Thoughts from the Frontline: The Last Argument of Central Banks

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Posted on 11th November 2014 by Administrator in Economy |Politics |Social Issues

Thoughts from the Frontline: The Last Argument of Central Banks

By John Mauldin

 

For a central banker, deflation is one of the Four Horsemen of the Apocalypse: Death, Famine, Disease, and Deflation. (We will address later in this letter why War, in the form of a currency war, is not in a central banker’s Apocalypse mix.) It is helpful to understand that, before a person is allowed to join the staff or board of a central bank, he or she is taken into a back room and given DNA replacement therapy, inserting a gene that is viscerally opposed to deflation. Of course, in fairness, it must be noted that central bankers don’t like high inflation, either (although, looking around the world, we see that the definition of high inflation can vary). In the developed world, 2% inflation seems to be the common goal. You wouldn’t think that 2% a year is a significant change in the overall price structure, but the panic among economists that would ensue with a 2% price deflation would border on hysteria.

Inflation and deflation are often topics of discussions as I travel, but I find that there is general confusion about what inflation and deflation actually are. This is understandable, since many economists don’t agree on the definitions, so they are often talking about totally different phenomena. In this week’s letter I have for you a brief essay on the topic of deflation. Depending on your view, you might find some of my thoughts controversial, but I will try to make my case clear, at least. Please note this is the 30,000-foot view and is nowhere close to definitive. If you want great detail, I suggest you get my good friend Gary Shilling’s latest book on deflation (of four that I know of), called The Age of Deleveraging. (It’s only $11.49 on Kindle.)

Definitions of Inflation and Deflation

Generally speaking, there are two schools of thought about inflation. The Austrian school of economic theory, founded by Ludwig von Mises, sees inflation as an increase in the money supply and deflation as a contraction in the money supply. Somewhat similarly (but not entirely!), the monetarist school of economic theory tends to see money supply as the chief determinant of GDP in the short run and of the price level over the long run.

Mainstream economics (generally Keynesian) tend to refer to rising or falling prices as inflation or deflation. They tend to see deflation as a general price decline, often brought about by reductions in available credit, money, or reserves or by the government’s restraint of spending programs.

So when we talk about inflation/deflation, it is important to know whether we’re talking about monetary inflation or price inflation. As we have seen recently, a rising money supply is not necessarily accompanied by rising prices (although there is a certain long-term rhythm to the two different measures).

When I talk to the general public about deflation being something to be avoided, I get confused looks. Don’t we like it when the price of something goes down? Who doesn’t love a sale on something they want to buy? Since the beginning of the First Industrial Revolution, the general tendency for the prices of manufactured goods (in real inflation-adjusted terms) has been to go down as productivity has gone up. This is what Gary Shilling and others refer to as “good deflation.”

You can actually have solid productivity, GDP growth, wealth creation, a general increase in the standard of living, and a buoyant economy during a period of overall price deflation such as we had in the late 1800s – if it is the good kind of deflation.

What is the difference between good deflation and bad deflation? Good deflation is the general fall in prices that comes from an excess supply of goods due to increased productivity and product improvement. From 1870 to 1897 wheat prices fell from $1.06 to 63¢ a bushel, corn from 43¢ to 30¢ a bushel, and cotton from 15¢ to 6¢ a pound. Most of the time farmers received even less for their crops.

While farmers blamed all sorts of people for their falling prices, the primary cause of their problem was overproduction resulting from increases in the acreage of farms and increased yields per acre due to improved farming methods, as well as the advent of railroads that made it easy to get produce to Eastern markets. A farmer had to produce more just to stay even. It didn’t help that global competition from Argentina, Russia, and Canada was added into the mix, as increasingly large oceangoing steamboats made international transportation cheaper and ended an era of American agricultural export advantages.

This period of time saw one-third of farmers move to the cities for other work as they lost their employment on small family farms. That trend in falling farm employment continued until recent years, and farming has seen even greater increases in productivity (yield per acre) in recent decades. Farm and ranch families are just 2% of the US population today. Only 15% of the US workforce produces, processes, and sells the nation food and fiber. Today’s farmers produce almost three times more food with 2% lower inputs than farmers did 60 years ago. A third of American agriculture is strictly for exports.

