Aged Pension Overpromise - A Disaster in the Making

An excerpt from an article by Vern Gowdie for the Daily Reckoning.

Why governments could start paring back the age pension in 2020.

…. Meanwhile, the working majority — while being entertained by the day to day legal and political theatre — get on with the day to day issues. The ones that keep roofs over their heads…food on the table...and who try to save a few dollars for their retirement.
Presidents, Prime Ministers, judges and senior bureaucrats do not have to worry about the latter of these issues…saving a few dollars for their retirement.
That’s well taken care of courtesy of the taxpayer, Wall Street, cushy consultancy gigs with lobbyists, and, if you are so inclined, you can even establish your own ‘Foundation’ to enrich (sorry, I mean assist) causes close to your heart…oh like, your own bank balance.
For those who actually work (and don’t deal in graft, corruption and manipulation) for a living, the age pension underwrites the retirement years for the majority of people.
‘Around 65% of older Australians rely on a government pension or allowance as their main source of personal income at retirement.’ That’s according to the Australian Securities and Investments Commission (ASIC) Money Smart site.
The percentage of age pension dependency is fairly consistent around the developed world.
More — not less — rely on social security to make ends meet in their later years.
But how sustainable is the pension system?
On 25 February, 2015 Laurence J Kotlikoff (Professor of Economics at Boston University) addressed the US Senate Budget Committee. This was his opening statement (emphasis mine):

‘Chairman Enzi and Other Distinguished Members of the Senate Budget Committee,

‘I am honoured to discuss with you our country’s fiscal condition. Let me get right to the point. Our country is broke. It’s not broke in 75 years or 50 years or 25 years or 10 years. It’s broke today. Indeed, it may well be in worse fiscal shape than any developed country, including Greece.

‘This declaration of national insolvency will, no doubt, shock those of you who use the officially reported federal debt as the measuring stick for what our country owes. After all, federal debt in the hands of the public is only 74 percent of the GDP. Yes, this is double the debt-to-GDP ratio recorded a decade ago. But it’s still a far cry from Italy’s 135 debt-to-GDP ratio or Greece’s 175 percent ratio.

‘Unfortunately, the federal debt is not an economic measure of anything, including our nation’s fiscal position. Instead, the federal debt and its annual change, the deficit, are purely linguistic constructs that reflect how you members of Congress choose to label government receipts and payments.’

Nothing like hitting them straight between the eyes!
Kotlikoff told the US Senate committee what those of us with even a passing interest in the economy already knew…the data is BS.
Pure spin, deliberately doctored not to frighten the masses. They want you dumbed down. Keep working. Keep paying taxes. Keep spending. Keep borrowing. Ah, but will the political class keep their promises? Do I really need to answer that for you?
Let’s continue with the Good Professor’s candid address to the (clueless) Senators.

‘Spending six decades raising or extending transfer payments and cutting or limiting taxes helped members of Congress get re-elected. But it has placed our children and grandchildren under a fiscal Sword of Damocles that gravely endangers their economic futures.’

For 60 years, politicians of all persuasions have increased or extended transfer payments — this is economic speak for ‘welfare payments’ — while at the same time reducing the taxes that are needed to fund the increased social security largesse.
Decrease your income and increase your expenses. What idiot thought of this? A politician who wants to get re-elected. To hell with tomorrow, this is all about getting the snout in the taxpayer trough today.
Well, tomorrow has arrived. Our children and grandchildren are expected to pay for this overpromise with higher taxes, longer working lives, and no expectation of ever receiving what their parents and grandparents have come to expect as a given…an age pension.
I’m not so sure future generations are going to take too kindly to honouring an arrangement they had no say in. Here’s Professor Kotlikoff again: ‘…a positive fiscal gap means the government is attempting to spend, over time, more than it can afford...’
What’s the size of the financial albatross around the necks (‘fiscal gap’) of future generations in the US?
Professor Kotlikoff has done his own numbers and puts them into context:

‘The U.S. fiscal gap currently stands at $210 trillion. This figure is my own calculation based on the Congressional Budget Office’s July 2014 75-year Alternative Fiscal Scenario (AFS) projection.

