Marc Faber – “Total Collapse Will Come” – Economic Armageddon – Dollar Crash

Governments hoard food stockpiles in anticipation of public uprisings

Ethan A. Huff
Natural News
Feb 1, 2011

Economic failures, government corruption, banking system fraud — these and many other factors have together contributed to the escalating turmoil that the world currently faces. The costs associated with everything from energy and fuel to food and health care have soared in recent years because of manipulation of the fiat monetary system, and actual shortages of resources. And according to reports, nervous governments are now starting to stockpile massive food stocks to offset what they believe is a coming wave of civil unrest over the continued rising costs of basic essentials.

Though not typically a course of action in the U.S., protests and even aggressive riots are rather common in many countries around the world, particularly those with blatantly authoritarian governments. When the noose gets a little bit too tight, the people of these nations often quickly push back and demand changes. The current situation in Egypt, for example, is a perfect illustration of what people are willing to do when they are pushed too far by their tyrannical overlords.

But the unrest is beginning to spread worldwide. As food prices continue to rise, and commodities traders warn about “panic buying” over fears of massive price increases, desperate populations are starting to take it to the streets, much like they did in 2008 when food prices skyrocketed (http://www.naturalnews.com/023277_r…). But it appears as though the world is headed for another, and this time possibly worse, food crisis in the very near future.

The U.K. Telegraph reports that various countries in Asia, the Middle East, and North Africa, are buying up rice, wheat, and other grains by the hundreds of thousands of tons. In some cases, they are buying enough to last up to a year.

These efforts, which presumably are to offset the disruption caused by major shortages, are actually creating shortages of their own, however. They are also further driving up prices, which is causing average citizens to panic.

“It’s really something that can topple regimes, as we have seen in the Middle East,” explained Nouriel Roubini, a New York University (NYU) economics professor that predicted the 2008 financial crisis, to listeners at the World Economic Forum in Davos. He added that something as isolated as high food prices can cause “riots, demonstrations and political instability.”

According to some experts in the industry, the wave of panic buying has only begun. Once one country takes the first move in initiating panic buying, many others follow suit, which makes the situation perpetually worse.

“This is only the start of the panic buying,” said Ker Chung Yang, a commodities analyst with Phillip Futures in Singapore. “I expect we’ll have more countries coming in and buying grain.”

According to the same report, Algeria has already purchased 800,000 tons of wheat, while Saudi Arabia has stockpiled 12 months worth of wheat. Bangladesh has reportedly tripled its rice imports, and Indonesia has purchased 820,000 tons of Thai rice. Ironically, all this buying activity is creating even worse shortages that will raise prices for other countries who import these commodities.

Food shortages are coming to the West

NaturalNews recently covered a report released by the National Inflation Association that warns of massive food inflation coming to the West in the very near future. And the report identifies the Federal Reserve’s practice of printing fiat money and manipulating the money supply at will as one of the primary causes of the coming food crisis. The practice of creating money backed by nothing only leads to rapid inflation, as it devalues the overall worth of money through dilution (http://www.naturalnews.com/030309_f…).

Then there is the problem of actual food shortages. Changing weather patterns, unseasonable warm and cold spells, droughts, floods, and other erratic climate conditions in various growing regions have destroyed many crops and significantly reduced yields over the years (http://www.naturalnews.com/026453_d…). Combined with the countless diversified agricultural systems that have been replaced by genetically-modified (GM), monoculture varieties — many of which have failed to deliver upon their promised yields — the entire global food system is destined for failure (http://www.naturalnews.com/030913_M…).

Self-reliance is truly the key to solving the food crisis. Dependance on an unsustainable system of industrialized agriculture that depletes soil, eliminates crop diversity, and contaminates the environment with harmful pesticides and other toxins will only lead to disaster. Such a system is controlled by a few powerful elite, such as multinational biotechnology giants like Monsanto, whose only goal is profits and control. The end result is a centralized power that controls the food supply for its own gain.

Instead, it is time for a food reformation based on local, community-based agricultural systems — and even simple backyard gardens — which will greatly improve Americans’ food independence and decouple them from the corrupt, centralized food system on which they largely rely.

A return to an honest money system, where the dollar is backed by something of value like gold or silver rather than nothing like it currently is, is also necessary to bring about real, positive change. When the value of a dollar is no longer controlled by the money masters who print it at will, but instead by the value it actually holds as a real currency, is the day Americans will begin to understand the true meaning of freedom and liberty.

Housing Armageddon: 12 Facts Which Show That We Are In The Midst Of The Worst Housing Collapse In U.S. History

The Economic Collapse
Feb 1, 2011

We are officially in the middle of the worst housing collapse in U.S. history – and unfortunately it is going to get even worse.  Already, U.S. housing prices have fallen further during this economic downturn (26 percent), then they did during the Great Depression (25.9 percent).  Approximately 11 percent of all homes in the United States are currently standing empty.  In fact, there are many new housing developments across the U.S. that resemble little more than ghost towns because foreclosures have wiped them out.  Mortgage delinquencies and foreclosures reached new highs in 2010, and it is being projected that banks and financial institutions will repossess at least a million more U.S. homes during 2011.  Meanwhile, unemployment is absolutely rampant and wage levels are going down at a time when mortgage lending standards have been significantly tightened.  That means that there are very few qualified buyers running around out there and that is going to continue to be the case for quite some time to come.  When you add all of those factors up, it leads to one inescapable conclusion.  The “housing Armageddon” that we have been experiencing since 2007 is going to get even worse in 2011.

Right now there is a gigantic mountain of unsold homes in the United States.  It is estimated that banks and financial institutions will repossess at least a million more homes this year and this will make the supply of unsold properties even worse.  At the same time, millions of American families have been scared out of the market by this recent crisis and millions of others cannot qualify for a home loan any longer.  That means that the demand for unsold homes is at extremely low levels.

So what happens when supply is really high and demand is really low?

That’s right – prices go down.

