- Economists DESTROY the Myth that War Is Good for the Economy
Debunking the Stubborn Myth that War Is Good for the Economy
About.com notes:
One of the more enduring myths in Western society is that wars are somehow good for the economy.
It is vital for policy-makers, economists and the public to have access to a definitive analysis to determine once and for all whether war is good or bad for the economy.
That analysis is below.
Top Economists Say War Is Bad for the Economy
Nobel prize winning economist Paul Krugman notes:
If you’re a modern, wealthy nation, however, war — even easy, victorious war — doesn’t pay. And this has been true for a long time. In his famous 1910 book “The Great Illusion,” the British journalist Norman Angell argued that “military power is socially and economically futile.” As he pointed out, in an interdependent world (which already existed in the age of steamships, railroads, and the telegraph), war would necessarily inflict severe economic harm even on the victor. Furthermore, it’s very hard to extract golden eggs from sophisticated economies without killing the goose in the process.
We might add that modern war is very, very expensive. For example, by any estimate the eventual costs (including things like veterans’ care) of the Iraq war will end up being well over $1 trillion, that is, many times Iraq’s entire G.D.P.
So the thesis of “The Great Illusion” was right: Modern nations can’t enrich themselves by waging war.
Nobel-prize winning economist Joseph Stiglitz agrees that war is bad for the economy:
Stiglitz wrote in 2003:
War is widely thought to be linked to economic good times. The second world war is often said to have brought the world out of depression, and war has since enhanced its reputation as a spur to economic growth. Some even suggest that capitalism needs wars, that without them, recession would always lurk on the horizon. Today, we know that this is nonsense. The 1990s boom showed that peace is economically far better than war. The Gulf war of 1991 demonstrated that wars can actually be bad for an economy.
Stiglitz has also said that this decade’s Iraq war has been very bad for the economy. Seethis, this and this.
Former Federal Reserve chairman Alan Greenspan also said in that war is bad for the economy. In 1991, Greenspan said that a prolonged conflict in the Middle East would hurt the economy. And he made this point again in 1999:
Societies need to buy as much military insurance as they need, but to spend more than that is to squander money that could go toward improving the productivity of the economy as a whole: with more efficient transportation systems, a better educated citizenry, and so on. This is the point that retiring Rep. Barney Frank (D-Mass.) learned back in 1999 in a House Banking Committee hearing with then-Federal Reserve Chairman Alan Greenspan. Frank asked what factors were producing our then-strong economic performance. On Greenspan’s list: “The freeing up of resources previously employed to produce military products that was brought about by the end of the Cold War.” Are you saying, Frank asked, “that dollar for dollar, military products are there as insurance … and to the extent you could put those dollars into other areas, maybe education and job trainings, maybe into transportation … that is going to have a good economic effect?” Greenspan agreed.
Economist Dean Baker notes:
It is often believed that wars and military spending increases are good for the economy. In fact, most economic models show that military spending diverts resources from productive uses, such as consumption and investment, and ultimately slows economic growth and reduces employment.
Professor Emeritus of International Relations at the American University Joshua Goldstein notes:
Recurring war has drained wealth, disrupted markets, and depressed economic growth.
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War generally impedes economic development and undermines prosperity.
And David R. Henderson – associate professor of economics at the Naval Postgraduate School in Monterey, California and previously a senior economist with President Reagan’s Council of Economic Advisers – writes:
Is military conflict really good for the economy of the country that engages in it? Basic economics answers a resounding “no.”
The Proof Is In the Pudding
Mike Lofgren notes:
Military spending may at one time have been a genuine job creator when weapons were compatible with converted civilian production lines, but the days of Rosie the Riveter are long gone. [Indeed, WWII was different from current wars in many ways, and so its economic effects are not comparable to those of today’s wars.] Most weapons projects now require relatively little touch labor. Instead, a disproportionate share is siphoned into high-cost R&D (from which the civilian economy benefits little), exorbitant management expenditures, high overhead, and out-and-out padding, including money that flows back into political campaigns. A dollar appropriated for highway construction, health care, or education will likely create more jobs than a dollar for Pentagon weapons procurement.
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During the decade of the 2000s, DOD budgets, including funds spent on the war, doubled in our nation’s longest sustained post-World War II defense increase. Yet during the same decade, jobs were created at the slowest rate since the Hoover administration. If defense helped the economy, it is not evident. And just the wars in Iraq and Afghanistan added over $1.4 trillion to deficits, according to the Congressional Research Service. Whether the wars were “worth it” or merely stirred up a hornet’s nest abroad is a policy discussion for another time; what is clear is that whether you are a Keynesian or a deficit hawk, war and associated military spending are no economic panacea.
The Washington Post noted in 2008:
A recent paper from the National Bureau of Economic Research concludes that countries with high military expenditures during World War II showed strong economic growth following the war, but says this growth can be credited more to population growththan war spending. The paper finds that war spending had only minimal effects on per-capita economic activity.
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A historical survey of the U.S. economy from the U.S. State Department reports the Vietnam War had a mixed economic impact. The first Gulf War typically meets criticism for having pushed the United States toward a 1991 recession.
The Institute for Economics & Peace (IEP) shows that any boost from war is temporary at best. For example, while WWII provided a temporary bump in GDP, GDP then fell back to the baseline trend. After the Korean War, GDP fell below the baseline trend:
IEP notes:By examining the state of the economy at each of the major conflict periods since World War II, it can be seen that the positive effects of increased military spending were outweighed by longer term unintended negative macroeconomic consequences. While the stimulatory effect of military outlays is evidently associated with boosts in economic growth, adverse effects show up either immediately or soon after, through higher inflation, budget deficits, high taxes and reductions in consumption or investment. Rectifying these effects has required subsequent painful adjustments which are neither efficient nor desirable. When an economy has excess capacity and unemployment, it is possible that increasing military spending can provide an important stimulus. However, if there are budget constraints, as there are in the U.S. currently, then excessive military spending can displace more productive non-military outlays in other areas such as investments in high-tech industries, education, or infrastructure. The crowding-out effects of disproportionate government spending on military functions can affect service delivery or infrastructure development, ultimately affecting long-term growth rates.
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Analysis of the macroeconomic components of GDP during World War II and in subsequent conflicts show heightened military spending had several adverse macroeconomic effects. These occurred as a direct consequence of the funding requirements of increased military spending. The U.S. has paid for its wars either through debt (World War II, Cold War, Afghanistan/Iraq), taxation (Korean War) or inflation (Vietnam). In each case, taxpayers have been burdened, and private sector consumption and investment have been constrained as a result. Other negative effects include larger budget deficits, higher taxes, and growth above trend leading to inflation pressure. These effects can run concurrent with major conflict or via lagging effects into the future. Regardless of the way a war is financed, the overall macroeconomic effect on the economy tends to be negative. For each of the periods after World War II, we need to ask, what would have happened in economic terms if these wars did not happen? On the specific evidence provided, it can be reasonably said, it is likely taxes would have been lower, inflation would have been lower, there would have been higher consumption and investment and certainly lower budget deficits. Some wars are necessary to fight and the negative effects of not fighting these wars can far outweigh the costs of fighting. However if there are other options, then it is prudent to exhaust them first as once wars do start, the outcome, duration and economic consequences are difficult to predict.
We noted in 2011:
This is a no-brainer, if you think about it. We’ve been in Afghanistan for almost twice as long as World War II. We’ve been in Iraq for years longer than WWII. We’ve been involved in 7 or 8 wars in the last decade. And yet [the economy is still unstable]. If wars really helped the economy, don’t you think things would have improved by now? Indeed,the Iraq war alone could end up costing more than World War II. And given the other wars we’ve been involved in this decade, I believe that the total price tag for the so-called “War on Terror” will definitely support that of the “Greatest War”.
Let’s look at the adverse effects of war in more detail …
War Spending Diverts Stimulus Away from the Real Civilian Economy
IEP notes that – even though the government spending soared – consumption and investment were flatduring the Vietnam war:
The New Republic noted in 2009:
Conservative Harvard economist Robert Barro has argued that increased military spending during WWII actually depressed other parts of the economy.
(New Republic also points out that conservative economist Robert Higgs and liberal economists Larry Summers and Brad Delong have all shown that any stimulation to the economy from World War II has been greatly exaggerated.)
How could war actually hurt the economy, when so many say that it stimulates the economy?
Because of what economists call the “broken window fallacy”.