‘The size of the U.S. fiscal gap — $210 trillion — is massive. It’s 16 times larger than official U.S. debt, which indicates precisely how useless official debt is for understanding our nation’s true fiscal position.’

By now you’d hope the Senate Committee is feeling a little uncomfortable about the liability the ‘as-yet-unborn’ are going to inherit due to the decades of political vote-buying shenanigans.
To bring home the enormity of the task confronting those charged with balancing the books, Laurence the Brave hit them with this:

‘What’s Needed to Close the Fiscal Gap?

‘Our $210 trillion fiscal gap represents 58 percent of the present value of projected future taxes. Hence, eliminating the fiscal gap via tax hikes requires an immediate and permanent 58 percent hike in federal taxes. Stated differently, the overall federal government is 58 percent underfinanced.’

A 58% hike in taxes — TODAY (that was back in February 2015) — is what’s required to finance decades of overpromise.
Needless to say, the tax rates have not increased.
The Australian government’s 2010 ‘Intergenerational Report’ shows we are on the same fiscal gap path as the US.

Source: Intergenerational Report
[Click to enlarge]

To quote from the report (emphasis mine):

‘Population ageing will increase spending on health, age-related pensions and aged care.

‘Escalating health costs associated with technological enhancements, such as new medicines, and increasing demand for higher quality services, will add to fiscal pressures from ageing.

‘At the same time, slowing economic growth as a result of an ageing population will reduce the capacity of Australia to fund this increasing spending.’

Whether Britain leaves the Eurozone, or one of Hillary and Donald occupy the Oval Office, or Bozo the Clown becomes our next PM (and no snide remarks here about that being a quantum leap forward in political leadership), it matters little to what’s important to you…funding your retirement.
The numbers are baked into the cake, irrespective of whose backside shines the ministerial leather.
Either future generations agree to a substantial increase in taxes to pay for something they never had a say in (and will never)…or future generations are going to wrest control of the fiscal ‘Sword of Damocles’ and use it to slash age pension entitlements…or we could see a bit of both.
My money is on the age pension being pared back substantially in the coming years and decades. This won’t happen tomorrow, but, after 2020 (only a few years away), tougher measures will be introduced.
Knowing this is coming is why you need to move into retirement with as much capital as possible. Which means that avoiding the next, potentially catastrophic, market correction should be paramount for anyone who’s within 15 years of receiving the gold watch.
What’s building within the system is a social disaster in the making. You need to make your own plans to ensure you are prepared for the time when overpromise is replaced by under-delivery.
For anyone interested in reading Professor Kotlikoff’s address, here’s the link.
Regards,
Vern Gowdie,
For The Daily Reckoning

After the Election Debacle :))

To the Citizens of the United States of America                A message  from Her Sovereign Majesty Queen Elizabeth II

In light of your failure in recent years to nominate competent candidates for President of the USA and thus to govern yourselves, we hereby give notice of the revocation of your independence, effective immediately. (You should look up 'revocation' in the Oxford English Dictionary.)

Her Sovereign Majesty Queen Elizabeth II will resume monarchical duties over all states, commonwealths, and territories (except North Dakota, which she does not fancy).

Your new Prime Minister, Theresa May, will appoint a Governor for America without the need for further elections.

Congress and the Senate will be disbanded. A questionnaire may be circulated next year to determine whether any of you noticed.

To aid in the transition to a British Crown dependency, the following rules are introduced with immediate effect:

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1. The letter 'U' will be reinstated in words such as 'colour,' 'favour,' 'labour' and 'neighbour.' Likewise, you will learn to spell 'doughnut' without skipping half the letters, and the suffix '-ize' will be replaced by the suffix '-ise.' Generally, you will be expected to raise your vocabulary to acceptable levels. (look up 'vocabulary').

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2. Using the same twenty-seven words interspersed with filler noises such as ''like' and 'you know' is an unacceptable and inefficient form of communication. There is no such thing as U.S. English. We will let Microsoft know on your behalf. The Microsoft spell-checker will be adjusted to take into account the reinstated letter 'u'' and the elimination of '-ize.'

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3. July 4th will no longer be celebrated as a holiday.

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4. You will learn to resolve personal issues without using guns, lawyers, or therapists. The fact that you need so many lawyers and therapists shows that you're not quite ready to be independent. Guns should only be used for shooting grouse. If you can't sort things out without suing someone or speaking to a therapist, then you're not ready to shoot grouse.

