UKRAINE PARLIAMENT VOTES TO STIFF CREDITORS AND DEFAULT ON THEIR BOND OBLIGATIONS!

Today, Yahoo reported on the Ukrainian's parliament decree to stiff their creditors by $3.8 billion, defaulting on that debt. By propaganda, the report calls this default, "a restructuring agreement...[to keep Ukraine]...from falling into an unmanaged default." Elsewhere in the story, the writer refers to the default as a "20-percent debt write-down". Even the headline is pure propaganda — "Ukraine parliament backs crucial debt write-off deal."



The action by the Ukrainian Parliament is typical of lawgivers. They have no respect for property — the right of ownership — in this case the property collecting debt in full over time, or that, which we all call credit.

And people wonder why economies go bad and they live through hard times. Most live by superstition, believing in a slew of myths as to why economies go bad. Almost always, they accept stories by politicians who blame businessmen. In reality, it's lawgivers who devise the rules and who change the rules by which people trade their property while in pursuit of profit.

If you owed Mary $100 and paid only $80 back, you stiffed Mary of $20, or 20%. You defaulted on the deal made with Mary for $100.

In your mind, you might believe Mary is lucky to get even $80. However, Mary banked on getting $100 from you. Now, her life changes to the worse because she trusted you and you stiffed her.

If you owned Sally and Suzy $100, owing Sally $80 and Suzy $20, and you paid Sally 100% and Suzy 0%, you still defaulted, but only to Suzy. The net effect is the same as if you only owed Mary.

Paying Sally in full keeps you in good standing with Sally. However, as in the Mary example, you have harmed Suzy. Sally should be wary of you for her own sake going forward. So too should anyone else you approach to enter into credit relationships.

Can you imagine if it were this easy for you, that every time you borrowed on credit cards, home equity lines of credit and the like and if you were to find yourself with weaker cash flow, you could force your creditors into bargining what you would call a "write down" but which is in fact, you defaulting on your deal?

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AWAKEN. YOU'RE LIVING THROUGH THE GREAT GLOBAL DEPRESSION. IT'S HERE, WORLDWIDE. I BET YOU DIDN'T KNOW IT.

The U.S. economy has yet to leave depression. Current dollar GDP is meaningless.

"Real" GDP is meaningless as well since to calculate it, government statisticians use an average ("the chain") of successive inflated current dollar GDPs to deflate the latest GDP. How is it possible to deflate something inflated by something else already inflated?

There are 69.8% more dollars in circulation today, August, 2015, than in June, 2008! That is what quantitative easing does. QE has papered over the ongoing losses.

Quantitative Easing means increasing negotiable bank credit in circulation — cash and checkable deposits so as to trick the public into believing the economy is growing through rising sticker prices expressed in current dollars.

Quantitative Easing works. QE has papered over the massive credit deflation undergone at banks. QE has papered over the Greatest Depression.

That is its purpose. QE is not intended to spur on an economy.


Current Dollars in Circulation from the Federal Reserve

Look at the angle of the curve from June, 2008. It started to bend toward vertical, which means growth has been moving toward infinite.

This is what US GDP looks like in True Dollars™ terms rather than bogus current dollars or the equally bogus real dollars:






My chart is the only accurate chart on US GDP produced by anyone, the earth over, as are all my GDP charts and every other chart I produce. Unless someone has a standard yardstick that can't grow or shrink, that one can't get an accurate measure.

Look at my chart closely. My chart conforms to everyone's experiences through the years precisely. No other GDP chart on earth can do that.

Because I use an invariant standard that conforms to scientific knowledge about commercial banking, my measures are accurate and reflect commercial reality. No one else on earth can make this claim, unless he or she were to copy my method.

In true terms measured in True Dollars™ rather than measured in current dollars or the equally fake "real GDP" terms — as that uses already-inflated averaged current dollar terms over successive periods as the deflator — the economy has shrunk in almost every quarter since hitting a peak in 2007.

Americans don't see this precisely because QE has papered over reality. Current dollar prices including wages are up. So Americans believe they have been living through a recovery and an advance when they have not in reality.

Americans think in current dollars. They don't think in buying power terms.
When credit falls, the economy must shrink.

The US economy has yet to leave the Greatest Depression.

I track GDP for 40 countries in True Dollars™ terms. Those 40 countries comprise 86.6% of World GDP. The world is in serious economic depression.

The top 15 countries comprise 75% of world GDP. In True Dollars™, which is the only way you can get accurate true GDP, quarter-over-quarter

• Australia is down -11.4%
• Brazil is down -8.9%
• Canada is down -4.4%
• China is down -1.0%
• France is down -9.0%
• Germany is down -8.7%
• India is down -2.1%
• Italy is down -9.3%
• Japan is down -3.6% [Japan hasn't stopped falling since 30-June 1995! It's now down almost -74% since then ]
• Mexico is down -2.9%
• Russia is down an eye-popping -39.4% owing to sanctions.
• Spain is down -8.7%
• The UK is down -7.5%
• The USA is -1.5%

The notable bright spot is Korea, up 0.4%

I'll share a link to these charts as well as my True Dollars™ price guides for ETFs, which show which ETFs are rising fastest over designated periods as soon as my server comes up. My ETF price guides are indispensable for anyone who speculates with ETFs.

As my ETF price guides are merely that, the guides do not constitute advice of any kind as to what to buy or to sell. Such decisions are the both the legal and technical responsibilities of those speculating.

That said, having my True Dollars™ ETF Price Guides likely is the closest anyone can ever get to having a crystal ball. It's like insurance so cheap that you don't need to question the pittance to acquire one.

The charts above for the USA are what the charts look like for the 40 countries I track and for which I produce GDP in True Dollars™

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THE SUPPOSED RECORD 94 MILLION AMERICANS NOT IN THE LABOR FORCE IS A MEANINGLESS RECORD

Recently, there has been this stupid meme going around whereby tricksters have tried to shock fools with the meaningless statistic about 94 million Americans not in the labor force. A quick googling of the phrase record not in labor force reveals a slew of search results.



First, the phrase labor force is a technical term and means the sum of those employed along with those who have looked for work in the last four weeks based on a survey conducted during the so-called reference week. So those not in the labor force are those who don't have jobs and who haven't looked for work in the last four weeks.

As I show always, numbers without context lack meaning and usefulness to describe reality. Here is reality:



So is the current percent of 37.3% far from historical norms? No. Right now, the latest reading of 37.3% is only 11.2% higher than the average from the end of July, 1986, to the end of July, 2007.

You can better believe that before World War 2, consistently, those not in the labor force as a percent of free total civilian population would have been been a far greater percentage.

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FLOODING GERMANY WITH "REFUGEE" IMMIGRANTS WILL HARM GERMANS BY THE INESCAPABLE RULES OF CAPITALISM

Many who support the flood of refugees into Germany hold or parrot this false belief:

Germany has a labor shortage.

Thus, they call for more bodies who can become more workers in Germany. They believe having more workers is key to growing an economy. Such a belief is one of the most pernicious fallacies that causes more mischief than perhaps anything else.

Now here is reality:

Germans are suffering a capital shortage.

German enterprisers need to acquire more property put to production, aka capital, to leverage extant working age population. So the answer all should seek is the one that tells anyone why Germans have a capital shortage.

Capital shortages arise because returns to capital are not present. Only in the presence of positive returns does capital formation happen.



Most successful businessmen suffer from improvident nearsightedness. They focus on their own P&L statement and not the entire realm of commerce.

Many foolish enterprisers who don't understand capitalism believe they want more workers so they can pay workers less and thus incur less costs per unit of output. Yet, when all enterprisers do that, prices must fall as wages are the source of prices.

In short, the mass of idiot businessmen who call for more immigrants so as to depress wages end up killing the goose that laid the golden egg.

All working people should want to control immigration to keep capital growth rate far higher than the working age population growth rate.

Labor shortages are great for laborers and people in general. All shortages give rise to more capital among enterprising people.

Wages arise from capital. Higher wages arise from more capital producing ever more efficiently. As capital gives rise to wages, more capital gives rise to higher wages. Among no people in the history of mankind do you find wages absent capital.

In countries with big populations and no capital, you get bare subsistence (e.g., countries of Africa). In countries with big population and much capital, you get low wages (e.g., China, India).

Massively increasing the prime working age population, roughly 18-54, both depresses wages and leads to a capital death spiral. When the prime working age labor growth rate exceeds the capital spending rate, wages fall. Falling wages necessitates a fall in prices. A fall in prices causes a fall on the return to capital.

All prices get set by winning bidders in purchases and sales in the face of what is on offer. Wage rates are prices.

Would-be employers bid against themselves in an English auction. Would-be workers bid against themselves in a Dutch auction.

Massively increasing the worker head count means both would-be employers and would-be workers bid less.