Specifically, if a window in a store is broken, it means that the window-maker gets paid to make a new window, and he, in turn, has money to pay others. However, economists long ago showed that – if the window hadn’t been broken – the shop-owner would have spent that money on other things, such as food, clothing, health care, consumer electronics or recreation, which would have helped the economy as much or more.
If the shop-owner hadn’t had to replace his window, he might have taken his family out to dinner, which would have circulated more money to the restaurant, and from there to other sectors of the economy. Similarly, the money spent on the war effort is money that cannot be spent on other sectors of the economy. Indeed, all of the military spending has just created military jobs, at the expense of the civilian economy.
Professor Henderson writes:
Money not spent on the military could be spent elsewhere.This also applies to human resources. The more than 200,000 U.S. military personnel in Iraq and Afghanistan could be doing something valuable at home.
Why is this hard to understand? The first reason is a point 19th-century French economic journalist Frederic Bastiat made in his essay, “What Is Seen and What Is Not Seen.” Everyone can see that soldiers are employed. But we cannot see the jobs and the other creative pursuits they could be engaged in were they not in the military.
The second reason is that when economic times are tough and unemployment is high, it’s easy to assume that other jobs could not exist. But they can. This gets to an argument Bastiat made in discussing demobilization of French soldiers after Napoleon’s downfall. He pointed out that when government cuts the size of the military, it frees up not only manpower but also money. The money that would have gone to pay soldiers can instead be used to hire them as civilian workers. That can happen in three ways, either individually or in combination: (1) a tax cut; (2) a reduction in the deficit; or (3) an increase in other government spending.
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Most people still believe that World War II ended the Great Depression …. But look deeper.
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The government-spending component of GNP went for guns, trucks, airplanes, tanks, gasoline, ships, uniforms, parachutes, and labor. What do these things have in common? Almost all of them were destroyed. Not just these goods but also the military’s billions of labor hours were used up without creating value to consumers. Much of the capital and labor used to make the hundreds of thousands of trucks and jeeps and the tens of thousands of tanks and airplanes would otherwise have been producing cars and trucks for the domestic economy. The assembly lines in Detroit, which had churned out 3.6 million cars in 1941, were retooled to produce the vehicles of war. From late 1942 to 1945, production of civilian cars was essentially shut down.
And that’s just one example. Women went without nylon stockings so that factories could produce parachutes. Civilians faced tight rationing of gasoline so that U.S. bombers could fly over Germany. People went without meat so that U.S. soldiers could be fed. And so on.
These resources helped win the war—no small issue. But the war was not a stimulus program, either in its intentions or in its effects, and it was not necessary for pulling the U.S. out of the Great Depression. Had World War II never taken place, millions of cars would have been produced; people would have been able to travel much more widely; and there would have been no rationing. In short, by the standard measures, Americans would have been much more prosperous.
Today, the vast majority of us are richer than even the most affluent people back then. But despite this prosperity, one thing has not changed: war is bad for our economy. The $150 billion that the government spends annually on wars in Iraq and Afghanistan (and, increasingly, Pakistan) could instead be used to cut taxes or cut the deficit. By ending its ongoing wars … the U.S. government … would be developing a more prosperous economy.
Austrian economist Ludwig Von Mises points out:
That is the essence of so-called war prosperity; it enriches some by what it takes from others. It is not rising wealth but a shifting of wealth and income.
We noted in 2010:
You know about America’s unemployment problem. You may have even heard that the U.S. may very well have suffered a permanent destruction of jobs.
But did you know that the defense employment sector is booming?
[P]ublic sector spending – and mainly defense spending – has accounted for virtually all of the new job creation in the past 10 years:
The U.S. has largely been financing job creation for ten years. Specifically, as the chief economist for BusinessWeek, Michael Mandel, points out, public spending has accounted for virtually all new job creation in the past 1o years:
Private sector job growth was almost non-existent over the past ten years. Take a look at this horrifying chart:
Between May 1999 and May 2009, employment in the private sector only rose by 1.1%, by far the lowest 10-year increase in the post-depression period.
It’s impossible to overstate how bad this is. Basically speaking, the private sector job machine has almost completely stalled over the past ten years. Take a look at this chart:
Over the past 10 years, the private sector has generated roughly 1.1 million additional jobs, or about 100K per year. The public sector created about 2.4 million jobs.
But even that gives the private sector too much credit. Remember that the private sector includes health care, social assistance, and education, all areas which receive a lot of government support.
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Most of the industries which had positive job growth over the past ten years were in the HealthEdGov sector. In fact, financial job growth was nearly nonexistent once we take out the health insurers.
Let me finish with a final chart.
Without a decade of growing government support from rising health and education spending and soaring budget deficits, the labor market would have been flat on its back. [120]
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So most of the job creation has been by the public sector. But because the job creation has been financed with loans from China and private banks, trillions in unnecessary interest charges have been incurred by the U.S.
And this shows military versus non-military durable goods shipments:
[Click here to view full image.]So we’re running up our debt (which will eventually decrease economic growth), but the only jobs we’re creating are military and other public sector jobs.
Economist Dean Baker points out that America’s massive military spending on unnecessary and unpopular wars lowers economic growth and increases unemployment:
Defense spending means that the government is pulling away resources from the uses determined by the market and instead using them to buy weapons and supplies and to pay for soldiers and other military personnel. In standard economic models, defense spending is a direct drain on the economy, reducing efficiency, slowing growth and costing jobs.
A few years ago, the Center for Economic and Policy Research commissioned Global Insight, one of the leading economic modeling firms, to project the impact of a sustained increase in defense spending equal to 1.0 percentage point of GDP. This was roughly equal to the cost of the Iraq War.
Global Insight’s model projected that after 20 years the economy would be about 0.6 percentage points smaller as a result of the additional defense spending. Slower growth would imply a loss of almost 700,000 jobs compared to a situation in which defense spending had not been increased. Construction and manufacturing were especially big job losers in the projections, losing 210,000 and 90,000 jobs, respectively.
The scenario we asked Global Insight [recognized as the most consistentlyaccurate forecasting company in the world] to model turned out to have vastly underestimated the increase in defense spending associated with current policy. In the most recent quarter, defense spending was equal to 5.6 percent of GDP. By comparison, before the September 11th attacks, the Congressional Budget Office projected that defense spending in 2009 would be equal to just 2.4 percent of GDP. Our post-September 11th build-up was equal to 3.2 percentage points of GDP compared to the pre-attack baseline. This means that the Global Insight projections of job loss are far too low…
The projected job loss from this increase in defense spending would be close to 2 million. In other words, the standard economic models that project job loss from efforts to stem global warming also project that the increase in defense spending since 2000 will cost the economy close to 2 million jobs in the long run.
The Political Economy Research Institute at the University of Massachusetts, Amherst has also shown that non-military spending creates more jobs than military spending.
High Military Spending Drains Innovation, Investment and Manufacturing Strength from the Civilian Economy
Chalmers Johnson notes that high military spending diverts innovation and manufacturing capacity from the economy:
By the 1960s it was becoming apparent that turning over the nation’s largest manufacturing enterprises to the Department of Defense and producing goods without any investment or consumption value was starting to crowd out civilian economic activities. The historian Thomas E Woods Jr observes that, during the 1950s and 1960s, between one-third and two-thirds of all US research talent was siphoned off into the military sector. It is, of course, impossible to know what innovations never appeared as a result of this diversion of resources and brainpower into the service of the military, but it was during the 1960s that we first began to notice Japan was outpacing us in the design and quality of a range of consumer goods, including household electronics and automobiles.
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Woods writes: “According to the US Department of Defense, during the four decades from 1947 through 1987 it used (in 1982 dollars) $7.62 trillion in capital resources. In 1985, the Department of Commerce estimated the value of the nation’s plant and equipment, and infrastructure, at just over $7.29 trillion… The amount spent over that period could have doubled the American capital stock or modernized and replaced its existing stock”.
The fact that we did not modernise or replace our capital assets is one of the main reasons why, by the turn of the 21st century, our manufacturing base had all but evaporated. Machine tools, an industry on which Melman was an authority, are a particularly important symptom. In November 1968, a five-year inventory disclosed “that 64% of the metalworking machine tools used in US industry were 10 years old or older. The age of this industrial equipment (drills, lathes, etc.) marks the United States’ machine tool stock as the oldest among all major industrial nations, and it marks the continuation of a deterioration process that began with the end of the second world war. This deterioration at the base of the industrial system certifies to the continuous debilitating and depleting effect that the military use of capital and research and development talent has had on American industry.”