Hopefully housing prices don’t have too much farther to go down.  Ben Bernanke and the boys over at the Federal Reserve are doing their best to flood the system with new dollars in order to prop up asset values, but you just can’t create qualified home buyers out of thin air.

Many analysts are projecting that U.S. housing prices will decline another ten or twenty percent before they hit bottom.  In fact, quite a few economists believe that the total price decline from the peak of the market in 2006 will end up being somewhere in the neighborhood of 40 percent.

But whether prices go down any further or not, the truth is that the housing crash that we have already witnessed is absolutely unprecedented.

The following are 12 facts which show that we are in the midst of the worst housing collapse in U.S. history….

#1 Approximately 11 percent of all homes in the United States are currently standing empty.

#2 The rate of home ownership in the United States has dropped like a rock.  At this point it has fallen all the way back to 1998 levels.

#3 According to the S&P/Case-Shiller index, U.S. home prices fell 1.3 percent in October and another 1 percent in November.  In fact, November represented the fourth monthly decline in a row for U.S. housing prices.  Many economists are now openly using the term “double-dip” to describe what is happening to the housing market.

#4 The number of homes that were actually repossessed reached the 1 million mark for the first time ever during 2010.

#5 According to RealtyTrac, a total of 3 million homes were repossessed by mortgage lenders between January 2007 and August 2010.  This represents a huge amount of additional inventory that somehow must be sold.

#6 72 percent of the major metropolitan areas in the United States had more foreclosures in 2010 than they did in 2009.

#7 According to the Mortgage Bankers Association, at least 8 million Americans are at least one month behind on their mortgage payments.

#8 It is estimated that there are about 5 million homeowners in the United States that are at least two months behind on their mortgages, and it is being projected that over a million American families will be booted out of their homes this year alone.

#9 Deutsche Bank is projecting that 48 percent of all U.S. mortgages could have negative equity by the end of 2011.

#10 Some formerly great industrial cities are rapidly turning into ghost towns.  For example, in Dayton, Ohio today 18.9 percent of all houses are now standing empty.  21.5 percent of all houses in New Orleans, Louisiana are standing vacant.

#11 According to Zillow, U.S. home prices have already fallen furtherduring this economic downturn (26 percent) than they did during the Great Depression (25.9 percent).

#12 There are very few signs that the employment situation in the United States is going to improve any time soon.  4.2 million Americans have been unemployed for one year or longer at this point.  While there has been some nominal improvement in the government unemployment numbers recently, other organizations are reporting that things are getting even worse. According to Gallup, the unemployment rate actually rose to 9.6% at the end of December.  This was a significant increase from 9.3% in mid-December and 8.8% at the end of November.

But even many Americans that do have jobs are finding out that it has become very, very hard to qualify for a home loan.

In an attempt to avoid the mistakes of the past, banks and financial institutions have become very stingy with home loans.  While it was certainly wise for them to make some changes, the truth is that perhaps the pendulum has swung too far at this point.  The U.S. housing industry will never fully recover if they can’t get their customers approved for mortgages.

Congress is talking about passing even more laws that will make it even more difficult to get home loans.  Even though they give speeches about how they want to help the U.S. housing industry, the truth is that Republicans and Democrats are both backing proposals that would make home mortgages much more expensive and much more difficult to obtain as a Bloomberg article recently explained….

Government officials and lawmakers want to make the market less vulnerable to another credit crisis, and all the options lead the same general direction: Borrowers will need larger down payments than in the bubble years, have higher credit scores, and pay extra fees to cover risks and premiums for federal guarantees on government-backed mortgage bonds.

While all that may sound reasonable, the truth is that the U.S. middle class has become so cash poor that the vast majority of them cannot afford homes without the kind of mortgages that were available in the past.

Not that we should go back and repeat the mistakes of the past 20 years.  It is just that nobody should expect the U.S. housing market to “bounce back” in an environment that has fundamentally changed.

The housing market is not like other financial markets.  It is difficult to artificially pump it up with funny money.  If the U.S. housing market is going to rebound, it is going to take lots of average American families getting qualified for loans and going out and buying houses.  But they can’t do this if they do not have good jobs.  Today, only 47 percent of working-age Americans have a full-time job at this point.  Without a jobs recovery there never will be a housing recovery.

In fact, there are all kinds of warning signs that seem to indicate that the U.S. economy could get even worse in 2011.  Many economists are now openly using the word “stagflation” for the first time since the 1970s.  Back in the 70s we had both high unemployment and high inflation at the same time.

Well, we have already had very high unemployment, and thanks to the relentless money printing of the Federal Reserve, it looks like we are going to have high inflation as well.

Middle class American families are going to be spending even more of their resources just trying to survive, and this is going to make it more difficult for them to purchase homes.

In fact, in recent years average Americans have been getting significantly poorer.  Over the past two years, U.S. consumers have withdrawn $311 billion more from savings and investment accounts than they have put into them.  That is very troubling news.

Now the price of food is soaring and the price of oil is about to cross $100 a barrel again.  So what is going to happen if we have another major financial crisis and we witness another huge spike in the unemployment rate?

The Federal Reserve is trying to smooth all of our problems over with a flood of paper money, but it isn’t going to work.  Yes, increasing the money supply will produce some false highs on the stock market and some false economic growth statistics for a while, but the tremendous damage that will be done to the economy is just not worth it.

In any event, let us all hope that we see some really great real estate deals over the next couple of years, because in the times ahead land will be something very good to own.  In fact, down the road it will be much better to own land than to have your money sitting in the bank where it will continuously decline in value.

Use your paper money wisely.  It will never have more value than it does today.

So what do all of you think?  Is the “housing Armageddon” almost over, or do housing prices still need to decline a bit more?  Feel free to leave a comment with your opinion below….

 

The Road to Madness Is Paved With $100 Bills

The Road to Madness is Paved with $100 Bills

…just as I am affected by the maniac, so I am affected by most modern thinkers. That unmistakable mood or note that I hear from Hanwell [an insane asylum], I hear also from half the chairs of science and seats of learning to-day; and most of the mad doctors are mad doctors in more senses than one. They all have exactly that combination we have noted: the combination of an expansive and exhaustive reason with a contracted common sense. They are universal only in the sense that they take one thin explanation and carry it very far. But a pattern can stretch for ever and still be a small pattern. They see a chess-board white on black, and if the universe is paved with it, it is still white on black. Like the lunatic, they cannot alter their standpoint; they cannot make a mental effort and suddenly see it black on white.

