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JEROME POWELL ISSUED A WARNING - NO ONE IS LISTENING

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           Source: David Stockman          In  a moment of unexpected candor, Jerome Powell, Chairman of the US Federal Reserve Bank,  recently said the US "was on an unsustainable fiscal path," that "we are borrowing from future generations," and efforts must be undertaken to address this problem, "the sooner the better." Former Treasury Secretary Robert Rubin told Bloomberg that the US is "in a terrible place." Jamie Dimon, Chairman of JP Morgan said that the US was heading for a fiscal cliff "at 60 mph."       Following such dire warnings, Americans would expect Congress to be urgently focusing on this looming disaster. Instead, their elected representatives are fixated on: 1) what should be done about the nation's southern border where millions of immigrants have been perfunctorily waved into the country by the "Border Patrol," and 2) how many more tens of billions of dollars in aid and war materiel to give to Ukraine

A PONZI SCHEME FOR THE AGES

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      Nearly all Americans have heard of the infamous Charles Ponzi but they may not know much more than he perpetrated a fraud. Ponzi was born in Italy in 1882, educated in Rome and came to the US as a young man with $2 in his pocket. After taking and being terminated from many menial jobs (often for theft), starting numerous failed business ventures, and serving a period of imprisonment in Montreal for theft, he returned to Boston and concocted his namesake fraud. As with most frauds, his was founded on the premise that greed will induce people to be taken in by a story that, in hindsight, was obviously too good to be true.       He claimed that he could profit from arbitraging the difference in "international reply coupons" - a type of voucher used at that time to purchase postage. He organized a company called Securities Exchange Company and sold interests in it to investors promising 50% returns in just 45 days or 100% in 90 days. He took in an astonishing $15 million (o

HEY MISTER, CAN YOU SPARE $2 TRILLION?

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Public office candidates routinely promise more handouts. In the US, Republicans were once the party of small government and balanced budgets but they and Democrats now vie with one another for more "free" benefits. One would think that voters understand by now that they pay for these benefits directly through higher taxes and indirectly through their constantly debased currency - but they do not. Voters are eager to raise taxes on businesses believing that will reduce their tax burden. They have not figured out that all corporate costs (labor, materials, utilities, insurance - and taxes ) must be passed on to the consumer or the company will go out of business. Thus, voters pay their personal income taxes and also corporate income taxes. Taxation and inflation are time-honored means by which workers are continually fleeced by their governments. Adam Smith wrote in his 1774 book, The Wealth of Nations , "There is no art which the government sooner learns than that of dr

THE COMING DEBT TSUNAMI

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                                         Source: Shutterstock      In our last post we discussed two ugly realities that savers and investors must be  aware of if they hope to avoid retirement penury: Reality Number One: the insidious effects of price inflation, and Reality Number Two: the ongoing debasement of our currencies. To demonstrate their corrosive effects we included two graphs. We include them again. The first shows that an eventual reduction in the rate of inflation never returns us to pre-inflationary lower prices. That is because the effects of price inflation are  cumulative.  A new lower rate of inflation merely means that existing high prices will increase at a slower pace.  The first chart shows that prices (in blue) remain painfully high even after the rate of inflation falls from 8% to 2%.  So the Fed's trumpeted goal of returning the rate of inflation to 2% is no solution for these higher prices. 

REALITY BITES

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                                            Source: Shutterstock      Many wags have noted that, "You can ignore  reality but you can't ignore the consequences of doing so." Or as James Kunstler recently put it,  Having lived through a reality-optional period of history, it will come as a shock to learn that the world requires us to pay attention to what is really happening and to act accordingly.

Central Bankers to Workers: "You're poorer now. Deal with it."

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                                             Source: Shutterstock                                                                                                                                                     Hu Pill, chief economist at the Bank of England recently told Britons that they need to accept that they're worse off and stop trying to maintain their real spending power by asking for wage hikes. BOE governor Andrew Bailey seconded this message adding that salary increases will feed through to higher costs due to "second round effects" and workers' demands for higher wages are frustrating his efforts to combat rising costs. Brits are poorer due to price inflation's impact on food, energy, housing and nearly all other goods and services. At bottom, the bankers' view is that workers, who are the biggest victims of price inflation, should bear its cost and quit carping. Needless to say, that has not gone over well.

Ray Dalio: We Are "Here" In the Economic Cycle

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     Ray Dalio is the manager and co-chief investment officer of the world's biggest hedge fund, Bridgewater Associates. He has written extensively about economic cycles and has been outspoken in his warnings that the public always pays the price for their government's fiscal and monetary misadventures and are about to do so again. Here is a recent post.

A Central Banker, a Venture Capitalist and a Bank CEO Walk Into a Bar...

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                                         Source: CantonRep.com      They stand mute, shell-shocked and ashen-faced.  Finally, the central banker speaks up. I can't believe what's happened!! Who could have known that lowering real interest rates to below zero  for a decade following the sub-prime mortgage crisis - that we caused with low rates, excess liquidity and no regulatory oversight - could lead to high inflation? And who