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Posts Tagged ‘Paul Krugman

Gold and silver: We were right – they were wrong

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by Brandon Smith of Alt Market
Posted July 25, 2011

ONLY NOW, AFTER THREE YEARS OF ROLLER COASTER MARKETS, EPIC DEBATES, and gnashing of teeth, are mainstream financial pundits finally starting to get it. At least some of them, anyway.

Precious metals have continued to perform relentlessly since 2008, crushing all naysayer predictions and defying all the musings of so called “experts”, while at the same time maintaining and protecting the investment savings of those people smart enough to jump on the train while prices were at historic lows (historic as in ‘the past 5000 years’).

Alternative analysts have pleaded with the public to take measures to secure their hard earned wealth by apportioning at least a small amount into physical gold and silver. Some economists, though, were silly enough to overlook this obvious strategy. Who can forget, for instance, Paul Krugman’s hilarious assertion back in 2009 that gold values reflect nothing of the overall market, and that rising gold prices were caused in large part by the devious plans of Glen Beck, and not legitimate demand resulting from oncoming economic collapse.

To this day, with gold at $1600 an ounce, Krugman refuses to apologize for his nonsense. To be fair to Krugman, though, his lack of insight on precious metals markets is most likely deliberate, and not due to stupidity, being that he has long been a lapdog of central banks and a rabid supporter of the great Keynesian con. [And he a Nobel Prize winner!] Some MSM economists are simply ignorant, while others are quite aware of the battle between fiat and gold, and have chosen to support the banking elites in their endeavors to dissuade the masses from ever seeking out an alternative to their fraudulent paper. The establishment controlled Washington Post made this clear with its vapid insinuation in 2010 that Ron Paul’s support of a new gold standard is purely motivated by his desire to increase the value of his personal gold holdings, and not because of his concern over the Federal Reserve’s destructive devaluing of the dollar!

So, if a public figure owns gold and supports the adaptation of precious metals to stave off dollar implosion, he is just trying to “artificially drive up his own profits”. If he supports precious metals but doesn’t own any, then he is “afraid to put his money where his mouth is”. The argument is an erroneous trap, not to mention, completely illogical.

Numerous MSM pundits have continued to call a top for gold and silver markets only to be jolted over and over by further rapid spikes. Frankly, it’s getting a little embarrassing for them. All analysts are wrong sometimes, but these analysts are wrong ALL the time. And, Americans are starting to notice. Who beyond a thin readership of mindless yuppies actually takes Krugman seriously anymore? It’s getting harder and harder to find fans of his brand of snake oil.

Those who instead listened to the alternative media from 2007 on have now tripled the value of their investments, and are likely to double them yet again in the coming months as PM’s and other commodities continue to outperform paper securities and stocks. After enduring so much hardship, criticism, and grief over our positions on gold and silver, it’s about time for us to say “we told you so”. Not to gloat (ok, maybe a little), but to solidify the necessity of metals investment for every American today. Yes, we were right, the skeptics were wrong, and they continue to be wrong. Even now, with gold surpassing the $1600 an ounce mark, and silver edging back towards its $50 per ounce highs, there is still time for those who missed the boat to shield their nest eggs from expanding economic insanity. The fact is, precious metals values are nowhere near their peak. Here are some reasons why…

Debt ceiling debate a final warning sign

If average Americans weren’t feeling the heat at the beginning of this year in terms of the economy, they certainly are now. Not long ago, the very idea of a U.S. debt default or credit downgrade was considered by many to be absurd. Today, every financial radio and television show in the country is obsessed with the possibility. Not surprisingly, unprepared subsections of the public (even conservatives) are crying out for a debt ceiling increase, while simultaneously turning up their noses at tax increases, hoping that we can kick the can just a little further down the road of fiscal Armageddon. The delusion that we can coast through this crisis unscathed is still pervasive.