~C.K. Chesterton

Ben Bernanke is insane.

I mean neither insane in a flippant sense, nor in the ordinary sense (as in plain nuts), but an even more insidious form of insanity, namely the insanity of one who cannot see the world as a place outside his own thoughts and beliefs.

I am speaking of the insanity of one who believes that all things can be reduced to a simple issue or pattern, the insanity of which Chesterton spoke in his essay The Maniac.

Indeed, all of Bernanke’s monetary policies and actions can be traced to his one core belief: that the US Federal Reserve didn’t do enough to stave off the Great Depression. Never mind that this belief is completely inaccurate (as the data clearly shows), it is the foundation of Bernanke’s entire academic and now monetary career. It is the lone road on his mental map of the world.

It doesn’t matter that the road is leading us all to disaster, for Bernanke there is simply no other course of action to take. In his mind, the Fed failed to act in the ‘30s and so he MUST act regardless of facts, data, or consequence.

Indeed, were any of us to point out to Bernanke that his claims regarding inflation (that it is contained), unemployment (that QE will help it), or economic growth (that we’re in a recovery) are all at complete odds with reality, his answer would be, “well, it would be much worse if I hadn’t acted.”

This is the hallmark of an insane argument. It is logic without common sense, reason taken to the absolute limit, unable to consider anything outside the confines of its own understanding. Bernanke will drive us all to ruin, pushing ever harder on the gas pedal and repeating, “I must act, I must act, I must act” under his breath in order drown out the cries of, “stop, you’ll kill us” from the 308+ million of us sitting in the backseat.

Indeed, the only ones whom Bernanke can hear are the Primary Dealer banks, all of whom slap him on the back and tell him he’s doing a great job. Bernanke is the nerd with a single skill the jocks currently find useful. And he’s mistaken their support for genuine admiration and camaraderie. He feels their hands slapping his back and doesn’t notice the “kick me” sign they’ve installed there.

And herein lies the great irony of Ben Bernanke and his academic theories. The Primary Dealer banks, who pull the real strings at the Fed and who are only interested in making money (not theories), will use him and his misguided beliefs to serve themselves for as long as the benefits of said theories, namely hundreds of billions in free money, outweigh the risks (public outrage), just like all capitalists do when considering an investment.

However, once Bernanke’s policies bring the US public to a true boil, the puppet masters will discard their Chairman and his misguided theories like an old, broken toy. They’ll make a human sacrifice of him, pinning the blame for the collapse of the US Dollar and the US’s descent into 3rd world status on his slouched academic shoulders right next to the “kick me” sign. For when the public wants blood, it will be Bernanke, not the banks or their bonuses, who will be sacrificed.

It’s tragic, especially for the thousands of people who are now literally starving because of Bernanke’s monetary madness, that the nerd who wanted so desperately to fit in with the big shots will find himself and his theories discarded in the dustbin.

At least he got a Time Magazine cover out of it. For the rest of history, his 15 minutes of fame will stare out at us from the archives of other discarded maniacs. Indeed, he’ll find himself in good company, surrounded by others who believed the world fit only into their own manias; men such as Hitler and Stalin.

Good Investing!

Graham Summers

Richard Daughty on the Fiscal and Monetary Insanity of the Whole Freakin’ World

Anthony Wile

Introduction: Richard Daughty, the Mogambo Metals and Money Guru, describes himself as “the angriest guy in economics.” No doubt this is because a genuine belief in Austrian hard-money economics leads him to question the moves, rationale and even, sometimes, the sanity of the financial officers, institutional investors and central bankers about whom he writes. In Swahili, Mogambo apparently means “big gorilla” – and Richard is certainly a big gorilla among the hard-money publishing set – providing at least portions of his Mogambo Guru report to many of the ‘Net’s most prestigious hard-money sites and top magazines and newspapers as well – including Barron’s and the Wall Street Journal. He is also a partner and COO for Smith Consultant Group, serving the financial and medical communities. Prior to joining Smith, Richard was a financial adviser to American Express Financial Advisers in Clearwater, Florida. He holds an MBA in operations research from the University of South Florida and has long been a strong advocate for sound fiscal and monetary policy – even when it wasn’t fashionable.

Daily Bell: We have previously interviewed you and your alter ego, the Mogambo Guru. Now we’ll follow up. But please pretend you are addressing an audience that does not know about your fine work or writing.

Mogambo Guru: I do fine work or writing? Wow! Who knew? Thanks!

Daily Bell: A general question first. When did you get interested in Austrian economics and how?

Mogambo Guru: I got interesting in Austrian economics only because I was trying to make a lot of money in a hurry without actually working because I am greedy and lazy. I was using technical analysis to trade index options, and, obviously, market-following technical analysis follows the market.

The problem was that the market had already turned by the time the charts showed it, and so I always missed the first chunk of the rollup/uptrend while still holding my puts, and always missed the first chunk of the rollover/downtrend while still holding my calls! Bummer! I only got the middle part, if any, of any move.

So I wondered “How can I make a lot more money without, you know, working? For example, how did the guys who got in first, or got out first, know to get in, or know to get out? What, what, what did they know?”

Naturally, I turned to economics, and started with the usual college textbooks and bookstore offerings, all centered around that Keynes crap that they teach almost everywhere, which I found both logically incomprehensible and (my suspicions having been vindicated QED) a Big Stinking Load Of Crap (BSLOC).

Then, one happy, lucky day, flailing around as I was, lost in the darkness of modern economic Keynesian econometric stupidity, I stumbled upon the Austrian Business Cycle Theory, I forget how or where, but probably Hazlitt’s “Economics in One Easy Lesson,” and then it was Rothbard, Hayek and Mises from then on!

