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0 A Brief History of Technocracy

James Corbett to Gold Prices — Tags:  

Today, Marion King Hubbert is best known as the Shell Oil researcher who gained notoriety in the 1950s for predicting that the US would achieve its peak production of petroleum by 1970, and that almost all of the planet's oil supplies would be exhausted by 2020.

This "peak oil" theory, still sometimes referred to as "Hubbert's Peak," was, like everything else generated by Big Oil, a conveniently crafted lie, designed to habituate the market to artificial scarcity and thus keep oil prices high. Hubbert's "prediction" was not based on any empirical data from any oil field, but instead relied on Hubbert's incorrect guesses about remaining oil reserves and employed a heuristic tool to model production.

As Hubbert's protege and colleague at Shell Oil, Kenneth Deffeyes, conceded years later: "The numerical methods that Hubbert used to make his prediction are not crystal clear. Today, 44 years later, my guess is that Hubbert, like everyone else, reached his conclusion first and then searched for raw data and methods to support his conclusion."

Shortly before his death in 1989, Hubbert himself admitted that when he showed his Peak Oil paper to Shell's managing director before presenting it to his colleagues, the director had told him not to "go overboard" with his estimates of oil reserves, pointing specifically to L.G. Weeks, a rival geophysicist who had estimated reserves to be much higher, and thus the impending threat of undersupply and the need for high oil prices to be much weaker.

But although today Hubbert is remembered almost exclusively for his Peak Oil thesis, he was in fact involved in a much larger, lifelong project, helping to codify and incorporate a movement that, much like eugenics, was wildly popular nearly a century ago, fell out of favor in polite society, and yet continues today under other names. That movement was called "Technocracy."

Technocracy billed itself as a social movement, a philosophy, a scientific solution to political and economic problems, and a new way of ordering the world. But at base, it is an idea for a new international economic order, one to be designed and managed down to the most minute detail by a select few: the "technocrats."

As Patrick Wood, author of Technocracy Rising: The Trojan Horse of Global Transformation, explains:

"Technocracy was defined very succinctly in 1938 by their own publication The Technocrat's Magazine. They call it a system of scientifically engineering society. They believed that they alone were the only ones that could run society correctly. As a result of technology having come in and change the fabric of society, they hated politicians, they hated the establishment, the organization of society they way it is because it was not efficient, it was not conservation based if you will to conserve resources. So they took it upon themselves to define the economic model that would replace capitalism and free-enterprise and that's exactly what it was, a replacement of the economic system."

Drawing on Henri Saint-Simon's call for a scientifically-organized socialist system, the positivism and secular humanism of Auguste Comte, and the "Principles of Scientific Management" propounded by Frederick Taylor, the technocratic movement emerged from the same environment of progressivism, positivism and social Darwinism that birthed eugenics. Just as the eugenicists believed the human race could be improved through selective breeding controlled and administered by a small group of scientists and their billionaire backers, so, too, did the technocrats believe that they could improve the social and economic conditions of humanity by controlling and administering society. And, happily enough for the oiligarchs, the technocrats would would improve the world by replacing money with energy certificates.

Led by the eccentric "revolutionary" economist and sociologist Thorstein Veblen, the technocratic movement that formed around Veblen's "New School for Social Research" and "Technical Alliance" attracted both engineers and serious researchers like King Hubbert and Buckminster Fuller, and fellow eccentrics like Howard Scott.

Scott, a "mysterious man" of uncertain background, established himself in New York City at the end of World War I and came to be seen as a "bohemian engineer." In 1920 he went to work for the Wobblies as a research director, and the following year he founded the Technical Alliance, a group of engineers and scientists centered around Columbia University who, as a forerunner to the technocracy movement, advocated for a society run by scientists and engineers.

In 1932, the charismatic and well-spoken Scott managed to attach himself to Walter Rautenstrauch, a professor at Columbia and the founder of the university's Department of Industrial Engineering. With a common interest in technocracy, the two became friends and allies. It was through Rautenstrauch that Scott was able to approach the president of Columbia, Nicholas Murray Butler, for permission to use the university's facilities. Butler, always on the lookout for the cutting-edge of progressivism, was swayed by the technocratic ideas, and soon Scott's "Committee on Technocracy" was operating out of the basement of Hamilton Hall.

When Butler let word slip about the next big idea being cooked up in the basement of his university, technocracy became a sensation. It was lauded in the press, Scott became a sought-after speaker, and there was even a dance named after the movement.

It was at Columbia that Scott met King Hubbert, and the two, an unlikely pair of serious-minded researcher and eccentric revolutionary, immediately hit it off. There stint together at Columbia came to an abrupt end when Scott was exposed as a fraudster. Everyone had assumed he was a qualified engineer, but one enterprising reporter discovered that Scott had no credentials from any university. Butler kicked technocracy out of Columbia and the "Committee on Technocracy" disbanded almost as quickly as it had come together.

Scott found himself at a personal low. Penniless and with an old debt having caught up to him, he had only one person he could rely on: M. King Hubbert.

Hubbert let Scott live in his Greenwich Village apartment and paid out of his own pocket to file the articles of incorporation for Technocracy, Inc., a new membership organization that would carry on the principles of technocracy. The first step, of course, was to define precisely what those principles were.