As income (wages, earnings) is the source of prices, falling income means falling prices. Falling prices on extant capital investment means falling return to investment.

Capital spending then must fall and unemployment must rise so that enterprisers can then adjust to re-gain the same return rate to capital. Future capital gets lessened. Life gets worse.

Heed my dictum: Labor makes property. Capital makes property efficiently.

Property means right of ownership and not what is owned. Capital is merely another name for property put to production in hopes of a gain (see: CAPITALISM. BECAUSE WITHOUT IT, YOU WOULD BE LIVING AS A BARE SUBSISTENCE SAVAGE and WHY IS THE ECONOMY SO HORRIBLE? BECAUSE ACADEMIA ECONOMICS IS FAKE).

Capital alone is the source of improvement in the lives of all.

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THE 2010-2015 GREEK LAWGIVERS' CRISIS, THE EURO AND CURRENCY AREAS. SHOULD THE EURO ZONE BREAK APART?

So today, editors at Forbes published yet another train-wreck of flawed thinking by Tim Worstall. In The Cause of the Eurozone Crisis Was the Euro: The Solution Is Abolition of the Euro, Worstall tries hard to call for an end to the Euro by blaming its existence for the cause of a what he calls the Eurozone Crisis, which likely he means the the Euro Banking Crisis of 2008 the Greek Lawgivers' Debt Crisis of 2010-2015.




Seriously, I don't understand why Worstall doesn't find another line of work besides trying to write about economies and economics (see more on Tim Worstall right here on Bizarro Theater),

"Even a cursory glance at the economics of this field, optimal currency areas (founded by Robert Mundell) tells us that over such disparate economies a single currency just isn’t going to work." ~ Tim Worstall

Worstall seems not to understand Mundell's Optimum Currency Area Theory at all. Mundell included his theory in a textbook titled International Economics, (1968, pp. 177-186).

Mundell's Optimum Currency Area Theory is one where an authority can stabilize employment and prices over a well-defined region. According to Mundell himself:

• "If the case for flexible exchange rates is a strong one, it is, in logic, a case for flexible exchange rates based on regional currencies, not on national currencies. The optimum currency area is the region."
• "If the world can be divided into regions within each of which there is factor mobility and between which there is factor immobility, then each of these regions should have a separate currency which fluctuates relative to all other currencies."
• "The argument works best if each nation (and currency) has internal factor mobility and external factor immobility."
• "But if regions cut across national boundaries or if countries are multiregional, then the argument for flexible exchange rates is only valid if currencies are reorganized on a regional basis."

In the work, Mundell cites two who he believes has captured the essence for defining the optimum currency area — Meade and Scitovsky.

• "In both cases [Meade's; Scitovsky's ] it is implied that an essential ingredient of a common currency, or a single currency area, is a high degree of factor mobility;"
• "...neither writer disputes that the optimum currency area is the region-defined in terms of internal factor mobility and external factor immobility-but there is an implicit difference in views on the precise degree of factor mobility required to delineate a region."

According to László Andor, European Commissioner for Employment, Social Affairs and Inclusion, in his speech titled Labour Mobility in the EU: Challenges and Perspectives for a Genuine European Labour Market, Europeans have the necessary ingredient of labor mobility.

Free movement of workers began in 1968. Today, it encompasses the labor markets of 28 Member States of the EU and every Eurozone country.

EU nationals have the right to look for work and take up employment in another Member State and to receive assistance from the employment services in the host country when looking for a job.

Countries experiencing the highest increase in labor outflows to other EU countries in 2011-12 were Greece, Spain, Ireland, Hungary and Latvia. Labor outflows went mostly to Germany, Austria and the UK.

So according to Mundell and his theory, the European Central Bank (ECB) ought to make more credit available in Germany, thus pushing up prices in Germany to remove the demand of Greeks from buying German products.  With Greek demand for German goods cut by being priced out, Greeks would then produce the alike, substitute goods on lower prices (lower wages), thus taking up unemployment slack in Greece.

But the problem has been the lawgivers in countries like Greece. As wages are prices, they have kept wages up through massive fake-work, make-work government programs, pensions and welfare. Greeks had been living through a credit bubble, a public sector credit bubble and not a private sector. When that bubble burst — Greek lawgivers couldn't borrow without bailouts — Greeks suffered at the hands of lawgivers rather than commercial bankers.

For those who doubt that Greek lawgivers haven't been the source of the problems for the Greeks, have a look at GREXIT IS NO EXIT. Nigerians export more than three times as much as the Greeks, but only import 1.34 times as much as the Greeks.

So how do the Greeks do it? How do the Greeks pay for those imports? Their lawgivers have borrowed year after year to pay for government agency workers, pensioners and welfare collectees who, in turn, take their Euro borrowings and buy imports from those of other Eurozone countries.

In the countries hit hardest by the Euro Banking Crisis, their problems have been caused by lawgivers borrowing to keep afloat phony economies and thus hampering price discovery. As well, by Mundell's theory, those countries within the Eurozone experiencing trade surpluses need to have their regional central bankers rediscount more and thus pump more credit into those countries, which presumably would jack up prices relative to the Eurozone trade deficit countries. By Mundell's theory, it doesn't matter if Germany and Greece are separate countries as long as the countries operate under the same exchange rate and have factor mobility.

Mundell also said, "Similarly, if factors are mobile across national boundaries, then a flexible exchange system becomes unnecessary, and may even be positively harmful, as I have suggested elsewhere." 

The Euro is a "gold" standard - one rate for an internal common market with factor mobility that requires lawgivers to adjust policy to that standard. The price of that Euro "gold" standard relative to the outside world (other banking systems' cash) fluctuates.

Mundell wrote at a time when countries had fixed exchange rates with bank cash convertible to gold while many called for floating exchange rates with irredeemable cash. Mundell proposed his theory as an attempt to explain international disequilibrium caused by balance-of-payments crises under fixed exchange rates and price fixing by legislators (rigid wage and price levels).

Mundell believed that countries with trade surpluses whose leaders capped bank credit caused unemployment for those living in trade deficit countries because leaders of trade deficit countries had to shrink their economies to restore the imbalance.

Whether one banking system shared among a few countries or countries each with their own banking systems, according to Mundell, the fix for regional disparities is for trade surplus countries to inflate (add bank credits) —

• "In a currency area comprising different countries with national currencies, the pace of employment in deficit countries is set by the willingness of surplus countries to inflate."
• "Unemployment could be avoided in the world economy if central banks agreed that the burden of international adjustment should fall on surplus countries, which would then inflate until unemployment in deficit countries is eliminated"
• "But in a currency area comprising many regions and a single currency, the pace of inflation is set by the willingness of central authorities to allow unemployment in deficit regions."

Under floating rates with irredeemable bank cash, those living in the trade deficit countries would need to pay more for foreign cash of trade surplus countries until BOP equalized. Thus, all inflation would be unneeded as is the fix for disparities between regions under the same banking system.

So, absent the will to inflate by region in the Euro zone, the Euro zone ought to break up and let floating exchange rates do their work — force prices up of foreign goods as expressed in one's own bank cash.

At the end Mundell concludes, "...the optimum currency area is the world, regardless of the number of regions of which it is composed." By that Mundell means there should be one money and balance of payments would adjust regional difference. In short, Mundell means something like gold as money would be the ideal for the world over.

Legally, Europeans have labor mobility. Culturally, whether they move or not is another matter (see: On the Move, The Economist).



Hordes of illegal aliens, many claiming to be refugees, don't seem to have a labor mobility hang up. For more on the horde invading Europe, check out 2015 EUROPEAN REFUGEE CRISIS. FLEEING THE FAILURES OF TOTALITARIANISM, BUT FAILING TO EMBRACE BETTER WAYS.

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2015 SEPTEMBER EMPLOYMENT SITUATION FOR AUGUST 2015. IT'S MUCH BETTER. WILL THE FOMC RAISE THE FFR TARGET?

The latest employment situation from the Current Population Survey looks better than it has in a long time. Mainstream media report the unemployment rate (aka the competition for jobs rate) fell 5.1% from 5.3%. As the rate consists only of those who have looked for a job in the last four weeks, the measure fails to describe how many Americans are willing to work and could work.

If the Fed Res FOMC members decide based on data, then little reason exists for them to continue with their wrong-headed near zero interest rates policy. It's only been eight years of meddling by the Federal Reserve and by Congress to get the economy where it is now. Back when men debated whether or not to create the Federal Reserve, those in favor of creating the Federal Reserve claimed the Federal Reserve would shorten or even prevent altogether economic depressions. Their claims have yet to be backed by history as both the 1930s and the 2010s have proven them wrong.

Unfortunately, for these charts, key parts of the data needed for this calculation only go back to 2008. So it's hard to know if 6.2% is a good rate or a bad rate.