Daily Bell: For purposes of this interview, give us a short rundown on your background and most important work.

Mogambo Guru: A useless college degree in psychology, various post-grad MBA and PhD work ending in disillusionments and disappointments, bored business manager, simplistic computer programmer, low-producing stockbroker, disheartened financial planner, with a sorry streak of “lack of ambition” running through it all.

And as for “important work” I have done, I have never done any important work, and very little work that wasn’t substandard, now that I think about it. But thanks for asking, anyway!

Daily Bell: Is the West in a double-dip recession?

Mogambo Guru: It looks like it to me. Or a triple dip! Or more dips! Or the dip before the end of the world! Who knows? Maybe a boom! Never underestimate the government response, and there WILL be a government response!

Daily Bell: What is the real American unemployment rate versus the labor pool?

Mogambo Guru: It’s odd that you should mention that, because I just looked at it so recently that I can still remember the conclusion, which is that the US economy is so malformed and grotesquely twisted, because the Federal Reserve created the excess money to finance all that idiocy, that nowadays 7 out of 12 workers are employed either by a government, the school system, some other tax-eating agency, or work for a non-profit organization.

None of these 7 of 12 people can possibly make a profit with which to pay any taxes, and all are relying on sharing government revenues and/or soliciting the good-hearted citizens to engage in a little self-taxation and cough up some bucks for a nice donation.

So, more than half of all work in The Whole Freaking Country (TWFC) will not pay any taxes on any profit? Wow! Half!

“What kind of a crazy economic system in that?” I ask with a look of alarm and fear on my ruggedly handsome face, which, I have been told by people, is neither rugged nor handsome, but they were idiots, and it is not about rugged or handsome, anyway, but about how the distorted, bloated, cancerous economic system is causing my face, ruggedly handsome or not, to have a look of alarm and fear, which is undeniable, so who is the “conceited stupid bastard” now, you morons?

Daily Bell: What is unemployment worldwide?

Mogambo Guru: I have no idea, nor do I have any idea of the effect of unemployment in different cultures, or anything concerning foreigners, who all seem to speak foreign languages and I can’t understand a word of what they say, much less making heads or tails out of their cultural norms, although I am sure that they are all talking about me behind my back and plotting things because that is the kind of paranoid weirdo I have become as a result of the world’s central banks making so, so, so much money, over so, so, so many years, especially to accommodate the foul Federal Reserve creating so incredibly much money for the biggest economy on earth, and which is going exponential even as we speak! Yikes!

Daily Bell: What is the difference between a depression and great recession. Semantics?

Mogambo Guru: As far as I can tell without doing any real thinking, which is how I like it. I notice that they rhyme, though, if that helps!

Daily Bell: What can government do to make things better? Anything?

Mogambo Guru: Hahaha! Do? What can government do, now that it has borrowed itself into bankruptcy and after having encouraged the population to do the same so that everyone faces bankruptcy and ruination unless an inflationary hell created from stimulus spending somehow saves them all? What can they do? Hahaha!

Well, the short answer is, of course, that “Nothing can be done!” and for the very good reason that if something COULD be done, there would be no such thing as economics! “Borrow and spend as much as you like, and then when you are drowning in debt, we economics hotshots will just use a Powerful Magic Move (PMM) that will solve all financial problems!” Hahahaha!

Daily Bell: What are the worst US government statistics in your estimation – or are they all OK?

Mogambo Guru: The only thing that scares me, because it is the only thing that CAN really scare anybody that fears hordes of poor people rioting in the streets because prices are so high that they are starving, is inflation in consumer prices.

And inflation in prices comes from an increase in debt, and thus a corresponding increase in the money supply, and all that springs from an increase in Fed Credit.

So inflation’s the one thing that scares me the most, and the increase in Fed Credit is where it begins!

Daily Bell: Is the housing market beginning to bottom out?

Mogambo Guru: I doubt it, since I don’t think general incomes are rising, nor do incomes seem high enough to pass the tighter mortgage standards at the banks. But who knows?

At the risk of repeating myself, it’s always a mistake to underestimate the government!

For example, what would happen to house prices if the government reimbursed homebuyers, via a fat, luscious tax credit (payable in cash!), for what the homebuyer spent on the mortgage payment?

I mean, what is the top price someone would pay for a house that will always be, “after taxes,” free?

Daily Bell: What is the real inflation level – or is there deflation?

Mogambo Guru: I think it depends on what you are looking at! Food and energy are a lot higher in price, and almost certainly going higher, but other things are not higher, and some are lower in price.

And with the cost of housing being 40% of the Consumer Price Index and housing going down in price, the rate of inflation you experience will not be indicated in that index, if all your money is spent on higher prices for food and energy, but it will if not!

Daily Bell: How are retail sales doing?

Mogambo Guru: Well, retail-wise, I was going to buy a new putter at this golf store, but my wife said “No dice” because I already have so many putters in the garage that turned out to be pieces of expensive-yet-useless crap, their sheer number statistically eliminating the club itself as the key variable that is my freaking problem with getting that damned little white ball into that damned little hole in the damned ground.

Other than that, I don’t know anything about retail sales. Sorry.

Daily Bell: We have a theory that the controlling monetary elite is basically Anglo-American, not French, German, etc. Is that simplistic?

Mogambo Guru: With a phony philosophy that flows like profound poetry, I say “Those that have the money call the shots. It is always thus.”

Daily Bell: You tend in your public speaking to concentrate more on the Federal Reserve than the income tax when it comes to identifying what is the most damaging financial and economic mechanism. Why do you think central banking is more of a menace than graduated income taxes? Or do you?

Mogambo Guru: Changing taxes merely rearranges who, government or non-government, gets what proportion of the money supply.

When the economic stagnation of an over-reaching government starts to hurt the economy, political things, like taxes, usually reverse over the next couple of elections.

The Federal Reserve, on the other hand, constantly increases the money supply, and now at astounding rates, without anyone’s permission or input! And all this money makes consumer prices rise in horrible inflation, which, unless drastic measures are taken, always leads to economic catastrophe, unstoppable starvation, riots in the streets, and that sort of thing, which is the “good news” part.