Hubbert got to work penning the Technocracy Study Course, the Bible of the Technocracy movement. In it, Hubbert laid out the vision of "an abundance of physical wealth on a Continental scale for the use of all Continental citizens," which, he warned, "can only be accomplished by a Continental technological control, a governance of function, a Technate."

The technocratic system was to be structured around a new monetary paradigm, one based not on dollars and cents but "Energy Certificates" representing the nation's net energy expenditure. These certificates would be denominated in Joules and issued based on a net energy budget deemed appropriate by the technocratic state's governing scientists. Citizens would be issued an equal share of the nation's certificates and make their purchases with them, and the information about these purchases would be relayed back to the central planning body for analysis. By this method, the technocrats could, in the words of one proponent, "create a thermodynamically balanced load of production and consumption, thereby doing away with unemployment, debt and social injustice."

In the Technocracy Study Course, Hubbert, like a good technocrat, laid out the exact conditions that would need to be met for this vision to come to pass. According to him, technocracy would require:

  • all energy usage and all consumer spending throughout the nation to be calculated and registered on a continuous and instantaneous basis\
  • a 24/7 inventory of all production and consumption
  • a complete registry of all products available for sale, where they were produced, how much energy was expended in their production, and where and when they were sold.
  • And, finally, a "specific registration of the consumption of each individual, plus a record and description of the individual."

Hubbert's vision was not just that of a totalitarian society in which every detail of every interaction was recorded and reported to a central authority, but, for the 1930s, the concept of continuously and instantaneously updated registries of every good in the economy was not just audacious, but borderline insane.

Nevertheless, suffering through the Great Depression, the American people were willing to listen to any ideas to replace the current system that had so obviously failed them, no matter how outlandish. Technocracy, Inc. did attract a following, swelling into the tens of thousands later in the decade. But Scott's eccentric ways, compelling members to salute him in public and delivering rambling radio addresses, ultimately led to the movement's long, slow decline in relevance.

Hubbert never repudiated the concept of technocracy, but when he joined Shell as a researcher he resigned his position on the board of Technocracy, Inc. and avoided direct mention of the organization.

The technocrats had sketched the outlines of a completely ordered and controlled society, one in which energy is the fundamental measure of value and all consumption and production is meticulously analyzed by a central authority. Technocracy, Inc. still exists to this day, but the language and thinking of the technocrats has, like eugenics, undergone a metamorphosis. And, also like eugenics, the name may have faded into obscurity, but the idea lives on in the hands of the oiligarchs...

0 North Korea

Bob Rinear to Gold Prices — Tags:  

The dance continues. On Tuesday at 10 am, President Trump addressed the UN, and while he hit on a lot of markers, he was quite focused on North Korea and Iran. As you are all aware, North Korea and the US have been butting heads for quite some time. And like many big time topics, the question remains the same. What’s going to happen?

First let’s take a peek at why we’re seeing what we’re seeing. The “Korean” war doesn’t get the press of WWII nor of Vietnam. Yet it was an absolutely horrific war, with incredible loss of life. The number of Korean dead, injured or missing by war’s end approached three million, ten percent of the overall population. The majority of those killed were in the North, which had half of the population of the South; although the DPRK does not have official figures, possibly twelve to fifteen percent of the population was killed in the war, a figure close to or surpassing the proportion of Soviet citizens killed in World War II.

When it was over, it wasn’t over. There was never a declaration, simply an armistice. The armistice is however only a cease-fire between military forces, rather than an agreement between governments. No peace treaty was signed which means that the Korean War has not officially ended.

At the end of the hostility, the nation was cut in half, with the North Half being strongly communist influenced and the South half looking toward a more Democratic solution.

The contrast is startling. South Korea makes electronics, cars, steel and a thousand other first world products. The North struggles to feed its people. But that’s not uncommon in a dictatorship. What is uncommon is the “cult” that became North Korea. These people have been cut off from the world for so long, they have no idea about life outside their state. They truly believe that Kim Jung-un is a God.

The leadership of North Korea has sought for decades to keep their people insulated from the world. They want total control of their population, and to stay in power indefinitely. In reality, that’s ALL they want.

Well if that’s their whole goal, why all the head butting between us and them? Part of it is the fear of them having nukes and yes that’s a big part. But the lesser known part is that the US would like nothing more than to have a North Korea that’s US friendly, so we could park military on China’s doorstep. Don’t ever think that’s not part of this equation.

Now, Kim Jong might be a scumbag. He might be a lot of things, but he’s not stupid. He saw what happened in Iraq as Saddam was overthrown. He’s seen what happened in Libya as they were overthrown. He’s watching in real time as the US tries to oust Assad of Syria. What was a common thread between them all? They didn’t have nuclear weapons.

Thus, Jong figures that if he doesn’t have nukes, at some point the US will invade him and overthrow him and try and democratize his nation. So they’ve been working on nukes for years and they’ve now got them. While that was bad enough, it wasn’t the worst thing. But then they got the technology good enough to get one of these nukes on a missile. That right there is exactly why we’re seeing all this head banging.

See, the bottom line for the Pentagon types is to make sure we don’t see one of our cities go up in a mushroom cloud. Very soon Kim Jong will have that capability. Now would he ever do that, knowing his nation would be obliterated? Probably not. But probably isn’t good enough for the war hawks. They figure the only way to be positive it can’t happen, is to dismantle his program.