Economist Robert Higgs makes the same point about World War II:
Yes, officially measured GDP soared during the war. Examination of that increased output shows, however, that it consisted entirely of military goods and services. Real civilian consumption and private investment both fell after 1941, and they did not recover fully until 1946. The privately owned capital stock actually shrank during the war. Some prosperity. (My article in the peer-reviewed Journal of Economic History, March 1992, presents many of the relevant details.)
It is high time that we come to appreciate the distinction between the government spending, especially the war spending, that bulks up official GDP figures and the kinds of production that create genuine economic prosperity. As Ludwig von Mises wrote in the aftermath of World War I, “war prosperity is like the prosperity that an earthquake or a plague brings.”
War Causes Austerity
Economic historian Julian Adorney argues:
Hitler’s rearmament program was military Keynesianism on a vast scale. Hermann Goering, Hitler’s economic administrator, poured every available resource into making planes, tanks, and guns. In 1933 German military spending was 750 million Reichsmarks. By 1938 it had risen to 17 billion with 21 percent of GDP was taken up by military spending. Government spending all told was 35 percent of Germany’s GDP.
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No-one could say that Hitler’s rearmament program was too small. Economists expected it to create a multiplier effect and jump-start a flagging economy. Instead, it produced military wealth while private citizens starved.
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The people routinely suffered shortages. Civilian wood and iron were rationed. Small businesses, from artisans to carpenters to cobblers, went under. Citizens could barely buy pork, and buying fat to make a luxury like a cake was impossible. Rationing and long lines at the central supply depots the Nazis installed became the norm.
Nazi Germany proves that curing unemployment should not be an end in itself.
War Causes Inflation … Which Keynes and Bernanke Admit Taxes Consumers
As we noted in 2010, war causes inflation … which hurts consumers:
Liberal economist James Galbraith wrote in 2004:
Inflation applies the law of the jungle to war finance. Prices and profits rise, wages and their purchasing power fall. Thugs, profiteers and the well connected get rich. Working people and the poor make out as they can. Savings erode, through the unseen mechanism of the “inflation tax” — meaning that the government runs a big deficit in nominal terms, but a smaller one when inflation is factored in.
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There is profiteering. Firms with monopoly power usually keep some in reserve. In wartime, if the climate is permissive, they bring it out and use it. Gas prices can go up when refining capacity becomes short — due partly to too many mergers. More generally, when sales to consumers are slow, businesses ought to cut prices — but many of them don’t. Instead, they raise prices to meet their income targets and hope that the market won’t collapse.
Ron Paul agreed in 2007:
Congress and the Federal Reserve Bank have a cozy, unspoken arrangement that makes war easier to finance. Congress has an insatiable appetite for new spending, but raising taxes is politically unpopular. The Federal Reserve, however, is happy to accommodate deficit spending by creating new money through the Treasury Department. In exchange, Congress leaves the Fed alone to operate free of pesky oversight and free of political scrutiny. Monetary policy is utterly ignored in Washington, even though the Federal Reserve system is a creation of Congress.
The result of this arrangement is inflation. And inflation finances war.
Blanchard Economic Research pointed out in 2001:
War has a profound effect on the economy, our government and its fiscal and monetary policies. These effects have consistently led to high inflation.
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David Hackett Fischer is a Professor of History and Economic History at Brandeis. [H]is book, The Great Wave, Price Revolutions and the Rhythm of History … finds that … periods of high inflation are caused by, and cause, a breakdown in order and a loss of faith in political institutions. He also finds that war is a triggering influence on inflation, political disorder, social conflict and economic disruption.
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Other economists agree with Professor Fischer’s link between inflation and war.
James Grant, the respected editor of Grant’s Interest Rate Observer, supplies us with the most timely perspective on the effect of war on inflation in the September 14 issue of his newsletter:
“War is inflationary. It is always wasteful no matter how just the cause. It is cost without income, destruction financed (more often than not) by credit creation. It is the essence of inflation.”
Libertarian economics writer Lew Rockwell noted in 2008:
You can line up 100 professional war historians and political scientists to talk about the 20th century, and not one is likely to mention the role of the Fed in funding US militarism. And yet it is true: the Fed is the institution that has created the money to fund the wars. In this role, it has solved a major problem that the state has confronted for all of human history. A state without money or a state that must tax its citizens to raise money for its wars is necessarily limited in its imperial ambitions. Keep in mind that this is only a problem for the state. It is not a problem for the people. The inability of the state to fund its unlimited ambitions is worth more for the people than every kind of legal check and balance. It is more valuable than all the constitutions every devised.
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Reflecting on the calamity of this war, Ludwig von Mises wrote in 1919
One can say without exaggeration that inflation is an indispensable means of militarism. Without it, the repercussions of war on welfare become obvious much more quickly and penetratingly; war weariness would set in much earlier.***
In the entire run-up to war, George Bush just assumed as a matter of policy that it was his decision alone whether to invade Iraq. The objections by Ron Paul and some other members of Congress and vast numbers of the American population were reduced to little more than white noise in the background. Imagine if he had to raise the money for the war through taxes. It never would have happened. But he didn’t have to. He knew the money would be there. So despite a $200 billion deficit, a $9 trillion debt, $5 trillion in outstanding debt instruments held by the public, a federal budget of $3 trillion, and falling tax receipts in 2001, Bush contemplated a war that has cost $525 billion dollars — or $4,681 per household. Imagine if he had gone to the American people to request that. What would have happened? I think we know the answer to that question. And those are government figures; the actual cost of this war will be far higher — perhaps $20,000 per household.
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If the state has the power and is asked to choose between doing good and waging war, what will it choose? Certainly in the American context, the choice has always been for war.
And progressive economics writer Chris Martenson explains as part of his “Crash Course” on economics:
If we look at the entire sweep of history, we can make an utterly obvious claim: All wars are inflationary. Period. No exceptions.
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So if anybody tries to tell you that you haven’t sacrificed for the war, let them know you sacrificed a large portion of your savings and your paycheck to the effort, thank you very much.
The bottom line is that war always causes inflation, at least when it is funded through money-printing instead of a pay-as-you-go system of taxes and/or bonds. It might be great for a handful of defense contractors, but war is bad for Main Street, stealing wealth from people by making their dollars worth less.
Given that John Maynard Keynes and former Federal Reserve chair Ben Bernanke both say that inflation is a tax on the American people, war-induced inflation is a theft of our wealth.
IEP gives a graphic example – the Vietnam war helping to push inflation through the roof:
War Causes Runaway Debt
We noted in 2010:
All of the spending on unnecessary wars adds up.
The U.S. is adding trillions to its debt burden to finance its multiple wars in Iraq, Afghanistan, Yemen, etc.
Indeed, IEP – commenting on the war in Afghanistan and Iraq – notes:
This was also the first time in U.S. history where taxes were cut during a war which then resulted in both wars completely financed by deficit spending. A loose monetary policy was also implemented while interest rates were kept low and banking regulations were relaxed to stimulate the economy. All of these factors have contributed to the U.S. having severe unsustainable structural imbalances in its government finances.
We also pointed out in 2010:
It is ironic that America’s huge military spending is what made us an empire … but our huge military is what is bankrupting us … thus destroying our status as an empire.
Economist Michel Chossudovsky told Washington’s Blog:
War always causes recession. Well, if it is a very short war, then it may stimulate the economy in the short-run. But if there is not a quick victory and it drags on, then wars always put the nation waging war into a recession and hurt its economy.
(and remember Greenspan’s comment.)
It’s not just civilians saying this …
The former head of the Joint Chiefs of Staff – Admiral Mullen – agrees:
The Pentagon needs to cut back on spending.
“We’re going to have to do that if it’s going to survive at all,” Mullen said, “and do it in a way that is predictable.”
Indeed, Mullen said:
For industry and adequate defense funding to survive … the two must work together. Otherwise, he added, “this wave of debt” will carry over from year to year, and eventually, the defense budget will be cut just to facilitate the debt.
Former Secretary of Defense Robert Gates agrees as well. As David Ignatius wrote in the Washington Post in 2010:
After a decade of war and financial crisis, America has run up debts that pose a national security problem, not just an economic one.
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One of the strongest voices arguing for fiscal responsibility as a national security issue has been Defense Secretary Bob Gates. He gave a landmark speech in Kansas on May 8, invoking President Dwight Eisenhower’s warnings about the dangers of an imbalanced military-industrial state.
