I favor is the Ka-Poom theory put out by Erik Jansen of iTulip.com back in 1999.
Basically it states that the end of a bubble era begins with a sharp deflationary event (the ‘Ka’ part of the title), but ends in a highly inflationary blow-off, (the ‘Poom’).
It’s a one-two punch. Down then up.
by
charleshughsmith
Executive Summary
- Why currency wars are heating up, and will get more intense from here
- Why it’s critical to understand the influence that Triffin’s Paradox has on the situation
- Why global crises will cause the dollar to strengthen further
- What will happen next
If you have not yet read How Many More “Saves” Are Left in the Central Bank Bazookas? available free to all readers, please click here to read it first.
In Part 1, we reviewed the deterioration of the dominant narrative of the past six years—that central banks can move markets higher and generate growth more or less at will. In shorthand: central bank omnipotence.
Three dynamics are undermining that narrative: diminishing returns on central bank monetary policies and public relations pronouncements; a collapse in oil prices that is destabilizing a key sector of the global economy, and the strengthening U.S. dollar, which is wreaking havoc on emerging-market currencies and economies.
If central banks really had such absolute control of the financial universe, would they let these three trends undermine their policies and power? The answer is clearly “no.”
There are a number of other factors undermining the “central banks are in control” narrative, but the field of battle where central banks are most likely to lose is foreign exchange (FX), for two fundamental reasons:
1. The FX market dwarfs the central banks. The equivalent of the entire Federal Reserve balance sheet ($4.5 trillion) trades in the FX markets every few days. Given the size of the market, central banks cannot manipulate the FX market via proxies or direct purchases for long. The only central-bank controlled factors that influence FX are interest rates paid on government bonds and money-printing. The first supports the currency, the second weakens it.
2. The FX market is still an open market, influenced by government bond interest rates, trade deficits and surpluses, perceptions of risk and speculative bets. This mix is much more dynamic than the two levers controlled by central banks: setting interest rates targets and creating new money to buy bonds.
Let’s trace the primary dynamics of the FX market, which is currently being destabilized by the rising U.S. dollar…
What Will Happen Next For the US Dollar
PREVIEW by charleshughsmithExecutive Summary
- Why currency wars are heating up, and will get more intense from here
- Why it’s critical to understand the influence that Triffin’s Paradox has on the situation
- Why global crises will cause the dollar to strengthen further
- What will happen next
If you have not yet read How Many More “Saves” Are Left in the Central Bank Bazookas? available free to all readers, please click here to read it first.
In Part 1, we reviewed the deterioration of the dominant narrative of the past six years—that central banks can move markets higher and generate growth more or less at will. In shorthand: central bank omnipotence.
Three dynamics are undermining that narrative: diminishing returns on central bank monetary policies and public relations pronouncements; a collapse in oil prices that is destabilizing a key sector of the global economy, and the strengthening U.S. dollar, which is wreaking havoc on emerging-market currencies and economies.
If central banks really had such absolute control of the financial universe, would they let these three trends undermine their policies and power? The answer is clearly “no.”
There are a number of other factors undermining the “central banks are in control” narrative, but the field of battle where central banks are most likely to lose is foreign exchange (FX), for two fundamental reasons:
1. The FX market dwarfs the central banks. The equivalent of the entire Federal Reserve balance sheet ($4.5 trillion) trades in the FX markets every few days. Given the size of the market, central banks cannot manipulate the FX market via proxies or direct purchases for long. The only central-bank controlled factors that influence FX are interest rates paid on government bonds and money-printing. The first supports the currency, the second weakens it.
2. The FX market is still an open market, influenced by government bond interest rates, trade deficits and surpluses, perceptions of risk and speculative bets. This mix is much more dynamic than the two levers controlled by central banks: setting interest rates targets and creating new money to buy bonds.
Let’s trace the primary dynamics of the FX market, which is currently being destabilized by the rising U.S. dollar…
by
Chris Martenson
Executive Summary
- Ukraine's economic free fall
- The real risk of Ukraine igniting the next world war
- Why a lasting peace is unlikely
- What you should do in preparation of escalating conflict between Russia and the West
If you have not yet read Part 1: The US' Suicidal Strategy On Ukraine, available free to all readers, please click here to read it first.
What's At Risk
Now we come to the hard part of this report, the part where we have to discuss what might happen next. My analogy for this period of history is the year(s) before WW I. Historians still cannot quite say what led up to the immense human disaster that we now call World War I, but enough failed diplomacy, bugled treaties, inept leadership, and inflexible political institutions were all grating against one another that a single assassination of a single archduke was a sufficient spark to set the whole pile ablaze.
Were those other failures not all stacked up like so much try tinder, a dozen archdukes could have been shot without anything more serious than a dozen solemn state funerals would have resulted.
Similarly, today we have a conflict in Ukraine which nobody can exactly say what the US's compelling interests are with Ukraine because nobody really knows. It's more a matter of principle, with that principle being the US gets to do what it wants, when it wants, and nobody is supposed to challenge that.
Putin said as much on Feb 7, 2015:
“There clearly is an attempt to restrain our development with different means,” he told trade union activists. “There is an attempt to perturb the existing world order… with one incontestable leader [Obama] who wants to remain as such thinking he is allowed everything while others are only allowed what he allows and only in his interests. This world order will never suit Russia.”
