Over the years there have been many dramatic thefts and cons pulled off by daring criminals. In 1963 thieves stole bags from a Royal Mail train in the UK containing over $3.5 million. The Antwerp Diamond Heist in February 2003 saw thieves make off with over $100 million worth of diamonds, gold, silver and jewelry from a heavily guarded vault in the diamond district. General Sani Abacha, governor of Nigeria in the late 1990’s, is believed to have stolen $3-5 billion from his government. Philippine president Ferdinand Marcos pocketed between $5-10 billion in bribes and money stolen from the government. “Baby Doc” Duvalier in Haiti stole up to 5% of his nation’s GDP. Bernie Madoff conned investors out of billions of dollars in his huge Ponzi scheme. But these miscreants are minor league players in the world of financial embezzlements.

To achieve a truly monumental heist you need a number of ingredients. First, you must assemble a group of cunning sociopaths willing to work together. They typically hold positions of trust and confidence. They must craft a plan that will produce massive gains while not revealing the scheme so that it can continue for years. They need to position themselves so they always have “plausible deniability.” Finally, they must have a scapegoat to blame if their plan is discovered. History’s Biggest Swindle has all of these features.

We begin with the “marks” (those to be fleeced). In 2020, US workers earned a collective $8.9 trillion in wages. It is expected that they earned about $9.4T in 2021 (per the St. Louis Fed). Next we need the devious scheme. In November 2021 the government calculated consumer price index rose 6.8% on an annualized basis. If that continues for twelve months, US wage earners will collectively lose $639 billion in purchasing power. However, if the consumer price index is calculated as it was before the Fed began implementing “hedonic adjustments” and other data manipulations of the cost of goods and services to camouflage the true extent of price inflation, the CPI is actually over 10% (1990 based) or over 15% (1980 based).

Thus, US real wage losses would be somewhere between $940B-$1.41T. Let’s call it $1 trillion for ease of discussion. These same wage earners lost another $338B-$623B (say, $500B) in 2020 and hundreds of billions more in preceding years. The charts below from ShadowStats.com reveal the discrepancies between the government’s “massaged” consumer price data (red lines) and the raw data (blue lines). This loss of purchasing power has the identical effect as a secret 10-15% salary cut.

Politicians and their main stream media apologists will argue that wages have increased so, “No harm, no foul!” While it is true that wages have increased, those wages have consistently, and now dramatically, trail the rise in the cost of living. The green line in the chart on the next page shows “reported” wages and the red line shows “real” wages (net of price inflation). The disparity is striking.

In a moment of insight, the victims of this scam might wonder, “Where does my lost purchasing power go? Does it just disappear?” The answer is “No,” it does not disappear but the path to its final destination is intentionally difficult to follow. This opaqueness is an essential part of the scheme. Were the victims of this monumental scam able to identify the resting place of the product of their years of labor, they would storm the citadel with torches and pitchforks and hang the thieves from the parapets. Unfortunately, workers have no clue of what is happening to them or who is responsible for it. This has allowed the theft to continue for decades.

Who benefits from this fraud? We can readily see that it is the rich and political elite who rake it in because they own the vast majority of the types of assets that appreciate rapidly in value when the cost of living rises. Their share (blue) of total US net worth has risen dramatically.

Another way to visualize this vast transfer of wealth from workers to the elite is the abrupt rise in the value of stocks following the Fed’s actions to inflate the money supply with QE and Congress’ decision to hand out helicopter money. Because the richest Americans own the majority of stocks, the value of their assets (blue) has skyrocketed while GDP growth (red) has been modest. Life has been very good for the 1% and is rapidly getting better.

Do not misunderstand us. We have no quarrel with highly innovative and successful people making huge sums of money. They deliver exceptional goods and services to us. Examples include Steven Jobs, Elon Musk and Jeff Bezos. They put miniature computers into our pockets, mainstreamed electric vehicles and deliver virtually any product of our desires to our front door step the next day. They may be quirky folks but they are driven to provide breakthrough products and services. Of course there are highly successful people who are less warm and fuzzy. Facebook’s Mark Zuckerberg comes to mind. Nevertheless, he too delivers a product that appeals to a large segment of the population. Whether his company malevolently throttles debate on important issues is a discussion for another day.

