After years of declines, the 11 weeks since President Trump was elected have seen something ‘different’ happen in continuing jobless claims.
Despite payrolls and ADP exuberance, the number of people continuing to receive unemployment benefits has risen at the fastest rate since 2008 post-election.
Probably just a coincidence.
The question of when will central banks fail is a popular one that comes in. Suffice it to say, the turmoil will hit Europe first. While so many people blame the Fed for all sorts of things, you must realize that Roosevelt usurped the Fed during the Great Depression and imposed a single interest rate administered from Washington. It was during April 1942, when the Department of the Treasury requested the Federal Reserve formally to commit to maintaining a low interest-rate peg of 3/8% on short-term Treasury bills. The Fed also implicitly capped the rate on long-term Treasury bonds at 2.5%. This became the known as the “peg” with the express goal to stabilize the securities market and allow the federal government to engage in cheaper debt financing of World War II, which the United States had entered in December 1941. Today, we have extraordinary low rates of interest that have funded government, but has wiped out the real bond markets insofar as being a viable market long-term. The World War II accord to maintain low rates was followed by a collapse in bonds after 1951 once the accord ended. We will see the same outcome moving forward.
At the time, in order for the Fed to maintain the peg, it was ordered to give up control of the size of its portfolio as well as the money stock. That is also what has happened today with Quantitative Easing among all central banks. Frankly, the Fed back then maintained the low interest rate by buying large amounts of government securities, which also increased the money supply domestically at the time. Because the Fed was committed to a specific rate by the peg, it was compelled to keep buying securities even if the members of the Federal Open Market Committee (FOMC) disagreed.
After the war, politicians were afraid of a new depression would emerge as they always fight the last war. They ordered the Fed to maintain the peg even after 1945. The United States entered the Korean War in June 1950. The problem was inflation not deflation. The FOMC of the Fed argued strongly that the continuation of the peg would lead to excessive inflation. A real confrontation with the politicians was brewing all year and they opposed by the Treasury who naturally wanted to keep borrowing at cheap rates.
Everything exploded by February 1951. In inflation had soared reaching 21%. As the Korean War intensified, the Fed faced the possibility of having to monetize a substantial issuance of new government debt coming out to fund that war. This only intensified inflation. Nevertheless, Harry S. Truman became president in 1945 and it was his administration that continued to urge the Fed to maintain the peg.
The financial crisis erupted into a major conflict when Truman invited the entire FOMC to a meeting at the White House. Truman then issued a statement saying that the FOMC had “pledged its support to President Truman to maintain the stability of Government securities as long as the emergency lasts.” In reality, the FOMC had made no such pledge. Conflicting stories began to appear about the dispute in the press. The Fed then made an unprecedented move – they release the minutes of the FOMC’s meeting with the president.
The conflict erupted in full view. The Fed revolted against the politicians. Shortly thereafter, the Fed informed the Treasury that as of February 19th, 1951, it would no longer “maintain the existing situation.” The Treasury was caught in a crisis for it needed to refund existing debt and issue new debt, a situation governments are still in today. They never pay off debt, they simple roll forever.
The government had no choice but to negotiate a compromise under which the Fed would continue to support the price of five-year notes for a short time, but after that the bond market would be on its own. It was on March 4, 1951, when the Treasury and the Fed issued a statement saying they had “reached full accord with respect to debt management and monetary policies to be pursued in furthering their common purpose and to assure the successful financing of the government’s requirements and, at the same time, to minimize monetization of the public debt.”
It was this accord that created a free market in government securities. The likelihood that government debt becomes extinct will appear by 2023. We can see that the bond market began to crash as interest rates were at last free to move. This is the most likely outcome of the voluntary Quantitative Easing that is really a critical issue. This time, the central banks have gone and done this themselves and they are trapped. They cannot sell the debt they have bought and therefore, we are looking at a crisis when that debt has to roll. The European Central Bank holds more than 40% of the government debt for the whole of Europe. Once that matures, who will buy the new debt the next time around? We are looking at a deflationary impact by default.
Trump should IMMEDIATELY reinstate the Fairness Doctrine in the media that once existed at the FCC. The Fairness Doctrine was a policy of the United States Federal Communications Commission (FCC), introduced in 1949, that required the holders of broadcast licenses both to present controversial issues of public importance and to do so in a manner that was — in the Commission’s view — honest, equitable, and balanced. The FCC eliminated the Fairness Doctrine in 1987 and in August of 2011, the FCC formally removed the language that implemented the Doctrine.
Expand this doctrine to print media – all newspapers! They lose their license if unbalanced and refuse to stop with the propaganda. Freedom of the Press is not the freedom to report only what they want in the way the want. If they claim to be reporting news, then it has to be the unbiased news. Opinion is for op-eds and they must report both views. STOP THE PROPAGANDA NOW!
Wonder how many journalists would end up behind bars?
Wolf might look stunning in stripes.