The late 1800s was a particularly contentious period of history in the United States as farmers blamed railroads, bankers, and industrialists for their problems – a situation not unlike the income inequality debate we have today. And while falling prices weren’t fun for the farmers, the general public enjoyed lower food costs and higher-quality food.

The easiest way to illustrate this trend in the modern area is by looking at the cost of a gigabyte of storage. You can see an interactive version of this chart here. Prices for a gigabyte of storage dropped from $500-700,000 in the early 1980s (depending on what you were buying) to about $0.03 today. Put another way, a gigabyte cost about 2 million times more 35 years ago than it does today. And it has fallen by 50% every few years. The good deflationary fall in prices for data storage has enabled all sorts of industries and products, creating millions of jobs. And we could find dozens of other, similar products whose prices have been falling dramatically.

Measuring Inflation/Deflation

Each month we are greeted by the announcement of the Consumer Price Index (CPI), telling us what the level of general price inflation has been for the previous month and year. I’ve written about CPI extensively in past letters, but basically we need to understand that the CPI is an artificial amalgamation of the prices of various products and services. The composition of the CPI has changed significantly over the last 40 years. As John Williams at Shadow Stats demonstrates, if we used the same measurement methodology that was in force during the Reagan years or the early Clinton years, inflation would be almost 4 percentage points higher now than it is currently calculated to be.

Contrary to some commentators, I do not see this is a conspiracy to mislead investors or consumers, or to slow down the rise in Social Security payments. We should all be grateful that there is a small band of economists who are consumed by the details of what inflation actually is. They go to conferences and vehemently argue with each other (well, vehemently for academic economists) over arcane topics that would bore 99%-plus of the population. They are passionate about trying to find the proper measure of inflation.

My personal feeling is that the adjustments that have been made in the calculation of inflation are generally quite reasonable, if somewhat controversial. With the prices of electronics and many other manufactured goods falling over the decades, how do you measure inflation in those items? Or rather deflation? I still spend about the same amount for a new phone today as I did 10 years ago, but my new iPhone 6+ is a major improvement over the Motorola flip phone I had 10 years ago, by any standard you want to apply. Both could make phone calls, but that is about where the similarity ends. Am I getting better value for my money? More bang for the buck? Absolutely.

Currently, the economists who determine inflation see that increase in value as an actual drop in inflation, and they use a somewhat controversial methodology called hedonics to adjust the prices of a myriad of products for quality. If anti-lock brake systems are now standard whereas before they were optional, then by this doctrine the price of your car went down. (Those who are interested can google hedonics and get a wealth of information on the definition and the controversy.)

Housing is a big component of our spending. Should we use actual housing prices or what the inflation economists call “owner’s equivalent rent prices” as our measure of housing cost increases? If we had used actual housing prices during the 2000s, the inflation figures would have gone through the roof, suggesting to the Federal Reserve that they should be raising interest rates rather than lowering them or keeping them too low. And again, if we had been using actual house prices to calculate inflation during the Great Recession, the economy would have been seen as being swamped by serious deflation. There would’ve been even more weeping and wailing and gnashing of teeth.

To continue reading this article from Thoughts from the Frontline – a free weekly publication by John Mauldin, renowned financial expert, best-selling author, and Chairman of Mauldin Economics – please click here.

Important Disclosures

Fed and CPI missing housing inflation yet again: The CPI is completely missing the increase in housing prices.

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Posted on 24th May 2015 by Administrator in Economy |Politics |Social Issues

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Guest Post by Dr. Housing Bubble

The most widely used measure for inflation is the Consumer Price Index (CPI) put out by the Bureau of Labor and Statistics (BLS).  Nearly a decade ago I discussed how poorly a job the CPI did in measuring home price increases while they were happening.  In fact, during the raging housing bubble the CPI only measured moderate increases in home prices.  Why?  The measurement looks at something called the owners’ equivalent of rent (OER) that essentially considers what your home would rent for versus your actual housing payment.