While price inflation further enriches the already-rich, it especially hurts the poor and middle classes because they devote a far larger share of their take-home pay to essentials such as food, housing, education and commuting. But it also hurts them in ways they are unlikely to consider. For example, if they buy a new car for $25,000 and the state sales tax is 8%, they pay $2000 in state taxes. If price inflation drives the cost of a comparable car up to $30,000, they pay $2400 in taxes. Likewise, when their salary increases (always lagging price inflation) they pay more in income taxes to the US Treasury Department and their state revenue departments even though the money they make is steadily worth less. They may even move into a higher tax bracket causing their income tax rate to rise as well.

Even the upper middle class will discover, too late, that they too are in a very difficult situation. Consider a single, white-collar employee who works very hard and has managed to save $1 million for her retirement. Her financial advisor confidently tells her that at retirement she can safely withdraw 4% a year to supplement her Social Security income. If she withdraws $40,000 a year, her nest egg will last 25 years. If she retires at 67, she feels confident that she can support herself until she is 92. But if price inflation continues at 6.8% and she is invested in 10-year Treasuries paying 1.4% interest, she is losing $54,000 every year in purchasing power! If she takes nothing out of her savings, her money will effectively be gone in 18.5 years! If she takes out just $20,000 a year it will be gone in 13.5 years. Her life will not be as she imagined.

Do you recall the toy of yester-year called Stretch Armstrong? You could simultaneously pull his limbs in all directions. That is what it is like to be a lower and middle-income worker today. They feel increasing pain but do not understand who is inflicting that pain. Governments will always be quick to try to shame and blame “greedy” corporations (the scapegoats) but it is always governments that cause price inflation, not businesses.

What triggered last year’s upsurge in prices? It does not take a Ph.D. in economics to figure it out. The US money supply surged. It is worth pointing out that “greedy” corporations did not print that money. The Federal Reserve Bank printed it at the behest of our elected officials. On the next page we can see the recent stunning growth of the M2 money supply (cash, checking deposits, savings, money market securities and other time deposits).

The Fed printed more money in just one month last year than the nation printed during its first 200 years. You may remember from high school physics class that for every action there is a reaction (Newton’s Third Law). That reaction might not be immediately observable but there will always be a reaction. The reaction to the rapid expansion of the money supply can be described either as “price inflation” or “dollar devaluation.” They are two sides of the same coin. Your money buys less than it did before the money printing.

In order to buy your vote so they can remain in power, politicians routinely tempt you with ever more “free stuff.” Of course, it is never free. Someone must pay and, it generally turns out, that someone is you. When inflation gets really bad, voters are tempted to “throw the bums out” and replace them with the opposing political party. Is this a real solution? Jeff Deist suggests that it is not:
The Left is hopelessly consumed by hatred and ingratitude, mired in identity, and animated by a desire to hurt and vanquish the Deplorables (Trump voters, antivaxxers, covid deniers, et al.) as an act of revenge. The Right is lost in Trumpian dysfunction, moving further and further from any coherent message about economics or opportunity while allowing neoconservatives to regroup and promote bellicosity toward Russia, China, and Iran. [All] sides are led by deeply unserious people who are congenitally unfit to organize a sandwich shop, much less lord over 330 million people.
While all is not lost and there is time to right the ship-of-state, there are huge obstacles to accomplishing that task. Allister Heath, writing at the Telegraph, identifies a few.
America’s global plan lies in ruins, its elites confounded on almost every issue, the stupidity and incompetence on display over the Afghan withdrawal confirming that they don’t understand the rest of the world, and aren’t fit to govern their own country, let alone the globe. Blinded by a simplistic universalism, they no longer understand religion, tribalism, history, and national differences or why countries want to govern themselves.

America’s internal problems are immense: its constitution is broken, its predilection for second-rate gerontocrats such as Biden unrivalled. Racked with self-doubt, its elites in the grip of a bizarre “awakening” centred around a nihilistic, ungrateful self-loathing, it no longer has values to sell, neither capitalism nor democracy nor the American dream. How can people who live in terror of “micro-aggressions” find it in themselves to defeat real evils? As to the public, it doesn’t want to know about the rest of the world: how, under such circumstances, can the US empire not be in terminal decline?

The West has lost control: there will be mass population movements, currency wars and battles over natural resources. The American empire at least believed in freedom and democracy; what replaces it won’t even pretend to be liberal. (Emphasis added)
That is a very grim assessment of US politics – and, in our view, not far off the mark because “political solutions” are rarely the answer to any serious problem. It is the collective actions undertaken by a great nation’s hardworking people that make that nation great. Politics may temporarily provide the framework for a nation to grow and mature, but historically, it is never business, but politics, that ends up suffocating great nations. Politicians’ ever-growing bias toward authoritarianism heaps debt onto the nation until its life’s blood is sucked dry. History shows that every great nation has met the same bitter end.

