Guest Post by Bill Bonner
To dream the impossible dream
To fight the unbeatable foe
To bear with unbearable sorrow
To run where the brave dare not go
– “The Impossible Dream (The Quest),” Man of La Mancha
BALTIMORE, MARYLAND – We left off yesterday promising to rev up the chainsaw.
We’re searching the woods, hills, and urban jungles for the coveted “magic money tree.” Family: arbor. Genus: pecunia. Species: magicae.
For thousands of years, alchemists, grifters, and proto-central-bankers have tried to find it. But it has remained as elusive as the Himalayan snow lizard and the American jackalope.
But it must be out there somewhere. Everyone believes it, including the president of the USA. “Give me some of that money,” says he.
And yesterday, the magic money tree – aka MMT… aka Modern Monetary Theory – was in full flower. CNBC:
Stocks rose on Monday as the market’s rally to record highs resumed amid increasing expectations that China and the U.S. will reach a so-called phase one trade deal.
The S&P 500 and Nasdaq Composite hit all-time closing highs as they rose 0.8% to 3,133.64 and 1.3% to 8,632.49, respectively. Both indexes also notched intraday records. The Dow Jones Industrial Average also had a record close, gaining 190.85 points, or 0.5% to 28,066.47.
President Donald Trump tweeted about the record, saying: “Enjoy!”
MMT Myth
The idea – given to us by David Graeber, Elizabeth Warren, Thomas Piketty, and a whole cast of MMT enthusiasts and half-wit hallucinators – is that money really does grow on trees. It is just a matter of political willpower, they say… even courage… to put it to use.
Donald Trump, for example, displayed that kind of courage when he pushed for a tax cut in December 2017. The Fiscal Times estimated that the cut could add $24.5 trillion to the U.S. debt over the next 20 years.
Where will the money come to pay for it? The magic money tree, of course.
Even otherwise sane and sensible economists, such as our friend Richard Duncan, think the time has come when the feds can take advantage of free money (from ultralow or even negative interest rates) to work wonders.
They can rebuild U.S. infrastructure… and provide coast-to-coast free broadband… free university education… and a guaranteed income.
Some people even think it is vitally important… or even unethical not to do it. With this cash, they say, we can right the world’s wrongs… cure its ailments… and wash away its sins.
And why not? Why not stop global warming… if it can be done at no cost? Why not help the poor… heal the sick… and raise the dead?
Too Good to Be True
Sounds great, doesn’t it? Almost too good to be true. So, maybe some due diligence is in order…
First, how is it that this magic money tree has remained hidden all these many, many years? Isn’t it remarkable that through periods of stark, dismal poverty… famine… financial chaos and collapse… nobody ever stumbled on the magic tree?
That is, we know of no episode in history… even when people were starving by the millions and desperately begging for pennies… when the discovery of this magical tree solved the problem.
Instead, they had to work their way out of every financial crisis… slowly and painfully, regretting every dime they spent when they were flush. Why?
Second, there are many episodes in history when people thought they had discovered the wondrous tree… only to be rudely disappointed years later.
John Law thought he had one in his offices on the Rue Quincampoix. People lined up outside to get his new “money”… backed by shares in the Mississippi Company.
Hugo Chávez thought he had one in Venezuela – one with deep roots into the country’s oil fields.
And dozens of countries – including Greece, Brazil, Germany, and Argentina – have printed up omega-zillions in their own currencies. By just adding a zero, they discovered, they could multiply their money 10 times.
But if governments and central banks really could create real “money,” residents of Harare and Caracas would have a lot more real “money” now.
Instead, in every case, the money tree yielded enormous quantities of paper money, but the magic went out of it just when they needed it most.
Fruit of Progress?
But wait. Maybe this is just another fruit of modern, technological progress – like the iPhone?
When we were little, in order to make a phone call, you had to first pick up the heavy receiver… make sure no one else was on the line… and then turn the numbers in sequence on the rotary dial.
Now, with ultramodern communications, we can get the weather… receive correspondence… and even watch dirty movies – all on our iPhone.
Has the same sort of progress come to the money world, where things that were impossible a few years ago are now commonplace?
Is the sad experience from other “money tree” episodes now irrelevant… because we are all so much smarter… with so many cool new tools to work with?
Toughest Question
This is the toughest question. Just because something never happened before doesn’t mean it won’t happen now. And maybe genetic engineering has produced something that never before existed… something that was considered impossible – a magic money tree.
But wait. How would that work?
A printing press can produce all the currency with all the zeros you could possibly want. Currency is not money. It’s only money if people are willing to trade their time and wealth for it.
That’s the trouble with hyperinflation – fewer and fewer people are willing to make the trade. Eventually, no one will. Then, the currency becomes worthless.