So you could be paying $3,000 in a mortgage, taxes, and insurance but the actual rent would be something like $2,000.  That is a massive differential.  In the LA/OC market, this measurement did a horrible job.  The argument of course is that rents eventually catch up and we are seeing some of that now.  Yet Fed policy and other government decisions are made on the basis of the CPI and miss big changes by years.  The latest CPI report is now showing this inflation creeping in but of course, it is late once again.  And this is important to address because the largest component of the CPI is housing costs.

The problem with the CPI and housing

Housing makes up over 40 percent of the CPI tool which is a by far, the biggest component.  So wouldn’t you want this instrument to accurately measure home value changes?  We now have plenty of tools that can give a better indicator of home price changes like the Case-Shiller Index.  There has been large pressure on home prices recently thanks to many years of slow home building and a lack of inventory.  We also had the interesting phenomenon of investors diving into the market since the crash and being a dominant force.

First, it might be useful to look at how the CPI is composed:

CPI-categories

Even looking at three categories in housing, education, and healthcare we know that costs are soaring.  Yet the overall CPI has showed only tiny increases in prices.  This is completely off base nationally and doubly so in bubblicious markets like California where people need to move into apartments with roommates as if they were crowding into clown cars to make the rent.

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A Vision of Monetary Hell …

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Posted on 23rd May 2015 by Administrator in Economy |Politics |Social Issues

… Troubles Our Sleep …

It is the vision of what the United States will be like when the authorities have obliterated almost three millennia of monetary progress and have their boots on our necks.

Here’s Peter Bofinger, a leading German Keynesian economist, in Der Spiegel magazine:

 

“With today’s technical possibilities, coins and notes are in fact an anachronism. They made payments incredibly difficult, with people wasting all sorts of time at the cashier as they wait for the person ahead of them to dig through their belongings to find some cash, and for the cashier to render change (rather than, for example, waiting for someone to find the right credit card, complete the transaction, and wait for approval).

[…]

But the additional time is not the largest benefit of the elimination of cash. It dries out the markets for moonlighting and drug trafficking. Almost a third of the euro cash in circulation consists of 500-euro notes. No one needs those for shopping; light-shy figures use them for their activities. [Also] it would be easier for central banks to impose their monetary policies. At this time, they cannot push interest rates appreciably below zero because the savers would hoard cash. If there is no cash, the zero bound is eliminated.”

 

vision_of_hell_11They said they were going to make me an advisor ... Bofinger discovers they lied to him.

Painting by Zdzislaw Beksinski

 

A Slide Back into Prehistory

Yes, dear reader, it seems to be coming – a dreadful slide back beyond the darkest ages and into the mud and slime of prehistory. Back then, modern “money” had not been invented. Using rudimentary credit and barter systems, you could only trade with people you knew – and on a limited scale.

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Superpower

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Posted on 22nd May 2015 by Administrator in Economy |Politics |Social Issues

Outside the Box: Superpower

By John Mauldin

Ian Bremmer’s new book on the future of the US and geopolitics, Superpower, just hit the streets yesterday, and it’s already creating quite a buzz. It draws on Bremmer’s remarkable understanding of politics, America, and the world. I first ran into Ian at a conference about four years ago, where he was the after-dinner keynote speaker. It was one of those dinners where I had to go (I had spoken earlier), and I confess I had no knowledge of Ian other than his official bio. A professor of geopolitics. From New Yawk. So this Texas boy settled in while Ian walked on stage … and in three seconds I realized that this was an uber-nerd. Total geek. Seriously, when Hollywood wants to type cast a brilliant super-nerd, they should use Ian as the model. He hit all my stereotype buttons, and I of all people should know better.

Now I know, you’re saying it takes a nerd to know a nerd, and I do get that. But within five minutes, this nebbish professor was blowing me away. I was totally captivated. He took me on a trip through the geopolitical landscape as profound as any I had ever been on. I knew that I had to have him at my own conference, and he has been a featured speaker and crowd favorite there for the past three years.