Some common phrases I’ve heard lately: “I just don’t get it! They’re crazy for not compromising! Their political games are going to ruin the country! Why not just raise the ceiling?!”

What these people are lacking is a basic understanding of the bigger picture. Ultimately, this debate is not about raising or freezing the debt ceiling. This debate is not about saving our economy or our global credit standing. This debate is about choosing our method of poison, and nothing more. That is to say, the outcome of the current “political clash” is irrelevant. Our economy was set on the final leg of total destabilization back in 2008, and no amount of spending reform, higher taxes, or austerity measures, are going to change that eventuality.

We have two paths left as far as the mainstream economy is concerned; default leading to dollar devaluation, or, dollar devaluation leading to default. That’s it folks! Smoke em’ if you got em’! This train went careening off a cliff a long time ago.

If the U.S. defaults after August 2, a couple of things will happen. First, our Treasury Bonds will immediately come into question. We may, like Greece, drag out the situation and fool some international investors into thinking the risk will lead to a considerable payout when “everything goes back to normal”. However, those who continued to hold Greek bonds up until that country’s official announcement of default know that holding the debt of a country with disintegrating credit standing is for suckers. Private creditors in Greek debt stand to lose at minimum 21% of their original holdings because of default. What some of us call a “21% haircut”.

With the pervasiveness of U.S. bonds around the globe, a similar default deal could lead to trillions of dollars in losses for holders. This threat will result in the immediate push towards an international treasury dump.

Next, austerity measures WILL be instituted, while taxes WILL be raised considerably, and quickly. The federal government is not going to shut down. They will instead bleed the American people dry of all remaining savings in order to continue functioning, whether through higher charges on licensing and other government controlled paperwork, or through confiscation of pension funds, or by cutting entitlement programs like social security completely.

Finally, the dollar’s world reserve status is most assuredly going to be placed in jeopardy. If a country is unable to sustain its own liabilities, then its currency is going to lose favor. Period. The loss of reserve status carries with it a plethora of very disturbing consequences, foremost being devaluation leading to extreme inflation.

If the debt ceiling is raised yet again, we may prolong the above mentioned problems for a short time, but, there are no guarantees. Ratings agency S&P in a recent statement warned of a U.S. credit downgrade REGARDLESS of whether the ceiling was raised or not, if America’s overall economic situation did not soon improve. The Obama Administration has resorted to harassing (or pretending to harass) S&P over its accurate assessment of the situation, rather than working to solve the dilemma. Ratings company Egan-Jones has already cut America’s credit rating from AAA to AA+.

Many countries are moving to distance themselves from the U.S. dollar. China’s bilateral trade agreement with Russia last year completely cuts out the use of the greenback, and China is also exploring a “barter deal” with Iran, completely removing the need for dollars in the purchase of Iranian oil (which also helps in bypassing U.S. sanctions).

So, even with increased spending room, we will still see effects similar to default, not to mention, even more fiat printing by the Fed, higher probability of another QE announcement, and higher inflation all around.

This period of debate over the debt ceiling is liable to be the last clear warning we will receive from government before the collapse moves towards endgame. All of the sordid conundrums listed above are triggers for skyrocketing gold and silver prices, and anyone not holding precious metals now should make changes over the course of the next month.

What has been the reaction of markets to the threat of default? Increased purchasing of precious metals! What has been the reaction of markets to greater spending and Fed inflation? Increased purchasing of precious metals! The advantages of gold and silver are clear…

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Into the Economic Abyss

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by Brandon Smith
Monday, 25 April 2011


OVER THE PAST FEW YEARS, MAINSTREAM ANALYSTS HAVE SHOWN A TENACIOUS BLIND FAITH in the U.S. economy and the dollar that goes far beyond religion to the point of mindless cultism, so, when even they begin to question the future of American finance (as has been occurring more and more everyday), you know its time to worry.