Could the US just launch an attack and take out Kim and his nukes? Yes, with little doubt. The problem of course is that the North has so many conventional weapons pointed at South Korea, that no matter how hard and how fast we hit him, they could easily kill 10, 20, 30,000 South Koreans in the first hours. That right there is the ONLY reason we’re not bombing him to hell.

Well, I just lied. See, there’s another reason. The President of South Korea has told the US they do not want us “going in”. While having a nuclear North Korea scares the crap out of them, it doesn’t scare them as much as having the North bomb Seoul, and killing half a million citizens. So the South has told us, please, no attack.

This is why we see the back and forth head banging. This is why we see the war talk. This is why we see Kim shooting missiles. He feels he needs to display nuclear strength to stay in power, the US thinks he’s too unstable to have such weapons. It’s a stalemate so far.

The question is, what is the answer? Is the US ever going to be comfy with a nuclear North? Nope. Yet they too know that if we go in, it’s going to be uglier than most imagine. So the game lately has been to try and squeeze China into talking down their NK buddy. This is still their best plan, but as you can imagine, China’s going to want all kinds of concessions for doing it. They’ll want more trade bargains, they’ll want us out of the South China Sea, etc. The price will be steep.

We are not in the clear. The US won’t stop trying to denuclearize the North and Kim will not stop building them unless China steps in and gets him all manner of “gifts” from the US. If China doesn’t pull it off, or if the North makes a mistake and drops a missile on Japan or Guam or hits one of our ships, then the gloves come off. We will indeed “go in” and it would be horrifying.

One last thing to consider. It’s not pleasant. The highest decorated marine of all time, General Smedley Butler wrote a book way back in the 30’s called “War is a Racket” in which he said all wars were for profit. Considering the economic mess we’re in, and considering the military/industrial complex, it isn’t far fetched to think that they might rely on a horrible war to cover up the Nations issues.

0 Repeal the Debt Ceiling?

Alfred Adask to Gold Prices — Tags:  

 The "debt ceiling" is the maximum amount of debt that can be incurred by the U.S. government.  Congress periodically authorizes a higher debt ceiling to allow government to go legally deeper into debt.  

     The problem with the debt ceiling is that lots of American conservatives don't want government to go deeper into debt.  Politicians are therefore forced to seemingly oppose each additional debt ceiling increase or risk being voted out of office.  

Result?  Each debt ceiling cycle is controversial and politically explosive.  If Congress fails to raise the debt ceiling, government can't borrow the currency it needs to pay its bills and/or "service" (pay the interest on) the National Debt.  Failing to raise the debt ceiling would force the government to either admit that it's unable to repay its debts and bankrupt-or, government would have to raise taxes dramatically.  If government admitted it was bankrupt, the U.S. and even global economies could collapse.  If government had to raise taxes, there'd be a political uproar.  In either case, incumbent politicians would risk being voted out of office and forced go back to working for a living.  (The horror!)

     Given the dire consequences following a failure to raise the debt ceiling, you can bet that the debt ceiling will be raised-at least for a little longer.   

     Given that raising the debt ceiling is almost inevitable, you might suppose that that the political process would be simple and painless. You'd be wrong.  

     Although there's little doubt that the debt ceiling must be raised, that increase will raise two political questions:  

     First, when shall the debt ceiling be raised?  

     Congress never wants to raise the debt ceiling during an election year since doing so is sure to antagonize voters and cause some incumbents to be voted out of office. That's why the debt ceiling increase that should've taken place in 2016 was postponed until September 29th of 2017.  

     The strategy is simple: First, get last year's election out of the way so the incumbents can be reelected.  Then, pass a new debt ceiling limit this year so the voters will forget by the time we get to the 2018 mid-term elections.  In broad strokes, that's the preferred time table for raising the debt ceiling.

     Second, how large shall the increase be?   

     The current debt ceiling is about $20 trillion.  If Congress raised the current debt ceiling by another $10 trillion, the public would riot and no member of the Republican Party could claim to be a fiscal conservative in the 2018 election.  

     On the other hand, if Congress raised the current $20 trillion debt ceiling by, say, just $1 trillion, there'd be no public backlash and incumbents will be reelected in 2018.  The trouble with a mere $1 trillion increase is that government will spend that increase in short order and another debt ceiling controversy might occur just before the 2018 election-and no politician wants that.

     The debt ceiling issue really is a darned-if-you-do/darned-if-you-don't political problem  As you'll read, the only politically-rational solution to the debt ceiling problem is to repeal the debt ceiling law and let government borrow as much as it likes, whenever it likes, without a need for congressional approval or congressional liability.  I'm not for that solution, but it does strike me as logical and inevitable.

     Wolf Richter recently penned an article dealing with the debt ceiling entitled "US Gross National Debt to Spike by $800 Billion in October?":   

      "'There is no chance we won't raise the debt ceiling,' swore Senate Majority Leader Mitch McConnell (R., Ky.). He was confident that the Senate would pass a bill that would raise the debt ceiling so that the government could continue to pay for things that Congress told the Government to pay for, and so that the government could service its debts, rather than default on them.

         "Treasury Secretary Steven Mnuchin said, "This is not about spending money.  This is about paying for what we've spent, and we cannot put the credit of the United States on the line."

     If the Debt Ceiling debate is about "paying for what we've spent," it's not simply about "spending [more] money".  It's primarily about repaying some of our existing debt.  