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5. Therefore, you will no longer be allowed to own or carry anything more dangerous than a vegetable peeler. Although a permit will be required if you wish to carry a vegetable peeler in public.

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6. All intersections will be replaced with roundabouts, and you will start driving on the left side with immediate effect. At the same time, you will go metric with immediate effect and without the benefit of conversion tables. Both roundabouts and metrication will help you understand the British sense of humour.

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7. The former USA will adopt UK prices on petrol (which you have been calling gasoline) of roughly $10/US gallon. Get used to it.

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8. You will learn to make real chips. Those things you call French fries are not real chips, and those things you insist on calling potato chips are properly called crisps. Real chips are thick cut, fried in animal fat, and dressed not with catsup but with vinegar.

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9. The cold, tasteless stuff you insist on calling beer is not actually beer at all. Henceforth, only proper British Bitter will be referred to as beer, and European brews of known and accepted provenance will be referred to as Lager. South African beer is also acceptable, as they are pound for pound the greatest sporting nation on earth and it can only be due to the beer. They are also part of the British Commonwealth - see what it did for them. American brands will be referred to as Near-Frozen Gnat's Urine, so that all can be sold without risk of further confusion.

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10. Hollywood will be required occasionally to cast English actors as good guys. Hollywood will also be required to cast English actors to play English characters. Watching Andie Macdowell attempt English dialect in Four Weddings and a Funeral was an experience akin to having one's ears removed with a cheese grater.

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11. You will cease playing American football. There is only one kind of proper football; you call it soccer. Those of you brave enough will, in time, be allowed to play rugby (which has some similarities to American football, but does not involve stopping for a rest every twenty seconds or wearing full kevlar body armour like a bunch of nancies).

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12. Further, you will stop playing baseball. It is not reasonable to host an event called the World Series for a game which is not played outside of America. Since only 2.1% of you are aware there is a world beyond your borders, your error is understandable. You will learn cricket, and we will let you face the South Africans first to take the sting out of their deliveries.

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13.. You must tell us who killed JFK. It's been driving us mad.

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14. An internal revenue agent (i.e. tax collector) from Her Majesty's Government will be with you shortly to ensure the acquisition of all monies due (backdated to 1776).

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15. Daily Tea Time begins promptly at 4 p.m. with proper cups, with saucers, and never mugs, with high quality biscuits (cookies) and cakes; plus strawberries (with cream) when in season.

God Save the Queen!

PS: Only share this with friends who have a good sense of humour (NOT humor)!

People Power and Politiics

An interesting article by Gerald Celente of New York, for the Daily Reckoning, Australia.