For those that have been following my work since 2007, the events of the past few months have not been a surprise at all, however, for those just waking up to the ongoing implosion of our fiscal infrastructure, the bubbling inflationary meltdown just over the horizon and the nightmare unfolding around our national debt is rather shocking. Living through a full spectrum catastrophe is, to say the least, confusing, especially when you have no idea where the whole thing began.

Until now, the mainstream media has provided nothing but economic fantasy for the masses. They have satiated the public with what amounts to financial toddler talk for helpless preschool minds averse to any research beyond their daily 15 minute sippy cup of New York Times, CNN, MSNBC or FOX cable news sound bites. I mean, have you ever actually stopped and read a Paul Krugman article more than once? Or listened carefully to an MSNBC economic piece? It’s like being violently accosted by a band of slobbering mental deficients with securitized ARM mortgages stuffed in their pants. Of course, fewer and fewer people are now buying what these hucksters are selling.

With gasoline nearing $5 a gallon, grain prices doubling, and shelf prices beginning to skyrocket, it’s hard for even the most ignorant suburban schlep to remain oblivious to the problem anymore. We are no longer on the edge of the abyss; we have fallen into it head first…

I make this statement not for effect, not to startle people out of their apathy, not even to illustrate what “may” be coming around the bend in the near future. I make this statement as directly and sincerely as I know how; we have indeed crossed the line between economic weakness and economic catastrophe. For those of you who have been asking when the final stage of the economic collapse will begin, that time has arrived. Here is why…

Energy Inflation Overdrive

Here’s how to tell when inflation is about to run out of control in your country; wait for the politicians and bankers to begin making excuses for its consequences instead of pretending it doesn’t exist! Remember after the initial 2008 spike in oil prices when we talked about the prospect of “speculation” as the culprit? Remember also that I have pointed out for the past three years at Neithercorp Press that when the dollar eventually began to crumble, and the price of crude began to spike again, the government would try to blame speculators as the scapegoat hoping that Americans would assume the situation today was the same as it was in 2008?

Well, guess what? The Obama Administration has just initiated the first volley of “speculation” propaganda talking points by tapping the Department Of Justice among others to “investigate” possible trader fraud and speculation in the price destabilization of oil.

Ah! So it’s those devious “traders” and “speculators” out there in the ether that are driving up the price of oil, and don’t worry folks, ole’ Barry is on the case! Little mention of OPEC’s general distaste for current U.S. activities in the Middle East. And certainly, no mention of the dollar’s continuous sharp decline over the past two months from the White House as being even remotely responsible for you being robbed at the gas pump. The dollar, despite intervention by G7 countries, continues to depreciate against the Japanese Yen, and has also slid to a 15 month low against the Euro.

At the publishing of this article, the Nymex crude index is at around $113 a barrel, while the Brent crude index stands at $124 a barrel. Gasoline prices across the country are averaging $3.50 to $4.00 a gallon. Now, some crazy individuals out there may question any overt concerns towards $120 or even $150-a-barrel crude. We survived it back in 2008, right? Why not today? However, this fuzzy logic depends greatly on a very unfortunate premise; that the economic atmosphere of today is the same as it was in 2008. Not even close…

The crude explosion in 2008 lasted for around six months, peaked at around $4 a gallon, and then ended with a deflationary-like plunge precisely because that price spike WAS (for the most part) caused by speculation. This time, expect no peak. Only an endless steady climb as the summer months progress. We have been calling for an increase in oil costs far exceeding the $150 a barrel achieved in 2008 and we stand by that prediction.

Negative aspects of energy inflation will take hold much faster than in 2008, primarily because our economic foundations are even weaker than they were three years ago. Today, we not only have a massive and unsustainable national debt, and a credit crisis still unresolved, but also a privately controlled Federal Reserve with no oversight running amok, printing non-stop since the derivatives bubble first popped. Not even the dollar’s fake reputation as a safe haven investment can stall the collapse now.