“Eisenhower was wary of seeing his beloved republic turn into a muscle-bound, garrison state — militarily strong, but economically stagnant and strategically insolvent,” Gates said. He warned that America was in a “parlous fiscal condition” and that the “gusher” of military spending that followed Sept. 11, 2001, must be capped. “We can’t have a strong military if we have a weak economy,” Gates told reporters who covered the Kansas speech.
On Thursday the defense secretary reiterated his pitch that Congress must stop shoveling money at the military, telling Pentagon reporters: “The defense budget process should no longer be characterized by ‘business as usual’ within this building — or outside of it.”
While war might make a handful in the military-industrial complex and big banks rich, America’s top military leaders and economists say that would be a very bad idea for the American people.
Indeed, military strategists have known for 2,500 years that prolonged wars are disastrous for the nation.
War Increases Inequality … And Inequality Hurts the Economy
Mainstream economists now admit that runaway inequality destroys the economy.
War is great for the super-rich, but horrible for everyone else. Defense contractors, Congress membersand bankers love war, because they make huge profits from financing war.
Pulitzer prize winning New York Times reporter James Risen notes that the so-called war on terror has caused “one of the largest transfers of wealth from public to private hands in American history,” and created a new class of war profiteers which Risen calls “the oligarchs of 9/11.”
War Increases Terrorism … And Terrorism Hurts the Economy
Security experts – conservative hawks and liberal doves alike – agree that waging war in the Middle Eastweakens national security and increases terrorism. See this, this, this, this, this, this and this.
Terrorism – in turn – terrorism is bad for the economy. Specifically, a study by Harvard and the National Bureau of Economic Research (NBER) points out:
From an economic standpoint, terrorism has been described to have four main effects (see, e.g., US Congress, Joint Economic Committee, 2002). First, the capital stock (human and physical) of a country is reduced as a result of terrorist attacks. Second, the terrorist threat induces higher levels of uncertainty. Third, terrorism promotes increases in counter-terrorism expenditures, drawing resources from productive sectors for use in security. Fourth, terrorism is known to affect negatively specific industries such as tourism.
The Harvard/NBER concludes:
In accordance with the predictions of the model, higher levels of terrorist risks are associated with lower levels of net foreign direct investment positions, even after controlling for other types of country risks. On average, a standard deviation increase in the terrorist risk is associated with a fall in the net foreign direct investment position of about 5 percent of GDP.
So the more unnecessary wars American launches and the more innocent civilians we kill, the less foreign investment in America, the more destruction to our capital stock, the higher the level of uncertainty, the more counter-terrorism expenditures and the less expenditures in more productive sectors, and the greater the hit to tourism and some other industries. Moreover:
Terrorism has contributed to a decline in the global economy (for example, European Commission, 2001).
So military adventurism increases terrorism which hurts the world economy. And see this.
Attacking a country which controls the flow of oil also has special impacts on the economy. For example, well-known economist Nouriel Roubini says that attacking Iran would lead to global recession. The IMF says that Iran cutting off oil supplies could raise crude prices 30%.
War Destroys Freedom … Which, In Turn, Destroys the Economy
A permanent war economy destroys our freedoms.
In turn, loss of liberty is horrible for the economy.
War Causes Us to Lose Friends … And Influence
While World War II – the last “good war” – may have gained us friends, launching military aggression is now losing America friends, influence and prosperity.
For example, the U.S. has launched Cold War 2.0 – casting Russia and China as evil empires – and threatening them in numerous way. For example, the U.S. broke its promise not to encircle Russia, and isusing Ukraine to threaten Russia; and the U.S. is backing Japan in a hot dispute over remote islands, and backing Vietnam in its confrontations with China.
And U.S. statements that any country that challenge U.S. military – or even economic – hegemony will be attacked are extremely provocative.
This is causing Russia to launch a policy of “de-dollarization”, which China is joining in. This could lead to the collapse of the petrodollar.
- Economic Collapse Will Serve One Purpose: "Global Governance And The Enslavement Of Mankind"
The ever-tightening noose around the neck of man shows no sign of slippage: all actions by all of the governments are anent control and dominion. The path to global governance is plainly marked, visible through all of the turmoil. It is that turmoil, those “incidents” that are created and fostered by the governments that enable them to further constrict the noose. The economy plummets in Cyprus and Greece? Time to limit the cash withdrawals. The European banks are having a “hard time” in places such as France or Spain? Time to pillage people’s savings and their IRA’s.
Manufactured crises are the norm, not the exception, and all of them are designed to facilitate one purpose: global governance and the enslavement of mankind.
The Bilderbergers are meeting in Germany this week. Paul Joseph Watson of Alex Jones’ Prison Planet reported on some of the key issues they will be discussing, as such:
“…the creation of a virtual passport that web users will need to obtain before they can use many Internet services is high on the agenda. The Internet ID will be justified under the guise of “cybersecurity” and creating a convenient method for citizens to access government services, but free speech advocates will view the proposal with deep suspicion as it would threaten online anonymity and possibly chill dissent. Services such as Facebook, YouTube and Twitter could also use the online passport to revoke posting permission if a user violates terms of agreement, another obvious threat to the free flow of information that has made the web what it is today. Bilderberg globalists are also set to re-invigorate momentum behind another long term goal – a global tax system presided over by the UN.”
Bilderberg Leak: Secretive Group to Discuss Internet ID, Global Tax, By Paul Joseph Watson
These things are not new, in that they have been proposed before. Just as with anything that is repeated long enough, however, the reiteration has dulled the senses of most. The bad thing is that it is being acted upon. A report by Tarun Wadwha last week described the inculcation of facial recognition software and the use of over 250 million cameras worldwide with the capability of utilizing this software.
250 million cameras. That would equal a camera for every 30 people.
The article went on to detail how in Russia an application called FindFace has come out, the invention of two young entrepreneurs. This application enables you to track down and identify virtually anyone; the app is building a database as we speak, and it is a matter of time before it expands outside of Russia to Europe and eventually the United States. The article went on to detail some of the following measures used in the U.S. and Europe in the manner of the movie “Minority Report” with Tom Cruise as such:
“Microsoft Corp. has patented technology that can allow a billboard to determine who you are and show you personalized advertisements. British authorities are using facial recognition at music festivals to spot troublemakers, while brick-and-mortar stores worldwide are racing to adopt the technology to track loyal customers. Even some high schools and churches have started to use facial recognition to take attendance.”
source: Opinion: Facial recognition will soon end your anonymity
We see it being inserted into our society and the societies in the world: the surveillance state. We see the deliberate and intentional collapses of the economies worldwide, the shifting of assets into the hands of those who control the strings either via legislation and “authority” (governments) or monetarily and economically (corporations and banks/bankers). The daily decline in freedom of speech and the freedom to challenge the establishment…on anything, no matter how minute or obscure…is the rule, not the exception.
In order for the global governance to occur, each “sphere of influence” such as parallel’s Orwell’s “1984” and the super-states must control its respective sphere absolutely. Because of the homogeneity of ethnicity that accompanies each area, overlap is not possible from a perspective of control. But if the spheres of influence are “aligned” at least in purpose and levels of totalitarian control, then an effective balance can be maintained. Then (to paraphrase Alinsky) it can be a matter of “organizing the organized” with “controllers” who oversee the governments/regimes of all of the spheres without any of the people (the enslaved) ever knowing.
We are heading into a very dark time…a time where technology will be used to enslave, not enlighten or uplift mankind. The new dark ages are almost upon us. It will require nothing less than a world war or a complete global economic collapse (orchestrated, in both cases) to destroy the last vestiges of self-governance and law that exist for us. The time to put a stop to it is now, before the power base of the elite becomes so strong that individuals cannot withstand it. The time to rebel against it is now, while we still have the chance before that boot tramples the face of humanity…forever.
- UNSEALED: Tran vs Wells Fargo – DOJ Declines to Intervene, Banks Continue to Foreclose with Impunity
“Please remember when you come across a situation where we have a lost contract, deed, any type of document, really, but especially when It relates to securing a property, we are not to share that with the customer”
~ Regards, Wells Fargo, Your Friendly Neighborhood Banker~
UNSEALED: Tran vs Wells Fargo Qui Tam – DOJ Declines to Intervene, Banks Continue to Foreclose with Impunity
First, last month, from The
A Damascus man claims he was terminated by Wells Fargo & Co. in 2014 after he discovered the bank was repeatedly collecting on mortgage loans for which it did not have the proper documentation. When Duke Tran, 54, complained about the practice, he claims he was told to lie to customers. When he resisted, the bank fired him in November 2014, Tran said. In a whistleblower lawsuit unsealed a week ago, Tran claims Wells also defrauded the U.S. government. He argues the bank illegally collected hundreds of millions of dollars in federal foreclosure-prevention funding for loans the bank knew lacked proper documentation.