The “bad news” part is much more nightmarish, and, thus, I think the Federal Reserve is a bigger danger, by far, than taxes!

Daily Bell: How come the Federal Reserve did not predict the crisis with all its trained economists, researchers etc?

Mogambo Guru: Because Austrian economics, which DID predict the crisis, is so simple and elegant that it is not conducive to playing “mind games” with computers and equations and econometric models to show everyone how smart you are, while proving how disastrously and utterly wrong you are, and surprisingly showing that they are too stupid to even see their obvious failure, year after year after year, and stop doing whatever in hell that it was doing to the Serious, Serious Detriment (SSD) of all, like the foul Federal Reserve.

Daily Bell: How is it possible that the Federal Reserve is going to receive yet more regulatory power given its track record?

Mogambo Guru: It is part of everyone clutching at straws in panicked desperation due to the dawning realization that “We’re Freaking Doomed (WFD)!”

Daily Bell: Is it possible given current resistance to the Fed that it is on its way out? Something else will have to replace it. Perhaps the IMF?

Mogambo Guru: Is it possible to replace the Fed? Sure! But with what? The American economy cannot now exist without the Federal Reserve, or something just like it, constantly creating money in insane multiples, gradually increasing exponentially, accomplished by unrestricted fractional-reserve banking and insane levels of credit and money creation!

Daily Bell: Will we see a truly international non-dollar reserve currency in your lifetime?

Mogambo Guru: Just tell me: Who would trust who, and why, unless it was gold?

Daily Bell: Could we then perhaps see a reversion to a gold and silver market-elected money standard?

Mogambo Guru: Perhaps, but only if we are willing to withstand a lot of pain installing it, and willingly suffer more pain as things adjust so far downward that the standard of living is just a mere fraction of what it is now, which does not sound like anybody I know!

Daily Bell: If we did see such a standard, would it emerge as a free-banking standard?

Mogambo Guru: It depends on who makes the rules, I’d say! Hahaha!

Daily Bell: Where do you stand in the free-banking controversy? Do you see private (competition-based) fractional reserve banking as fraudulent, even criminal, or would you consider it to be an appropriate market evolution if it emerged out of a return to honest money?

Mogambo Guru: The problem with fractional-banking is that it is always carried to excess, such as the situation Right Freaking Now (RFN), where “reserves” in the banks is a laughable $67 billion, held against something like $7 trillion in loans and leases! A tiny little fraction of one lousy percent counts as “reserves” against losses?

And this does not count covering the risk of another $7 trillion or so in deposits and liabilities, too! Reserves? With a miniscule $67 billion? Hahahaha!

Daily Bell: We’ve pointed out that everyone is piling on the Fed these days. There may even be an audit. Is it possible that the monetary elite has decided to sacrifice the Fed – and in doing so create an alternative structure?

Mogambo Guru: Never underestimate a truly desperate person with links to other truly desperate persons that have the power to enact laws to change your whole universe.

Daily Bell: Does gold remain undervalued?

Mogambo Guru: Most definitely! And by a long, long shot, too!

Daily Bell: How about silver?

Mogambo Guru: Even more so! Wow! I could drone on for hours and hours, one fact after another, about silver being such a screaming value that it would easily rate Number One With A Bullet (NOWAB) recommendation on the Mogambo Can’t-Miss, Sure-Fire Investment List (MCMSFIL), if there were such things as a NOWAB or MCMSFIL, which there aren’t because I just made them up, but both sound like wonderful ideas for someone not as lazy as I am.

Daily Bell: Are both manipulated?

Mogambo Guru: Isn’t everything?

Daily Bell: Is the world headed back to a gold standard? What kind of money would you like to see?

Mogambo Guru: Yes, the world is ALWAYS headed back to a gold standard because of the guaranteed degradation all monetary systems based on a fiat currency, but usually only achieved after suffering a lot of misery caused by inflation in prices for generations until the currency finally devalues to literal worthlessness.

Daily Bell: Where is China headed? Will price inflation bring China down?

Mogambo Guru: We all know where China is headed, because with that much pent-up demand, comprising almost a third of the world’s population, it is just a matter of increasing consumer credit and building retail systems to sell all that crap!

And even better for them, what will bring China’s inflation down is a strong yuan so that imports of consumer items and industrial goods will fall in price for years! Growth without inflation!

Daily Bell: What is inflation? Mises believed it was a monetary aggregate plus the willingness of society to CIRCULATE the money. Your view?

Mogambo Guru: Mises has it right. Would YOU want to hold onto a currency that was losing value with every tick of the clock, and then lose more purchasing power at every tock of the clock, and then lose more value with each tick, and then each tock, then each tick tock, tick tock, ticktockticktockticktock? Me, neither!

Daily Bell: Why is the velocity of money a false paradigm?

Mogambo Guru: I don’t know how FALSE it is, but regarding velocity, just plug the dependent variable to balance Fisher’s equation PQ=MV. Therefore, all changes in velocity (V) can only be the result of changes in prices (P), and/or quantity sold (Q), and/or the money supply (M).

Daily Bell: What is deflation? Is it a monetary phenomenon? Is there such a thing as price deflation versus monetary deflation?

Mogambo Guru: Monetary deflation is when the money supply goes down because the guy who borrowed the money won’t, or can’t, pay you back, and you have to just forget about getting your money back. And since money is created at the instant the loan is made, money literally disappears when the loan disappears!

Price deflation, on the other hand, is what happens AFTER monetary deflation: Since there is a smaller money supply being used to bid on goods and services in the free-market auction-place known as “real life,” prices cannot all be bid as high as when there was a bigger money supply, and in fact some, or all, prices must be bid lower so that the market is cleared of the same goods but less money!

Daily Bell: Can you have REAL deflation in a fiat money economy?