A large trade deficit is one indicator of a declining great power. Post World War II, the US was the workshop to the world and boasted a massive trade surplus. Now it is the world’s biggest debtor and has become dependent on its strategic enemy (China) for ever more of its essential goods, such as rare earth metals necessary for advanced electronics, drug compounds, lithium batteries, and solar panels, to name but a few.

Too, the US is not alone in shooting itself in the foot over power generation. As nuclear and fossil fuel power plants that provide a reliable base load are retired and replaced with intermittent power from solar and wind generators we will find that brown outs and black outs become a routine part of our lives. Following the Fukushima disaster in Japan, Germany’s political elite decided to decommission twenty-six of its nuclear power stations. Perversely, it imports ever more French electricity - that is generated by nuclear plants. It is also forced to rely on old fossil fuel plants that burn the dirtiest form of coal to supplement the power from solar panels and windmills that now dot the landscape like mushrooms. Germany is the industrial powerhouse of the EU. Without a reliable electric supply its factories will periodically go dark and prices will continue to rise rapidly. Germany has also grown ever more dependent on imported Russian natural gas. It will rue the day it lost energy self-sufficiency. What happens if Russia invades the Ukraine mid-winter? Germans will be forced to stand mute or freeze in their homes. It has been foolishly outmaneuvered by Putin.

Ross Clark in the UK describes our common futures if electrical generation continues to be controlled by political idealogues.
Ministers love to point out that the unit cost of generating electricity from wind and solar has fallen over the past decade, but that ignores the intermittency problem. Consumers have to pay through the nose to fire up dormant gas and coal plants to provide power at times when, as in recent weeks, the sun hasn’t been shining and the wind hasn’t been blowing. At one point in November, energy suppliers were forced to stump up £2000 per MWh for electricity – around 40 times the usual wholesale price [causing 26 of them to go bankrupt as retail prices are capped].

Conversely, when the wind does blow we are forced to shell out to compensate wind farm-owners ordered to turn their turbines off – last year we collectively paid £282 million in so-called ‘constraint payments’ when the national grid was unable to absorb all the electricity they were producing. Ever desperate to make herself look more “progressive” than Westminster, [Scotland’s Nicola] Sturgeon has committed to cutting emissions by 75 percent on 1990 levels by 2030 – a target which could only be met by a massive replacement of existing domestic heating systems. As most people will correctly work out for themselves when they receive their inflated energy bills this spring, the biggest danger they face is not being fried or drowned in a slightly warmer world – it is succumbing to hypothermia because they cannot afford to heat their homes.
“Clean energy,” sounds terrific but it is rife with hidden costs. The smug Tesla driver who incessantly boasts about his “green” bona fides is ignorant of the mining, refining, manufacturing and transportation pollution related to the metals that go into his battery and the source of the electricity that recharges it. He is also blissfully ignorant of the fact that rechargeable batteries have a limited life just like the battery in his I-Phone. The news recently reported on a Tesla S owner who discovered that a replacement battery for his car was going to cost over $20,000. He gained notoriety for a video of him blowing his car up with high explosives.

All forms of “clean energy” come with a price. Solar panels are made with toxic chemicals and also have a limited lifetime. They are impossible to “recycle” and millions of square feet of them will have to be retired and replaced. Wind farms decimate migratory bird populations. Hydroelectric power stations wreak havoc on the environment and fish populations. “Fusion” power avoids the risk of nuclear accidents but requires far more electrical power to generate the plasma to make it work than it generates in power.

Modern life is dependent on the reliable availability of electricity. Consider the food industry and home life bereft of refrigeration, central heating and air conditioning or the airline, trucking and marine industries without fossil fuel. The flood of consumer goods coming from China and elsewhere to the US would screech to a halt and products would suddenly become much more expensive - if they were available at all. There are always hidden costs for every political action and such costs are either never considered, or are ignored, by policy zealots.

Another serious problem we face is that the majority of costs incurred to support our present lifestyles are funded by debt. David Stockman notes,
As recently as 1995, global debt totaled just $57 trillion or 184% of the world’s $31 trillion of GDP. At that time, the combined balance sheets of the world’s significant central banks totaled just $2.0 trillion. That represented about 6.5% of global GDP, a figure only slightly above its longer term average.

By the eve of the financial crisis in 2007, however, the combined central bank balance sheets had tripled to $6 trillion or 10.3% of GDP and the debt levels and leverage ratios were off to the races. Global debt had reached $142 trillion and 244% of GDP as Keynesian central banking spread around the planet.