(Source)
Clearly Russia is no pushover country and has no interest in having dangerous coups and rising ultra-nationalism on its borders go unchecked, and this is why we are in such dangerous territory. The US has not been up against a legitimate foe for such a long time, it may be like the school yard bully that fails to properly evaluate the new kids at school before picking a fight.
Russia is making its position known to the world. It has been…
America Vs Russia: What’s At Risk
PREVIEW by Chris MartensonExecutive Summary
- Ukraine's economic free fall
- The real risk of Ukraine igniting the next world war
- Why a lasting peace is unlikely
- What you should do in preparation of escalating conflict between Russia and the West
If you have not yet read Part 1: The US' Suicidal Strategy On Ukraine, available free to all readers, please click here to read it first.
What's At Risk
Now we come to the hard part of this report, the part where we have to discuss what might happen next. My analogy for this period of history is the year(s) before WW I. Historians still cannot quite say what led up to the immense human disaster that we now call World War I, but enough failed diplomacy, bugled treaties, inept leadership, and inflexible political institutions were all grating against one another that a single assassination of a single archduke was a sufficient spark to set the whole pile ablaze.
Were those other failures not all stacked up like so much try tinder, a dozen archdukes could have been shot without anything more serious than a dozen solemn state funerals would have resulted.
Similarly, today we have a conflict in Ukraine which nobody can exactly say what the US's compelling interests are with Ukraine because nobody really knows. It's more a matter of principle, with that principle being the US gets to do what it wants, when it wants, and nobody is supposed to challenge that.
Putin said as much on Feb 7, 2015:
“There clearly is an attempt to restrain our development with different means,” he told trade union activists. “There is an attempt to perturb the existing world order… with one incontestable leader [Obama] who wants to remain as such thinking he is allowed everything while others are only allowed what he allows and only in his interests. This world order will never suit Russia.”
(Source)
Clearly Russia is no pushover country and has no interest in having dangerous coups and rising ultra-nationalism on its borders go unchecked, and this is why we are in such dangerous territory. The US has not been up against a legitimate foe for such a long time, it may be like the school yard bully that fails to properly evaluate the new kids at school before picking a fight.
Russia is making its position known to the world. It has been…
by
Chris Martenson
Executive Summary
- Which countries are next in line to "go Greek"?
- Which major countries will be hit by deflation next? Which will instead see massive inflation?
- How individuals should start preparing
- Why huge massive losses and wealth transfer are inevitable for many
If you have not yet read Part 1: Greece Exposes The Global Economy's Achilles Heel, available free to all readers, please click here to read it first.
At a high level, the suite of predicaments we face are as obvious as they are serious.
Perhaps the largest predicament we face is that infinite economic growth on a finite planet is an impossibility and yet that's exactly what our monetary and banking systems require.
Not merely because the bankers and politicians want it, which they do, but because that's how the system itself is designed. When you loan money into existence, you get an exponential increase of that money over time. Actually you get an exponential increase in debt too, only at a faster pace which translates into larger quantities.
For as long as debts are growing at an exponential pace, everything is fine with the world, the economy hums along, politicians get re-elected and the big banks churn out profits year after year.
However, when the debt growth stops, financial panic sets in, the banking system threatens collapse, and the fiscal and monetary authorities pull out all the stops in their efforts to prevent these various ills from getting any worse.
What the political and banking folks are desperately seeking to prevent is nothing less than a Great Unraveling.
Their task is impossible.
The Great Unraveling will be a set of related economic and financial crises that end up taking inflated expectations and reducing them to match reality. Perhaps this process will take years, or maybe it will take decades, or maybe it will take months. Nobody knows. But the longer that…
The Approaching Great Unraveling – Are You Prepared?
PREVIEW by Chris MartensonExecutive Summary
- Which countries are next in line to "go Greek"?
- Which major countries will be hit by deflation next? Which will instead see massive inflation?
- How individuals should start preparing
- Why huge massive losses and wealth transfer are inevitable for many
If you have not yet read Part 1: Greece Exposes The Global Economy's Achilles Heel, available free to all readers, please click here to read it first.
At a high level, the suite of predicaments we face are as obvious as they are serious.
Perhaps the largest predicament we face is that infinite economic growth on a finite planet is an impossibility and yet that's exactly what our monetary and banking systems require.
Not merely because the bankers and politicians want it, which they do, but because that's how the system itself is designed. When you loan money into existence, you get an exponential increase of that money over time. Actually you get an exponential increase in debt too, only at a faster pace which translates into larger quantities.
For as long as debts are growing at an exponential pace, everything is fine with the world, the economy hums along, politicians get re-elected and the big banks churn out profits year after year.
However, when the debt growth stops, financial panic sets in, the banking system threatens collapse, and the fiscal and monetary authorities pull out all the stops in their efforts to prevent these various ills from getting any worse.
What the political and banking folks are desperately seeking to prevent is nothing less than a Great Unraveling.
Their task is impossible.
The Great Unraveling will be a set of related economic and financial crises that end up taking inflated expectations and reducing them to match reality. Perhaps this process will take years, or maybe it will take decades, or maybe it will take months. Nobody knows. But the longer that…
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