RED ALERT: US 2017 Q4 Net Private Saving Crashes to Disastrous Levels; Huge Recession Suddenly In The Cards!

As I’ve written before, the private sector’s net private saving is a reliable indicator to predict severe recessions, and even depressions.

More specifically, there hasn’t been a period of negative net private saving that hasn’t resulted in a depression or at least a very severe recession, such as the so called Great Recession of 2008.

Recent Q4 data paints a shockingly bleak picture:

The government’s deficit (red line) has gone from a Q3 level to around -$900 billion to a surplus of around $15 billion in Q4. As you can see, the private sector’s net saving (blue line) has correspondingly crashed from a positive $538 billion to -$499 billion (!!), with the foreign sector’s saving (green line) also expanding a little bit.

The way to reverse this trend would be massive government budget deficits or a monumental reversal in the US current account deficit. If this doesn’t happen in the current and future quarters, a huge recession is now all of a sudden in the cards, even though private sector leverage has remained low, when compared to 2008 levels, for now.

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Why the US Dollar WON’T Collapse | Rebuttal to Mike Maloney and Stefan Molyneux

A rebuttal to “Why the US Dollar Will Collapse” with Mike Maloney interviewed by Stefan Molyneux on Freedomain Radio. Mike and Stef cover various economic issues from a classical/Austrian viewpoint of economics which all draw the same conclusion: the US dollar is going to collapse SOON.

Watch their video here.

Dylan Moore of the Volitional Science Network and Nima Mahjour of economicsjunkie.com provide evidence to rebut many of the points brought up in the video:

1. Why the Federal Reserve is NOT a private bank
2. Why the Fed DOES NOT “print money”
3. Why interest rates are not a useful metric for predicting economic stability
4. Why the Fed can only “push” interest rates UP, not down
5. The myth of fractional reserve banking
6. The myth of the barter theory of money
7. Why the Fed is not causing inflation
8. Why the evidence points to US dollar NOT CRASHING

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The First US Money Was Fiat, Not Gold; The “Gold Standard” Is A Fiat Money System With A State Fixed Gold Price

We know from anthropological records that the first money in world history was credit money, in particular state credit money, aka fiat money, which is money introduced by a violent authority that imposes a tax in its currency and then proceeds to spend the currency into existence to move resources and labor into the public sector, as I’ve explained before, and as you can read in books like London School of Economics anthropology professor David Graeber’s Debt – The First 5000 Years.

Even the barter economy that supposedly preceded the advent of gold as money has never existed outside the minds of many “gold standard” theorists. This compounding effect of piling unproven falsehoods upon more unproven falsehoods has had absolutely disastrous consequences in the realm of economic thinking.

Recently I’ve encountered some arguments from people suggesting that while I may be correct as far as world history goes, surely at least in the United States money was initially gold & silver coins, before the advent of fiat money issued on top.

This is also a made up claim.

Here are some relevant, documented, referenced excerpts in the Wikipedia post on Early American currency:

One by one, colonies began to issue their own paper money to serve as a convenient medium of exchange. In 1690, the Province of Massachusetts Bay created “the first authorized paper money issued by any government in the Western World.”[3] This paper money was issued to pay for a military expedition during King William’s War. Other colonies followed the example of Massachusetts Bay by issuing their own paper currency in subsequent military conflicts.[3]

The paper bills issued by the colonies were known as “bills of credit.” Bills of credit were usually fiat money: they could not be exchanged for a fixed amount of gold or silver coins upon demand.[2][4] Bills of credit were usually issued by colonial governments to pay debts. The governments would then retire the currency by accepting the bills for payment of taxes. When colonial governments issued too many bills of credit or failed to tax them out of circulation, inflation resulted.

After the American Revolutionary War began in 1775, the Continental Congress began issuing paper money known as Continental currency, or Continentals. Continental currency was denominated in dollars from $​1⁄6 to $80, including many odd denominations in between. During the Revolution, Congress issued $241,552,780 in Continental currency.[46]

Continental currency depreciated badly during the war, giving rise to the famous phrase “not worth a continental”.[47] A primary problem was that monetary policy was not coordinated between Congress and the states, which continued to issue bills of credit.[48] “Some think that the rebel bills depreciated because people lost confidence in them or because they were not backed by tangible assets,” writes financial historian Robert E. Wright. “Not so. There were simply too many of them.”[49] Congress and the states lacked the will or the means to retire the bills from circulation through taxation or the sale of bonds.[50]

Another problem was that the British successfully waged economic warfare by counterfeiting Continentals on a large scale. Benjamin Franklin later wrote:

States have fixed prices of certain things throughout history, always to please certain special interest groups. The so called gold standard is nothing but a fiat money system with a gold price fixed by the state, a policy supported by special interest groups for various reasons, and suspended whenever expedient to the plans of other powerful groups.

The people who claim the “natural” gold money came first, and then was replaced by fiat money issued on top of it, have it precisely backwards. Fiat money came first, and was at times off and on accompanied by a government policy of fixing the gold price at a certain level.

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Why Is The Stock Market Crashing?