Thereafter, of course, it was Katie-bar-the-door. Today, combined central bank balance sheets total $36 trillion or 18X their quarter century ago level. In turn, that has fostered a tsunami of worldwide debt growth, which by Q2 2021 had reached $296 trillion or 330% of the planet’s $89.9 trillion of GDP.

Needless to say, the sheer math of these extra turns of debt is prohibitive. And it’s why central bankers noisily pretend they are expertly pegging rates, when, in fact, they are cowering in deathly fear that anything even remotely approaching market clearing levels would cause the entire global financial system to implode
These massive debts must, at some point, either be repaid or written off as losses. The world’s economies do not generate enough income to pay them off – they barely earn enough to pay interest on these debts. This suggests a coming “Debt Jubilee.” That would be great for those who are over their heads in debt (individuals, corporations and governments at all levels) but it would be a disaster for those holding the debts as assets (think: pension funds, insurance companies, central banks, and individual bond investors).

The Never Ending Covid “Crisis”

Eight months ago we wrote,

We think that history will not be kind when assessing how governments reacted to the virus threat. It will be critical of both the initial inaction and then the wholesale closing of the world economies. The latter has caused vast and poorly understood negative consequences that will take years to overcome. As data started coming out, it quickly became clear that the apocalyptic projections of “millions of US deaths” coming from the UK’s Imperial College were deeply flawed. The frightful early projections made great copy for the mainstream media that are forever looking for a crisis du jour to boost ratings but those projections were quickly refuted by actual hospital data.

As of April 25, [2021] when the CDC had scored 40,072 “confirmed or presumed” Covid-19 deaths, the breakdown by age was revealing:

Age 0-14: 5 deaths among 60.9 million or a mortality rate of 0.008 per 100,000; 
Age 15-34: 354 deaths among 88.7 million or a mortality rate of 0.39 per 100,000; 
Age 35-64: 7,907 deaths among 125.8 million or a mortality rate of 6.3 per 100,000; 
Age 65-84: 19,840 deaths among 45.9 million or a mortality rate of 43.2 per 100,000; 
Age 85 and older: 11,966 deaths among 6.54 million or a mortality rate of 182.9 per 100,000.

Deaths for children under 14 are as near to zero as statistics allow. Why should their schools be closed? If the argument is that school children would expose grandma to the virus, grandma should have the common sense to isolate herself from the child for a while. That would allow the child to continue her education and grandma to stay healthy.

Furthermore, including “presumed” virus deaths as being Covid related, is patently “anti- science.” A presumption is not “science.” An unconfirmed diagnosis is not “science.” Data become worthless when infected with spurious information. Why was this done? We suspect it was done to magnify the death rate in an effort to justify the draconian actions taken by our political leaders.

Beyond destroying the economy, there are two additional problems with the lockdown. First, isolating people to ensure that they will not be exposed to the virus ensures that they will not develop antibodies causing them to remain susceptible to the virus’ return in the coming months. The second problem is that isolating millions of people who have existing medical conditions means they are not being treated. Patients with heart conditions are not being seen and evaluated. Cancer screenings are not being done. Surgeries are being postponed, doctor’s visits are pushed back, diagnoses are not being made, treatments are not being started. This will inevitably result in thousands of unnecessary deaths. Politicians ordering isolations are not looking beyond the ends of their noses. Their actions have a “seen” consequence (“we are fighting the virus”) but they also have “unseen” consequences (deaths from lack of medical care, depression, permanent damage to the economy). Who is assessing these risks?

During every new real or imagined “crisis” the main stream media and the public clamor for the government to “do something.” The lesser risk is that what is done is ineffective. The greater risk is that it will have unforeseen negative consequences that only become evident later. We believe that the political decision to smother the economy will be shown to have been a monumental disaster. Neither politicians nor the media have any comprehension of the breadth and depth of the damage being done to the economy. Their unfounded assumption is that the economy will quickly spring back to life as soon as the bell rings and workers are released back to work.

President Joe Biden boldly announced early in his presidency that, “I am not going to shut down business. I am not going to shut down the economy. I am going to shut down the virus.” So how has that worked out for him (and us)? Just as you would expect from a person who had no comprehension of what he was dealing with. The media continue to sell ad time and newspapers continue to trumpet the contagiousness and “deadly risks” of the new Omicron variant despite the fact that doctors in South Africa, where it first appeared, advised early on that while this version appears to be highly infectious it is not very serious. Their voices were quickly cancelled by US politicians, the media and pharmaceutical companies all of whom stand to benefit from keeping the public in a constant state of alarm. Drug companies would like to sell new Covid booster shots to you every six months until the end of time.