Ian gave one of the most compelling presentations at our most recent Strategic Investment Conference. No fancy Powerpoint, just one machine-gun idea after another, strung together in what I now realize is his own carefully crafted style.

As I shared with you in Thoughts from the Frontline last week, Ian’s summary of the geopolitical situation and America’s role in managing it can be expressed in two words: it’s bad.

The US is not in decline, he asserts in today’s Outside the Box, citing “the strength of the dollar, US equity markets, employment levels and the economic rebound, the energy and food revolutions, and generation after generation of technological innovation”; but America’s foreign policy and international influence are most certainly in decline. Nevertheless, no other country can even come close to claiming superpower status, so the role the US chooses to play in the world remains of paramount importance.

For the past quarter-century, says Ian, our leaders have just been winging it:

From the fall of the Wall and Soviet collapse, US presidents of both parties have defined America’s mission in terms of tactics. US foreign policy has been reactive and improvisational for 25 years. And we can no longer identify a Democratic or Republican approach to foreign policy.

That’s where we, the American public, come in. We will have a national election in a year and a half, and our foreign policy needs to be front and center in the national conversation until then. To help us think about how we want to be in the world, in Superpower Ian offers three dramatically different foreign policy alternatives, which he outlines in today’s OTB. As I read Ian’s book, there was, I confess, an attraction to each elemental strategy.

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No Kidding? Stan Sees The Problem?

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Posted on 21st May 2015 by Administrator in Economy |Politics |Social Issues

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Guest Post by Karl Denninger

Gee, yet no solutions…..

Billionaire investor Stan Druckenmiller said an aging population will present a “massive, massive problem” for the U.S. in 15 years.

“The young people are not going to be talking about cutting back,” Druckenmiller said Wednesday night in New York at an event hosted by Addepar, a technology company that provides software to financial advisers, fund managers and family offices. “There will be nothing to cut back.”

Druckenmiller, 61, has argued for several years that the mushrooming costs of Social Security, Medicare and Medicaid will bankrupt the nation’s youth and eventually result in a crisis worse than the financial meltdown of 2008. The government will have to reduce payments to the elderly, he said at the event.

Nope.

How do you do that when the elderly can outvote the younger people?

Further, will you stop including Social Security in this description of the problem?  It’s not the problem, and that Stan, like so many others, continue to include it tells me that something is very wrong with what is being propounded — probably that he knows damn well where the problem is and thus how to address it but doesn’t want to put that on the table.

It’s really not complicated folks: Medicare and Medicaid are the problem, all of it.

Let’s take the numbers right out of the MTS for last fiscal year.

Medicare tax receipts, last fiscal year and all-in, were $224 billion.  That’s it.  Medicaid received zero since there’s no tax associated with it.

But between Medicare and Medicaid last year $1,187 BILLION was spent, resulting in a deficit between spending and tax receipts of nearly a trillion dollars.  In fact last fiscal year the US Federal Debt increased by $1,085 billion which means that essentially all of the actual deficit was due to this disparity.

You got that folks?  The entire reason that we have a budget deficit — all of it — is that we are spending $963 billion more than we take in through taxes on Medicare and Medicaid.

THE ENTIRE PROBLEM LIES THERE, ALL OF IT.

Now to be fair, the Social Security system ran a $150 billion deficit last fiscal year too.  But $150 billion is chump change compared against $960 billion, and the latter is growing in payments far faster than receipts.

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QUOTES OF THE DAY – VOTING EDITION

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Posted on 19th May 2015 by Administrator in Economy |Politics |Social Issues

“The best argument against democracy is a five-minute conversation with the average voter.”

Winston S. Churchill

“I have never voted in my life… I have always known and understood that the idiots are in a majority so it’s certain they will win.”

Louis-Ferdinand Céline

“Representative government is artifice, a political myth, designed to conceal from the masses the dominance of a self-selected, self-perpetuating, and self-serving traditional ruling class.”