To learn the difference between my Jobless Rate and the BLS Unemployment Rate, read THE JOBLESS RATE, THE TRUE UNEMPLOYMENT RATE.



And the Strict Jobless Rate looks much better as well.




The number of Americans capable of work is falling.




And there are far fewer able-bodied in America sitting around doing nothing.



There are 3.7% fewer Americans being being supervised today than at the end of June, 2008.




Likely, there are millions of Americans who are not truly disabled, but merely legally disabled according to the generous rules decreed by Congress. Since the end of July, 2009, the number of supposed disabled has risen 17.5%. It seems so unlikely that before 2009, these Americans didn't know they were disabled.

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THE JOBLESS RATE, THE TRUE UNEMPLOYMENT RATE

News reporters never tell you what words define before they say them. Quite often, they don't know themselves what words mean. That doesn't stop them from talking though.

Many don't understand unemployment as reported by the Bureau of Labor Statistics of the Department of Labor. To help clear up any confusion caused by them, I have done this for you.

The Class of Worker

The BLS minions define persons in three ways based on their relationships to firms:

1. wage and salary workers —  those who get paid by private firms or by government agencies 
2. self-employed — those who sell work under contract
3. unpaid family workers — those who work for firms owned by their families

The Employed

The BLS minions define the employed as the count of those working who meet one of three tests:

1. those who did any work for pay or profit during the survey reference week
2. those who did at least 15 hours of unpaid work in a family-operated firm
3. those who were absent from their regular jobs temporarily because of illness, vacation, bad weather, industrial dispute, or personal reasons

The Unemployed

The BLS minions define the unemployed as the count of those not working who meet this test:

1. those without jobs 
2. those who have have looked for work in the 4 weeks before they were surveyed 
3. those available for work on the day of the survey
   
   Added to those who meet the test are these: 
4. those who were not working but who were waiting to be recalled to a job from which they had been temporarily laid off

The Labor Force

The BLS minions define the labor force as the sum of the counts of those employed and those unemployed.

The First Ratios

Here are the ratios published by the BLS minions, which get talked about by news media talking heads.

The Employment-Population Ratio

Employed head count ÷ Civilian noninstitutional population

The Labor Force Participation Rate 

Labor force head count  ÷ Civilian noninstitutional population

The Unemployment Rate 

Unemployed head count ÷ Labor force

Not in the Labor Force

Those who fail to meet the BLS tests for the employed or the unemployed get categorized as those not in the labor force. In short, those who are not working nor who have sought work in the last four weeks are not in the labor force.

Of these defined as not in the labor force, there are some who get defined as discouraged workers. The discouraged worker are those who meet this test:

1) those who want work
2) those who are available for work
3) those who have looked for jobs within the last 12 months but not in the last four weeks

What the Unemployment Rate Truly Means

The unemployment rate doesn't tell how many don't have jobs but who would like to work. The prefix un is an means not. Employment means the state of being employed. The BLS concept of unemployment misses many who are not employed but who would like to be.

In truth, the unemployment rate is the measure of competition for jobs firms make available. Thus, in truth, it's the jobs competition rate.

When you think about it, employers could fire all those workers who are lazy or disgruntled and replace them with all active job seekers. The more active job seekers there are relative to the labor force (the sum of employed and active job seekers), the bigger the pool of immediate potential workers there is from which employers can draw to fulfill existing jobs.

Clearing Up The Mess Of The BLS

Ordinary words such as employed and unemployed as used by the minions of the BLS fail to match the meaning expected by most. Because of their mess, I have sorted out their data to give you a true picture of the economy.

First. It is unclear whether for those who meet the third test of being employed are being paid. Ask yourself what good is a job without pay? Can a person not being paid buy things with pay?

Those not on payroll ought not to be included as employed, even if  their employers would put to them to work and pay them for it.

Second. The unemployment rate really mixes two unalike concepts — those who have jobs but who are laid off with those actively seeking work. Those who have jobs but who are laid off (Unemployed, Test #4) are more alike to those who those who were absent from their regular jobs temporarily because of illness, vacation, bad weather, industrial dispute, or personal reasons and who are not being paid (Employed, Test #3). The latter two ought to be in its own category, perhaps called Idled Workers.

As the unemployed rate mixes active job seekers and those on temporary layoff, the rate fails to be useful as a descriptor of reality. If those workers on temporary layoff are not working but receiving a paycheck, they are not unemployed.

Merely they are not producing immediate work. Their pay gets apportioned to both work days and idle days.

The Jobless Rate, the True Unemployment Rate

Clearly, if someone could work and would work if offered a job regardless of having looked for work in last four weeks, five weeks, six weeks, six months and so on, that one is unemployed. That one might not be an active job seeker, but that one is truly not employed.

I give you two rates, the jobless rate and the strict jobless rate. Here is how I do it.

First, I calculate the count of True Free Americans taken from the count of civilian non-institutional population, 16 and older, less those those not in the labor force owing to disability, 16 and older. In spite of the potential of some disabled persons to work, they can't do so without changing their legal status.

Next, I calculate the Straightaway Working Potential, which is the sum of the unemployed and those not in the labor force who want a job now. The figure of those who want a job now comes from the BLS.

The BLS defines those who want a job now as the sum of those who searched for a job within the last 12 months, but not in the last four weeks, whether or not they held a job within that 12 months,  added with those who have not searched in the last 12 months and added with those who have not searched since the end of their last job.

To calculate the Jobless Rate, I calculate the the ratio of the Straightaway Working Potential to True Free Americans. 

Also, calculate the Strict Jobless Rate. To do so, first, I calculate the Strict Straightaway Working Potential, which consists of a subset of those not in the labor force who want a job now — those who have searched in last 12 months or since the end of their last jobs when those jobs were held in past 12 months — added to the unemployed as counted by the BLS. Next, I take the ratio of the Strict Straightaway Working Potential to True Free Americans. 

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"REAL" GDP IS FAKE, BOGUS, CRAP. AMERICANS AND SCHOOL CHILDREN HAVE BEEN HOODWINKED FOR DECADES.

The formula for "real" GDP taught in schools:

nominal GDP ÷ base year GDP × 100

This yields "real" GDP in what was called "constant dollars." Supposedly, this "real" GDP is a measure goods and services of the current year deflated to the prices of a base year GDP. Base year GDP is merely the nominal GDP of the year chosen to be the base.

You can watch Sal from the Khan Academy teach the difference between nominal and "real" GDP on YouTube and then you can watch Sal teach the Constant Dollar method to calculate supposedly "real" GDP also on YouTube.

Under logical scrutiny, the concept gets exposed as mere hokum, bunko. Think about it. The base year GDP is inflated by whatever the inflation was for that year.

Before 1996, the BEA used the school method. From 1996, the U.S. Department of Commerce has used the chained-dollar method (see: BEA's Chain Indexes, Time Series, and Measures of Long-Term Economic Growth).

The BEA method for real GDP, though complicated, is hardly much different that school-method GDP. The new method uses the average of two successive periods of GDP. So year two of a chained-dollar average becomes the year one of the next chained-dollar average. The minions at the BEA believe this removes distortion that any year might cause owing to changes in composition of goods and services.

The math looks something like this:

"real" GDP = nominal GDP ÷ implicit price deflator

where the implicit price deflator = (current-dollar ÷ chained-dollar) × 100

and a chained-dollar = base period current-dollar measure × (chained-type quantity index number current period - chained-type quantity index number base period)


Anyway, chained-dollar "real" GDP is still as bogus as the chain consists of an averaged succession of already inflated GDP as the basis to deflate current dollar GDP.



Could you measure a length of a distance with a ruler that changes in size the farther you go? That is what academicians and the minions at the BEA claim you can do with their bogus method.

And today, that academician economists can't see this plain truth reveals how stupid they are, how weak their intellects are, how indoctrinated they are. Worse are the millions of idiot-like parroters who parrot the false belief of "real" GDP when they report on it.

Men were much smarter about money and banking from the years of the late 1870s through the 1920s. One such man was Edwin Walter Kemmerer who was known as "the money doctor." This is what Kemmerer had to say about inflation:

 

Kemmerer goes on to say:

Anyway, there is a method to deflate away inflation, which uses a metaphorical measuring stick kept at a constant length. That method is my method — the True Dollars™ method. It is the only real, true, legitimate method.

Both the constant-dollar method or the chained-dollar method rely on prices. Prices are an effect and not a cause. It's impossible for an effect to be its own cause.

It's impossible to deflate prices with past inflated prices.


Economists are idiots to believe otherwise. And guess what? They believe otherwise.

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Q2 2015 VELOCITY OF CIRCULATION. THE GREATEST DEPRESSION CONTINUES. IS THIS THE MOST DAMNING INDICTMENT AGAINST CONGRESS AND THE FEDERAL RESERVE?