Mogambo Guru: You sure as hell can! And in fact, you cannot stop it unless somebody stops borrowing and spending so much money that it produces inflationary bubbles in stocks, bubbles in bonds, bubbles in houses, bubbles in derivatives, and bubbles, bubbles, bubbles in the size and expense of government, which doesn’t even count as an “expense,” measured in suffering, of the horrific inflation in consumer prices that people must pay thanks to monstrous amounts of deficit-spending by the federal government!

Daily Bell: Is fiat money collapsing worldwide?

Mogambo Guru: As it always does, as the disappearance of literally thousands of now-worthless and forgotten fiat currencies, and the losses suffered by those unfortunates holding fiat currencies, through history so richly attest.

Daily Bell: Will the EU survive?

Mogambo Guru: I’m surprised it lasted this long! A unified monetary policy but 18 separate fiscal policies, and they thought it would last? Hahaha!

Daily Bell: What is the role of government if any?

Mogambo Guru: Interesting question! The 18 powers granted to Congress, enumerated in the Constitution, is a good place to start, I suppose.

Daily Bell: What are your feelings about the war on terror?

Mogambo Guru: I assume that it’s all a big convoluted web of lies and corruptions at this point, providing good diversion for all kinds of corrupt activities and increased defense spending, as always!

Daily Bell: What is your take on Ron Paul? On the Tea Party?

Mogambo Guru: A wish come true, but arrived, alas, too, too late, but in time to take the blame.

Daily Bell: How complicated is economics really? Human action tells us that individuals will create solutions for themselves and their families and communities as necessary. What else does one need to know but “let the market decide?” What are the other mysteries that need to be delved? Is it analysis of HOW the process works that is important? Or does this over-complicate things?

Mogambo Guru: I’m glad you asked that question, because not only do I agree with you that economics is simple, but that Austrian economics, the Only True Economic Theory (OTET) is like, I figure, sort of like chess. The basic moves can be easily taught to children, but the subtleties take a lot to master.

Daily Bell: Any books or articles you would recommend to our readers?

Mogambo Guru: I would say Hazlitt’s Economics in One Lesson would do the trick!

Daily Bell: Thank you for your time and graciousness in conducting another interview with us.

Mogambo Guru: Thanks for interviewing me without leading me into a trap where I foolishly confide the fact that we’re freaking doomed to die of catastrophic inflation because the Federal Reserve is creating so much money, which it does so that the Obama administration can deficit-spend so much money, a trajectory of borrowing putting us as a nation further in debt to the tune of almost $2 trillion this year – 14% of GDP! – and bringing the total outstanding national debt to more than 100% of GDP, so that to talk of investing in anything other than gold, silver, oil stocks and high-caliber weapons, with or without bunkers and reinforced defensive positions, is to laugh the famous Mogambo Laugh Of Scorn (MLOS) at such lunacy! Hahahaha!

Daily Bell After Thoughts

Interviewing the Great Mogambo always makes us happy. He’s a funny fellow, and he’s also been right about most everything he’s written for the past ten years or so. Of course you’ve seen him on TV – wait a minute. He’s not on TV. Not even on radio so far as we can tell. This is a primary law of American finance. The more correct you are, the less you will appear on mainstream, Western media.

Fortunately, there is the Internet. The Great Mogambo has thrived on the Internet and his many grateful fans are grateful for his always-pertinent analyses. To write with humor about what is occurring today is no easy feat. In fact, to write about finance and economics at all with such wit is something that only a very few can do. To do so with his level of honesty and accuracy is astonishing.

Those who follow the Great Mogambo will no doubt have been enriched by his musings in numerous ways. It is a sad commentary on American letters – and on the mainstream media in general – that inaccurate mediocrities have acquired vast electronic platforms from which to bore us. But reading Mogambo is always a treat. Long may he write, and thrive.

Coming Round the Mountain When She Comes

Mark Sircus

Michael T. Klare warns us to, “Get ready for a rocky year.  From now on, rising prices, powerful storms, severe droughts and floods, and other unexpected events are likely to play havoc with the fabric of global society, producing chaos and political unrest. It’s not surprising then that food and energy experts are beginning to warn that 2011 could be the year of living dangerously – and so could 2012, 2013, and on into the future.” Just weeks into the New Year things are not looking so good with rising prices already threatening to devastate a great part of humanity.

Klare says we should already be able to “hear the first rumblings about the tenuous economic recovery being in danger of imminent collapse.” So we might as well get ready right? More and more are saying that a ‘perfect storm of issues‘ will bring widespread starvation, rioting, cultural collapse and a decent into urban hells that war zones often become. They are speaking about food prices rising by 50 per cent over the next decade when we are lucky if we do not see that in the next year or two with world agriculture being gutted by the dramatic weather and reserve currency rich nations willing to dip into the till to scoop up dwindling food stocks.

It is, quite literally, going to be the end of the world as we know it and not even aliens landing from Mars or coming up from underground will stop it. And don’t be surprised if they do climb out of a cave and say, “we’re here!” There is so much talk about extraterrestrials these days even at rich man’s conferences. Sure they have been here all along and sure they have all the answers and we should trust them even after their decade’s long cooperation with the American military.

No amount of manic optimism is going to change reality as it presents itself to us through the months or years ahead. And we don’t need huge solar flares, polar shifts, tidal waves of immense proportion, or earthquakes to sustain this view though we might get these plus some dramatic volcanic eruptions just to light up the skies with fireworks as the magnetic polls continue to shift putting more and more strain on the earth’s crust. They even had to shut the runway at Tampa airport to recalibrate for the magnetic changes and more will do so in the near future.

Tsunamis of different types are dead ahead but most first world citizens have mostly known tremendous prosperity all of their lives, so they can’t conceive of what it will be like to go through difficult times. Most Americans have been conditioned to believe that while we may have brief “recessions” once in a while, in the end their economy will always get better and the good times will continue to roll. That has changed but don’t tell them about it because they don’t want to know for it’s too painful to understand and appreciate.