High energy costs hit every conceivable sector of the economy, from freight, to food, to vacations, to housing. People drive less when it costs them twice as much to do so, which means less shopping, fewer trips to Disney World, and second thoughts about moving to a new home in a new state. The cost of producing goods hits wholesale prices, which eventually hit retail prices when corporate chains are no longer able to absorb the increases. Your electric and heating bills take a bite right out of your tender behind. All of these factors will snap the thin thread our system is clinging to. America, as we know it, WILL NOT survive $5-$10 gas. Period.

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Feeling Depressed?

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by Jenny
Posted originally Jan 26th, 2011

THIS PAST WEEK THERE WAS ALL SORTS OF GOOD NEWS about the economic recovery spinning forth from National Public Radio. In a sure sign the recovery is moving forward, Obama has decided to replace his recovery oversight team with some sort of a new job creation team. Apparently the recovery process is forging full steam ahead in the housing sector as well, with home sales on the rise nationwide. Now, increased sales would have nothing to do with the fact that there’s an unprecedented wealth of repossessed property hitting the market with hugely eroded value, of course… or that excessively positive spin from the media is influencing investor buying?

The media seems desperate to report something positive about the economy these days. I understand the draw. People are tired of the bad news and the tough times. The idea that things could get worse or go on like this for much longer is frightening. But isn’t the function of journalistic reporting to cut to the truth of the matter?

I am coming to completely distrust anything positive I hear from the mainstream, even NPR. The atmosphere is verging on Orwellian these days, but with the ludicrous conflict of interest at play regarding sponsors such as the National Association of Realtors backing public radio and the commercial media already beholden to the designs of big business, it only stands to reason we are not going to get a clear picture of where the economy stands.

Surprisingly, one recent article from CNBC did manage to cut through the chatter with a title declaring Housing Market Slips Into Depression Territory.  The article itself was perhaps not wholly accurate as it described the economy as revving back to life with “signs of hiring on the horizon.” That remains to be seen. I suppose it depends on the distance of that horizon, but I don’t expect to see any bold improvement for a while without the development of some amazing new energy technology or such to drive it. Nonetheless, it was refreshing to have the press acknowledge the severity of the situation we are steeped in.

According to the CNBC article, home values have now seen a worse decline than they did during the Great Depression, having hit a 26% reduction nationwide with home prices still falling. While it wasn’t addressed in the article, the housing market and the investments attached to it are what led us into this downturn, and falling prices continue to put downward pressure on the greater economy. The fact that housing is now worse off than it was during the Great Depression suggests our economic engine may not be revving back to life with quite the verve the press would have us believe.

I suppose it is wise for the press to be careful. If you subscribe to the school of behavioral economics you understand the influence emotion and attitude have on the market, and it can be argued that this is just cause for prudence in reporting. However, there are multiple and very reputable economists, investors, analysts and scholars alike who are calling the situation we’re in a depression.

Nobel Prize recipient and Professor of Economics at Princeton University, Paul Krugman, warned in a New York Times article published last July, “We are now, I fear, in the early stages of a third depression.” Though he has since come to believe the severity of the downturn was tamed to some degree by fiscal stimulus, he again referred to the economy just yesterday on his Conscience of a Liberal blog as being in a depression.

Last month 87-year-old promoter, trader and investment letter author Harry Schultz warned in his final issue of the International Harry Schultz Letter “Roughly speaking, the mess we are in is the worst since the 17th century financial collapse. Comparisons with the 1930’s are ludicrous. We’ve gone far beyond that.” He should know, having grown up during the Great Depression.

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Everything I learned about succeeding in business, I learned outside of the institutional academic system

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by JS Kim
Originally posted January 26th, 2011

Here is a related article to the previous one (posted earlier today) by JS Kim. I apologize if I appear to be plugging SmartKnowledgeU, Mr Kim’s independent research, education and consulting company, but I happen to completely agree with all that he says about education and related issues. Bold italics are my own. This is a must-read!! –Aurick

In a recent US study called “Academically Adrift: Limited Learning on College Campuses”, researchers studied more than 2,300 students that attended 29 different US universities. Here is what they concluded:

(1) 45% of the students showed no gains in learning the first two years of college, and
(2) 36% gained little learning even after four years of college level courses

even though the average GPA (Grade Point Average) was 3.2 among the sample of students.