Such an annoying question to ask, isn’t it? The correct answer is because people desire to hold stocks less and prefer to hold cash more than they did prior to the crash. The reasons for this are ultimately unknown but we can speculate.

The value of a stock to an investor is the present value of all future expected cash flows, discounted by the risk free rate. If you wanted to be 100% accurate you’d need to use the expected rate from now through the day of each individual cash flow, respectively, but I like to use the 20 year t-bond rate for simplicity’s sake.

Based on this there are two major reasons for stocks to crash: a drop in future expected earnings and/or a previously unexpected increase in the risk free rate.

Market action from Feb 1-8 has basically been marked by the following factors:

  • crashing stocks
  • slightly falling gold prices
  • falling/stable short term Treasury rates, rising long term Treasury rates, with a shift occurring around the 3-5 year duration (see graphic below)

Falling/stable gold prices indicate that investor expectations of future inflation haven’t fundamentally changed in recent days.

There’s no evidence that I’m aware of that indicates that corporate profit expectations are collapsing, in fact, the recent earnings season was upbeat, with positive news & expectations all over the place. But it’s also important to point that after the recent tax reform which is expected to expand deficits (a net positive on corporate profits, as I’ve explained before) one big factor towards rising corporate profits is now 100% priced in, whereas before it wasn’t.

Furthermore, there’s currently no evidence that the Fed is planning on accelerating the expected schedule of 3 rate hikes this year. In fact, at this very moment CME Fedwatch probabilities even slightly lean towards only 2 vs the widely expected 3 rate hikes!

In my opinion, this kind of action more than anything hints at a sudden change in investor expectations in the schedule of Federal Reserve interest rate increases over the coming years.

The one significant factor that I’ve been able to pinpoint is the seemingly subtle change in language in the most recent FOMC statement from January 1 2017. Minor shifts early on in the future schedule of expected rate hikes can have a huge impact on long term rates, since long term rates are basically just a bet on the average rate of short term rates inbetween.

If you do a text compare with previous FOMC statements, the following changes in verbiage stand out:

  • While most previous Fed statements said that “Market-based measures of inflation compensation remain low”, the most recent one states that “Market-based measures of inflation compensation have increased in recent months but remain low”.
  • Furthermore, most previous statements said that “Inflation on a 12‑month basis is expected to remain somewhat below 2 percent in the near term”, while the most recent one states that “Inflation on a 12‑month basis is expected to move up this year and to stabilize around the Committee’s 2 percent objective over the medium term”.
  • And finally, another subtle difference is that statements recently always said “The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate”, while the most recent one stated that “The Committee expects that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate”.

These changes could indicate that the Fed is beginning to prepare markets for an acceleration in the pace of raising interest rates, not immediately this year, but in the coming years.

This could explain why there hasn’t been a big shift in the rates on 3-5 year bonds, but after that the rates have increased substantially, with the 20 and 30 year Treasury rate (the one I like to use to discount future expected profits) rising by 13 basis points over just a few days. Such an adjustment in the medium to long term schedule of expected rate hikes, without corresponding changes in future profit expectations, can absolutely lead to significant adjustments in current stock market valuations, after which things should continue at the usual pace. For simplicity’a sake you could run a simplified model of present value at constant growth using different discount rates to get an idea of the possible magnitude of such adjustments.

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Declassified FISA Abuse Memo Confirms DNC, Obama Administration & Criminal FBI Elements Engaged in Grafting, Perjury, Obstruction of Justice, Fraud, Lying to the Government, Illegal Spying & Treason

We now have final confirmation for what we knew all along:

– Trump’s campaign was spied on illegally by criminals in the FBI under Obama.

– Mueller’s criminal witch hunt was initiated based on COMPLETELY fraudulent information.

– This is Watergate x 1000

Here’s somem gems from the document:

“Neither the initial application in October 2016, nor any of the renewals, disclose or reference the role of the DNC, Clinton campaign, or any party/campaign in funding Steele’s efforts, even though the political origins of the Steele dossier were then known to senior and FBI officials.”

“The Carter Page FISA application also cited extensively a September 23, 2016, Yahoo News article by Michael Isikoff, which focuses on Page’s July 2016 trip to Moscow. This article does not corroborate the Steele dossier because it is derived from information leaked by Steele himself to Yahoo News. The Page FISA application incorrectly assesses that Steele did not directly provide information to Yahoo News. Steele has admitted in British court flings that he met with Yahoo News and several other outlets in
September 2016 at the direction of Fusion GPS. Perkins Coie was aware of Steele’s initial media contacts because they hosted at least one meeting in Washington DC in 2016 with Steele and Fusion GPS where this matter was discussed.”

“in September 2016, Steele admitted to Ohr his feelings against then-
candidate Trump when Steele said he was desperate that Donald Trump not get elected and was passionate about him not, being president. This clear evidence of Steele bias was recorded by Ohr at the time and subsequently in offcial FBI files but not reflected in any of the Page FISA applications.”

“The Ohrs’ relationship with Steele and Fusion GPS was inexplicably
concealed from the FISC.”

“Deputy Director McCabe testifed before the Committee in December 2017 that no surveillance warrant would have been sought from the FISC without the Steele dossier information.”

Read the document here:

FISA Abuse Memo

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