So, if there were a magic money tree, it would have to do more than the counterfeiters working for the feds. It would have to create not just pieces of paper called “money,” but products and services – real wealth, real money – equal to the currency.
How could it do that? Still seems impossible…
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COULD lead to financial calamity? How about WILL instead?
Sub-prime is worse than 2007-2008. Pile on consumer debt and the college loan problem. There’s a big indication something’s broken when the Fed starts dumping billions into the short-term repo markets. Just a matter of time before we find out WHO that is, and for the Little People, that means looking a way to insure your savings and reduce your losses before the Bubbles pop.
I have no idea when the SPX is gonna dump 1,000 points. During the 2007-2008 crisis I made a few thousand bucks shorting Lehman Bros. but after a couple days and a $6k gain I got nervous about the risk and closed out the trade. The wiseguys in the room will have a stable income stream, hard money, and goods to exchange no matter what comes, and God willing, farmers will become some very important people.
The Fed dumping billions into the short-term repo markets is to hide the fact that Deutsche Bank in Germany is in the process of imploding, and has huge exposure to the Derivatives Market – which is about a $46 trillion liability.
When that bank craters, the EU craters, along with the rest of the Western Banking Cartels, and the global economy goes into yet another depression, like 1929.
These idiots in charge of these global banking giants plan on printing away the bad bets, and putting the load on “the little people”.
I can understand that, what I can’t understand, is who has enough power to call in a $46 trillion note?
my only guess is the family that is worth $500 Trillion, begins with a Roth, ends with a Child.
seems to me, that if we get rid of this mega usurper, we could wipe the debts, and start over.
Just saying what everyone is thinking.
You can’t just “wipe out all the debts”. It would create a black hole that would dwarf the Dark Ages. There is a more reasonable solution where everyone takes some lumps, but the longer we extend and pretend, the worse the outcome is going to be.
You also can’t just “keypress digital money out of thin air” to zero out the balance sheet. That would indeed create a complete collapse in confidence of government, hence its currency issuance, hence hyperinflation.
Debts that can’t be paid, won’t be paid.
Plan accordingly.
Debts that can’t be paid pave a road to total war and confiscation of the loser’s real assets. There are plenty of untapped Ruhr Valleys in America.
A of C,
Anon said tap uncle Rothschild for the dough. He’s got $Trillions, literally.
You said it right Anonymous – the implosion is overdue.
MMT is of course total bullshit founded on desperate govts. trying to paper over their issues. However, the amount of capital being swallowed by the debt vortex has thus far been much larger than any easing. By a lot. The hyperinflation chimera is at best a secular issue starting in the periphery, given that emerging markets oftentimes rely on the FRN as their medium of exchange, and the debt they issue in FRNs functions similarly to Civil War greenbacks.
We’ll have cost-push inflation in commodities. That’s a given and for multiple reasons. Ultimately the FRN will collapse as the world’s reserve currency, again for multiple reasons. People are going to be worried about the cost of food long before the FRN collapses and a new monetary system is devised, and no hyperinflation will be necessary. Economists solely focused on a domestic vacuum miss out on international capital. That would be a lot of goldbugs as well as Keynesians. Two sides of the same coin.
International capital is Big Money. Trillions of dollars. It has to park somewhere and right now, this shit-show called America and its lousy fiscal policy is the only game in town. There’s not a single market as big as USG bonds that can handle Big Money. Not even close.
A house of cards. Get ready, Don’t say you weren’t warned. I don’t think anyone is ready for what is coming.
Economics is BS dressed up to appear respectable. The only parts of Economics that make sense are what that “profession” appropriated from common sense. The rest is nothing but opinion that’s usually wrong.
Economists are the yes men for the bankers. They’ll come up with some cockamamie rationale for anything that group of criminals wants to foist on the population. I’ll include all the Austrian Economists as not worth listening to because they also THINK they KNOW something and are willing to push their version of BS.
Economics is the Phrenology of the modern world. If you can’t prove what you say, then it’s opinion regardless of the number of degrees one has.
SOA.
Yup. Economists are just one more Pathocratic bump on the Bankers cranium.
“Donald Trump, for example, displayed that kind of courage when he pushed for a tax cut in December 2017. The Fiscal Times estimated that the cut could add $24.5 trillion to the U.S. debt over the next 20 years.”
“Where will the money come to pay for it? The magic money tree, of course.”
You’re still a hack.
According to CNS News, “The federal government collected a record $1,683,537,000,000 in individual income taxes in fiscal 2018 (October 2017 through September 2018).”
https://bongino.com/the-federal-government-collected-record-income-tax-revenue-in-2018/
I may not be able to put this into words correctly but, I feel sorry for the generations who have no clue what it used to be like. Watching past episodes of The Waltons don’t cut it, you had to be there and live it. No, I didn’t live during the Depression but grew up shortly after and was raised in a country when truth was still a virtue and good morals abounded in our community. It was still tough but we made it work and were taught skills handed down from family who knew how to build a house with used lumber and nails, yes we straightened used nails and re used them. It is my opinion that the Great Depression was in a lot of ways good for the country, it stopped a lot of nonsense and corrected a nation who had veered off course; my family was better because of it.