     However, government won't borrow more currency in order to pay off some of the National Debt's $20 trillion principal.  Instead, government will raise the debt ceiling primarily so it can borrow more currency to merely "service" the existing debt by just paying the interest due on that debt.  So long as government is able to "service" the debt (pay the interest), government can sustain the illusion that it can and will someday repay the $20 trillion principal in full.

     But, if the day ever comes when government can't even repay the interest on the National Debt, the illusion of solvency will disappear and the economy will collapse into calamity.

      Moody's credit rating service recently threatened to cut the government's credit rating from its current level of "AAA" if government fails to raise the debt ceiling by September 29th because the resulting failure to pay the interest on the National Debt that's due in October and November.  

     Moody's wouldn't have made that public threat unless there was valid concern that the U.S. government might default on its debt by failing to service that debt (pay just the interest, no principal) in  just the next few months.  Moody's threat implies that government's financial affairs are no better than those of someone who's maxed-out his Master Card and can't even make the minimum monthly payment on the balance due.  The man who can't make the minimum monthly payment will soon lose his credit card, see his credit rating fall, and watch his cost of borrowing (interest rate) rise on any new debt.

     If government can't service the $20 trillion National Debt by merely paying the interest, the national economy is as shaky as the finances of the man who can't make minimum payment on his Master Card. If government must borrow more currency just to pay the interest on its National Debt, then government is about to see it's credit rating plunge and its cost of borrowing (interest) soar.  As government's access to more credit is increasingly inhibited, diminished or even terminated by higher interest rates, we could soon approach a moment when government is forced to admit can't even borrow enough to pay interest on its debts and is therefore bankrupt.

       I don't expect government to fail to raise the debt ceiling so it can borrow more currency in order to pay the interest on the existing debt.  I don't expect government to become an admitted bankrupt this year.

     Nevertheless, my point is that government is so so close to bankruptcy, right now, that it could be forced to publicly admit that it's bankrupt in the first quarter of next year.  

     And, while it's unlikely that government will be forced to admit bankruptcy in the next few months, the fact that it could be forced to do so is evidence that government is already in such enormous financial trouble that a declaration of bankruptcy is virtually inevitable-maybe not this year, but soon.

      If it's true that government is nearly bankrupt, then there are some interesting implications:

      Government can't take on many new programs that require significant additional funding.  I.e., who will pay for a wall between the U.S. and Mexico?

    How much currency can the feds give to Texas for Hurricane Harvey or Florida for Hurricane Irma?  

         Can a bankrupt government continue to subsidize Obamacare?  Or, will Obamacare have to be curtailed or even canceled?  

      Can a bankrupt government continue to project as much military power into the Middle East or the Korean peninsula as it has in the past?  

      If government's ability to project military power into foreign countries is diminished, will the dollar's perceived value and standing as World Reserve Currency also diminish?   

     What about paying government pensions and So-So Security?

     What about paying current government employees' wages?  Can you say "lay-offs" boys and girls?

      What will happen to the perceived value of the U.S. bonds that are being held as collateral by banks for making loans or being held by pension funds as investments?  

      If government is close to an admitted bankruptcy, it'll be desperate for any source of credit or revenue it can find.  That means the chances of cutting taxes on corporations or the middle class are slim and none.  Meaningful tax reform is unlikely.  If government is truly near bankruptcy, expect taxes to rise.

     You can also expect an increasingly aggressive IRS determined to shake down all taxpayers for more loot.

      A (nearly) bankrupt government can be expected to "beg, borrow or steal" as much currency as it can find, wherever it can find it, to sustain the illusion of solvency.  

     Of those three options (begging, borrowing and stealing), begging won't work.  Who loves government enough to give them free currency?  Who respects a government that begs?

     Borrowing is unlikely to work much longer. Who will lend more to the debtor who can't make minimum payments on his Master Card?  Who will lend more to a government that can't even service (pay interest on) its existing debt?  

       Government survived the Great Recession because it was able to force the Federal Reserve to lend it more currency at near-zero interest rates.  Private lenders had largely refused to lend more currency to the U.S. government at artificially low interest rates, so the Fed became the "lender of last resort".

     Without the Fed's "voluntary" purchase of trillions of dollars worth of additional government bonds, government would've expressly or implicitly declared bankruptcy at least five years ago.  Government's dependence on the Fed's "generosity" is evidence that government has been bankrupt for years.

     And now, government is caught in a predicament wherein it's at least doubtful that the Federal Reserve is still willing (assuming it's even able) to increase its already bloated balance sheet by lending as much more currency as the government needs and/or wants.  I doubt that the Fed can refuse to be government's "lender of last resort," but I'll bet that the Fed can drag its feet in order to minimize however much more currency it pays for new U.S. bonds that are certain to be intrinsically-worthless and irredeemable.   

     That leaves "stealing" as a bankrupt government's last resort to acquire more currency.  We can expect that government (just like any other thug who's too broke to purchase more crack in the hood) will mug somebody (or some class of people) to get the currency it needs to maintain its illusion of  solvency and power.  (The moral equivalence between government and thugs is not hyperbole.  A gov'ment's gotta do what a gov'ment's gotta do.)

       So, who can gov'ment rob?  

     During the Great Depression, Willie Sutton was a famous bank robber.  When captured and asked "Why do you rob banks?" Willie replied, "'Cuz that's where the money is."  Willie's observation offered sage advice for thugs and bankrupt governments.  If you gotta have more cash, rob banks 'cuz that's where the money is.