Giuseppe Prezzolini

“As democracy is perfected, the office of president represents, more and more closely, the inner soul of the people. On some great and glorious day the plain folks of the land will reach their heart’s desire at last and the White House will be adorned by a downright moron.”

H.L. Mencken

“Presidents are selected, not elected.”

Franklin D. Roosevelt

“All voting is a sort of gaming, like checkers or back gammon, with a slight moral tinge to it, a playing with right and wrong, with moral questions; and betting naturally accompanies it. The character of the voters is not staked. I cast my vote, perchance, as I think right; but I am not vitally concerned that that right should prevail. I am willing to leave it to the majority. Its obli­gation, therefore, never exceeds that of expediency. Even voting for the right is doing nothing for it. It is only expressing to men feebly your desire that it should prevail. A wise man will not leave the right to the mercy of chance, nor wish it to prevail through the power of the majority.”

Henry David Thoreau

“General Motors, General Mills, General Foods, general ignorance, general apathy, and general cussedness elect presidents and Congressmen and maintain them in power.”

Herbert M. Shelton

“Think of how stupid the average person is, and realize half of them are stupider than that.”

George Carlin


 

9 Killed, 18 Injured, 192 Arrested After “True Biker Shootout” At Texas “Breastaurant”

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Posted on 18th May 2015 by Administrator in Economy |Politics |Social Issues

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This is probably how a TBP get together would end.

Tyler Durden's picture

It’s not everyday that a “true biker shootout” happens, but according to police and eyewitness accounts, a “simmering feud” between rival biker gangs reached the boiling point at Twin Peaks Sports Bar and Grill in Waco Texas on Sunday afternoon.

Twin Peaks — a so-called “breastaraunt” where “eats and drinks” are all “served by friendly and attentive Twin Peaks Girls, offering their signature ‘Girl Next Door’ charisma and playful personalities to ensure that your adventure happens at the Peaks” — erupted into chaos after a dispute which Reuters reports “may have been over a parking lot” spilled from a bathroom, to the restaraunt, and then into the parking lot, where five rival biker gangs “attacked each other with guns, knives, brass knuckles, clubs and motorcycle chains.” 

Police soon joined the shootout and when all was said and done, 9 people were dead and 18 were hospitalized (presumably all bikers) while 192 were arrested. Authorities say they adopted the standard ‘deadly biker shootout rules of engagement’ by only firing once fired upon:

“Yesterday’s events was bad guys on bad guys. When our officers arrived, those bad guys turned their guns on our officers.” Waco Police Sergeant Patrick Swanton said.

Unfortunately for local patrons who enjoy having their “eats” and “drinks” served by “playful girls next door,” the Waco Twin Peaks location was shut down by the Texas Alcoholic Beverage Commission due to … well, due to the threat that high noon biker shootouts pose to the public.

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Dead Nation Walking

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Posted on 18th May 2015 by Administrator in Economy |Politics |Social Issues

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Guest Post by Jim Kunstler

Many people seem to think that America has lost its sense of purpose. They overlook the obvious: that we are striving to become the Bulgaria of the western hemisphere. At least we already have enough vampires to qualify.

You don’t have to seek further than the USA’s sub-soviet-quality passenger railroad system, which produced the spectacular Philadelphia derailment last week that killed eight people and injured dozens more. Six days later, we’re still waiting for some explanation as to why the train was going 100 miles-per-hour on a historically dangerous curve within the city limits.

The otherwise excellent David Stockman posted a misguided blog last week that contained all the boilerplate arguments denouncing passenger rail: that it’s addicted to government subsidies and that a “free market” would put it out of its misery because Americans prefer to drive and fly from one place to another.

One reason Americans prefer to drive — say, from Albany, NY, to Boston — is that there is only one train a day, it never leaves on time or arrives on time, and it takes twice as long as a car trip for no reason that makes any sense. Of course, this is exactly the kind of journey ( slightly less than 200 miles) that doesn’t make sense to fly, either, given all the dreary business of getting to-and-from the airports, not to mention the expense of a short-hop plane ticket.

