Confidence Gets a Boost

OUZILLY, France – Last week’s U.S. jobs report came in better than expected. Stocks rose to new records. As we laid out recently, a better jobs picture should lead the Fed to raise rates. This should cause canny investors to dump stocks.

 

stock-market-cartoons-3Canny investors at work (an old, but good one…)

Cartoon via Pension Pulse

 

But the stock market paid no attention. It follows logic of its own. Headlines told us that last Friday’s report “boosted confidence” and sent the Dow up 191 points.

Wait – what about the Fed?

Now, with unemployment dropping and the economy appearing to finally recover,  isn’t it time to go “back to normal” with interest rate policy? Won’t that mean that today’s stock prices – resting on the brittle reed of super-low rates and buybacks – will collapse?

Maybe. But investors seem to have realized that, as we’ve been saying, the Fed will never normalize interest rates. It operates a fake economy, with fake money, and fake interest rates, and fake statistics, too.

And now, there is no retreat. The bridges have been burned. The ships have been sunk. The return address has been lost. Now, the Fed is so deep into make-believe, the shock of reality would be too much for it. It is like a crazy person you try to protect from the truth:

“I hear this awful woman, Hillary Clinton, is running for president. Imagine, a woman in the White House! The next thing you know they’ll want to put up a black guy, but Americans would never stand for that.”

“Don’t worry about it, Uncle Frank. Ronald Reagan will win again. He always does.”

“Oh good.”

Hold on… fake economy? Fake money? Fake interest rates?

 

DJIA, 10 minDJIA, 10 minute candles –  the market seemed happy about the jobs report – click to enlarge.

 

The 30-mph Plan

Visiting this weekend were two of our colleagues – Chris Lowe from Berlin and Vern Gowdie from the Gold Coast of Australia. While many in our group went swimming at the river or sightseeing in the nearby city of Limoges, the three of us kept up a lively debate.

“You talk about ‘fake money,’” said Chris. “But it’s not fake. At the end of the day, money is whatever the government says it is.”

Chris and another colleague, Chris Mayer, have been following the work of former hedge fund manager and economist Warren Mosler.  Mosler is known for his work on how the fiat money system functions.

For many months, after hearing about Mosler, we were puzzled. His ideas didn’t quite make sense to us. But we gave him the benefit of the doubt, as we do to reports of subatomic particles, newsletter gurus, and people who claim to have met Hitler in South America.

 

MoslerWarren Mosler, a proponent of so-called “Modern Monetary Theory” (MMT) – which is essentially a warmed up version of Georg Friedrich Knapp’s Chartalism (Knapp authored “The State Theory of Money”). Knapp’s work was reportedly well-received by members of the board of the German Reichsbank in the decade following the end of WW1.

Photo via neweconomicperspectives.org

 

Then, we found something that clarified the situation. And now we know: Mosler is a quack. You may form your own view. But we will give you the detail that shaped our opinion: He proposed to lower the speed limit nationally to 30 mph. This was supposed to allow autos to run more efficiently and reduce demand for oil.

 

Clear, Simple, and Wrong

We don’t know what problem Mosler was trying to solve with his 30-mph plan. But we know that no sensible person would ever suggest such a thing. You might as well tie your shoelaces together and hop to work.

For a moment, we thought that maybe Mosler was just pulling our leg. Nope. Look at the rest of his oeuvre.

“Government should do this…” he says. “Government should do that…” Mosler is full of ideas.

“For every complex problem,” said Baltimore newspaper man H.L. Mencken, “there is an answer that is clear, simple, and wrong.” Mosler seems to find every one of them. There is scarcely any part of the economy or the financial system he doesn’t want to fiddle with.

 

mencken-dressed-up1024x675H.L. Mencken would undoubtedly have been greatly amused…

Photo via reformedlibertarian.com

 

For example, he believes the feds should buy houses in foreclosure, guarantee all bank deposits, and meet economic recessions – in classic Keynesian fashion – by more government spending.

What? The feds don’t have enough money for all that? That’s not a problem, says Mosler. “Federal checks don’t bounce,” he says.

 

The 180-Degree Rule

Mosler points out that the feds are the source of money. They are currency issuers, while the rest of us are mere currency users. That means, says Mosler, they can do what they want… with no natural limits – other than inflation – on their ability to use their money to make a better world.

“Not true,” we replied to Chris.

“Just because the feds want something doesn’t mean they will get it. And just because they say something doesn’t make it true.

“Hunter S. Thompson proposed a ‘180-degree rule’: When the feds say something, usually, the truth is the exact opposite.

“There is good money and there is bad money,” we went on. “The feds can declare anything money, but that doesn’t make it good money.

 

Zimbabwe_$100_trillion_2009_ObverseAn example of money declared “good” by a government, and “bad” by everybody else. In fact, it ceased to work as a viable medium of exchange and had to be abandoned. Today Zimbabwe uses foreign currencies such as USD and ZAR.

 

“In Zimbabwe, just 10 years ago, the government printed up 100 trillion dollar notes.

“The government said it was money. But nobody used it as money. Because it wouldn’t buy anything. It was not ‘money’ at all. It was just paper.”

Mosler is an activist, and a world improver –  that is, by definition, he is a moron.

 

Chart by: StockCharts

 

Chart and image captions by PT

 

The above article originally appeared at the Diary of a Rogue Economist, written for Bonner & Partners. Bill Bonner founded Agora, Inc in 1978. It has since grown into one of the largest independent newsletter publishing companies in the world. He has also written three New York Times bestselling books, Financial Reckoning Day, Empire of Debt and Mobs, Messiahs and Markets.