And of course, Wells Fargo denies any wrongdoing…
Tran’s wrenching transition from happy 10-year veteran at Wells Fargo to self-proclaimed whistleblower began in December 2013 when he fielded a call from a couple terrified they were going to get foreclosed out of their home. They were overdue on their second mortgage and Wells Fargo was demanding a balloon payment. Tran, who worked at the bank’s Beaverton call center, checked and checked again. He claims he could find no trace of the couple’s loan in the bank’s computer system and he told the couple so.
So what happened when he alerted his superiors?
Tran says his bosses were not happy. Three months later, on April 21, 2014, Tran and the rest of his team received an email from a supervisor telling them that full disclosure was a bad idea. “Please remember when you come across a situation where we have a lost contract, deed, any type of document, really, but especially when It relates to securing a property, we are not to share that with the customer,” reads the email, which Tran submitted into the court file.
Tran was troubled. The first-generation Vietnamese-American and volunteer in the US Army Reserve considered it illegal and unethical for the bank to threaten foreclosure when it didn’t have the mortgage contract in question. “The company told me to lie about that,” he said in an interview. “I don’t think that’s right, for the customers, for the company or the entire country.”
Now, let’s take a look at the unsealed complaint for more details …
SUMMARY OF CASE
Duke Tran was a humble, hardworking family man, who had overcome many obstacles to establish himself in the banking industry. Tran was honest and forthright. He had worked at Wells Fargo for over 10 years as a model employee in its home equity department.
In 2014, Tran began to ask questions after stumbling upon a secret Wells Fargo policy that he felt compromised his personal ethics and violated the laws governing mortgage servicing.
Wells Fargo’s internal policy required its employees to unfairly deceive its customers, and the United States, as to the quality of Wells Fargo’s loan documents, in violation of American common law, the Dodd-Frank Act, and Oregon’s Unfair Trade Practices Act.
When Tran continued to express concerns about its secret policy, Wells Fargo began a campaign designed to discredit Tran and ultimately force him out of the company. Wells Fargo illegally retaliated against Tran throughout 2014 and wrongfully terminated his employment on November 12, 2014.
Now, having no other choice to make things right, Tran files this complaint to recover fair compensation for Wells Fargo’s retaliation and wrongful termination. Tran also seeks to take back over $1.4 billion on behalf of the American taxpayers; paid by the United States on account of Wells Fargo’s unfair deceptive mortgages practices.
FACTUAL ALLEGATIONS: Wrongful Termination
On or around March 10, 2013, Tran transferred to the position of Home Equity Customer Service Specialist 4 in the home equity department.
…
Most calls that Tran received involved customers who had received letters from Wells Fargo indicating their mortgage balloon payments were due within 90 days, and that if they did not pay, their accounts would be referred to collections for foreclosure. When Wells Fargo received calls from customers with balloon payments due, its policy was to offer its customers financial products to avoid foreclosure, including HAMP loan modifications.
In or around December of 2013, Tran received the first of what would be many similar phone calls. A husband and wife with an alleged balloon mortgage payment due called Wells Fargo and spoke with Tran. When Tran looked in the Clipper system for their loan contract he realized it was missing or nonexistent, and reported this to them.
Tran promptly reported the issue with the customers to his supervisor and others within Wells Fargo. The next day, Tran received multiple emails from Wells Fargo headquarters that the loan documents were missing and that the company did not have the customers’ contract. Despite this, Wells Fargo directed Tran to deceive the customers and treat the loan like a balloon payment was due.
…
The next day, LeDonne met with Tran and berated Tran for telling the customers the truth about their loan documents. LeDonne told Tran that Tran’s job was in jeopardy and that Tran had placed Wells Fargo at risk by providing this information to the customers. LeDonne went on to say that Janice Norris (“Norris”) and Vice President Lending Manager, Debbie Clausen (“Clausen”) had directed that Tran have no more contact with these customers.
From then on, Tran received many more calls from customers whose loan documents were missing or nonexistent. Tran began to notice many of the loans with missing documents had been acquired by Wells Fargo from First Union or Sun Trust Bank. As he was directed, whenever customers called in and Wells Fargo’s loan documents were missing, Tran sent the matter to a supervisor.
On or around March 4, 2014, Tran received a call from a co-worker from Iowa. The coworker asked Tran about the customers Tran told that Wells Fargo had no loan documents for their loan. The customers had called for an update on their loan. Tran reported that he had referred the customers to his supervisors. Tran then asked his team lead, Heather Stone (“Stone”), about the issue. Stone told Tran that she planned to follow-up with the customers but it appeared they had hired an attorney.
Later that same day, Tran was called in to meet with his supervisor, LeDonne. When Iran walked into his office, LeDonne immediately blew up at him. LeDonne told Iran, “See, I told you before that we’ll get sued and now they’ve hired an attorney!” LeDonne threatened Iran that he would be fired if he ever told another customer the truth about missing or nonexistent loan documents.
On or around April 21, 2014, Tran received an email about a Wells Fargo internal policy stating that when Wells Fargo has lost loan documents, especially those securing a home, employees are to not share this information with customers under any circumstance.
“Please remember when you come across a situation where we have a lost contract, deed, any type of document, really, but especially when It relates to securing a property, we are not to share that with the customer.”
Tran was immediately uncomfortable with this secret internal policy and went to LeDonne to discuss it. Tran stressed that it was not right or legal to lie to customers. LeDonne cut Iran off and told him that the policy directive came from his boss, Kimberly Thrush (“Thrush”), and senior management.
A lot more goes on from here, see complaint for much more detail, before Mr Tran is fired for failing to say “hello.”
On or around November 12, 2014, Tran had a second interview with another unit within Wells Fargo. The interview was for the same day and LeDonne again refused Tran’s request for time off for the interview. Before Tran was able to resolve the issue again LeDonne called Tran in to discuss a customer call. LeDonne told Tran he was being investigated for “misbehavior” in that he did not say “hello” to a customer at the onset of the call. Tran asked to hear the phone call but LeDonne refused. LeDonne told Tran they would meet with the rest of the management team at the end of the day.
Later that day, Tran was called into a meeting with LeDonne, Thrush, and Norris. LeDonne told Tran that based on the misbehavior they discussed earlier, Wells Fargo was terminating his employment. LeDonne then stood up and told Tran he needed to escort him out of the building.
FACTUAL ALLEGATIONS: Defrauding the Government
Wells Fargo’s policy of unfair deception negatively affected not only its employees and customers but also the American taxpayers. From 2009 until March 31, 2015, the United States paid out over $1.4 billion in HAMP incentives based on Wells Fargo loan modification applications. As of the date of this complaint, Wells Fargo has completed more than a million mortgage modifications through HAMP. Of the $1.4 billion paid based on Wells Fargo applications, only a relatively small fraction ($246,871,173.00) went to Wells Fargo’s customers. The largest portions went directly to corporate investors ($825,776,921.00) and Wells Fargo ($359,151,497.00).
Many of Wells Fargo’s HAMP modifications, including some of the loans Tran was involved with, were based on materially false representations made by Wells Fargo about the quality of its mortgage loan documents.
Wells Fargo fraudulently used the HAMP modification process to turn incomplete loan files into enforceable mortgages. Wells Fargo intentionally misled its customers and the United States by failing to disclose known material defects in its loan documents. Specifically, Wells Fargo’s secret internal policy involved deceiving customers and the United States when Wells Fargo knew or suspected its loan files were missing documents.
Just another day in the Good Ol’ USA.
Full complaint and the DOJ’s order declining to intervene below…
www.4closureFraud.org
- This Won't End Well – US Asset Managers Target Australia's $1.5 Trillion Pension Funds
Hedge funds attracted a net $44 billion in assets globally last year, the smallest amount since 2012. As these increasingly desperate funds try to change that in 2016, one enormous target has been identified in Australia.
Australia has approximately USD$1.5 trillion in retirement savings, one of the largest and fastest growing pools of pension money in the world according to the WSJ. Several US asset managers are already actively working to get a foot in the door, even though management fees charged in Australia are among the world's lowest according to local lobby group Financial Services Council.