I take the popular (and gorgeous!) Hudson River Amtrak train between Albany and New York several times a year because bringing a car into Manhattan is an enormous pain in the ass. This train may have the highest ridership in the country, but it’s still a Third World experience. The heat or the AC is often out of whack, you can’t buy so much as a bottle of water on the train, the windows are gunked-over, and the seats are often broken. They put wifi on trains a couple of years ago but it cuts out every ten minutes.

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Seymour Hersh: Obama’s Entire Account Of bin Laden’s Death Is One Big Lie; This Is What Really Happened

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Posted on 11th May 2015 by Administrator in Economy |Politics |Social Issues

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Tyler Durden's picture

The last time famed US investigative journalist Seymour Hersh made news in the global media was with his massive, 5000-word expose from April of 2014 “The Red Line and the Rat Line” revealing the true motives behind the Syrian near-war of 2013 including what we had said from the very beginning: the very professionally created YouTube clips showing the consequences of what was said to have been an Assad poison gas attack, were nothing but a fake (subsequent reports identified the propaganda source as Rami Abdul Rahman of the Syrian Observatory for Human Rights, whose entire operation has been funded by an unidentified European country.)

Fast forward to today when in a report whose word count doubles his previous record for the London Review of Books, Hersh targets a topic near and dear to the hearts of many Americans: the story of the capture and death of Osama bin Laden. Or rather the completely false and, according to Hersh, fabricated story, one made up entirely by the US president and spoon fed for popular consumption with the aid of a Hollywood blockbuster whose entire plot line is, if Hersh is correct, one big lie as well.

In a nutshell, and one really needs to read Hersh’s magnum opus as no amount of abbreviation will do it justice, Hersh accuses Obama of not only taking credit for the al Qaeda leader’s death, but fabricating the story that resulted from what has been widely reported to have been a Navy seal incursion into bin Laden’s Abbottabad compound in Pakistan. As a result the military and intelligence communities were forced to scramble and then corroborate the president’s version of events.

Hersh uses several sources for his refutation of the official narrative, including Asad Durrani, who was head of the Pakistani Inter-Service Intelligence agency in the early 1990s, as well as various American sources, of which the major source “is a retired senior intelligence official who was knowledgeable about the initial intelligence about bin Laden’s presence in Abbottabad. He also was privy to many aspects of the Seals’ training for the raid, and to the various after-action reports.”

Hersh also uses two other US sources, who had access to corroborating information, have been longtime consultants to the Special Operations Command, and also had information “from inside Pakistan about widespread dismay among the senior ISI and military leadership – echoed later by Durrani – over Obama’s decision to go public immediately with news of bin Laden’s death.”

Needless to say, the White House did not respond to Hersh’s requests for comment.

Among the many allegations of Hersh’s report are that:

  • bin Laden had been a prisoner of the Pakistan intelligence at the Abbottabad compound since 2006 (something revealed previously in “Osama bin Laden ‘protected by Pakistan in return for Saudi cash“)
  • that the two most senior Pakistani military leaders knew of the raid in advance and had made sure that the two helicopters delivering the Seals to Abbottabad could cross Pakistani airspace without triggering any alarms;
  • that the CIA did not learn of bin Laden’s whereabouts by tracking his couriers, as the White House has claimed since May 2011, but from a former senior Pakistani intelligence officer who betrayed the secret in return for much of the $25 million reward offered by the US,
  • and that, while Obama did order the raid and the Seal team did carry it out, many other aspects of the administration’s account were false.

Hersh notes that the Obama administration originally agreed to announce bin Laden had been killed in a drone strike rather than shot during an active Special Forces mission:

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Free Trade Is Plutocratic Propaganda

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Posted on 10th May 2015 by Administrator in Economy |Politics |Social Issues

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Submitted by Dark Bid

 Free Trade Is Plutocratic Propaganda

With the looming Trans-Pacific Partnership dominating the headlines, now is a good time to revisit an old scam called “free trade.”