Donald Trump and the Rise of ‘People Power’
By Gerald Celente in New York, US
Last night we saw a red, white and blue living-colour freak show.
Did last night’s circus resolve anything? Is this the best our democracy can do? And more importantly, is Establishment politics dying?
Whatever you think of Donald Trump, his candidacy is one big middle finger to the Establishment. It’s part of the worldwide rise of ‘People Power’.
The People Power trend, while at a ripe old age in nations such as Switzerland — one of the wealthiest, most democratic countries in the world, where its people vote on issues that affect their lives and livelihoods, and not political parties — is now growing globally.
Direct Democracy, anathema in the US, the Land of the Free, where the two-party Congressional Gang of 535 runs and rules the lives of 320 million citizens, found new life in Mother England when the people voted to put their future in their own hands.
In a stunning upset to the status quo, on 23 June, by a 52 to 48 percent majority, United Kingdom citizens voted to leave the European Union, despite pressure from world leaders and higher financial authorities telling them to remain.
From President Obama to Japanese Premier Shinzo Abe, from International Monetary Fund Managing Director Christine Lagarde to Wall Street’s biggest and boldest…dire warnings of end-of-world consequences were issued if the public voted to leave the holy altar of the almighty, infallible European Union.
Beyond the UK’s Brexit, there is widespread disgust with the entrenched ruling parties that have been running most European nations since the end of the Second World War and the centralised control from a supranational Brussels bureaucracy.
Among the key elements that the ‘Leave’ campaign tapped into is the anti-establishment current spreading throughout Europe.
For example, in a paper co-authored by Will Jennings, a professor of politics at the University of Southampton, wrote, ‘Citizens now describe their “hatred” for politicians who made them “angry”, “incensed”, “outraged”, disgusted’ and sickened.’
He said the words used to describe politicians are arrogant, boorish, corrupt, creepy, devious, loathsome, lying, parasitical, pompous, shameful, sleazy, slippery, spineless, traitorous weak and wet. (Financial Times, 16 June 2016).
Thus, the People Power trend — fuelled in Europe by the growing contempt for the ruling elite, the loss of power of national governments to centralised powers, high unemployment, falling wages and a declining standard of living blamed on globalisation — is fuelling Direct Democracy movements across the continent.
Immediately following the Brexit vote, several populist European parties pledged to launch referendums to ‘leave or remain’ in the 28-member EU bloc. Politician Geert Wilders, leader of the Dutch Party for Freedom, called the Brexit vote ‘historic’ and said, ‘Now it’s our turn. I think the Dutch people must now be given the chance to have their say in a referendum.’
And, with polls showing that more than 40% of Brexit supporters cited immigration as the most important factor in deciding how to vote — blaming cheap migrant labour for the loss of jobs and human waves of refugees and migrants for a loss of national identity — ‘keep them out’ anti-immigration movements will intensify throughout Western nations.
For example, on 2 October, Hungary will hold a referendum to reject European Union quotas demanding they accept refugees.
While the current take-back-their-country referendum movements spreading across Europe are anti-Brussels super-state rule from bureaucratic overlords and disenchantment with career politicians, financial elites and an entrenched establishment, the Direct Democracy trend that will spread throughout advanced nations is bigger than Brexit.
Appropriately administered by putting ‘We the People’ in charge of our destiny, rather than obeying self-serving politicians and bloated bureaucrats that enrich the few at the expense of the many, Direct Democracy provides a blueprint for the revolutionary advancement of society.
Non-violent, intellectually and philosophically sound, emotionally empowering and potentially unstoppable, ‘In due time, the voice of the people will be heard and their latent wisdom will prevail,’ Thomas Jefferson wrote.
However, as illustrated by my dear friend Thomas Naylor, may his soul rest in peace, depending on the size and composition of nations, there are formidable challenges that must be addressed. In assessing the pros and cons of Direct Democracy in the US, in part he wrote:

‘Switzerland is a tiny, well-educated, hard-working country with a strong sense of community. The United States is not Switzerland.
‘For starters, retrofitting the U.S. Constitution and legal system to accommodate Direct Democracy would require the expertise of a plethora of constitutional scholars and legal experts. For those legal scholars and political scientists up to the challenge of designing such a complex system, courage and dedication will be required.
‘A process would also have to be developed to bring important issues to the table for consideration by a nationwide referendum. And then there is the matter of the computer network and software required to make Internet voting work. Although introducing Direct Democracy into the United States sounds like a very good idea, it would involve a number of conceptual, legal, constitutional, economic, technical and political challenges. Such a move would require bold, creative leadership combined with world-class marketing skills.
‘But the alternative is a nation whose government has lost its moral authority and is tightly controlled by a self-serving military/industrial/congressional complex accountable only to itself — a nation that has become unsustainable economically, militarily, socially, environmentally and politically. The United States is so large that it may no longer be governable and has possibly become unfixable.
‘If there is a way out of our nation’s death spiral, Direct Democracy just might be one of our last remaining viable options. We could do a lot worse than emulate the Swiss.’