Readers of Bizarro Theater know that Americans have not had a money-based economy legally since Congress decreed that Federal Reserve banknotes are legal tender. That happened more than 100 years ago.

Bizarro Theater readers know that were it to exist, money would be coined metal by weight and fineness.  BT readers know that were it to exist, money could exist without either banking or lawgivers such as Congress.

BT readers know that cash is bank credits with bearer negotibility circulating in perpetuity. BT readers know that cash requires banking to exist. Further, BT readers know that cash as legal tender requires both banking, lawgivers and their enforcement agents.

So when anyone talks about the velocity of money, if they weren't muddled in thought by their false beliefs, rightly, they would say velocity of circulation or velocity of the circulating media or something along those lines.

With the legal tender banknote system Americans live by today, velocity of circulation reveals the turnover of negotiable bank credit in the buying and selling of domestically-produced products through time. A rising velocity of circulation shows anyone that Americans are trading new property in the pursuit of profit with greater frequency. Likewise, a falling velocity of circulation shows that Americans are trading new property with less frequency.

In short, an increasing velocity of circulation shows a bettering economy and likely leading to better living for many Americans, if not most. Likewise, a decreasing velocity of circulation shows a worsening economy and life worse off for most Americans.




Hover over the bars for the actual numbers.



For those old enough, when they follow along the chart and reflect on their life, they will see the chart corresponds to reality. In spite of minor recessions here and there, Americans became ever richer after World War 2 through the 1970s. Especially during the 1950s and 1960s, Americans moved to the suburbs, bought houses easily, had two cars in the garage while, had one primary income earner and could easily pay medical bills as well as easily pay for higher education for their college-aged children.

Americans were the envy of the world.

During the late 1970s, American living became increasingly harder. To quell inflation, Fed Chairman Volker oversaw the rising of Fed Funds Rate which pushd the prime interest rate through the roof.

During the Reagan years, and more so during the middle years of his presidency, living improved for many but not all. Yet, optimism prevailed among many.

By the time, the self-professed, kinder and gentler George Bush, Sr., became president, owing to the policies he supported that Congress turned into law, Americans began to see their livelihoods fall. American life became fairly bleak through near to the end of the first term of Bill Clinton.

Around 1994, Americans began to experience a bettering economy. This bettering rose until the peak of the Dot Com bubble, which hit in 1999. After sputtering during the early George Bush, Jr., years, Fed Res chairman Greenspan goosed the economy. Doing so led to the Greenspan-Bernanke Great Inflation, the biggest banking credit bubble in the history of mankind.

The Greenspan-Bernanke Great Inflation combined with reckless mortgage-backed securities peddled by the U.S. Congress itself through its GSE agents, Americans lived through a massive bubble, a false prosperity. That false living came to an end by Q4 2007.

Since Q4 2007, life for Americans has become progressively worse. Much of the damage has been done by the progressive Congress of Harry-Reid and Nancy Pelosi under Barack Obama, a man always who is willing to push more government upon Americans. As well, the Ben Bernanke-Janet Yellen Fed Res policy of near-zero interest rates has wrecked capitalism.

As our lawgivers are weak, mindless men, it's going to take much more pain from a much bigger disaster before smarter men ascend to power who put forth laws and action that restores prosperity to Americans by restoring capitalism, focusing on the protection of the individual and his property (right of ownership) while riding Americans of the failed doctrine of kinder, gentler, crony politics, near-socialism economics.


For those curious as to the technical details of the chart, in the first footnote of the Federal Reserve release titled Money Stock Measures - H.6, someone at the Federal Reserve has defined M1 thus:

M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) traveler's checks of nonbank issuers; (3) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (4) other checkable deposits (OCDs), consisting of negotiable order of withdrawal (NOW) and automatic transfer service (ATS) accounts at depository institutions, credit union share draft accounts, and demand deposits at thrift institutions. Seasonally adjusted M1 is constructed by summing currency, traveler's checks, demand deposits, and OCDs, each seasonally adjusted separately.

The adjusted M1 is M1 with the traveler's checks removed.

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Q2 2015 GDP FOR CANADIANS. CANADIANS HAVE BEEN SUFFERING RECESSION FOR MUCH LONGER THAN RECENT PROPAGADISTS CLAIM

Yesterday, the John Shmuel of the Financial Post reported that Canadians have entered a "technical recession" — two quarters of negative growth. Shmuel went on to report that most Canadian economists would claim Canadians aren't experiencing a recession because the unemployment rate seems steady and wages in current Canadian dollars seem to be growing.

Of course, Schmuel's beliefs are silly.



Right now, Canadians are feeling the effects of the recession of the Chinese and the depression of the Americans.

The Canadian economy has shrunk -34.9% in True Dollars™ since Q2 2011.

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IF I COULD ASK PAUL KRUGMAN (OR JANET YELLEN, OR ...) ONE QUESTION

There is a scene in the movie True Lies where action-hero Arnie Schwarzenegger gets a shot sodium mannitol to force him to speak truth and answer questions. If I could ask Paul Krugman, Janet Yellen, Ben Bernanke and others like them one question with them being under the influence of sodium mannitol, I would ask each of them one question:

What is it like being wrong even when you sleep?

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U.S. PROPAGANDA ROLLS ONWARD. Q2 2015 DISPOSABLE PERSONAL INCOME SHRANK AT THE ANNUAL RATE OF -2%

Yesterday's, pro-government workers at the Bureau of Economic Analysis promoted their fiction that "real" GDP is now growing at the annual rate of 3.7% when in truth, the economy shrank -1.5% (see: Q2 2015 GDP FIRST REVISION. THE FICTION OF 3.7% "REAL" ANNUAL GDP GROWTH), the story for individuals gets even worse.

Personal income shrank at the annual rate of -1.9% as measured in the second quarter


Of those who work for a living, the hardest hit have been shopkeepers, restaurateurs and other proprietors whose income ex-inventory and capital depreciation shrank at the rate of -2.3%. The next hardest hit have been wage-earning workers whose compensation shrank at the annual rate of -2.2%.

Of everything, unemployment insurance payouts have shrunk the fastest, falling at the annual rate of -8.1%.

Likely, for those who are lucky enough to stumble upon my work, there are some, maybe even many, who doubt my True Dollar™ method. Owing to cognitive dissonance, they feel the need to defend the lies they accept from politicians, agents of Congress, academics and news media talking heads.

That doesn't bother me whatsoever. My graphs do the ultimate talking. My graphs consistently line up with reality, the reality of everyone's experiences.  Reality never lines up with the claims made by agents of Congress like those of the BEA and agents of the President along with the data and charts they present.

If you look at the Personal Rental Income, and if you thought about what happened after the peak of the Greenspan-Bernanke Great Inflation, the biggest credit bubble in the history of mankind, you would expect rental income to go up as millions of Americans defaulted on their mortgages and reverted to living in rentals. My chart shows that exactly.



Sometimes, confusion hits many because they see that welfare doled by Congress has fallen. They would expect such welfare to have risen during tougher times. In current dollars, that welfare spending rose, but in True Dollars™, that spending fell. Why welfare collectees didn't notice because True Dollars™ prices for the things they buy, like food, have fallen at a faster rate.



If you look at the Unemployment Insurance Income chart, and if you thought about what happened after the peak of the Greenspan-Bernanke Great Inflation, the biggest credit bubble in the history of mankind, you would expect unemployment income to go up as millions of Americans found themselves out of work. My chart shows that exactly.  Now that claims have been exhausted, payouts for unemployment insurance have fallen precisely because there are few left who qualify to make claim for benefits. My chart shows that exactly as well.



These Medicare and Medicaid income charts match reality as well.

You should tell all your family, friends and co-workers about Bizarro Theater. You should stop listening to the silliness propagated by academicians, politicians and those who work in financial news media.

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Q2 2015 GDP FIRST REVISION. THE FICTION OF 3.7% "REAL" ANNUAL GDP GROWTH

Minions at the Bureau of Economic Analysis claim that real gross domestic product is now growing at an annual rate of 3.7% as measured in Q2 2015 after a statistical revision from a number published a month ago. Their claim is pure fiction.

These minions deflate current GDP using a past inflated GDP. Ask yourself, how could that work, logically?

True GDP expressed in True Dollars™ tells an altogether different story. As you can see in the chart, True GDP is down -1.5% for the quarter and -4.4% year over year.




The only growth to be seen is growth in inventories. No one should want a growth in their inventories in a just-in-time world.

Mark my words. Black Friday is going to expose all of the phony numbers published by agencies of Congress, like the Commerce Department's BEA. In True Dollars™, total consumer credit relative to disposable personal income is too high. I shared the chart for that with you in THERE STILL IS NOT A RECOVERY SEVEN YEARS LATER. HERE IS WHY, PARTLY.