In 2003, Kevin Flanagan was an information technology employee at Bank of America. They told him he was being replaced with foreign labor, and he was ordered to train his replacement. After he completed his assignment, he was laid off. Then he went to the parking lot and shot himself.

That’s “free trade.”

Like The Ministry of Truth in George Orwell’s 1984, sometimes, the most effective way to lie is to use the most innocent words. No word is more susceptible to propaganda-leveraging than “freedom.” Attach that word to any concept, and all of a sudden, it’s unassailable. That’s exactly what happened with “free trade.”

Proponents of free trade will often use the simplest analogies to convey their point, as if you were retarded. The reason they have to resort to such caveman illustrations is because free trade does not exist in the real world. There is no such thing as equality of bargaining power. If someone has ten million dollars and you have zero dollars, anything above zero is an “improvement” in your situation. The free trade economists will say this person with zero dollars is “free” to work for $1 per hour, and they will do so because it improves their situation. This is what “freedom” means to free trade economists.

If you doubt the free trade economists, they will call you a “protectionist,” as if protecting your country’s economy were some kind of grievous transgression. In fact, nothing is more American than shunning free trade nonsense.

Ian Fletcher calls free trade the myth of “cowboy capitalism.” According to Fletcher, all four presidents on Mt. Rushmore were protectionists. The entire American Revolution was fought because the colonists were tired of being economically exploited by the British. Alexander Hamilton realized that British dominance in manufacturing and American reliance on agriculture were dooming us to a banana republic future. The solution? Tariffs. By taxing British goods, the United States boosted its manufacturing industry. By 1820, tariffs were at 40%.

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A Powerful Weapon of Financial Warfare–The US Treasury’s Kiss of Death

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Posted on 7th May 2015 by Administrator in Economy |Politics |Social Issues

A Powerful Weapon of Financial Warfare–The US Treasury’s Kiss of Death

By Nick Giambruno

It’s an amazingly powerful weapon that only the US government can wield—kicking anyone it doesn’t like out of the world’s US-dollar-based financial system.

It’s a weapon foreign banks fear. A sound institution can be rendered insolvent at the flip of a switch that the US government controls. It would be akin to an economic kiss of death. When applied to entire countries—such as the case with Iran—it’s like a nuclear attack on the country’s financial system.

That is because, thanks to the petrodollar regime, the US dollar is still the world’s reserve currency, and that indirectly gives the US a chokehold on international trade.

For example, if a company in Italy wants to buy products made in India, the Indian seller probably will want to be paid in US dollars. So the company in Italy first needs to purchase those dollars on the foreign exchange market. But it can’t do so without involving a bank that is permitted to operate in the US. And no such bank will cooperate if it finds that the Italian company is on any of Washington’s bad-boy lists.

The US dollar may be just a facilitator for an international transaction unrelated to any product or service tied to the US, but it’s a facilitator most buyers and sellers in world markets want to use. Thus Uncle Sam’s ability to say “no dollars for you” gives it tremendous leverage to pressure other countries.

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DON’T HAVE SEX ON THE BEACH

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Posted on 5th May 2015 by Administrator in Economy |Politics |Social Issues

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I hope it was worth it. He’ll be getting sex in the showers for the next 15 years, but probably not the kind he prefers.

Man Convicted of Sex on the Beach Likely to Get 15 Years

Excessive PDA, excessive sentencing

Couple

Sex on the beach: It’s a delicious beverage, and also a crime. A Florida man convicted of having it (sex, not the drink), is expected to get 15 years in prison, while his girlfriend will serve jail time. Both must register as sex offenders.

The man, Jose Caballero, faces a harsher sentence because he is a repeat offender subject to mandatory minimum sentencing: he was previously convicted of trafficking cocaine and spent eight years in prison. His next stay in prison will likely be twice as long, however, for the comparatively less serious crime of getting intimate with his girlfriend on a public beach in Bradenton, Florida.

According to The Miami Herald, the couple were noticed by a 3-year-old girl. Exactly what the girl saw is unclear; it’s not even obvious that the two were actually having sex, according to video footage of the encounter:

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