"Everyone wants to get their hands on that pie. People think there's a lot of money to be made in Australia" said Jesse Huang, director for strategic relations Boston based hedge fund PanAgora Asset Management
Other than the potential to grow AUM, the fact that Australian funds doubled their holdings of alternative assets between 2009 and 2015 has funds salivating to set up shop.
Australian funds doubled their holdings of alternative assets—ranging from venture capital and private equity to hedge-fund investments—to an average of 8% of their portfolios between 2009 and 2015, according to Morningstar. Inflows have been especially strong over the past two years. Including infrastructure and property, Australian funds now hold about 20% of their assets outside of traditional investments such as stocks, bonds and cash.
Additionally, a recent survey by State Street showed two-thirds of Australian pension funds plan to boost their exposure to hedge funds over the next three years.
Overseas funds are putting talent on the ground because Australia is "not an easy market to enter. It's complex and highly concentrated, buyers are sophisticated and competition is fierce. Players who only come here to push product are bound to fail" said Anthony James, a partner at PwC in Sydney.
Potential clients can be tough to convince said Damian Crowley, head of distribution with Pengana Capital, a boutique Sydney fund management firm, adding that some investors "think hedge funds caused the global financial crisis." Alas, if investors have that mindset now, wait until hedge funds tie up pension funds in a bunch of high risk, highly illiquid positions just as the market sells off.
MLC, one of the largest pension funds in Australia has increased its alternative exposure by nearly 40% over the past three years, most notably to PE and energy futures, but CIO Jonathan Armitage says the A$62 billion fund is "picky."
"Our starting point is deep, deep skepticism. We make sure we only buy what we understand." Armitage said
That fact that it's a tough market to enter is not deterring some firms from moving forward however. Oaktree Capital Management, who invests in commercial mortgages and distressed debt opened up a branch in Australia in March, TIAA Global Asset Management opened a Sydney office last year, and Chicago based Northern Trust also set up a Sydney office, along with a sales team in Melbourne to offer full asset-management services to pension funds.
The shift in asset allocation undoubtedly comes from the fact that safer investment strategies are no longer an option for managers trying to generate returns, thanks to central banks going absolutely insane and driving over $10 trillion of sovereign debt into negative yields (soon to be done with corporate debt as well as Mario accelerates the global collapse to light speed with the ECBs new program).
Recall that now fixed income is yielding so little, that to earn a return of 7.5% investors would have to construct a portfolio that has nearly 3x the risk than it did in 1995. This is causing pension funds to risk even more to find yield, and thus the increased allocation to alternative assets.
Hedge funds aren't just targeting the big fish of course, retail investors are also on the radar for those looking to get into Australia.
While foreign hedge funds are eager to target big institutional investors, they are also pitching hard to retail investors—in particular the growing number of Australians, nicknamed “selfies,” who manage their own pension savings. Such investors control about a third of Australia’s retirement assets.
PanAgora, which makes money through complex trading strategies from high-speed algorithmic trading to leveraged short selling, offers one of its funds to mom-and-pop investors here in conjunction with Pengana Capital, a boutique Sydney fund-management firm. Among the more unusual data PanAgora mines to form its trading strategy: thousands of lost-baggage claims for potential signs of poor airline management.
* * *
Ah yes, hedge funds who introduce complex trading strategies to mom and pop investors and massive pension funds – what could possibly go wrong there?
- Bitcoin Spikes Above $600 – 2 Year Highs – On Sudden Massive Chinese Buying
Once again, on a Saturday night (US time), Sunday morning (China) a sudden burst of buying pressure in Bitcoin, driven by Chinese buyers, has spiked the virtual currency higher on dramatic volume. With Bitcoin now trading at its highest level since May 2014 (in Yuan), and up 250% since we first suggested this an outlet for desperate-to-leave capital outflows in September, we note that the 'arbitrage' of over 150 Yuan points to massively more demand from Chinese buyers for now.
Another weekend buying-splosion in Bitcoin by The Chinese…
It appears, just as we initailly warned here, that more than a few of the few hundred million Chinese have decided that the time has come to use bitcoin as the capital controls bypassing currency of choice, and decided to invest even a tiny fraction of the $22 trillion in Chinese deposits…
… in bitcoin (whose total market cap at last check was just over $3 billion), sit back and watch as we witness the second coming of the bitcoin bubble, one which could make the previous all time highs in the digital currency, seems like a low print.
And once again tonight, that panic selling of Yuan for Bitcoin has sent it surging in the last few hours, now above $600…
This pushes Bitcoin to 2 year highs priced in USDollars…
And once again it appears the dominant buyer is in China (OKCoin exchange – which reportedly has 90% of global Bitcoin traffic). This is the highest 'China' Bitcoin price since May 2014
Notably with Bitcoin trading 4187CNY and 615USD (with USDCNY at 6.5624), China Bitcoin is trading around 150 Yuan rich to Dollar Bitcoin (once again suggesting strong demand from Chinese buyers).
Both Gold and Bitcoin have been rising since we first warned of the surge in Chinese capital outflows but the virtual currency has dramatically outperformed…
- Rapper Who Threatened To Kill Trump If "Momma's Food Stamps Are Taken Away" Arrested For Stealing Guns
There was much amusement three weeks ago, when Louisiana rapper Maine Musik said in a YouTube video recording that he would kill republican presidential candidate Donald Trump if his “Mamma’s food stamps are taken away.”
I could go to war with whoever the fuck I want to, but I really want to go to war with Donald Trump because Donald Trump trying to take food stamps from my mamma and that’s all the fuck she’s got. As long as the motherfucking government let us keep food stamps… we gonna be good, but the first time this nigga pass a law talking about he taking Louisiana purchase, shit going to get ugly. I swear to god on every motherfucking chain I got, bitchez gonna go down. You gotta understand them (inaudible) love Fruit Loops. They love that shit so if you take that shit nigga it’s coming with the madness and a nigga ain’t gonna play about that. Y’all take Donald Trump and let him know it’s up over here. We gonna declare war.
As we reported at the time, shortly after the “rapper” recorded this threat, he was visited by police for posting another video to his Instagram account on May 15, where he and his gang showed off a stockpile of weapons.
That’s when Maine Musik’s, whose real name is Demarcus Davis, problems really started, ironically not under president Trump, but Obama. The true culprit, however, was neither the current president nor a potential future one, but Demarcus’ own unprecedented stupidity.
As it turns out in the second video, “Musik” and at least eight other people can be seen brandishing a number of weapons, including rifles, pistols and a sawed-off shotgun, reports Baton Rouge ABC affiliate WBRZ. According to police, all of the guns visible in the video appear to match makes/models of firearms that were reported stolen by a local fun shop. The Baton Rouge Police Department reported the burglary at Meaux Guns & Ammo, located in the 9600 block of Mammouth Drive, on July 6 of last year. At the time of the report, dozens of firearms were reported stolen. Among those guns was a Ruger 10/22 Krinker Plinker.
When authorities examined Musik’s video, they noticed similarities between the weapons being waved around and weapons that had been stolen. A Baton Rouge police spokesman told the outlet that a stolen Ruger being brandished in the video was particularly easy to identify because it had been customized before it was stolen.
Detectives said they were also able to locate the suspect by using a house number and street name visible in the video. A search of Davis’ public Facebook account turned up a photo of the rapper holding the Ruger pistol that was reported stolen. The gun featured numerous customizations and modifications that made it distinctive and easy to spot, according to BRPD.
Davis was initially brought in for questioning concerning his social media posts and videos after he was arrested and booked for failing to stop at a stop sign while in possession of Drank, a purple liquid identified as codeine syrup. He would also be booked on a charge of possession of a Schedule V CDS in addition to the above gun charges.
Former Sons of Guns reality TV star Joe Meaux, who owns Meaux Guns and Ammo, told Fox News that he realized the firearms being waved around by Davis were his after watching a video titled “Rapper Threatens Trump” online. “As I’m watching it, I’m thinking these guns are very recognizable,” Meaux told Fox News. “As I watched more, I realized that they were very familiar. They were stolen from me last year. We do a lot of custom work,” he added. “There was one AK-47 copy built from a .22 I identified. Everything from the optic to the way the sling was placed was all very identifiable.”
As for Davis, he is once again free, having posted $23,000 bail and released the same day he was arrested, although perhaps not for much longer: either the Darwin Awards will snatch him or the secret service will. According to Breitbart, the Secret Service had already been investigating Davis before he was arrested over the rapper’s threats against Trump. Investigators also found photos on Davis’s personal Instagram page, which boasts 56,000 followers, showing him posing with guns. One video features a young girl shooting a replica handgun.