     In the spirit of Willie Sutton, if government truly  goes bankrupt, it will rob American banks (and, perhaps, pension funds) to get the currency it needs to survive.  There's no point to sending soldiers door-to-door to search homes for whatever currency (or gold) has been squirreled away in people's mattresses.  People will scream.  Innocents will be shot.  Sending storm troopers door-to-door would be a public relations nightmare.

     My point is that a governmental bankruptcy (which seems near) is virtually certain to cause government to rob banks, savings and pension accounts.  These thefts are easy because:  1) they can be done electronically; 2) there's no need to send storm troopers to the banks; 3)  no innocent people get shot; 4) better yet, no guilty people get shot. 

      Whenever people can be robbed under the color of law, it'll be legalized theft without the need for much violence.  The P.R. won't be too bad.

     Besides, the public (who, for the most part, have no savings whatsoever) won't mind if government robs the "rich" (those who have even modest savings and pension accounts).  The non-productive American consumers will support and cheer for their bankrupt government's self-righteous authority to rob anyone who's got anything worth having.  ("From each according to their bank accounts; to each according to their crack habit.")  No one will be safe.  But the banks and pension funds will be the low-hanging fruit that's easiest and therefore first to be robbed.

      Implication?

     If you have any wealth that you'd like to preserve, banks and pension funds may not be your first, best choice.

       Let's get back to today's debt ceiling dilemma.  

      The debt ceiling law was originally enacted over a century ago-but that was when our monetary system was based on physical assets-gold and silver.   To protect our assets from excessive governmental debt, Congress passed the debt ceiling law to minimize our National Debt.

     But, today, we have a debt-based monetary system.  As a result, we face a fantastic implication:  Debt (mere promises to pay) has become our primary form of wealth.  

Some readers will reject that implication as moronic-and they might be right.

     But riddle me this:  

     Q:  How did government and/or the Federal Reserve and/or local banks create the economic "stimulus" that prevented a complete economic collapse during the Great Recession?  

     A:  By injecting trillions of dollars worth of fiat currency into the economy.

     Q:  Where'd that fiat currency come from?

     A:  Government printed up trillions of dollars in intrinsically-worthless U.S. bonds (mere promises to pay; debt instruments) and then sold those bonds to the Federal Reserve and to major banks to be held as collateral.  This was possible because Congress, in its infinite wisdom, had previously passed laws that allowed banks to treat worthless U.S. bonds (debts) as collateral (assets) for making additional loans to the people and institutions of the U.S. and global economies.  

     Q:  Why would the world's bankers want these intrinsically-worthless debt-instruments?

     A:  I'm not sure.  I could be wrong.  But the answer may be because, under U.S. fractional reserve banking laws (enacted by the monetary alchemists we've elected to Congress, the Senate and the presidency), made U.S. bonds legally "magical".  That is, although intrinsically-worthless, U.S. bonds can be legally used by banks as collateral to lend up to $9  for every $1 in U.S. bonds held in their bank vaults as legal collateral.  

     For example, suppose a bank paid $1 billion fiat dollars (debt instruments) to purchase $1 billion in U.S. bonds (debt instruments) and parked those bonds in the bank vault. 

      As I understand it, the bank could then lend up to $9 billion to the public to purchase homes, cars and flat-screen TVs.  

     Let's suppose that $9 billion was loaned in the context of Near-Zero interest rates (more monetary alchemy-this time from the Federal Reserve) and the banks could only charge 3% on its $9 billion in loans.  3% doesn't sound like much.  On $9 billion loaned, 3% would only generate about $270 million in interest for the bank.  Figure for inflation, defaults, and the normal costs of business, etc., and lending $9 billion for a mere $270 million doesn't sound very profitable.

     Nevertheless, the banks don't bitch.  In fact, banks are oddly silent about the Fed's near-zero interest rate which seemingly deprives banks of a fair return on their $9 billion in loans.  We could expect banks to scream that they can't survive making a lousy 3% interest on their loans.  But bankers utter nary a sound in criticism or complaint about 3% interest rates.  

     Q:  Why are banks so silent?

     A:  I don't know, but I think it might work like this:  The banks aren't making 3% ($270 million) on their $9 billion in loans.  They're making $270 million in interest on their original investment of $1 billion used to purchase $1 billion worth of "magical" U.S. bonds from which $9 billion in "magic money" loans were "spun".  

     Get that?  If my reasoning is roughly correct, the banks charging a "lousy" 3% on $9 billion in loans are actually receiving $270 million per year on their original $1 billion investment.  Thanks to 9:1 fractional reserve banking, the 3% interest on $9 billion in loaned fiat dollars is really 27% interest on the bank's original investment of $1 billion.

     Q:  If you were a banker able to bring in 27% interest on your investments, would you bitch about how unfair banking laws were-or would you keep your mouth shut and just keep on raking it in?

     A:  Here, I'll lend you my rake for a mere $1 million.

      The modern monetary system is based on debt (mere promises to pay) rather than tangible assets derived from actual production.  Today's monetary system is an illusion, a house of cards, a brilliant Ponzi scheme to rob the productive elements of society by transferring the producers' wealth to parasitical bankers and politicians who understand and exploit the debt-based monetary system.  

     In the context of our former, asset-based monetary system, the debt ceiling law made sense since it protected producers and their assets from excessive governmental debt.  