The NY Post has emerged as the only real unbiased newspaper in New York City. It has repeated called out “American journalism is collapsing before our eyes.” Indeed, Journalists now com in near the bottom of poll ranking public respect for professions according to Gallup Polls. Indeed, the NY Post reported the truth that is so obvious to us all that Media more interested in hating Trump than reporting news. It’s time to clean up the press – not just drain the swamp. They swim in the same stench.
The European Commission is demanding that Apple pay Ireland €13bn in back taxes. They are attempting to retroactively change a tax agreement made with Apple years ago that the EU now says is cheaper than any other member so that’s not fair as it would attract business to Ireland. The EU is clearly trying to impose a federalized government by removing the independence of member states. Ireland is now vowing to fight the EU. This is all leading to the demise of the EU and demonstrates that the “EU project” has long since embarked upon a political state, not a simple trade union.
The European Union’s chief BREXIT negotiator, Guy Verhofstadt, told Reuters that Donald Trump is part of a three-pronged attempt to undermine the European Union. His comments reflect just how deranged the EU politicians really are for they will accept no blame whatsoever for any of their own policies that are dictatorial in nature and have sought from the start to federalize Europe while denying that was their goal all along.
Verhofstadt told Reuters that the other two threats were radicalized Islam, which they themselves opened their own borders to accept with open-arms, and from Russian President Vladimir Putin, who just said that Europe should stay together. Putin even warned that the EU would not be a global player as is.
Verhofstadt actually claimed that all three parties were working against the progress of the EU project. The EU is doomed and their own refusal to address the autocratic anti-democratic policies have sealed their fate. It was the USA that encouraged the formation of the Euro in 1985 at the Plaza Accord – NOT the political surrender of sovereignty of all members to Brussels.
This is the problem. The EU is blaming everyone but itself for its failures. That means they are incapable of preventing the collapse since they are in total denial that there is a problem. They deliberatly established a system whereby the European people CANNOT vote to change any politician since they do not stand for election. Draghi has engaged in QE since 2008. It has failed for 8 years. But no European can get rid of him at the polls. That means the ONLY was to bring about change is to exit the EU. Verhofstadt cannot bring himself to look in the mirror. We warned this would be the outcome of the EU project back in 1996 for its was designed knowing they wanted federalize Europe while denying that was their motive.
We warned about the rise and fall of the Euro back in 2011. We warned that the Euro would fail and provided the Hamiltonian Model as the answer to save Europe. The Committee establishing the Euro attended our World Economic Conference in London. We have had direct contact, yet it has gone in one ear and out the other. It is easier to blame others than admit a huge mistake they made all by themselves. Meanwhile, European politicians are deranged and believe they could win a trade war against the USA because of its strong economy? Not really sure what world these people are in but it does not seem to be connected to Earth.
The new conspiracy theory running around claims that the European Union was a CIA project. This serious distortion misses the entire point. It is very true that the idea of the EU was supported by the United States since World War II including the CIA. However, the U.S. supported the idea of the EU as a trade union that could support NATO during the Cold War. However, the idea of federalizing Europe came, not from the United States, but from France. It was de Gaulle who blocked Britain from joining the EU because he wanted France to dominate Europe. It was de Gaulle who broke Bretton Woods by buying up dollars and redeeming them for gold to make France the economic power of Europe. Britain was only allowed to join the EU upon de Gaulle’s death.
The idea of federalizing Europe was a dream inspired by de Gaulle. This is the origin of the idea that war could be eliminated if there were only one government. That never could have been spoken in real public settings because the differences within Europe ran deep and bitter following two world wars. The Treaty of Rome was to prevent a third European war.
The idea of transforming the EU from a trade union to an economic union was given birth at the Plaza Accord in 1985. That was the brainchild of James Baker to create a viable alternative to the US dollar. That is when the euro was born conceptually. The commission attended our WEC in London and I spoke directly with them at the time. I warned this would result in the collapse of the euro system unless they consolidated the debts. I was told they could not sell that to the European people so they would push for the currency first and later deal with the debt problem. Of course, phase two never came. The euro cannot survive with such a structure. You have people like Martin Schultz now pleading that the problem is not a central power, but Europe needs to surrender all sovereignty to Brussels.
By 1990, Maggie Thatcher was warning that “a single currency is about the politics of Europe. It is about a federal Europe by the back door.” (November 22, 1990). As everyone knows, I was friends with Maggie. I was there through all these machinations. This was BY NO MEANS a CIA plot. The desire for NATO and an EU was in the interests of the United States following World War II and the CIA — absolutely! But do not mix that with the state of the EU today and the attempt to federalized Europe. That is exactly the opposite of U.S. interests for it will lead to the risk of another European war. You can see war is coming. They were yelling at each other at Davos.
Within days of Davos, here in the European Commission statement on moving forward to eliminate cash. This is an “Inception Impact Statement” to provide notice to those involved and to ask for comments back. Everything is couched in terms of terrorism, but in fact it is to hunt taxes and eliminate our freedom to privacy regarding our own wealth. The Roman Emperor Maximinus I (235-238AD) declared that all wealth belonged to the state. He paid informants to rat out anyone who looked like they were hiding wealth. The bottom-line, this push the Roman Empire over the edge. Investment began to vanish and the velocity of money collapsed as people then hoarded their cash for fear of confiscation. This is why we find hoards of even debased money. This hoard was found in Somerset, Britain with coins covering the crisis period of the 3rd century AD with coins from 21 emperors and three emperors’ wives. This included Roman coins and when the Roman Empire split with the usurper Carausius who ruled Britain and parts of northern Gaul independent of the empire from 286-293 AD. Coins of Carausius are rarely found in hoards.