Naylor founded the Second Vermont Republic and was professor emeritus of economics at Duke University. Naylor co-authored Affluenza, Downsizing the USA and The Search for Meaning.
Naylor’s points are valid. There will be legal hurdles to jump and political obstacles erected that must be overcome. It will take passion and persistence to push the movement forward.
One path of progress in establishing a Direct Democracy is to redesign current antiquated systems with modernised 21^st-century online voting. While opponents of Direct Democracy will contend that online voting can be subject to hacking and fraud, it can be far less susceptible than the current stuffing of ballot boxes or rigging of voting machines.
In fact, voting online, with full transparency, would prove more secure than any polling place run by party operatives. Indeed, we bank online and buy online; surely we can vote online!
With fast-accelerating advancements in technology, from artificial intelligence to virtual reality, the only obstacles to online voting are the people’s will to make it happen versus the politicians and special interests benefiting from the current corrupt system.
Indeed, the so-called representative democracy form of government we adhere to in the West is a hoax…a cruel sham, a bone thrown to the proles following the overthrow of the aristocracies of the 18^th, 19^th and 20^th centuries that gulled the public into believing members of political parties represent their interests…while, as abundantly evidenced with spreading populist movements and the Brexit vote, a vast majority recognise that the current political systems serve special interests, not public interests.
Realistically, can Direct Democracy and online voting become reality? ‘It does not take a majority to prevail…but rather an irate, tireless minority, keen of setting brushfires of freedom in the minds of men,’ said Samuel Adams. Never in modern history have the trend lines for People Power — the freedom of a collective society to shape its destiny rather than living under the dictates of political gangs — been clearer.
As proven by Brexit, (agree or disagree with the vote), the ‘brushfires of freedom’ were not set by ‘an irate tireless minority,’ but rather an irate anti-establishment, anti-status quo, anti-elite, anti-centralised power, anti-globalisation MAJORITY.
And win or lose, and for all his faults, Donald Trump represents the awakening of American ‘People Power’.
Regards,
Gerald Celente,
For The Daily Reckoning, Australia

The Duality of Humanity

A Short Essay (1500 words)

Michael J. Bull 2016.

Introduction

There has been much written about the nature of human beings, encompassed by literature from science, religion and philosophy, and which often refers to the idea of the duality of humans as 'body' and 'spirit'. A discussion of the spiritual side of humanity has rarely been written which leaves out the factor called “belief”, at which point the logic which is associated with scientific method is lost, and the analysis is moved into pseudo-science and not acceptable in scientific circles.

The Body

The definition of body is obvious as the body is the physical part of humans and can be measured, studied, chemically defined and its operation can be monitored and corrected when necessary. That is the focus of modern Western medical research and practise. Eastern and indigenous medicine appears to place emphasis on a more holistic approach which includes both body and spirit by utilising the healing power of the mind in addition to medicines for the body. The role of the mind is not clearly defined. It seems to be the major controller for the body while connecting with the non-physical side, or consciousness, as well.

The Spirit

The spiritual side of humanity is described by numerous religions, but the logic of medical science does not accord with the religious analysis in many cases due to the absence of scientific evidence. The bridge between the two is often resolved as “faith” or “belief” by religion.

The question is whether the physical body and the non-physical spirit can be demonstrated as a credible duality which makes a 'whole' human.

Life Force

The most obvious non-physical attribute of humans, and indeed all life, is, for the want of a better term, called the 'life force' and has the attributes of being able to maintain, repair and reproduce the physical body. Upon bodily death, that energy is lost to the body and it rapidly decays into simpler chemical compounds. A long held tenet of physics states that 'energy can be neither created or destroyed'. While it is not known where life force energy goes at bodily death, it's existence is logically and observationally impossible to deny.

An Experiment

If one were to view (as a thought experiment) the Universe from outside it, as an expanding bubble set within a matrix which is unknown and not visible to us, it might appear as a bubble within which everything was in motion. All of matter, micro and macro and its energy, moves relative to every other part of matter and energy. This may be a fair description of the galaxies, stars, planets, atoms, particles and their related energies and motions as we see them. From our position within the Universe, we measure motion using an invisible and abstract concept which we call Time. Mathematics indicates that the concept of time has a variability with respect to motion, as outlined by the Theory of Special Relativity. Quantum mechanics' Uncertainty Principle, which states that the velocity and location of a particle cannot be known simultaneously, supports the above variability of time as calculated by Einstein's Special Relativity Theory. In this context from within the universe, it is motion which defines time, not time which defines motion.

A summary of the above observation is that time is not apparent without a change (caused by motion). It is that change which defines time rather than time defining the change. In terms of physics, change is called 'entropy' and it is therefore entropy which defines time. From our point of observation within the universe, entropy (change) moves only from a state of order to a state of increasing disorder (as stated by the Laws of Thermodynamics), and that is why time appears unidirectional to us.