     However, in our current, debt-based, fractional-reserve monetary system, anything (including the debt ceiling law) that impairs government's capacity to go deeper into debt threatens our financial system and economy.   For our debt-based economy to thrive, we must have more debt and more debtors.  

      If that principal seems absurd, please tell me why we had sub-prime mortgages and masses sub-prime debtors prior to the  Great Recession?  Then, tell me why today, we again have sub-prime auto loans and more sub-prime debtors.  Is the system designed to sell more cars or create more debtors?

     Q:  Why didn't banks learn from the Great Recession that sub-prime loans are dangerous?  Why are banks again engaging in sub-prime auto loans to sub-prime debtors?  

     A:  Because we live in a debt-based monetary system where debt, fantastically, is our principle form of wealth.  To keep this debt-based economy running, either the private sector or  government (or both) must keep going deeper and deeper into debt.  

     If we stop going into debt, the U.S. and global economies will collapse.  Millions might die.

     Implication?

     If we must have more debt and the debt ceiling laws impair the creation of more debt, then (in order to save the "economy") the debt ceiling laws must be repealed.

      Prediction?

      The debt ceiling law-which creates a huge and repeated embarrassment for politicians and, worse, impairs government's power to dive deeper into debt-will soon be repealed.  That repeal could come as soon as the first quarter of 2018 or it might be held off until after the 2018 mid-term elections.

     Pending that repeal, government will pass a series of relatively small, short-term debt-ceiling extensions.  Trump and the Democrats have done just that by agreeing to enact a short-term extension of the current debt ceiling from October 29th to the end of December.  Come December, we'll either see another short-term extension or we'll see the debt ceiling law repealed

     Assuming my premises are correct, logic suggests that, for the debt-based monetary system to continue, the debt ceiling law must be repealed.

0 The BRICS Summit: What You Need to Know

James Corbett to Gold Prices — Tags:  

The leaders of the so-called "BRICS" nations converged on Xiamen in Southeast China this week to convene the Ninth BRICS Summit, the annual get-together for the association. And to the surprise of absolutely no one, the event kicked off with a joint declaration full of the usual mealymouthed dipolomatic gobbledygook that was immediately hailed by the members' state-run media mouthpieces as the start of the group's second "golden decade" and (say it with me) "paving the way for a new world order." Yay.

But, buried in among all the feelgood diplobabble were a few nuggets of significance, as predictably undigestible as those nuggets may be. Like the BRICS' reaffirmation of commitment to the UN and their "sustainable development" scam, Agenda 21/2030:

"We reaffirm our commitment to fully implementing the 2030 Agenda for Sustainable Development.[...]We support the important role of the United Nations, including the High Level Political Forum on Sustainable Development (HLPF), in coordinating and reviewing global implementation of the 2030 Agenda, and support the need to reform the UN Development System with a view to enhancing its capability in supporting Member States in implementing the 2030 Agenda."

And their resolve to foster a "global economic governance architecture," complete with an obligatory curtsy and ring-kissing of their IMF/World Bank masters:

"We resolve to foster a global economic governance architecture that is more effective and reflective of current global economic landscape, increasing the voice and representation of emerging markets and developing economies. We reaffirm our commitment to conclude the IMF's 15th General Review of Quotas, including a new quota formula, by the 2019 Spring Meetings and no later than the 2019 Annual Meetings. We will continue to promote the implementation of the World Bank Group Shareholding Review."

And their genuflection to the World Trade Organization:

"We remain firmly committed to a rules-based, transparent, non-discriminatory, open and inclusive multilateral trading system as embodied in the WTO. We reaffirm our commitments to ensure full implementation and enforcement of existing WTO rules and are determined to work together to further strengthen the WTO."

Barf.

But, like it or not, the summit did generate some actual news worthy of some scrutiny, so in the interest of keeping you informed, here are the most important stories to emerge from this year's BRICS Summit.

Beijing Betrays Belt-and-Road Buddies?

One item from the joint declaration of actual news significance was buried halfway through the lengthy document, right after a discussion of the (in)security situation in Afghanistan. Blink and you'd miss it, but there in paragraph 48 is a little diplomatic bombshell alternately described as a "breakthrough" and a "betrayal."

"We, in this regard, express concern on the security situation in the region and violence caused by the Taliban, ISIL/DAISH, Al-Qaida and its affiliates including Eastern Turkistan Islamic Movement, Islamic Movement of Uzbekistan, the Haqqani network, Lashkar-e-Taiba, Jaish-e-Mohammad, TTP and Hizb ut-Tahrir."

For those unfamiliar with the groups named in this sentence and their affiliations, this otherwise innocuous clause condemning terrorism is a "breakthrough" for India, because they have tried (and failed) to get the BRICS to condemn Pakistani terror groups like the Haqqani network and Lashkar-e-Taiba (LeT) for some time now. Just the naming of these names as threats to the security of the region is a huge boost for India's position relative to its arch-nemesis, Pakistan, and is widely seen as diplomatic coup for New Delhi.

The sentence is seen as a "betrayal" by Pakistan, however, because that country had every reason to believe until now that it was in a blossoming relationship with China. They are partners in the highly lucrative China-Pakistan Economic Corridor (CPEC), after all, and Islamabad has been using Beijing as a diplomatic shield against Washington as Trump does his Obama Surge 2.0.