Here is the “Inception Impact Statement” showing days after Davos they are indeed taking steps to (1) restrict cash, and (2) move to eliminate cash entirely, but they cannot do that until there is an instant transfer system in place among banks. In other words, banks can no longer play with the “float” and will have to instantly pay for transactions. Without that system in place, cash cannot be completely eradicated. That is on schedule for September 2017. Here is what the statement says:
“Action Plan to further step up the fight against the financing of terrorism (COM (2016) 50). The Action Plan builds on existing EU rules to adapt to new threats and aims at updating EU policies in line with international standards. In the context of the Commission’s action to extent the scope of the Regulation on the controls of cash entering or leaving the Community , reference is made to the appropriateness to explore the relevance of potential upper limits to cash payments. The Action Plan states that “Payments in cash are widely used in the financing of terrorist activities… In this context, the relevance of potential upper limits to cash payments could also be explored. Several Member States have in place prohibitions for cash payments above a specific threshold.”
The EU leadership is attempting to minimize the importance and the explosive result of BREXIT. While the leaders merely yell “You will still regret it”, the disintegration of the EU has already begun and they are clueless as to what is really at stake. While many just focus of trade, the entanglement is far more complex than just trade. The banking system, clearing, and the implementation of bank-bail-in provisions place at risk the entire European banking system.
We will be issuing an Institutional Level report covering this extremely crazy and complex crisis that is about to unfold going into 2018. It is sufficient to say, whatever you may have thought could go wrong, it probably just the tip of the iceberg. This may be so catastrophic that the dollar may end up giving everyone more than just a nose bleed.
COMMENT: Sir,
Then Feinstein’s husband won the contract to sell Post Office Department real estate. Of course they cover that up claiming Blum Capital Partners, L.P (Richard Blum, Sen. Dianne Feinstein’s husband), won the bid against 7 other competitors. They have never released proof of the bidding. Even the appearance of impropriety is reason to recuse a judge whenever it may be “reasonable be questioned.” It goes even further: Blum and Feinstein both knew that this transaction has the appearance of corruption and a Federal Judge would be compelled to recuse themselves from such a case if “his spouse or minor child residing in his household, has a financial interest in the subject matter in controversy or in a party to the proceeding, or any other interest that could be substantially affected by the outcome of the proceeding.”
QUESTION: Do you support Trump’s wall?
ANSWER: A wall will not end the crisis. You can use boats as well. What are the issues? First, the purpose of the wall is to stop the drug trade. It will put a dent into it, but it will not eradicate it. Second, is the immigration. There are many people along the border who want to stop the illegal immigration because they bring in kids who then go to school and cause taxes to rise yet these people do not pay income taxes. The solution is very simple. Eliminate income taxes and compel states to survive on consumption taxes. Then it will not matter who is here, everyone will pay their fair share.
If it is really just about illegal immigration, then you can deal with that financially. Many illegal immigrants come to the States to earn money to send home. Prevent sending money to Mexico and you will change the incentives. Any Mexican who in the USA legally, has a bank account and can send money to relatives legitimately. Illegal immigrants would not be able to send money home but then you would probably create a black market.
The Mexican President Enrique Peña Nieto is refusing to meet with Trump was the worst possible decision he could have ever made. He just cut off diplomatic relations with the United States. He will now not be taken seriously and cannot in any way negotiate behind the curtain. He just killed US-Mexican relations. Refusing to even talk eliminates the possibility of resolution.
Let’s dig deeper. Many people come to the States for employment. There are many businesses who need labor willing to do hard work for Americans as a rule see that beneath them. Therefore, you have a demand for labor in the United States that goes unfulfilled and you have people willing to be hard workers in Mexico. The solution here is also simple. Introduce a market-based visa system whereby you can buy a visa for such jobs. The employers would gladly pay the fee and you would end smuggling people into the States for those jobs.
Clamping on 35% tariffs on all foreign goods introduced makes no sense. It will not change the real core problem. American unions sent their own jobs overseas because they were too abusive in their demands. Companies leave NOT merely because they can hire someone for $10 and hour less in Mexico than at home. The United States tax code is insane. It soars during Democrat control and declines during Republican control. Companies cannot construct a business plan because the tax swings are insane. Would you rent an apartment with a lease that said the landlord can raise your rent anytime he want on a whim? You cannot build a plant and then draft a business plan for 20 years when taxes can change at any time.
The ONLY way to create economic stability is to make taxation UNTOUCHABLE. We have to end this Marxist way of running our country. Until that is accomplished, we will always look for band-aids to keep the game going between elections.
I have created this site to help people have fun in the kitchen. I write about enjoying life both in and out of my kitchen. Life is short! Make the most of it and enjoy!
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