Entropy in Reverse

It can be strongly argued that the coalescence of random clouds of gas in space into the formation of stars is normal entropy in reverse, with matter moving from a state of disorder and random motion to a more ordered state. The fusion of simple hydrogen into more complex atomic structures as happens within a star seems to support the reverse entropy hypothesis. If that is the case, then that process by extension, constitutes a reversal of the 'arrow of time'. It also suggests how the universe could be returned to the 'singularity' which is thought to have preceded the 'big bang', or the birth of our universe. Entropy has been considered only to move in one direction, as has time. The birth of a star may be visual evidence of the reversal of entropy, and therefore the reversal of time. The concept of the linearity of time is one which is difficult to move away from, as evidenced by confusion when considering quantum entanglement.

Returning to the universe 'bubble' concept in the thought experiment, if one could observe the universe from outside it then the existence of motion within would be apparent, but would that mean that the motion observed is an agent of change?

An Analogy

Put another way, by analogy, if one were to stand under (or in) a waterfall, the motion and energy of the waterfall would be real and apparent. If one were to observe the waterfall from a distance, outside of it, the motion of the water is observable but the waterfall does not change as a whole. It will look the same tomorrow as it does today. Then, observation of motion from outside of a closed system (the bubble) yields a different result to an observation from within that closed system. If motion is not causing change, then time is not apparent. The conclusion is that beyond the three dimensional limits of the material universe, time may not exist. Time may exist only where motion causes change, and therefore time is a product of change rather than of motion.

Time

The implication of these observations may be that a dimension which does not form a part of the material universe is independent of time. Such a dimension may include consciousness or the concept of a spiritual dimension, which many believe exist but do not understand through 'rational provable science'. The idea of timelessness has been a part of these concepts from all cultures on earth. Perhaps the foregoing may point to a basis within physics for the existence of timelessness.

The apparent irreversibility of entropy (and time) when considering the nature of the universe from within it, has a limiting effect on the ideas that can be considered as possible, moving many of these to the realm of science fiction. An example of this is the phenomenon of quantum entanglement, which does not seem possible from the view available from within the universe. The ability to consider an idea arising from an observation of the universe from outside its limits enhances its inclusion in that which is possible.

Beyond the Physical

The ability to consider an idea arising from an observation of the universe from outside its limits is, in itself, a demonstration that our consciousness exists outside of the material universe, and outside of time. It would not otherwise be possible to observe the universe from outside it in a thought experiment. In can then logically be concluded that if we, as a material part of the universe, also possess a consciousness which is not a part of the material universe then we are a composite of both. That is the same idea which underlies the metaphysics which is called spiritualism. There are many differing views and 'beliefs' about the subject of spiritualism, but nearly all have that dualism of material and non-material in common, and a link between life and other life by a non-material commonality. The question of an 'afterlife' has been pondered by man from antiquity. There is no doubt that our material self returns to the earth. The question is what happens to the non-material part of the self, the life force, and whether it survives, changes form or returns anew.

The 'quantum leap' that science has yet to make is perhaps the recognition of the link between Physics and Metaphysics. That link, it can be argued, exists through the exploration of ideas related to time and entropy, as outlined above. Time and entropy are both areas thought by many to have no further possibilities for expansion of understanding. This essay is written to question that view and show that there may be a link between Physics and Metaphysics which can withstand logical scientific scrutiny without the need for “belief” to bridge that gap. A change in perception opens new possibilities to enhance understanding. That has always been the case in science.

Michael Bull is a student of physics, art and some of the other sciences and humanities. He sees that a balanced knowledge must consider the findings of all of these different disciplines. He has written a number of articles, including those published in New Dawn Magazine. His blog is at michaeljbull.blogspot.com (physics); mjbull.blogspot.com (art).

 

Globalisation and Skullduggery

Another article from Jim Rickards on the deceit and stupidity of the global economy.