Bank of England chief Mervyn King: standard of living to plunge at fastest rate since 1920s. “Mr. King claims he cannot “prevent the squeeze” for everyday people, while London traders go home with multi-million dollar bonuses. The main take-away from that is not even that the “standard of living is plunging“ at its fastest rate in almost a century, it’s that the standards of honesty and dignity, of how to build a society, are plunging. Corruption and fraud have free rein. King’s right when it comes to the end result, though, of course: the British future comes dressed as misery,” writes The Automatic Earth.

Jerry Robinson writes, “The World Economic Forum ahead of its high-profile annual meeting in Davos, the organization claimed that the global economy will need access to an additional $103 trillion in “credit” to sustain normal economic growth. It should be noted that the term “credit” is synonymous with the word “money.” Therefore, a less deceiving way to explain this report could be that the World Economic Forum is calling for over $100 trillion in new money. This proposed $103 trillion of fresh “credit” – or money – will be backed up by nothing. The question naturally arises: How will the creation of more “debt” help our debt-ridden global economy?”

The miracle of credit and debt is coming to an end, and the parasites are looting the system for a final time. – Bob Chapman

Present government intervention on a multi-trillion dollar scale is the only thing preventing a worldwide collapse into a new great depression. Without the bailouts in the United States, Europe and Japan we would all be collectively going over the falls in a barrel held together with spit and straw. Japan this week actually did as their debt rating has been downgraded tanking their currency.

But hey, if I get some of this funny money handed on a silver platter what the heck the bankers say. But if the value of paper money gets reduced to the value of toilet paper everyone loses except those smart enough to get into gold, silver and hard assets free from debt.

Martin D. Weiss PhD is shouting loudly this week that the collapse of the tax-free bond market has arrived. “This crisis is no longer something you hear about strictly from us and a handful of others; it has now burst into the headlines with the sweeping force of a giant tsunami. This crisis is no longer just a forecast. It’s happening right now – and it’s accelerating.”

The reality is that several events are converging with any of them alone holding the potential to bring down the entire financial structure of the Western world and perhaps the entire world. Imagine if they all hit together what a perfect and overwhelming storm it will be. Those who hold the reins of power know it. They are not stupid and are playing the Pipe Pipers horns of deception.

Any fool, at this point, understands that without the unlimited capacity to create and spend funny money, the United States is already a well-cooked goose. The same can be said about Europe and of course Japan. With every trillion of new credit (debt) money created we sink further into the abyss, into a black hole there is no returning from.

Bob Chapman writes, “We now have a Federal Reserve that controls a financial monopoly over the American people, as a result of recent legislation. In this process more power is also being given to the IMF, the BIS and the WTO. Power is being taken away from sovereign countries and put into the hands of people who want world government. If you do not think that is real, recall the comments of former US Secretary of the Treasury, Mr. Paulson. If the financial sector wasn’t rescued Americans would wake up to Martial law. In other words, you either go along with our program or we will destroy you and the system.“

Jim Rogers talks about Inflationary Holocaust at about the 4:33 minute mark.

Famine-Stressed Civilization

Eric de Carbonnel is again warning the world that, “Spiking food prices will likely cause competitive currency appreciation. Foreign exchange reserves exist for just this time of emergency. Central banks around the world will lower domestic food prices by either directly selling off their reserves to appreciate their currencies or by using them to purchase grain on the world market. Appreciating a currency is the fastest way to control food inflation. A more valuable currency allows a nation to monopolize more global resources.”

“When a nation appreciates its currency and starts consuming more of the world’s resources, it leaves less for everyone else. So when china appreciates the Yuan, food shortages worldwide will increase and prices everywhere else will jump upwards. As there is nothing that breeds social unrest like soaring food prices, nations around the world, from Russia, to the EU, to Saudi Arabia, to India, will sell off their foreign reserves to appreciate their currencies and reduce the cost of food imports. In response to this, China will sell even more of its reserves and so on. That is competitive currency appreciation.”

This all contradicts the reports of currency races to the bottom because when the value of a currency goes up imports flood and overwhelm local industries. Wind shear type forces are racing around the globe and where it will all end is hard to discern. Hungry bellies though do not sit well with the public and panic among governments and their politicians, who do not want to be thrown out into the streets, will certainly do some nervous things.

Certainly Egypt is out front having apparently done what many technologists thought was unthinkable for any country with a major Internet economy: It unplugged itself entirely from the Internet to try and silence dissent.

Bill Bonner concludes, “Since America’s modern social welfare democracy is not the product of enlightened rational, accumulated decision-making, America’s leaders will be unable to re-design it for the new conditions it faces. Instead, this social welfare democracy will face extinction – like dinosaurs and Neanderthal man…and all previous forms of government…all previous forms of paper money…and all previous monetary systems. In other words, don’t expect the US government to reduce its deficits and bring its finances under control voluntarily. It will take a crisis…and maybe even a revolution.”

Meanwhile the feds are destroying the currency and the credit of the world’s largest economy in what most people believe is a rearguard delaying action. It is my belief that those at the top know full well what is in store for the world’s populations and are playing their cards accordingly. Are you playing your cards to their best potential? Are you planning anything or is your mind refusing to see the rip tides ahead?

It is a good moment to remember that Post Stress Syndrome key component is the feeling of helplessness in the face of adversity and danger. Don’t become a victim. Use your consciousness to get in touch with options even if it’s just to secure your water and (natural) medical supplies.

The German-Chinese World

Martin Hutchinson

The Congressional Budget Office’s report Wednesday that the U.S. budget deficit was to run close to 10% of Gross Domestic Product for a third successive year, together with President Obama’s refusal to face the need for major public spending cuts in his State of the Union Address Tuesday night, finally opened the possibility of a lengthy period when the United States’ debt nightmare no longer allowed it to play its customary leading role in the world. The natural heirs to its hegemony will be Germany and China, the two powers that have retained a sense of fiscal responsibility in the 2008-11 economic meltdown. Needless to say, a world dominated by those two powers will have very different characteristics.