“Many of the items have been recovered, but the matter is still under investigation so when that is completed we will hopefully get them back,” Meaux told Fox. “But the most important thing is that they are off the streets now.”
Not really: after posting bail, the rapper is free and awaiting his next court date, although we no longer has any guns.
Meanwhile, it is clear that nothing has changed: “Maine Musik” posted another video Wednesday with a profanity-laced message for Donald Trump. “Fuck Donald Trump,” Davis says, although this time he has no gun and instead is seen waving a blade. “No more guns… It’s our summer 16, bitch.”
It is unclear who the knife was stolen from.
- An Everyman's Guide To Understanding Cryptocurrencies
Submitted by Charles Hugh-Smith via PeakProsperity.com,
When an asset rises by almost 30% in a few weeks, it tends to attract attention. Recently, that asset was bitcoin (BTC). The price of BTC in dollars rose from $454 on May 23 to $590 on June 6th.
When an asset doubles in a matter of a few months, it tends to attract attention. The cryptocurrency Ether (part of the Ethereum platform) doubled from around $7 in April to roughly $14 in early June.
Are these cryptocurrencies mere fads? Or are they potentially game-changing alternatives to the conventional currencies such as the U.S. dollar, Chinese RMB, Japanese yen or European Union euro?
There’s no lack of skeptics and critics of bitcoin and other cryptocurrencies. For example, “National currencies aren’t as Centralized, and Bitcoin isn’t as Decentralized, as you think.” (Source)
There are plenty of defenders of cryptocurrencies as well, for example this response to the article above.
The controversy is understandable; bitcoin has had a difficult adolescence. After soaring from $15 in early 2013 to over $1,000 in December 2013, the cryptocurrency crashed to $215 in early 2015 in the wake of the bankruptcy of a major exchange (Mt. Gox) that cost bitcoin investors $470 million in losses.
Yet despite concerns about security, criminal use and volatility, cryptocurrencies have proliferated at a dizzying pace, and new models such as the “smart contracts” of Ethereum have been developed.
So what are those of us who can’t follow the technical arguments supposed to make of all this? For that audience, here's my stab at making sense of the potential global role of cryptocurrencies.
Cryptocurrencies Are Digital Currencies That Are Not Issued by Governments
What’s a cryptocurrency? Wikipedia’s definition is “a medium of exchange using cryptography to secure the transactions and to control the creation of new units.” Cryptocurrencies exist only in the digital realm; there are no physical coins or paper notes.
Cryptocurrencies have no intrinsic value. They share this characteristic with fiat currencies issued by governments/central banks:
“Fiat money is currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat money is derived from the relationship between supply and demand rather than the value of the material that the money is made of. Historically, most currencies were based on physical commodities such as gold or silver, but fiat money is based solely on faith. Fiat is the Latin word for “it shall be.” (Source)
Though major central banks own gold, the currency they issue is not “backed by gold,” i.e. it cannot be converted into gold upon demand.
The value of fiat currency is a function of supply and demand. There are many sources of demand for currency: governments demand taxes be paid in their fiat currency, for example, and this creates demand for the currency.
There is however only two sources of supply: the central banks of nation-states (or regional unions like the Eurozone) and private banks in fractional reserve money systems that enable banks to create new money via issuing new loans.
In a fractional reserve banking system, if a bank has $10 in cash deposits (i.e. in reserve), it can issue a new loan of $100. This loan is new money that was created out of thin air. When the loan is paid in full, this new money disappears from the system.
When central banks or states issue new currency in excess of what the economy is actually producing, the supply overwhelms demand and the currency’s value (i.e. purchasing power) falls accordingly. Venezuela offers a present-day example: the official exchange rate of the Venezuelan bolivar is 10 to the U.S. dollar (USD), but the “street”/black market value is closer to 1,000 to 1 USD. (My correspondents in Venezuela report that it is illegal to post the black-market exchange rate on a website.)
Governments typically restrict alternative currencies to protect their monopoly on money issuance: residents must use the government-sanctified currency or face prosecution and prison.
The U.S. government has declared bitcoin is a commodity (i.e. property) rather than a currency. Other nations have banned bitcoin (presumably out of recognition that it is an alternative currency outside their control.)
Why does bitcoin have any value at all? There are two basic reasons:
- The supply is limited. The design of bitcoin limits the total number of bitcoins to 21 million. (If you really want to know why this is so, you’ll need to understand the blockchain and bitcoin mining, topics that are beyond the scope of this article.) At present, there are over 15.5 million bitcoins in circulation, roughly three-quarters of the eventual issuance of 21 million.
- There is demand for bitcoin precisely because it is outside the control of governments/central banks and cannot be devalued at will by governments/central banks.
Why Fiat Currencies Are Being Devalued
Why are most governments/central banks trying to devalue/depreciate their fiat currencies? After all, devaluing the currency reduces the purchasing power of everyone who holds the currency, meaning that the currency buys fewer goods and services. This loss of purchasing power makes everyone who must use the currency poorer.
Why do governments/central banks pursue a policy that makes their citizens poorer?
There are two primary reasons why governments seek to devalue their currency:
- To make the nation’s exports cheaper, i.e. more competitive, in the belief that expanding exports will make the overall economy grow, despite the fact that devaluing the currency makes imports more expensive, hurting everyone who buys imports.
- To make it easier for debtors to service their loans. As our currency loses its value, we experience that loss of purchasing power as inflation: the prices of goods and services rises as the purchasing power of the currency declines. Governments/central banks presume that wages will rise along with the prices of goods and services. This rise in wages will make it easier for debtors to service their debts, i.e. make their monthly payments. In a system that depends on the expansion of debt to fuel consumption, making it easier to service existing debt is of critical importance: if debt becomes more difficult to service, debt expansion slows and so does consumption. As consumption slows, the economy slides into recession.
As their currency is devalued (by intention or by unintended consequences), the great problem for many people will be transferring their remaining financial wealth out of depreciating currencies into a more stable currency or into assets in a more stable nation.
The Role of Cryptocurrencies in Capital Preservation
This is where cryptocurrencies have a role that could increase as global currencies are devalued: if you can shift financial wealth out of a currency that is losing purchasing power into a cryptocurrency that is holding its own or even gaining in purchasing power, it would be irrational not to do so.
What advantage do cryptocurrencies have over other stores of value such as gold, silver or cash? All of these traditional stores of value have advantages—portability and universal recognition that they are money—but they cannot be transported across the globe quite as easily as digital currencies.
Though it is a topic of hot debate, many observers believe it is technically difficult to the point of impossibility to stop people from buying, selling and sending cryptocurrencies because currencies such as bitcoin live in a network that is scattered around the globe—a network that can be accessed by anyone with a web browser.
While local exchanges could be shut down by governments, and businesses could be prohibited from accepting cryptocurrencies, stopping people from logging onto servers sited elsewhere is a bigger challenge. (Many governments have outlawed cryptocurrencies, though their success rate in stopping their citizenry from owning/using cryptocurrencies is unknown.)
The rise in daily transactions in bitcoin suggests an expanding base of users globally.
In Part 2: Will Cryptocurrencies Soar As The Global Economy Falters? we explore the potential demand for cryptocurrencies as a means of transferring and preserving capital, and the potential impact of these capital flows on valuations of cryptocurrencies.
As governments actively devalue their currencies (thereby making everyone using the currency poorer), their citizenry with financial capital are forced to seek ways to move their at-risk wealth into other currencies or assets. And as the stability and valuations of cryptocurrencies increase, the potential for a self-reinforcing feedback loop increases: as the value of cryptocurrency rises, it attracts more capital, which pushes prices higher, and so on.
Are we in the infancy of a global stampede into cryptocurrencies?
Click here to read Part 2 of this report (free executive summary, enrollment required for full access)
- How Fascism Comes To America
Submitted by Doug Casey via InternationalMan.com,
I think there are really only two good reasons for having a significant amount of money: To maintain a high standard of living and to ensure your personal freedom. There are other, lesser reasons, of course, including: to prove you can do it, to compensate for failings in other things, to impress others, to leave a legacy, to help perpetuate your genes, or maybe because you just can't think of something better to do with your time.
But I'll put aside those lesser motives, which I tend to view as psychological foibles. Basically, money gives you the freedom to do what you'd like – and when, how, and with whom you prefer to do it. Money allows you to have things and do things and can even assist you to be something you want to be. Unfortunately, money is a chimera in today's world and will wind up savaging billions in the years to come.