Indeed, it's hard not to see this clause as a clear win for India. Just a few months ago India was boycotting the Belt and Road Forum in protest of the CPEC and coming close to military confrontation with China over a seemingly insignificant mountain pass in Doklam, and now China has publicly chewed out their arch-rivals on the global stage. Don't expect China to completely abandon Pakistan politically, but this does indicate that Beijing is willing to use the stick as well as the carrot in their international dealings.

The Sidelines at Center Stage

At any major international summit, the bilateral meetings taking place on the sidelines of the main conference are where a lot of the real action can be found.

Once again the big winner of the sideline events appears to be Prime Minister Narendra Modi and the Indian people he claims to represent. After much "will they, won't they?" speculation it was finally confirmed that, yes, indeed, Chinese President Xi Jinping would meet with Modi for the two leaders' first substantive bilateral talks. Details of the deliberations were, as always, maddeningly vague, but at the very least indicated that the two powers are not on the edge of all-out warfare, as seemed possible during the Doklam standoff mere weeks ago.

One non-BRICS member getting in on the action was Egypt, with Egyptian President Abdel-Fattah al-Sisi meeting Russian President Vladimir Putin on the sidelines of the summit on Monday. The two discussed "boosting bilateral cooperation and other issues of mutual interest," including, understandably, the security situation at Cairo airport, scene of the October 2015 Russian plane crash that killed over 200 people, mostly Russians. Sisi also got to burnish his diplomatic credentials with a sideline meeting with Modi where the two, predictably, vowed to "strengthen ties."

BRICS Plus?

So what was Egypt doing at the BRICS Summit anyway? Or Mexico, Guinea, Thailand and Tajikistan, for that matter? Well, it's called "BRICS Plus," and it's a concept put forward by Chinese Foreign Minister Wang Yi last March. Employing the universal language of diplospeak, Wang explained that China wanted to "explore modalities" of an expanded BRICS grouping, adding: "We hope to establish extensive partnerships and widen our circle of friends to turn it into the most impactful platform for South-South cooperation."

That vision took shape at the Xiamen summit with China's invitation for "dialogue" with Mexico, Egypt, Guinea, Thailand and Tajikistan. The idea is to expand the BRICS' reach and bring more of the developing world into the fold.

The plan may have already hit a road bump, however. The idea has been heavily criticized by "existing members" (read: India) and China has reportedly backed off the idea to make these dialogue partnerships an ongoing part of the BRICS Summit. Of course, this by no means signals an end to China's interest in expanding the global reach of its diplomatic and economic ties, and India should tread carefully on ideas that expand the scope (and thus the relevance) of the BRICS. If the BRICS becomes an impediment to China's global ambitions it may just be left to wither on the vine.

No Nuking NK!

The real determinants of what happens on the Korean peninsula remain (much to the detriment of the Korean people) powers other than North or South Korea. Namely China and the US (and to some extent Russia and Japan). Given the Russian and Chinese backbone of the BRICS, it's no surprise, then, that the North Korean situation was one of the topics that was front and center at the shindig.

As the joint declaration put it:

"We strongly deplore the nuclear test conducted by the DPRK. We express deep concern over the ongoing tension and prolonged nuclear issue on the Korean Peninsula, and emphasize that it should only be settled through peaceful means and direct dialogue of all the parties concerned."

This remains the line in the sand for both Russia and China: There is no military solution to the Korean crisis.

Putin has floated an idea for a gas pipeline to Korea and the connection of the North and South Korean energy grid and railway systems (an idea that, incidentally, was first floated by Maurice Strong over a decade ago). Meanwhile, Xi is calling on France to get involved and give the whole situation a diplomatic restart. But both Xi and Putin are adamant: no military solution.

As Pepe Escobar puts it in his article on "The real BRICS bombshell:"

"Beijing has imposed a definitive veto on war – of which the Pentagon is very much aware.

"Pyongyang’s sixth nuclear test, although planned way in advance, happened only three days after two nuclear-capable US B-1B strategic bombers conducted their own 'test' alongside four F-35Bs and a few Japanese F-15s.

"Everyone familiar with the Korean peninsula chessboard knew there would be a DPRK response to these barely disguised 'decapitation' tests.

"So it’s back to the only sound proposition on the table: the RC 'double freeze.' Freeze on US/Japan/South Korea military drills; freeze on North Korea’s nuclear program; diplomacy takes over."

And Last but not Least...

The biggest news to emerge during the summit was not directly part of the summit at all, but in some way is a reflection of the topsy-turvy period of global geo-economic reorientation we are living through. I am referring, of course, to the yuan/oil/gold earthquake that is about to shake the monetary world.

If you saw my recent video on the subject you already know the story, but in a nutshell China is about to ring in a (say it with me) "new world order" with their Shanghai International Energy Exchange. The exchange will offer crude oil contracts denominated in yuan, which "will be fully convertible into gold on exchanges in Shanghai and Hong Kong." As Grant Williams points out in his important overview of the story (h/t Corbett Report user Ukdavec), the ability for a country like, oh, let's say, Russia, to sell oil to China directly for yuan (no dollars involved) and convert that yuan to gold effectively completely severs all the links to the US government, US banking system, US treasuries and US dollar that has underpinned the unipolar world of the post-Bretton petrodollar. It is difficult to overstate the significance of this event...

But, having said that, this story is beyond the bounds of this BRICS update. Suffice it to say, if the BRICS want to become the real beginning of an actually multipolar alternative to the US hegemony, something like the yuan/oil/gold triangle would have to be in place. And here it is. Fancy that.

