Four times each year, we publish a hard copy quarterly. I am featuring an excerpt from the second issue in 2012, written by Andy Hoffman. Andy “rants” less in these hard copy newsletters and his information is more “timeless,” and big-picture oriented. It’s good stuff! Read it.
Spring 2012 – Escalation of the Precious Metal Wars
It’s late March, and I can hardly believe three months have passed since the last Miles Franklin Report – much less the nearly five months since I came aboard as Marketing Director.
In that report, I wrote of my background in Precious Metals and financial markets, as well as some personal information to give you an idea how I got here and why I am qualified to guide you down the treacherous path of the global monetary system.
If that information wasn’t enough, I publish FREE missives five days a week – called “RANTS” – about the markets and the world in general, accessible at blog.milesfranklin.com. At Miles Franklin’s Blog site you can sign up to receive my daily newsletters via email, as well as the Daily Gold & Silver Summary from Miles Franklin’s founder, David Schectman.
The Federal Reserve Printing Press – Weapon of Mass Financial Destruction
Much has occurred in the past three months, and none of it yields hope of a return to “prosperity.” I put “prosperity” in quotes because the “Roaring 90s” was an illusion created by Alan Greenspan’s belief that the PRINTING PRESS could be used to not only prevent recessions, but create everlasting expansions yielding full employment, low inflation, lollipops, and unicorns.
I’m being facetious, of course, as Sir Alan failed to realize his scheme only worked because the U.S. debt had not yet grown to unsustainable levels, eventually falling victim to the inevitable DIMINISHING RETURNS on incremental debt described in my January 20th RANT of the same name.
When Greenspan took over the Fed in 1987, U.S. debt was a manageable $2.5 trillion. Equally important, the nation still maintained the financial and industrial leadership built over two centuries of hard work. By shifting the Fed’s policy from smoothing the economy’s ups and downs to attempting “eternal expansion” – cozying to the political establishment in the process – he inadvertently launched the early stages of America’s demise.
The primary catalyst of the U.S.’s decline from superpower status was Nixon abandoning the gold standard in 1971, but as noted above, until the U.S. debt grew unmanageable, the debilitating nature of expansionary monetary policy was masked. However, when Greenspan initiated the Fed’s now permanent “quantitative easing” policy in the late 1980s – starting with its response to the 1987 stock market crash – the road to ruin was started. The U.S.’s financial position was compromised further by the emergence of China as a manufacturing powerhouse in the 1990s, as well as the obvious appearance of “peak cheap oil”, a topic I know well having worked as a Wall Street energy analyst for a decade. Not “peak oil,” mind you, but “peak cheap oil.”
They say power corrupts, and absolute power corrupts absolutely, which couldn’t be truer when discussing the role of Federal Reserve Chairman – or any Central Bank with keys to its own printing press. Alan Greenspan was a long-time disciple of Ayn Rand in the 1950s – a gold standard advocate and writer of Atlas Shrugged; a timeless classic depicting the repeating saga of mankind’s addiction to paper money and welfare. Ironically, after writing a treatise in 1966 on the dangers of fiat currency– Gold and Economic Freedom – Greenspan became the most celebrated hyper-inflationist ever, just 20 years later, ignoring his own, prophetic words:
“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation.”
The problem is by no means limited to the U.S., as the entire world has imbibed the “monetary Kool-Aid.” I write often of the frailties of human nature, which sadly is prone to the seven deadly sins , particularly greed and sloth. Consequently, it repeatedly ignores its mistakes, including the immutable truth that fiat monetary systems ALWAYS fail, typically lasting no longer than 40 years before catastrophic devaluation or outright collapse.
Not coincidentally, this happens to be the exact age of the current U.S. dollar standard which has lasted longer than most because the U.S. has held the world “hostage” through the sheer size of dollar-based currency reserves and transaction volumes, a situation being rapidly unwound as we speak. To wit, I wrote extensively of mankind’s history of monetary self-destruction in my February 13th RANT, FIAT FAILURE, depicting the same systemic failure we are experiencing today in the dollar, Euro, pound, yen, and essentially every global currency.
Ominously, this is the first time ever that not a single currency is backed by gold. Thus, it shouldn’t surprise anyone how rapidly the debt edifice has grown. In just two decades, nearly every nation on Earth has built an unsustainable debt burden – growing exponentially and shortly, hyperbolically – which can ONLY be repaid via MONEY PRINTING.
And I assure you it will, as demonstrated by the overt policies of ALL global Central Banks. The world’s largest economy, the U.S. (though not for long) is committed to “ZIRP,” or “Zero Interest Rate Policy,” until “at least late 2014,” while China, the world’s second largest economy, is committed to pegging its currency – the Yuan, a/k/a Remnimbi – to the dollar ad infinitum. For those not versed in the nuances of monetary policy, “pegging” means the Chinese will print Yuan at the same pace as the Fed prints dollars, so as not to allow the Yuan to appreciate in value.
The worlds’ third largest economy – Japan – has been amidst its own catastrophic ZIRP since 1998, and just this month announced plans to expand its MONEY PRINTING to cover ALL future treasury issuance. Japan is the poster child for monetary failure and, sadly, Ben Bernanke believes its problems were caused by not enough money printing, which also happens to be his view of what caused the Great Depression.
By the way, the reason Japan’s financial bubble collapsed exactly ten years before America’s is simple: its population is ten years older. In other words, all of Japan’s failures are being repeated in America, as well as Europe, China, and countless others.
Fortunately for Japan , they have a strong industrial base (though losing market share to China), as well as a population of savers prepared for the coming difficult decade. These attributes are the polar opposite of America; , an abandoned manufacturing sector, rising population (due to poorly controlled immigration), and an average net worth in the under 40 age group close to ZERO.
Following are charts depicting the aforementioned exponential growth in MONEY PRINTING , which arguably has already reached the hyperbolic stage. Mind you, such data represents only what the government overtly prints, which anecdotal data suggests vastly understates reality. I could cite reams of work proving my assertion that far more money is printed than we are told, but instead I’ll simply give an example of the government spilling the beans on itself.
Amazingly, the largely toothless “Dodd-Frank” financial regulation laws mandated a GAO, or General Accounting Office audit of the Federal Reserve. Yet more shocking, the audit was actually completed last year, per the following article – Fed Once-Secret Loan Crisis Data Compiled by Bloomberg Released to Public.
In the audit, it was found out that in 2009 the Fed secretly lent $16 trillion of PRINTED MONEY to myriad corporations, banks, and sovereigns in the aftermath of Global Meltdown I, with little clarity as to whether such monies have yet been repaid. Would it make you uncomfortable – or appalled – to know that while the average person experienced financial CHAOS, the Fed gave interest-free loans to some of the world’s richest corporations, including Verizon, McDonald’s, and Toyota?
As the great NY sportscaster Warner Wolf used to say, “let’s go to the videotape,” starting with the U.S. adjusted monetary base, as calculated by the Federal Reserve Bank of St. Louis.
When viewing it, forget the actual numbers, as this measure dramatically understates the absolute amount of outstanding dollars. Instead, focus on its explosive growth since Global Meltdown I in late 2008, followed by a second EXPLOSION following Global Meltdown II in mid-2011, and yet another surge in recent months.
THIS meteoric growth rate,- plus increased government control over essentially ALL financial markets,- is why the Mainstream Media has been able to report relative calmin recent months, contrary to the experience of real-world economic conditions.
U.S. Adjusted Monetary Base