Americans continue to live in the Greatest Depression. Likely, there is world wide depression as the Chinese have now entered recession as I have shared in Q2 2015 CHINESE GDP REVEALS THE CHINESE ECONOMY IS SHRINKING. THE CHINA MIRACLE HAS COME TO AN END.

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Q2 2015 CHINESE GDP REVEALS THE CHINESE ECONOMY IS SHRINKING. THE CHINA MIRACLE HAS COME TO AN END.

Many claim workers for the National Bureau of Statistics of China (NBSC), the statistical agency of the National People's Congress of China fudge the GDP numbers for China. Their belief is so pervasive that articles about whether these workers fudge numbers or not has become regular journalism fodder. Chinese premier Li Keqiang fueled the fudged data beliefs of many when he said GDP data is "man-made and, therefore unreliable".



Back on July 15, 2015, the Economist.com published Whether to Believe China's GDP Figures. The writer of that work claims workers for the NBSC smooth the data rather than fabricate it. As well, the writer points readers to a work published by Quartz whose writer, Gwynn Guilford, mocks the latest NBSC GDP data, calling it a "charade."

Back on March 25, 2013, three workers of the Federal Reserve Bank — John Fernald, Israel Malkin, and Mark Spiegel — stated, "...reported Chinese output data are systematically related to alternative indicators of Chinese economic activity. These include alternative indicator indexes of Chinese activity composed of variables that are less susceptible to official manipulation, as well as externally reported trade volume measures. Importantly, these models suggest that Chinese growth has been in the ballpark of what official data have reported. We find no evidence that recently reported Chinese GDP figures are less reliable than usual." In short, Fernald and friends claim there isn't any unusual fudging of data by Chinese statisticians.

The Conversation published a work by an economics professor, Carsten Holz. In the work, Holz quoted a former NBSC official who said, “the government statistics organisation primarily serves the needs of macroeconomic decision-making of Party and government leaders at each administrative level, and is responsible to the Party and government leaders at each administrative level.” That said, Holz himself wrote, "Double-checks more often than not confirm the plausibility of the official data. In other words, if we make a reasonable comparison between the figures for real growth in GDP components against the actual volume of physical output, then those official real GDP growth rates look rather good."

In China GDP: Believe It or Not?, Leslie Shaffer of CNBC quoted a few men regarding their views on the veracity of second quarter 2015 data. Some take the data as truth, some do not. Still others say it doesn't matter because the Chinese economy is growing. A few of the guys might have it right, Adam Myers, senior market strategist at Credit Agricole; Ewen Cameron Watt, chief investment strategist at Blackrock Investment Institute; Brian Jackson, China economist at IHS Global Insight; and Patrick Chovanec, chief strategist at Silvercrest Asset Management.

Myers said, "You only have to look at commodity prices to see that there's a disconnect with what the official Chinese data is showing and what really the demand in the underlying economy is having for things like raw materials. We've been talking about that for months and still the Chinese data remains relatively solid, but all the underlying anecdotal evidence points to a much deeper slowdown in China. Put on top of that the wealth and credit effects that we've seen through the Chinese stock markets in the last couple weeks, a much larger deterioration appears to be on the cards than the official data would indicate."

Watt said, "If you really want to get the measure of what people think about China, go look at commodity prices, go look at the Aussie dollar, go look at employment in Australia. It's telling me the economy is slowing down," he said. "There's a huge oversupply because of the assumption the fixed investment boom is going to last forever."

Taking the GDP data as truth from the National Bureau of Statistics of China and expressing that data in True Dollars™, the Chinese economy shrank -1.0% from the second quarter of 2015. Already, the Chinese economy had shrunk 3.16% in the first quarter of 2015. Year-to-quarter, the Chinese economy has shrunk 4.1%.

And while the Chinese economy has grown 9.1% over the last five years, the Chinese economy has shrunk -5.4% since hitting peak GDP at the end of Q3 2013. So, it's likely a safe call to say the Chinese economy is in recession. It remains to be seen if the recession runs into a depression.



Looking at the graph above, the Q3 2008 dip into Q1 2009 should surprise no one as that came during the US and European Banking Crisis. The Chinese economy shrank -7.7% during that period.

Since Q2 2011, Chinese economy has fallen -2.79%. This should surprise no one. And if all gave earnest thought to the above, they would come to see that it makes sense.



Exports account for a bit more than one-fifth of Chinese GDP (22%). If economies of Chinese importers are slowing, how can the Chinese economy not also slow? 47.8% of Chinese exports go to these countries: USA (19%), Japan (8.3%), Germany (4.4%), UK (2.5%), Mexico (2.4%), France (2.3%), Russia (2.3%), Canada (2.3%), Australia (2.0%), Nederlands (2.0%). Poorer Americans and poorer Europeans can't buy Chinese goods even at low, Chinese prices.

Back on July 8, 2015, Michael Auslin writing for the New York Post claimed the China economic miracle is over. Auslin pointed to the 30% plunge in stock prices between May and July, 2015, after a 140% run up between July 2014 to July 2015, a plunge that wiped out $3 trillion from stocks as "more evidence that China’s high-flying days are over." In his work, Auslin mentioned Derek Scissors, a resident scholar at the American Enterprise Institute (AEI) who focuses on the Chinese and Indian economies. According to Auslin, Scissors supports the belief that economic growth in China has essentially stopped.

In a work by Scissors published by the Financial Times on August 21, 2015, Scissors stated, "China’s economy began weakening no later than 2008, and probably before. A temporary upswing starting in late 2009 and continuing into 2010 was due to an unsustainable, unwise, and unprecedented explosion in debt. From 2011 on, ups and downs in the global economy have not been due to ups and downs in China – the trend in Chinese performance has been invariably down." As you can see in my graph above, Scissors hunch is right. Scissors has another worthy read, China’s Stall, published on June 17, 2015, by the American Enterprise Institute.

On August 16, 2015, Foreign Affairs published China Hits the Wall by Salvatore Babones. Babones stated that, "[t]hree and a half decades of easy profits from one-way bets on China's reintegration with the outside world have come to an end."

Babones believes a crisis is coming to the Chinese, a crisis driven by administrators at all levels of the Chinese government failing to meet their financial obligations owing to demographic stagnation, capital flight, and the decision in 2013 to give the market a decisive role in Chinese economic development.

In the work, Babones suggested that China escaped the 2008 U.S. And European Commercial Banking Crisis even though the Chinese suffered a 16% decline in exports year-over-year 2009 to 2008. To offset that decline, Babones stated that executives for Chinese law givers spent $586 billion on airports, subways, and high-speed rail.

Way back on October 21, 2014, The New Yorker published Is the Chinese Economy About to Fall Off a Cliff, a work by John Cassidy. Cassidy cited a Conference Board work by David Hoffman and Andrew Polk in which Hoffman and Polk wrote, “Private sector debt, now at almost 200% of GDP and up from 117% at the end of 2009, is still accruing at 15 percentage points per year...[debt is]  well in excess of the thresholds that have historically triggered financial crises in other countries.”

The other day, Carlo Cottarelli, an executive director of IMF, went on record and said, "Monetary policies have been very expansive in recent years and an adjustment is necessary...It's totally premature to speak of a crisis in China." In so many words, Cottarelli has said that too much credit has been given.

Here is what I teach about any crisis and panic. A crisis arrives when too much property of futurity has been created and not enough profit arises from sales of property happening in the now. When true prices fall, margins get squeezed on extant capital. When enough dominoes of failing topple, all get pushed to panic.

A crisis begins with a sudden realization of epic loss. It's the movement of mind from uncertainty (50-50) to certainty (100%) and 100% probability of loss on a wide scale. A crisis begins when all those who have undertaken too much credit for trade find themselves lacking income from extant capital structure sufficient to service debt. All too often, they have overpaid for their capital structure.

Every crisis has the panic part. Panic is the scramble for the exits. Panic is the rush to exit credit positions. Crisis is the storm. Panic is the scuttling during the storm.

There has yet to be an economy derived from bank credit, especially one with bank credit as legal tender whose people haven't found themselves with too much credit relative to forthcoming expected profits. When the Chinese create too much property of futurity (credit) relative to property traded at profit in the now, the Chinese will experience crisis. This downturn in the Chinese economy could be the turning point when the Chinese find out they have paid too much for too many factories from which they cannot earn profits.

Clearly, the Chinese needed to embrace banking credit capitalism to lift 600 millions from bare subsistence poverty because Mao communism could not do it. Mao communism previously starved to death their ancestors.

Unfortunately, the Chinese Communist Party leaders likely won't let market forces remedy the excessive creation of property of futurity. Likely, the Chinese will pull a George Bush who said infamously (watch on YouTube), "I've abandoned free market principles to save the free market system."

The recent sodium cyanide industrial explosion accident in Tianjin that leveled blocks, blowing up thousands of new cars awaiting delivery and sadly killing over 100 might turn out to be symbolic of the blow up that could be happening in the Chinese economy.