Richard Arum, the author of the study, discovered that “students [were] able to navigate through [college] quite well with little effort”. Furthermore, he discovered that many faculty were focused on their own research with a disdain for teaching many of the introductory freshmen and sophomore level courses that colleges required of them.

The gains in learning were ascertained by tests that measured critical thinking, complex reasoning and writing skills in a standardized manner.

Of course, other factors outside of the enormous failures of the US educational system are also responsible for the failures of students to gain any critical thinking or complex reasoning skills during their years spent inside institutional academics.

There is a plethora of mass entertainment designed to prevent young adults from noticing that bankers are ruining their lives and ignoring all the topics that affect their quality of life while keeping them fixated on events that will eventually have no consequence on their quality of life. The Jersey Shore, American Idol, the Bachelor, an 18-game NFL season that will extend the nation’s fixation on football for several more weeks…shall I continue?

Arum’s study found that students spend less time studying today and more time socializing as compared to their peers from a decade ago and blamed students for deliberately seeking easy courses full of fluff for their lack of learning in addition to professors and universities that valued research and money more than teaching. Of course, the question still persists of why do universities even waste students’ time by offering students courses full of fluff? And if students really go to college to socialize more than they study, do they really need to waste $30,000 of their parent’s money every year for the privilege of playing Xbox in their dorm rooms with their friends?

Though the value derived from institutional academia seems to be little, this hasn’t prevented the owners of these institutions from raising tuition prices by 29% over the last four years from $84,940 to $109,172 for a four-year private university degree (Source: the National Inflation Association). In fact, if people were to view institutional academia as the money-making business it really is, one would likely conclude that in terms of value for money spent, this business would rank as one of the greatest all time-scams next to the fractional reserve banking system.

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Why People Don’t Buy Gold

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The only comment I might make about this cartoon is that the scripting could be a bit more acidic, the knife could be twisted a bit harder. After all, the mindless way most people value the opinions of certain well-known “economists” is a fairly easy target these days, now that it should be patently obvious that we have all been led down the road to a ruinous monetary future. –Aurick

How Keynesian Archduke Krugman recommended a housing bubble as a solution to all of America’s post tech bubble problems

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by Tyler Durden
Posted originally on Zero Hedge, August 9, 2010

THE YEAR IS 2002, AMERICA HAS JUST WOKEN UP WITH THE WORST POST-DOT.COM hangover ever. Paul Krugman then, just as now, writes worthless op-eds for the NYT. And then, just as now, the Keynesian acolyte recommended excess spending as the solution to all of America problems. Only this one time, at band camp, Krugman went too far. If there is one thing that everyone can agree on, is that the Housing Bubble, is arguably the worst thing to ever happen to America, bringing with it such pestilence and locusts as the credit bubble, the end of free market capitalism, and the inception of American-style crony capitalism. Those who ignored it, even though it was staring them in the face, such as Greenspan and Bernanke, now have their reputation teetering on the edge of oblivion.

So what can we say of those who openly endorsed it as a solution to America’s problems? Enter exhibit A: New York Times, August 2, 2002, “Dubya’s Double Dip?” Name the author: “The basic point is that the recession of 2001 wasn’t a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance. To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.”

If you said Krugman, you win. Indeed, the idiocy of Keynesianism knew no bounds then, as it does now. The solution then, as now, to all problems was more bubbles, more spending, more deficits. So we have the implosion tech bubble: And what does Krugman want to create, to fix it? Why, create a housing bubble… Well, at least we know now how that advice played out.