But recently there are cracks developing in the nonstop fear mongering. Sadly, it is politically based. Biden supporters are beginning to understand that the Omicron virus is now “his” problem. As a result we have Dr. Fauci suddenly dialing back his rhetoric and finally admitting that the number of “Covid cases” is being seriously overstated.
‘If a child goes into the hospital, they automatically get tested for COVID and they get counted as a COVID-hospitalized individual, when, in fact, they may go in for a broken leg or appendicitis or something like that. So it’s over counting the number of children who are, quote, hospitalized with COVID as opposed to because of COVID.”
Of course this has been true from Day One of the pandemic when Fauci was intentionally over-stating the “Covid count” to justify the government-imposed lockdown of the economy that prevented people with serious medical conditions from seeing their doctors, put children two years behind in school and raised the suicide rate among teens. It is also true regarding the incessantly reported “800,000 US Covid deaths.” That number includes people hospitalized and then dying, for example, from heart attacks, auto accident injuries and gunshot wounds who tested “positive” for Covid. They died “with Covid” but not “because of” Covid. We have been misled about the Covid fatality rate for nearly two years. Now Fauci’s tune has abruptly changed - to meet his political master’s needs. In our last issue we opined that he is not a man of integrity and should be ignored. We sympathize with the exasperated Henry II of England when he pleaded, “Will no one rid me of this troublesome [doctor]?”

Even long time Biden/Fauci cheerleaders at the New York Times are beginning to push back against the false narratives. On January 4th they committed the heresy of questioning the wisdom of the lockdowns and acknowledging the serious harms flowing from them.
For the past two years, large parts of American society have decided harming children was an unavoidable side effect of Covid-19. And that was probably true in the spring of 2020, when nearly all of society shut down to slow the spread of a deadly and mysterious virus.

But the approach has been less defensible for the past year and a half, as we have learned more about both Covid and the extent of children’s suffering from pandemic restrictions.

Data now suggest that many changes to school routines are of questionable value in controlling the virus’s spread. Some researchers are skeptical that school closures reduce Covid cases in most instances. Other interventions, like forcing students to sit apart from their friends at lunch, may also have little benefit.

One reason: Severe versions of Covid, including long Covid, are extremely rare in children. For them, the virus resembles a typical flu. Children face more risk from car rides than Covid.

The widespread availability of vaccines since last spring also raises an ethical question: Should children suffer to protect unvaccinated adults — who are voluntarily accepting Covid risk for themselves and increasing everybody else’s risk, too? Right now, the U.S. is effectively saying yes.

Children fell far behind in school during the first year of the pandemic and have not caught up. Among third through eighth graders, math and reading levels were all lower than normal this fall, according to NWEA, a research group. The shortfalls were largest for Black and Hispanic students, as well as students in schools with high poverty rates.

“We haven’t seen this kind of academic achievement crisis in living memory,” Michael Petrilli of the Thomas B. Fordham Institute told Politico.

Many children and teenagers are experiencing mental health problems, aggravated by the isolation and disruption of the pandemic. Three medical groups, including the American Academy of Pediatrics, recently declared a national state of emergency in children’s mental health. They cited “dramatic increases in emergency department visits for all mental health emergencies.”

Suicide attempts have risen, slightly among adolescent boys and sharply among adolescent girls. The number of E.R. visits for suspected suicide attempts by 12- to 17-year-old girls rose by 51 percent from early 2019 to early 2021, according to the C.D.C.
While this Times opinion piece focuses on the needless harm done to children, millions of adults suffered as well. This directly resulted from government officials and the mainstream media combining to ruthlessly “cancel” reputable physicians and researchers who criticized the lockdowns and suggested alternative therapeutic treatments.

The American people are entitled to know what cabal was behind this closing-off of open debate on such a critical public issue. We are confident that in time their identities and their responsibility for the vast damage done to the country will come out. If we start by employing the time-tested investigative strategy of identifying those who have the most to financially gain by shutting down debate and rejecting any therapeutics besides vaccines, then the drug companies, their lobbyists and the elected official recipients of their largess become prime suspects. The question is, when the truth finally comes out will anyone care?

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Important Message: The foregoing is not a recommendation to purchase or sell any security or asset, or to employ any particular investment strategy. Only you, in consultation with your trusted investment advisor, can select the strategy that meets your unique circumstances, investment objectives and risk tolerance.