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THERE STILL IS NOT A RECOVERY SEVEN YEARS LATER. HERE IS WHY, PARTLY

Economists seem slack-jawed to explain why there has been little in the way of a recovery after seven years of Bernanke-Yellen near zero interest rate policy (ZIRP) along with the crazed sum of cash accretion owing to Bernanke's failed academic exercise of Quantitative Easing.



As can be seen in these charts, in True Dollars™, disposable personal income is way down. Likewise, wages and salaries are way down.








And it should be no surprise that consumer credit has fallen as all credit in the has fallen substantially. That great deflation is resultant of the first cause, the Greenspan-Bernanke Great Inflation, the greatest credit bubble in the history of mankind.






Most academician eggheads in the field of economics believe that many Americans paid off their debts in what they call merely a "recession,"  as if it were an ordinary recession. So these eggheads wonder why Americans aren't now spending since also they believe a recovery has been underway since 2009.

And these two charts say thousands of words. While both incomes and credit have fallen, Americans have taken on ever more credit to maintain semblance of the lifestyle they once enjoyed during the boom phase of the Greenspan-Bernanke Great Inflation, the greatest credit bubble in the history of mankind.






Consumer indebtedness has increased during the Greatest Depression. That should surprise no one. First Bernanke and then Yellen made borrowing cheaper than acquiring income. And as massive unemployment pushed wages downward, those with income falling at a slower than credit opted for credit to make up for their buying power shortfall.

Falling true incomes and rising true indebtedness is a recipe for disaster.

Many call the day after Thanksgiving in the USA, Black Friday, because it is the day retailers are supposed move from losses to beyond breakeven and thus enter black into their accounting ledgers rather than red for losses. Don't count on it this Christmas retail shopping season.  I wonder if bears plan to short major retailers soon.

It doesn't seem likely that Americans can take on much more debt prudently.

For more of why, check out ZIRPED! BERNANKE AND NOW YELLEN HAVE FELLED CAPITALISM. VOLKER WAS RIGHT ON HOW TO DO IT.

I happen to live in a fairly well-to-do city, which happens to be home to a big biotech firm. Since the Banking Crisis of 2008 and the subsequent reckoning of the Greatest Depression, even my city has been touched. Seedy massage parlors popped up all over the main shopping boulevard like festering sores. Some have taken to living in illegal RV parks hidden behind fences on larger parcels.

The Greatest Depression keeps rolling along.

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ZIRPED! BERNANKE AND NOW YELLEN HAVE FELLED CAPITALISM. VOLKER WAS RIGHT ON HOW TO DO IT.

Today, the Telegraph UK published a work by Liam Halligan, Raising rates is trickier now that QE is a lifestyle choice.

"Since the financial crisis, QE has morphed from a just-about-justifiable emergency medicine, into a grotesque, self-serving lifestyle choice of our financial and political classes ... for many years now, QE has been less about crisis management than about pumping up equity and government bond prices to levels that belie underlying economic and fiscal realities.

QE, and the closely related policy of keeping interest rates nailed to the floor, has sent stocks to repeated all-time highs despite the lack of truly convincing recovery either here or in the US. It has allowed busted “zombie” banks that should have been thoroughly audited, rendered insolvent, then closed down and broken up, to keep trading."

Central bankers (CBs) have backed themselves into corners. In effect, through their near-ZIRP, CBs have severely harmed capitalism, if not mortally wounding capitalism for all time.

If CBs raise rates, there can be few new entrants in markets. How can would-be enterprisers compete? At higher rates, would-be new entrants would pay more for their capital relative to enterprisers operating with capital bought on credit at lower rates. Without new entrants, what will cause job growth?

CBs aren't smart enough to know what rates should be for millions of borrowers making many times more decisions about their daily lives. If central bankers knew what rates should be, never would there be banking crises such as the 2008 Banking Crisis.

The time to have raised rates long since passed — 2008 to 2009 — when speculation ran rampant. Rates should have been pushed high, blisteringly high between 2008 and 2009 to force many into bankruptcy. Such a policy — the right policy — would have bankrupted all of the shakiest of firms, culling the herd  while at the same time, protecting extant capital bought at higher rates of credit.

Instead, CBs Ben Bernanke and Janet Yellen have kept alive a sickly herd of bad enterprisers who have built edifices of bad businesses upon low interest rates during the Greenspan-Bernanke Great Inflation (1994 to 2008), the biggest credit bubble in the history of mankind.



The results of the Bernanke-Yellen near-ZIRP should surprise no one. Near-ZIRP has led to massive job cuts as enterprisers reduced their expenses to restore ROI on extant capital structures. Near-ZIRP has led to little borrowing and few new entrants since few can foresee expected future profits forthcoming from high true unemployment (7.57% as of today).

Worst of all, Bernanke-Yellen near-ZIRP has led to a massive decline in the economy, a decline that has gone unabated more or less since peak GDP of Q4 2007.

First under Bernanke and now under Yellen, CBs have engaged in an exercise of academic stupidity. Their beliefs run counter to real-world commerce driven by actual capitalism.

Paul Volker had it right between October 1979, and October 1982. When bankers ran amuck with bank credit, rates need to be pushed to the ceiling. Volker did that exactly by targeting the quantity of bank credit rather than the price of bank credit. Targeting bank credit, the federal funds rate reached a record high of 20% in late 1980. Consumer prices growth rate (wrongly called "inflation" by many) peaked at 11.6% in March of 1980.

William Poole, the eleventh chief executive of the Federal Reserve Bank of St. Louis (March 23, 1998 to March 31, 2008) had this to say, Volker's action:

How bad was the period of the Great Inflation? The inflation rate, a mere 1 percent in 1965, hit 14 percent by 1980. Unemployment trended up from a low of 3.5 percent (annual average) in 1969 to 9.7 percent in 1982. The stock market was in the dumps. Oil prices jumped off the charts. Presidents Richard Nixon and Jimmy Carter became desperate enough to tinker with price controls, the results being disastrous.

Volcker, in office only two months, took the radical step of switching Fed policy from targeting interest rates to targeting the money supply. The days of "easy credit" turned into the days of "very expensive credit." The prime lending rate exceeded 21 percent. Unemployment reached double digits in some months. The dollar depreciated significantly in world foreign exchange markets. Volcker's tough medicine led to not one, but two, recessions before prices finally stabilized.

Before Volker, the meddlers of Congress mandated that Federal Reserve CBs set targeted growth rates for circulating bank credit (wrongly said as "the money supply") and report on their success or failure. To try to meet the foolish mandate, using an unscientific approach, Fed Res CBs kept the federal funds rate within a narrow range.

And contrary to popular belief, incoming President Reagan and his treasury secretary Donald Regan did not like Volker's policy. Regan said, “What I am suggesting is that if (bank credit growth) stays here, you’re going to have a severe recession.”

By the summer of 1982, the recession hit bottom even though the active job seekers rate as a percent of workers and job seekers, the so-called unemployment rate, hit a peak of 10.8% in late 1982.  By 1983, the CPI had fallen to 3.7%. It had taken Volker three years to fix the economy on a sustained path of growth.

Raising rates to heights rapidly kills off bad business while protecting the capital structures of enterprisers who have built firms upon firm ground. Near-ZIRP destroys returns to capital bought on credit borrowed at higher rates for existing firms.

Interest rates ought to be set in futures markets by many players. In the abstract, futures markets are risk-reducing mechanisms, which curtail glut and prevent shortages.

Interest rates set by futures markets would see rates fall when the economy can handle the creative destruction forces of new entrants with superior technology pushing out the inefficient while at the same time producing sufficient returns to capital

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TWITTER AND GOLD. MY 2014 FORECASTS BECOME REALITY. BECAUSE ... I AM RIGHT

Most often, I am not one to brag, but because there are too many hustlers, scam artists and shills out there distorting reality, staging their Bizarro Theater plays, cajoling the innocent with their blather about gold and Twitter, I have decided to share this with you.

Here, here is a nutshell is what I wrote about in my forecasts:

1. There are no drivers for gold, none.
2. Twitter has horrible business design — expenses outpace revenues by a wide margin.

In current dollars, Twitter is down -59.8% from the December 26, 2013, peak of $73.31. The annualized loss on Twitter is -43.3%.

Many might not believe so, but likely, Twitter is a fad that has passed. Those 15-24 have taken up Line, KIK, Viber, Whatsapp, Snapchat and Instagram.