And now what? He wants another trillion in fiscal stimulus… Quadrillion? Sextillion (arguably this cool sounding number is at least two to four years away before the Fed brings it into the daily vernacular)? And just like the housing bubble he suggested then brought America to the biggest depression it has ever seen, so his current suggestion will be the economic cataclysm that wipes out America from the face of the earth.

So we have two simple questions:
i) how does Krugman still have a forum in which to peddle his destructive ways, and
ii) why does ANYONE still listen to this Nobel prize winner, a.k.a. charlatan?

Being stupid is one thing. Being stupid and learning your lesson after seeing your idea crash and burn is another. Pushing for the same policy response time after time, layering misery upon misery, is an altogether third, and most Krugman, thing.

How many more lunatics in charge of the insane asylum do we need before we finally say “enough” to their deranged ramblings and their illusions of reality…

Change You Can Believe In

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from The Daily Bell
Posted originally Friday, August 06, 2010

“The Great Recession has caused a seismic shift in how ordinary Americans view their government. Perhaps you saw the story this week about an Arizona sheriff who, in speaking about the Justice Department suit against his state’s new immigration law, said, “Our own government has become our enemy and is taking us to court at a time when we need help.” … We are led by fools who ignore the ample evidence history provides about the collapse of spendthrift societies. Such events abound. How is it they expect our overspending to end in other than disaster? You’d have to ask them, I guess. Or perhaps read the fantasies of Paul Krugman, the economist/columnist who believes the biggest problem with the stimulus spending is that there hasn’t been nearly enough of it. His name is rarely mentioned without the fact that he is a Nobel Prize winner. He could have a room full of prizes, but anyone with a lick of common sense knows he’s wrong on this. The few economists that warned that the credit explosion of recent years would hasten and deepen financial disaster were mainly from the so-called Austrian school and were derided by their Keynesian counterparts as kooks. Who looks kooky now?” – Baltimore Sun/Ron Smith

Dominant Social Theme:
Times are changing and free-market thinking has come to the fore – but let’s ignore it!

Free-Market Analysis:
We have made this point before, but it is an important one, so we’ll do so once again: The conversation about freedom in America is alive and well and becoming more important every day. This article in the Baltimore Sun – an editorial actually – provides evidence of what we’re talking about. First, the columnist Ron Smith makes the point that the Great Recession has made a big difference in how “Americans view their government.” Second, he mentions that the only economists to correctly predict the Great Recession were Austrians!

How far we have come. Ten years ago, a mainstream American newspaper would never have presented a columnist endorsing the claim that the federal government was the enemy. And the idea that the word “Austrian” would show up in a mainstream newspaper linked to “economics” would have been absolutely incredible. Austrian, free-market economics, even 10 years ago was known to a few thousand people in our opinion. Lew Rockwell was trying to hitch on with WorldNetDaily and Murray Rothbard had just passed away. This article is yet another proof of how the elite meme machine is slowly spinning out of control.

It is very important to note that the way the power elite keeps society under control is through these promotions. They have to be so all-encompassing that people self-censor. The beauty of the way these promotions worked was that when the power elite truly controlled the media, pre-Internet, there was no way to get away from the promotions; people didn’t even try because they were not aware that they were being promoted.

People were dimly aware that there was a set of social rules that had been established and it wasn’t considered polite (or for some reason even safe) to go beyond them. This awareness eventually came to be called in aggregate “political correctness,” and right-wing types fulminated against it and claimed that it was a leftwing media plot. It was not. Political correctness was the fullness of the panoply of elite promotions. It was something that people absorbed from the air around them.

We are old enough to remember well what the conversations were like in both Europe and America in the 20th century. One could not easily speak out against environmental concerns, nor against drugs or vaccines, nor against regulatory democracy, nor against central banking or taxes or the US military industrial complex or prison-industrial complex. The beauty of the system, from the elite’s point of view was that people would never even THINK of doing so because there was no set of available alternatives.

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