We should have had a similar correction long, long ago but “they” wouldn’t let it happen. Fast forward,………by not allowing a correction, they have created a whole society that are not in any way capable of taking care of themselves. I believe it was a “set up”and when it implodes, millions will die. I am one of the last hold outs in my family, one who remembers and has still clung to the old ways and I just don’t see this younger generation making it through what is coming. The learning curve for making it on your own is just too severe in such short notice. Just my opinion. Thanks.
Sir, I do believe you are deadly accurate. Millions will die through varying means. I just don’t see a way of avoiding it. In the old days, kings would decrease the surplus population through conventional warfare. Banks could only wildcat it so far before they’d end up like Amsterdam Wisselbank; today, we’ve leveraged everything that’s not nailed down.
Even worse, the populares are as addicted to debt as the sovereigns; sovereigns continue to have the exorbitant privilege of emitting bills of credit; the division of labor is too specialized (hence, very few know how to install a drain field); socialism has conditioned the populares to believe that Medicare and Medicaid are fundamental rights; a lack of term limits allows our govt. to promise free lunches; federalism has been all but nullified, so one state’s pain will be redistributed to all others; true Christianity has been neutered in favor of coercive “secular humanism”, so there’s no societal moral code; and the entire world is locked and loaded with a bullseye on us the minute we go pear-shared.
Yeah, I feel ya. And yet I believe the safest place in the world for a white, Christian American is in a Southern enclave.
I agree completely and yes, the so called Christianity I see today is secular humanism. Makes me sick to my stomach. I don’t even bother attempting to correct it any longer, this Old Timer just stays out of the way. I just recently got on the internet, sure is nice to read comments such as yours and fleabaggs. Makes me feel not so alone, I believe we could get along just fine. I live in the Ozark hills, people moving here to escape high taxes from Illinois and name your state. I hear them at farm auctions and such talk of how nice it is here. I think to myself, you don’t have a clue. This place is a skeleton of what it used to be. Thanks.
Flea is a good one, lots of good old timers that I learn from on this site. I’m in TN so I can relate to the influx of Illinoisans. I’m finding they’re bringing their screwed up politics with them.
Welcome, I have no doubt you’ll enjoy TBP.
O.T.
Maggie lives near Poplar bluff.
I think it will be healthy in the long run. And shedding this nation of its useless eaters wouldn’t be all bad. I think the overpopulation problem we have is also a side effect of cheap credit.
Old timer.
I agree completely.
Now about those boards and nails. Dad worked off farm as a carpenter and brought home used nail filled boards and cleaning them up sorting and stacking was one of my first jobs. Straightened nails and put them in coffee cans. As you know, if you don’t hit them right it hurts like heck. Splitting kindling was another early job then graduated to full size firewood by 8. We all cut wood out back every Saturday in winter and pumped and hauled water for a thousand chickens. Well was outside the kitchen and had to pour warm water down it to thaw it out. Dad was from E. Texas and Mom from Appalachia so that meant kids weren’t the little darlings they are today. Picked beans for 25 cents a bushel. That was two sodas and a candy bar. And I can wash and iron clothes with the best of them.
I said the same thing a few months ago. Theres too much to unlearn and too much to relearn now. Fema camps would be the most merciful thing to do with what I see walking around today. Hipsters with pussy hands and Progladykes with drama issues. Tie two buckets to their hands and put them in a strip mine pit and tell them to start walkin, get tired of walkin, run awhile. No coal no supper.
Enjoy reading your comments fleabaggs. Yes, your speaking my language for sure.
Too late now……….
Excellent sarc. Bill, thank you – I am smiling inwardly!
Sarcasm is an ironic or satirical remark tempered by humor. Mainly, people use it to say the opposite of what’s true to make someone look or feel foolish. For example, let’s say you see someone struggling to open a door and you ask them, “Do you want help?” If they reply by saying, “No thanks. I’m really enjoying the challenge,” you’ll know they’re being sarcastic. Sarcasm is all about the context and tone of voice, which is why it works better verbally. It’s something you’ll know when you hear it.
Sarcasm can also be used for comedic relief. For example, “I walked into my hotel room and wondered if the interior decorators thought orange was the new black.” The main gist of sarcasm is that the words are not meant to be taken literally.
As a celebrity was once heard to comment when visiting a Nouveau Riche’s new mansion for the first time: ” Wow I didn’t think you could buy all this at Woolworths” (today you would say Walmarks)