Now, as always, I have to re-re-restate the ground level truth: The BRICS are a phoney opposition literally created by Goldman Sachs whose pseudo-alternative institutions are run by the very same bankers and bureaucrats they pretend to oppose. The cold war of the 21st century is being engineered in the exact same way that the cold war of the 20th was. And, as always, whichever "side" wins this "fight," the oligarchs and their systems of control will come out on top.

But make no mistake: the cold war, engineered as it is, is here. And meetings like the BRICS Summit are where we catch the first glimpses of it.

0 Again?

Bob Rinear to Gold Prices — Tags:  

It’s Monday morning. I’m sitting here looking at the spaghetti string models of Hurricane Irma. I have to tell you, I’m not warm and fuzzy with what I see. Yes it’s a week away. However, on this particular day, 4 of the “better” models have Irma hitting Southern Florida and coming right up the center of the state. Only one has it putting in a really hard right turn late in the week and sending it up into the Carolina/Virginia area.

I don’t want to send it to Carolina. I’m not one of those that prays that it spares us, and who cares about the other folks. No, I’m praying that it gets sheared off, turned out to sea and only the fish get bounced around. As I said, I’m not feeling warm and fuzzy about it. From where I stand, someone’s going to catch hell.

For this thing to hard right and escape out the back door and stay in the sea, a LOT has to go right. So, we’re pulling for that outcome. If the steering high backs off a tad, and the “pulling” low sucks on it hard enough, there’s still a shot that this thing hooks wildly and goes into the Atlantic.

I don’t know how many of you out there are weather geeks. I don’t think I’ve ever brought this particular topic up before, but then again, I don’t remember so good any more. Getting old is for the birds. But my point is that when we lived on the Jersey Bayfront, you get a knack for being an amateur weather forecaster. You had to if you spend a significant amount of time in the bays and ocean. We did just that.

As some of you might know, parts of my family have been involved in the seafood industry for many years. Most of it concerning the harvest and cultivation of hard clams. So it goes without saying that if you’re waking up each day to catch the proper tide, and you’re going to be making a 5 mile run by boat to “little bay” for instance, you want a good eye on the weather. There’s not a lot that’s worse than being 5 miles from home, immersed in a warm saline solution (baywater) and the thunderstorm from hell breaks out. You discover quite quickly just how small and insignificant you are.

Between watching the weather for microbursts, thunder storms, gale winds, etc, so that my kid didn’t get killed trying to make a days pay, I had a habit of liking to go well offshore in the hunt for tuna, swordfish and Mako shark. The issue however is that the best “canyons” for catching such creatures is about 100 miles offshore.

As you might imagine, if you’re going to take the 4 hour run out to the middle of nowhere, to set up for an overnight of chunking for tuna, you really really really want a good picture of the weather for the next 24 hours. I’ve been out there, one time in particular in Tom’s Canyon, when a horrific storm popped up out of nowhere. 50+ MPH winds and lightening crackling all around you while you’re in the pitch of night 108 miles out…makes for some very tense times. Seeing an eerie green “glow” around your outriggers and Tee top, will raise the hair on most parts of your body.

So, most of us old baymen tend to be fair to middlin weather forecasters. Some of it is just experience, some of it is knowing where to look. So I want to dedicate today’s commentary to giving you all some pretty good resources to help with your weather decisions.

There’s an outfit called “weatherbell.com” that you might be interested in. They give out some good “free” stuff, and then they have a premium area that you pay for. The premium side is often frequented by hedge funds, farm conglomerates, etc, people that have a lot riding on how the weather will impact their crops, etc. But again, they give enough freebies out that you can get a pretty good glimpse of what’s coming your way.

Joe Bastardi is one of their forecasters and Joe’s one of the best. His dad was in weather and he took it up as a teen. Now in his early 60’s he’s about as good as it gets. Does he get them all right? Of course not. But I don’t know of anyone who’s any better. So, visit weatherbell now and then for some good analytics.

If you want to look at the tropics and get a really inclusive view of what’s out there, what’s coming and where it might be going, then a site you should visit is bearpawsweather.com. The people running that, pull charts, satellite photo’s, tracks, cones, and official statements from all the agencies and puts it in one place. It’s a great site, and one I use quite often.

Another in your arsenal has to be tropicaltidbits.com. Here you will find the latest tracking models, and allows you to pick what the models look like in different hour stages. In a way, it’s a scary site. For instance if you go to their home page, then hit “forecast models” you’ll get the list of models. Right now if I click the EFS model, and then advance through the hours starting at say 144 hours out, you see Irma parked over the Dominican Republic. Then at 162 hours it comes ashore at the southern tip of Florida.

Advancing through 174, then 180, 186, 192, and 198 hours out, you see this monster climb right up the center of Florida. With Florida only about 250 miles wide, the entire state, from coast to coast is underneath this behemoth.

I’m really hopeful that by the time you are reading this, the picture has changed, Irma’s been steered hard right, back into the Atlantic and we dodged this bullet. But on Monday morning, this is one model that I truly hope is not even close to coming true.

If you’re in Florida, don’t wait until the weekend to prepare. Get your water flashlights, candles, batteries, toilet paper, now. Sure, if the models adjust and send it away, okay good! But if they don’t you know that by Saturday everything will be gone.

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