As you know, I believe we're well into what I call The Greater Depression. A lot of people believe we're in a recovery now; I think, from a long-term point of view, that is total nonsense. We're just in the eye of the hurricane and will soon be moving into the other side of the storm. But it will be far more severe than what we saw in 2008 and 2009 and will last quite a while – perhaps for many years, depending on how stupidly the government acts.
Real Reasons for Optimism
There are reasons for optimism, of course, and at least two of them make sense.
The first is that every individual wants to improve his economic status. Many (but by no means all) of them will intuit that the surest way to do so is to produce more than they consume and save the difference. That creates capital, which can be invested in or loaned to productive enterprises. But what if outside forces make that impossible, or at least much harder than it should be?
The second reason for optimism is the development of technology – which is the ability to manipulate the material world to suit our desires. Scientists and engineers develop technology, and that also adds to the supply of capital. The more complex technology becomes, the more outside capital is required. But what if sufficient capital isn't generated by individuals and businesses to fund further technological advances?
There are no guarantees in life. Throughout the first several hundred thousand years of human existence, very little capital was accumulated – perhaps a few skins or arrowheads passed on to the next generation. And there was very little improvement in technology – it was many millennia between the taming of fire and, say, the invention of the bow. Things very gradually accelerated and improved, in a start-stop-start kind of way – the classical world, followed by the Dark Ages, followed by the medieval world. Finally, as we entered the industrial world 200 years ago, it looked like we were on an accelerating path to the stars. All of a sudden, life was no longer necessarily so solitary, poor, nasty, brutish, or short. I'm reasonably confident things will continue improving, possibly at an accelerating rate. But only if individuals create more capital than they consume and if enough of that capital is directed towards productive technology.
Real Reasons for Pessimism
Those are the two mainsprings of human progress: capital accumulation and technology. Unfortunately, however, that reality has become obscured by a morass of false and destructive theories, abetted by a world that's become so complex that it's too difficult for most people to sort out cause and effect. Furthermore, most people in the OECD world have become so accustomed to good times, since the end of WW2, that they think prosperity is automatic and a permanent feature of the cosmic firmament. So although I'm very optimistic, progress – certainly over the near term – isn't guaranteed.
These are the main reasons why the standard of living has been artificially high in the advanced world, but don't confuse them with the two reasons for long-term prosperity.
The first is debt. There's nothing wrong with debt in itself; lending is one way for the owner of capital to deploy it. But if a society is going to advance, debt should be largely for productive purposes, so that it's self-liquidating; and most of it would necessarily be short term.
But most of the scores of trillions of debt in the world today are for consumption, not production. And the debt is not only not self-liquidating, it's compounding. And most of it is long term, with no relation to any specific asset. A lender can reasonably predict the value of a short-term loan, but debt payable in 30 years is impossible to value realistically. All government debt, mortgage debt, consumer debt, and almost all student loan debt does nothing but allow borrowers to live off the capital others have accumulated. It turns the debtors into indentured servants for the indefinite future. The entire world has basically overlooked this, along with most other tenets of sound economics.
The second is inflation. Like debt, inflation induces people to live above their means, but its consequences are even worse, because they're indirect and delayed. If the central bank deposited $10,000 in everyone's bank account next Monday, everyone would think they were wealthier and start consuming more. This would start a business cycle. The business cycle is always the result of currency inflation, no matter how subtle or mild. And it always results in a depression. The longer an inflation goes on, the more ingrained the distortions and misallocations of capital become, and the worse the resulting depression. We've had a number of inflationary cycles since the end of the last depression in 1948. I believe we're now at the end of what might be called a super-cycle, resulting in a super-depression.
The third is the export of dollars. This is unique to the U.S. and is the reason the depression in the U.S. will in some ways be worse than most other places. Since the early '70s, the dollar has been used the way gold once was – it's the world's currency. The problem is that the U.S. has exported perhaps $10 trillion – but nobody knows – in exchange for good things from around the world. It was a great trade for a while. The foreigners get paper created at essentially zero cost, while Americans live high on the hog with the goodies those dollars buy.
But at some point quite soon, dollars won't be readily accepted, and smart foreigners will start dumping their dollars, passing the Old Maid card. Ultimately, most of the dollars will come back to the U.S., to be traded for titles to land and businesses. Americans will find that they traded their birthright for a storage unit full of TVs and assorted tchotchkes. But many foreigners will also be stuck with dollars and suffer a huge loss. It's actually a game with no winner.
What's Next
These last three factors have enabled essentially the whole world to live above its means for decades. The process has been actively facilitated by governments everywhere. People like living above their means, and governments prefer to see the masses sated.
The debt and inflation have also financed the growth of the welfare state, making a large percentage of the masses dependent, even while they've also resulted in an immense expansion in the size and power of the state over the last 60-odd years. The masses have come to think government is a magical entity that can do almost anything, including kiss the economy and make it better when the going gets tough. The type of people who are drawn to the government are eager to make the state a panacea. So they'll redouble their efforts in the fiscal and monetary areas I've described above, albeit with increasingly disastrous results.
They'll also become quite aggressive with regulations (on what you can do and say, and where your money can go) and taxes (much higher existing taxes and lots of new ones, like a national VAT and a wealth tax). And since nobody wants to take the blame for problems, they'll blame things on foreigners. Fortunately (the U.S. will think) they have a huge military and will employ it promiscuously. So the already bankrupt nations of NATO will dig the hole deeper with some serious – but distracting – new wars.
It's most unfortunate, but the U.S. and its allies will turn into authoritarian police states. Even more than they are today. Much more, actually. They'll all be perfectly fascist – private ownership of both consumer goods and the means of production topped by state control of both. Fascism operates free of underlying principles or philosophy; it's totally the whim of the people in control, and they'll prove ever more ruthless.
So where does that leave us, as far as accumulating more wealth than the average guy is concerned? I'd say it puts us in a rather troubling position. The general standard of living is going to collapse, as will your personal freedom. And if you're an upper-middle-class person (I suspect that includes most who are now reading this), you will be considered among the rich who are somehow (this is actually a complex subject worthy of discussion) responsible for the bad times and therefore liable to be eaten. The bottom line is that if you value your money and your freedom, you'll take action.
There's much, much more to be said on all this. I've said a lot on the topic over the past few years, at some length. But I thought it best to be brief here, for the purpose of emphasis. Essentially, act now, because the world's combined economic, financial, political, social, and military situation is as good as it will be for many years… and a lot better than it has any right to be.
What to Do?
No new advice here, at least as far as veteran readers are concerned. But my suspicion is that very few of you have acted, even if you understand why you should act. Peer pressure (I'm confident that you have few, if any, friends, relatives, or associates who think along these lines) and inertia are powerful forces.
That said, you should do the following:
- Maintain significant bank and brokerage accounts outside your home country. Consider setting up an offshore asset protection trust. These things aren't as easy to do as they used to be. But they'll likely be much less easy in the future.
- Make sure you have a significant portion of your wealth in precious metals and a significant part of that offshore.
- Buy some nice foreign real estate, ideally in a place where you wouldn't mind spending some time.
- Work on getting official residency in another country, as well as a second citizenship/passport. There's every advantage to doing so, and no disadvantages. That's true of all these things.
One more thing: Don't worry too much. All countries seem to go through nasty phases. Within the lifetime of most people today, we've seen it in big countries such as Russia, Germany, and China. And in scores of smaller ones – the list is too long to recount here. The good news is that things almost always get better, eventually.
- Mike Rowe Gives Advice To Students: "Never Follow Your Passion"
Mike Rowe has some truthiness for those students who are "following their passion" without possessing the skills necessary to accomplish what they're trying to do.
"You've all been given some terrible advice, and that advice is this: follow your passion."
The former host of Dirty Jobs tells it like it is by explaining to students that passion and ability have nothing to do with each other, and that "Just because you're passionate about something, doesn't mean you won't suck at it.". Rowe also reminds students that just because they may have a degree in a chosen field, it doesn't mean that a dream job awaits.
"Dream jobs are usually just that – dreams. But their imaginary existence just might keep you from exploring careers that offer a legitimate chance to perform meaningful work."
"Never follow your passion, but always bring it with you."
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Rowe's message fits nicely with our 7 Harsh Realities Of Life Millennials Need To Understand, which should be widely read, lest we end up with more of this…
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