 

 

 

Emigrate While You Can... Learn More

 


 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 12vB2LeWQNjWh59tyfWw23ySqJ9kTfJifA

   
 

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • The Gold Debate – Where Do Things Stand in the Gold Market?
      A Recurring Pattern When the gold price recently spiked up to approach the resistance area even Aunt Hilda, Freddy the town drunk, and his blind dog know about by now, a recurring pattern played out. The move toward resistance fanned excitement among gold bugs (which was conspicuously lacking previously). This proved immediately self-defeating - prices pulled back right away, as they have done almost every time when the slightest bit of enthusiasm emerged in the sector in recent...
  • Monetary U-Turn: When Will the Fed Start Easing Again? Incrementum Advisory Board Meeting Q1 2019
      Special Guest Trey Reik and Board Member Jim Rickards Discuss Fed Policy On occasion of its Q1 meeting in late January, the Incrementum Advisory Board was joined by special guest Trey Reik, the lead portfolio manager of the Sprott Institutional Gold & Precious Metal Strategy at Sprott USA since 2015 [ed note: as always, a PDF of the complete transcript can be downloaded further below].   Trey Reik of Sprott USA.   Also at the meeting, Jim Rickards, who is inter...
  • Acting Man Returns - A Brief Housekeeping Note
      Pater Temporarily Keels Over Regular readers have no doubt noticed that the blog has fallen silent for around three weeks and may be wondering what has happened. In a nutshell, we were hospitalized. After a lengthy time period during which our health gradually but steadily deteriorated (we have complained about this previously), we finally keeled over. Thereupon we were forced to entrust the ruin that houses our mind to an experienced team of doctors (depicted below).   A...
  • Watch Europe - Free Pass for the Elliott Wave European Financial Forecast
      Europe at an Important Juncture European economic fundamentals have deteriorated rather noticeably over the past year - essentially ever since the German DAX Index topped out in January 2018. Now, European stock markets have reached an important juncture from a technical perspective. Consider the charts of the Euro-Stoxx 50 Index and the DAX shown below:   The Euro-Stoxx 50 Index already peaked in early November 2017, the DAX followed suit in January 2018 – such divergent peaks...
  • Why Warren Buffett Should Buy Gold
      Riding the Tailwinds of Fiat Money Inflation to Fame and Fortune Warren Buffett bought his first shares of stock when he was 11 years old.  He saved up $114.75 and “went all in,” purchasing three shares of Cities Service preferred stock.  The day was March 11, 1942 – nearly 77 years ago.  Buffett recently reminisced about this purchase in his annual letter to shareholders:   “I had become a capitalist, and it felt good.”   The Oracle of Omaha – he was...
  • Fake Money’s Face Value Deceit
      Not the Brightest Tool in the Shed Shane Anthony Mele stumbled off the straight and narrow path many years ago.  One bad decision here.  Another there.  And he was neck deep in the smelly stuff. These missteps compounded over the years and also magnified his natural shortcomings.  Namely, that he’s a thief and – to be polite – a moron.   Over-educated he ain't: Shane Anthony Mele, whose expressive mug was captured by a Florida police photographer first in...
  • Rise of the Zombies - Precious Metals Supply and Demand
      Rise of the Zombies - Precious Metals Supply and Demand Last week, the prices of gold and silver fell $35 and ¢70, respectively. But what does that mean (other than woe unto anyone who owned silver futures with leverage)? The S&P 500 index and the euro was up a bit, though the yuan was flat and copper was down. Most notably, the spread between Treasury and junk yields fell. If the central banks can lower the risk of default premium, they can make everything unicorns and...
  • Bitcoin Bottom Building
      Defending 3,800 and a Swing Trade Play For one week, bulls have been defending the 3,800 USD value area with success. But on March 4th they had to give way to the constant pressure. Prices fell quickly to the 3,700 USD level. These extended times of range bound trading are typical for Bitcoin Bottom Building in sideways ranges. This 60 minute chart of Bitcoin shows (represented by the yellow candlestick wicks) how the bulls defended 3,800 USD :   BTCUSDT 60 minute chart...
  • The Magic Doesn't Always Work - Precious Metals Supply and Demand
      The Week Ends with a Surprise The weekly closing prices of the precious metals were up +$5 and +¢11. But this does not tell the full story of the trading action. Prices were dropping until Friday. More precisely, Friday 8am in New York, or 1pm in London.   Gold and silver - back in demand on Friday... [PT]   At that moment, a light cabal conspiring to jack the price struck traders began buying. The end result was the prices, especially of silver, rose on the day...
  • Intraweek Profit Opportunities
      In 6 of 10 Countries a Single Day Outperforms the Entire Week! In the Seasonal Insights issue of 13 February 2019 I presented a study illustrating the power of intraweek effects. The article was entitled “S&P 500 Index: A Single Day Beats the Entire Week!” The result of the study: if one had been invested exclusively during a single day of the week since 2000  – namely on Tuesday – one would have outperformed a buy and hold strategy, beating the broad market. Moreover,...

Support Acting Man

Item Guides

Austrian Theory and Investment

j9TJzzN

The Review Insider

Archive

Dog Blow

350x200

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

Mish Talk

 
Buy Silver Now!
 
Buy Gold Now!