A full abdication by the United States, as distinct from its gradual subsidence into a leading position within a “multi-polar” world order, may at first glance seem unlikely. Yet there is a clear precedent for it in the fate suffered by Japan since its market bubble burst in 1990. While the world’s second-largest economy for most of the last two decades, Japan has been traumatized by prolonged recession and spiraling debt, and has gone into its shell, punching consistently below its weight in international negotiations, except for a transitory period under Junichiro Koizumi. Russia, a far poorer country with a GDP one-third the size, riddled with corruption and cruelty, is of much more consequence at the world’s geopolitical top table.

It may be objected that since World War II Japan has kept a low profile, whereas the United States has been used to throwing its weight around and would wish to continue doing so. However in 1989-90 Japan was showing much more assertiveness – the best-seller “The Japan That Can Say No” was published in 1989 by Shintaro Ishihara, now governor of Tokyo, and Akio Morita, the founder of Sony. Two decades of spiraling debt and lackluster growth sap a nation’s ability to take foreign policy initiatives as well as its domestic policy.

Since the CBO’s forecast is for a U.S. debt trajectory deteriorating rather more quickly than Japan’s in the 1990s, and the country’s recent foreign adventures have been met either with failure or at best qualified success, it does not take much imagination to imagine a world in 2020 where the United States has retreated largely to isolationism, cutting off the greater part of its international commitments, slashing its participation in multilateral institutions, retreating into “anti-dumping” protectionism and struggling to bring its fiscal position and economic performance under control.

President Obama’s tendency to waste resources on domestic economic boondoggles and his relative lack of interest in foreign policy will between them take the U.S. a long way toward this future if his Presidential period in office lasts until 2016. It does not take much imagination to foresee his successor having a Jacksonian distrust of foreign entanglements, and undertaking defense and foreign policy rollbacks that “kept America safe” but left her without significant influence in the councils of the world.

I do not claim that this trajectory is certain (events and elections over a ten-year period make certainty impossible in these matters.) However it is very possible, with perhaps a 20-25% probability of occurring. It’s thus worth thinking about what an America-less world order might look like.

The leading powers in such a world will be those major economies that have not wrecked themselves by incurring excessive debt during the Great Recession. They will not include Britain therefore, which is bringing down its public sector deficit achingly slowly, and which has the incubus of a bloated financial services sector and a housing market that is still grossly inflated. They will not include India, which has since 2004 been grossly self-indulgent in its expansion of the public sector, allowing the borrowing requirement to spiral even as the economy was growing at record-breaking rates. They will not include Brazil or Russia, which not only have committed India’s folly but also have corrupt and inadequate styles of government that will cause immense difficulties once the world financial markets tighten and money does not grow on trees. They will not include southern Europe or probably France, which have bloated public sectors and are as protectionist as will be the diminished United States. They might include Japan, but only if it swiftly brings its budget under control and returns to the Koizumi-era policies of public sector restraint and private sector growth.

By a process of elimination therefore, and ignoring well-run but relatively minor economies such as Canada, Chile and Sweden, there will be two great economic titans of a post-America world. One will be the obvious – China – whose massive savings rate and increasingly market-oriented economy will allow it to overcome the inevitable future crisis in its banking system.

The other global leader will be much less obvious to U.S. observers, trained over the last twenty years to regard it as a basket case. However Germany has now overcome the difficulties of reunification and begun to take its natural leading role in the European Union. It avoided the senseless “stimulus” with even its social democrat finance minister referring to the policy as “crass Keynesianism.” Consequently it has emerged from the recession in excellent shape, its wage levels high but competitive and its superb engineering and technological innovation capabilities a match for any competitor in the world, even allowing for the adverse wage cost differential.

Economically, a world dominated by China and Germany will have very different ground rules from the “Washington Consensus” world of 1991-2008. Both countries are nationalist and have no particular commitment to free trade, so the world will be more protectionist. At the same time both countries are economically rational, recognizing that tariffs above a low level and a fortiori non-tariff barriers are seriously damaging to wealth. It’s likely that the world will become organized into trading blocs, with moderate tariffs between different blocs and more or less free trade within each bloc. The EU is already such a bloc; we are seeing informally a China-centric bloc taking form, with Taiwan and several countries of South-East Asia closely connected with China and Korea and Japan more loosely so. Intellectually, China was never subject to the Aristotle/Descartes logic whereby objects were either in or out of a set, so a “fuzzy logic” arrangement of economic relationships, with some countries being both inside and outside its bloc will suit China’s rulers just fine.

The global economy will be reoriented also by the competitive strengths of Germany and China, which are primarily in technology and manufacturing. Financial services will be very heavily regulated and will form a much smaller part of global GDP than at present. Top management remuneration will also be lower and less variable than at present, although the economies will not be un-entrepreneurial – the Chinese diaspora are among the best entrepreneurs in the world. However “transparency” will be considerably lower than at present, reflecting the Chinese system of operating through “guanxi” personal connections and the German tradition of long-standing family-held “mittelstand” about which very little information is publicly available. Global stock markets will thus be somewhat moribund by current standards, as they were in the 1950s, with retail investors using them as pure casinos while institutions lock up major shareholdings for long periods.

The transition to a German-Chinese hegemony may involve a period of heightened geopolitical tension. China has already demonstrated itself an assertive power in the foreign policy sphere and the disappearance of the United States as a major factor would doubtless cause its self-assertion to increase. Germany conversely has been a remarkably unassertive power since the end of World War II, but its rise to hegemony would undoubtedly cause it to reassess its military posture. Its most likely course would perhaps be to develop a subgroup of NATO containing the more militarily capable countries of Europe, in order to provide a balance to Chinese power. Japan and probably South Korea (or a reunited Korea if such existed by that time) would militarily ally themselves with Germany, even though economically their closer relationship would be with China. In such a world order, China would be near hegemony, but would be restrained by opposition from most of the non-Sinocentric world under Germany’s leadership.

A German-Chinese hegemony replacing the U.S. one is not unthinkable, nor would it be a disaster for the world as whole, provided China’s aggressive instincts could be contained. Economically however it would be a very different world order from today’s. Parents had better steer their offspring toward a heavily technological skill set rather than encouraging them to head for Wall Street.