Read the forecasts from 2014:

Gold

• LOSING ITS LUSTER. THE SECRET FUTURE OF GOLD REVEALED., Friday, May 23, 2014
• IS THERE EVER REASON TO BUY GOLD?, Wednesday, July 9, 2014
• "BUY GOLD" ADVICE IS AARON BULL*S$T IDOL WORSHIP, Tuesday, December 9, 2014
• FOLLOW THE YELLOW BRICK ROAD INTO THE LAND OF FOOL'S GOLD, Thursday, December 11, 2014
• MORE FOOL'S GOLD FOOLERY. GOLD VS COMMODITIES, Thursday, December 11, 2014
• AFTER THE GOLD RUSH. YELLOW BRICK ROAD FINAL DESTINATION. FOOL'S GOLD VS THE S&P 500, Thursday, December 11, 2014
• S&P 500 VS GOLD, Wednesday, May 7, 2014
• SILVER AND GOLD, Saturday, May 24, 2014

Twitter

• TWITTER TO DIE WITHIN THREE YEARS, FIVE TOPS. #OUCH, Tuesday, April 29, 2014
• TWITTER VS DIRECTV; OR TWITTER REVEALS DOT COM 2.0 MADNESS IN THE 21ST CENTURY, Wednesday, April 30, 2014

Because I know the true price of things, that is, the price of things in True Dollars™, I can see pricing relationship among things that many others cannot. In short, they are truly clueless and if you believe them, you are letting them lead you into the deepest caves without any flashlights or torches.

Soon, you can gain access to all my real-time charts priced in True Dollars™.

So what is the bottom line? Americans are living in the Greatest Depression. Credit continues to fall. Law givers in the USA demonetized gold last century. For all practical purposes, money — coined metal by weight and fineness — has not been used for more than a century.

Unless anyone believes in worldwide collapse, gold will be what it is, a rarer metal with industrial and commercial purposes only.

Some of the most popular blogger and YouTube personalities tied to the speculating business with the word Pacific in their business names shill for gold. Their incomes are tied to brokering gold, mostly selling it. And only one of those personalities actually has a background in finance.

So once again ...

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2015 Q2 GDP REPORT FROM THE BEA, ANOTHER REPORT AND ANOTHER BIG LIE.

Once again, workers at the Bureau of Economic Analysis, an agency of Congress, have lied to Americans. According to these minions of Congress,

Real gross domestic product -- the value of the production of goods and services in the United States, adjusted for price changes -- increased at an annual rate of 2.3 percent in the second quarter of 2015, according to the "advance" estimate released by the Bureau of Economic Analysis.  In the first quarter, real GDP increased 0.6 percent (revised).

The BEA jokers say "Real" GDP is up 2.3%. But they use a previous inflated GDP to deflate the current GDP. How can something currently inflated be deflated by something also inflated?

How does that work? It doesn't. It can't, ever.

Meanwhile, true GDP as measured in True Dollars™, which is the only legitimate way to account for inflation, has declined yet again. Year over year, true GDP is down -4.4%. Quarter over quarter, true GDP is down -1.8%.

The Greatest Depression continues, first brought to you by the Greenspan-Bernanke Great Inflation, the greatest credit bubble in the history of mankind, followed by the Bernanke-Yellen Quantitative Easing, the greatest capital killer in the history of mankind.







Since Q1 1959, this is the state of economy with respect to quarters up or down and streaks of true growth or true decline.

The USA economy has never been this bad for this long since 1959. Why should anyone expect anything else? Americans experienced the greatest inflation — rise in bank credit — in the history of mankind between 1994 and 1997. Americans have been experiencing reckoning ever since.

GDP is now down -6.3% below the Bill Clinton Q1 1994 low. OBAMA AND HIS CONGRESSES HAVE STEERED AMERICA INTO A 1975 FORD ERA ECONOMY.

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IT'S TIME TO END THE EU AND EURO MADNESS

The Greek Legislators Overspending Crisis has shown the world something that few politicians from the various countries of Europe want to acknowledge. It's time to end  the Euro zone and as importantly, end the EU. Everyone knows this but politicians and the simple-minded who depend on politicians to eat.

This is what should happen:

1. The Germans should exit the Euro and the EU and then create the new Mark zone and the new Hanseatic League.
2. The British should exit the EU. 
3. The Irish should exit the Euro and the EU and then the British and Irish should create the new Pound zone and the new Commonwealth.
4. The French and Italians should form the new Euro, call it the lira/livre and create the new Roman Europe.
5. Belgium should break up into Walloonia and Flanders.
6. South Tyrol should revert to Austria.

The Deutsche should create the new Mark zone. The Deutsch should invite these countries into the new Mark zone: Austria, Nederlands, Czech Republic, Finland, Estonia, and Belgian Flanders along with maybe Slovakia and Slovenia.

As a true free trade zone rather than a reciprocity zone, the new Hanseatic League should invite these countries to participate: Denmark, Sweden, Norway, Poland and Switzerland. As well, the new Hanseatic League could invite Latvia, Lithuania, and Hungary.

The new Hanesatic League ought to work out trade deals with the new Pound Commonwealth as well as with the Russian-Belarus Trading bloc.

The French and Italians should form the new lira/livre and new United Roman Europe. Likely, the countries joining the French and Italians in new lira/livre zone and New Roman Europe could be: Spain, Portugal, Greece, Malta and the whole of Belgium, if Belgium fails to split into the new Wallonia and the new Flanders.

The British ought to do what is in their best interest, revive their commonwealth and in so doing, entering in reciprocity trade agreements (wrongly and deceptively called "free trade") with the Americans, Canadians, Kiwi, Australians, and Hindians.

The foregoing would truly fix Europe for Europeans and better the world.

The idea of the EU itself arose from unscientific, superstitious thinking from the late 1940s to 1970s (see: the Schuman Declaration). The EU is as antiquated as the United Nations is.

By the time the EU coalesced, globalization was underway. The EU was obsolete before the ink dried on the signed documents.

Should the Germans leave the Euro and the EU, that giant sucking sound that you will hear is the vortex the Germans will create, which will pull along a slew of countries with politicians smarter than the French and Italians.

Following the Germans likely will be the Dutch, the Austrians, the Finns and the Estonians. Likely, the Czechs, the Slovaks, the Slovenes along with the Danes, the Swedes, the Poles and the Swiss will want to be a part of anything the Germans will devise.

Should the Germans up and go, so too will the Brits. Likely, the Brits would cozy up to a German run trade bloc before the Brits will hook up with the French and Italians.

The French and the Italians will collapse into each other's arms. Expect the Spaniards, the Portuguese, the Greeks, the Maltese, and maybe the Belgians to join them.


Likely, the Irish will be too stupid and join the French and Italian bloc even though the Irish mostly sell and buy from the Brits.

Brits need to awaken and leave the EU behind anyway, regardless of how the Germans and French settle this. Brits are missing out on a FTA with the Americans, the Canadians, the Aussies and the Kiwis. The future is in the Pacific and not found on a backwater peninsula at the far west end of Asia.

Gauls, other Latin Europeans and the Greeks think differently from Germanic Europeans. The former are fooling themselves if they can ever be the latter.

The difference between the Gallo-Latins along with the Greeks to the Germanics is alike to the difference between helpless school children and axe-wielding warrior men, between the effeminate and the manly, between those who teach because they can't do and those who can do, between socialists and individualists.

All should hope Europe blows up because of the Greek legislators' overspending. crisis.

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A GOLD HUCKSTER GETS SMELTED. ALL THAT GLITTERS DOESN'T YIELD PROFITS IN THESE TIMES.

On Friday, July 24, 2015, a popular blogger cut and pasted a story from Bloomberg about hedge funds betting on a decline in gold prices, a first for hedgers.

In the Disqus comments, a comment by a guy named Doug Eberhardt caught my eye. That Doug Eberhardt seems to be the same Doug Eberhardt who writes gold and silver blog and who has written a book.

So in the comments, Doug claimed this:

Gold maintains its purchasing power over time. Silver too. Speaking of real rate of return, how about 51 years ago and how a quarter could buy you a gallon of gas and today that same quarter exchanged for the "scrip of the day" can still buy you a gallon of gas in most states except the left coast (up until a few weeks ago) at $2.65. Meanwhile a 1965 quarter can buy you 25 cents worth of gas today. 

Not one to believe anyone's boldface claims and already knowing that against many things, gold has lost buying power, I decided to look up Doug's claim about gasoline. The facts easily refute Doug's claim.

According to the DOE, the average price of a gallon of gasoline in the USA in both 1964 and 1965 was 30¢. At face value, a 1932-64 Washington quarter has been quoted to sell at $2.6566 (the quoted price on July 25 , 2015).

So in either 1964 or 1965, at face value, it would take 1.2 quarters to buy a gallon of gasoline.

Today, in all other states, except Washington, Nevada, Hawaii, Alaska and California, you could buy more gasoline with that same coin first sold to coin collectors than you could with that coin at face value in 1965. However, in Washington, Nevada, Hawaii, Alaska and California, every 1932-1964 quarter lost buying power with respect to a gallon of gasoline purchase. 

It never dawned on Doug that rather than any 1932-64 quarter keeping its buying power, oil production and refining become more efficient since 1965 thus letting sellers accept lower winning bids.

All should note there are storage, discovery and transaction costs associated with holding coins, finding buyers and transferring property as well as possession of the coins for today's legal tender. So the net gain anyone gets for selling gold or silver spot will be less than the spot price times quantity. It is this net gain that counts.

Also, if everyone rushed to sell his collection of 1932-64 quarters, the price for those quarters would fall. That said, nothing would preclude anyone from melting his coins, illegally of course, extracting the silver and selling that silver spot. As well, there are costs associated with smelting that would reduce the net gain upon sell.

After I presented Doug the facts, Doug accused me of being a nitpicker. Ironically, by his doing so, Doug revealed himself as one doing nitpicking. What Doug believes is nitpicking is what I call  prudent businessman reckoning.

After which, Doug engaged in a bit of ad hominem by writing, "Smack, if you knew anything about this industry, people don't rush out to sell their 90% silver quarters and dimes, they hoard them."

Of course, I never made any claims about what anyone actually does. However,  if people hoard their silver quarters and dimes, as Doug claims they do, what is the point of holding silver coins at all? Doing so is like hoarding a 1980s VHS porn collection or a collection of 1960s TOPPS baseball cards.

Doug then asked as if he believed he had something, "Did they [hoarders] rush out and sell them when silver as $49.50 an ounce in 2011? No."

Of course, stupidly, anyone who hoarded, lost out. Being paper rich is useless.

Like Bitcoin collectors, Doug seems to miss why anyone buys collectibles. If anyone sold his silver-laden coins at the top in 2011, he would have bought cash or other bank credit denominated in dollars. At day's end, collectibles are worthless until sold and what people want when they sell their collectibles is cash or other bank credit denominated in dollars.

Of course, Doug's beloved hoarders could spend their silver-laden coins for everyday products right now. However, they could only get 25¢ of buying power for each quarter, regardless of silver content.

Doug's livelihood seems to be tied into price appreciation for gold and silver. In the comments, Doug made this boldface claim: Gold maintains its purchasing power over time. Silver too.

Yet, I have shown many cases where Doug's claim is quite false. You can see proof in charts that Doug's claim is false: 

• FOLLOW THE YELLOW BRICK ROAD INTO THE LAND OF FOOL'S GOLD
• MORE FOOL'S GOLD FOOLERY. GOLD VS COMMODITIES
• AFTER THE GOLD RUSH. YELLOW BRICK ROAD FINAL DESTINATION. FOOL'S GOLD VS THE S&P 500

So, after being showed facts vs his mere claims, seemingly agitated, Doug began a campaign of bragging and more ad hominem  — "Smack, I'll put my reputation on the line of understanding this market better than you or anyone else...... Congress ... asked me to testify before them in 2010." Further, Doug accused me of committed the fallacy of the strawman argument.

Comparing gold and the S&P 500 isn't a strawman. Doug doesn't seem to understand what the strawman fallacy is.

Doug's position is this: "[G]old and silver hold their purchasing power over time."

My refutation of his position is direct: Against many things, gold has lost buying power. For my argument to have been a strawman, I would needed to have argued something like this:

You say, gold and silver hold their purchasing power over time. But I say, so what! FDR banned gold ownership with Executive Order 6102. You could buy gold today and have the government take it tomorrow.

Doug made this boldface claim: "Gold maintains its purchasing power over time. Silver too."  For his claim to be true, there could be no instances where gold and silver lose purchasing power against other commodities, other products and other vehicles of speculation.

The S&P 500 is one such vehicle of speculation. Gold has done poorly against the S&P 500.

As anyone can buy a share of the S&P 500, for your claim to be true, someone with gold would have needed at least to buy the same number of shares of the S&P 500 today as he could have done so many years ago.

From Q3 1976 to Q3 2011, True Gold grew at less than 1% a year, coming in at a scant 0.5% a year for a total of 19.6%, from $87.11 to $104.18. In the same period, True S&P 500 grew almost 4 times as fast, albeit at 1.8% a year for a total of 95%, from $78.12 to $152.33.

All can enjoy the facts right here on Bizarro Theater: IS THERE EVER REASON TO BUY GOLD?

As anyone can buy a share of the S&P 500, for Doug's claim to be true, someone with gold would have needed at least to buy the same number of shares of the S&P 500 today as he could have done so many years ago.

The exact opposite has happened. It has taken ever fewer shares of the S&P 500 to buy the same weight of gold. Said another way, it has taken ever more gold to buy one share of the S&P 500. In short, gold has lost buying power to the S&P 500 as it has to many things.

Against many uniform contract commodities, gold has lost buying power. Such comparisons are valid. Since demonetization, against many things, gold has lost its buying power.

If Doug believes his claim, he doesn't understand the reality of commerce. If Doug doesn't believe his claim but says it to get others to buy from him, Doug uses questionable business practices. 

Gold and silver have been demonetized. The price of gold, the price for silver as well as anything else conforms to the one, true, infrangible law that governs all of commerce, the Law of Prices.

The Law of Prices holds the winning bids of purchase and sale in the face of what is on offer sets the price. Unlike man-made law, this law is inescapable.

Back in 2014, I showed readers of Bizarro Theater the future of gold. If you have not done so, you should read this: LOSING ITS LUSTER. THE SECRET FUTURE OF GOLD REVEALED.

Under the current state of the economy, bank credit and interest rates, the time to buy gold long has long gone. There are no drivers to buy gold. None.

Doug's livelihood seems to be tied into price appreciation for gold and silver. Doug said, "All my company sells are bullion coins as opposed to all other gold dealers," which seems that Doug is in the business of selling rounds. Selling gold rounds is a business predicated on finding buyers who believe people like Doug and who hope for a rise in the price of gold.

The worst bit are all the gold and silver hucksters preying upon gullible who suffer from end times delusions and thus feel compelled to become preppers for a future. It never dawns on them that if there would be worldwide financial collapse and reversion to money — coined metal by weight and fineness — even a small weight of gold and silver would make anyone rich.

Under total collapse, there won't be credit. Without credit, there won't be massive edifices of capital. Without capital there won't be products or wages.

It will take little gold to buy much of the few things that can be had.

UPDATE:

Today, 7/28/2015. a day after I wrote the above work, Doug couldn't resist himself. At the end of debate, one day ago, Doug wrote:

"I'll give you the last word and ignore you as you have your own agenda."

Doug lashed out recklessly, engaging in ad hominem. Some of Doug's gems were these:

• "You wouldn't make a good attorney."
• "I have now classified you as a troll who sits in their underwear at his computer and has nothing better to do with their time."
• "Next you used a strawman to make a point in bringing up the S&P 500 and not sticking with the 'issue.'"
• "#troll"

It seems Doug has stewed on everything I've written and having become enraged, Doug had to lash out it what seems to be little more than a childish tantrum. 

And yet, Doug Eberhardt wants adults to enter into purchases and sales with him by selling them gold or silver and buying from them their cash or bank credits. Doug's behavior should give anyone pause before considering entering into contract with him to buy gold or silver from him.

Doug still does not seem understand the fallacy of the strawman argument. Idiotically, Doug claimed "gold and silver hold their purchasing power over time". Whether or not Doug believes that to be true or Doug says such a phrase to wheedle others into buying gold and silver from Doug lacks relevancy.

It is not a strawman argument to compare things directly to which anyone would have lost their purchasing power had they bought gold and silver. It's a direct counterclaim. Producing a factual direct counterclaim so refutes your false claim, easily. 

One of those things is the S&P 500. Anyone can buy a share the S&P 500. The S&P 500 is one of those factual direct counterclaims.

I gave Doug a perfect example of what would be a strawman argument:

Doug's premise: You say, gold and silver hold their purchasing power over time.

Strawman: But I say, so what! FDR banned gold ownership with Executive Order 6102.

Knocked down strawman: You could buy gold today and have the government take it tomorrow. 

Ironically, Doug Eberhardt of buygoldandsilversafely.com's (that is the site Doug who commented put into the Disqus comments) argument against me is an example of the strawman fallacy. To wit:

After Doug Eberhardt said all should buy gold and silver because "gold and silver hold their purchasing power over time," Smack MacDougal showed factual instances where gold and silver lost purchasing power against other things.

Doug Eberhardt responded by implying that he was surprised that Smack hates anyone speculating on gold and silver so much that he wants them to become bankrupt by losing out on going long gold and silver. 

Doug Eberhardt of buygoldandsilversafely.com ought to prove to the world that he can time the market for gold and silver, exactly. His publicly-accessible writing on his blog alludes to Doug having such skill. However, Doug's publicly-accessible writing on his blog seems to be a whole bunch of gibberish masquerading as experience.

In True Dollars™, which is what counts, gold and silver will be going down for years, not months, but for years to come. There are no drivers for gold, none.

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