Get Ready for ‘Unencumbered’ Interest
Rate Policy
By Jim Rickards, Strategist, Strategic Intelligence
‘A promise is a comfort for a fool.’ — Proverb.
Janet Yellen’s recent speech at Jackson Hole, Wyoming, was eagerly awaited, and a complete non-event. The headlines were dominated by breathless accounts of Janet Yellen’s speech at a Federal Reserve conference in Jackson Hole.
The robot scanners read the speech first; it took a while for humans like me to catch up. But I’ve since had the chance to digest it. What was striking about the speech was how ordinary it was. As I predicted she would, she threw a bone to the hawks, saying ‘the case for an increase in the federal funds rate has strengthened,’ and then threw another bone to the doves: ‘As ever, the economic outlook is uncertain, and so monetary policy is not on a preset course.’ She also talked about ‘data dependence’ etc., and then went to lunch.
The conference at which the speech was delivered was titled ‘Designing Resilient Monetary Policy Frameworks for the Future’. That title at least suggested that some new thinking and new policies might be on display. They weren’t.
Yellen basically said that interest rate cuts, quantitative easing, interest on excess reserves and forward guidance were sufficient to pull the US economy out of a future recession if needed.
In short, Yellen said the Fed’s existing toolkit is adequate, and is unwilling to consider more radical tools or remedies. If you like weak growth, money printing and market manipulation, get ready for more of the same.
She took negative rates off the table — she said they were ‘impossible’. She also agreed that ‘helicopter money’ — really fiscal policy supported by Fed bond purchases to finance deficits — could be useful, but made it clear that it was up to Congress to implement that and the Fed would not lead the charge.
Investors should ignore Fed noise. But that doesn’t stop markets from overreacting to every syllable of Fedspeak. Gold investors just have to live with day-to-day volatility until the world finally realises that central banks are impotent and can safely be ignored in favour of global macroeconomic fundamentals.
Does this mean Jackson Hole was a non-event for gold investors?
Not at all.
Yellen was not the only one speaking there. Another major speech was by an economist named Marvin Goodfriend, from Carnegie Mellon University. His speech was called ‘The Case for Unencumbering Interest Rate Policy at the Zero Bound’.
In essence, the Goodfriend speech was about negative interest rates — and just because Yellen doesn’t like them now, it doesn’t mean they’re not coming in the future. That negative rate idea has been around for a few years. But Goodfriend’s focus was to promote ‘unencumbered’ negative interest rate policy, which means getting rid of things standing in your way.
Specifically, the No. 1 thing standing in the way of negative rates is cash.
If citizens can go to cash, that makes it difficult to impose negative rates on digital bank accounts. That’s also not a new insight. The war on cash has been going on for a while, and prominent economists, from Larry Summers to Ken Rogoff, have called for an end to cash. Rogoff did so just recently, in a front-page article in the ‘Review’ section of The Wall Street Journal.
What is new in all of this are ideas that Goodfriend presented to the Fed to neutralise the role of cash. His preferred way is just to ‘abolish paper currency’, as his paper outlines in Section 5A. But then Goodfriend laments that ‘the public is likely to resist the abolition of paper currency.’ He’s right about that.
So Goodfriend comes up with a new concept called the ‘flexible market-determined deposit price of paper currency.’ Seriously, I’m not making this up; you can find it in Section 5B of his paper.
In plain English, this means the ‘money’ in your bank account, and the ‘money’ in your purse or wallet, would be like two different kinds of currency. There would be an exchange rate between the two, just as there is an exchange rate between dollars and euros. The Fed could set this exchange rate at whatever level it wanted and would not be obligated to ‘defend’ that rate at any particular level.
What this means is that, if you go to the bank and withdraw US$1,000, the bank might only give you US$980 in cash because of the ‘exchange rate’ between your bank account and cash. Or if you deposit US$1,000 in cash, the bank might only credit your bank account US$980 because of the same ‘exchange rate’ between your cash and the bank account balance.
In short, it’s a way to impose negative interest rates on physical cash.
It’s true that Goodfriend is an academic, and not a policymaker. But Yellen and other Fed bigwigs like William Dudley and Stanley Fischer were sitting in the audience. In my experience, this is how things start. Some ivory-tower academic writes about a policy proposal.
A few other ivory-tower academics and beltway think tanks take the idea and run with it. Then one of those academics gets appointed to a policy position. The next thing you know, the policy is in effect.
That’s how I saw SDRs coming years in advance, and that’s how I see the war on cash coming now.
That’s why I also see a war on gold…
Curiously, academic policymakers have spent so many years disparaging gold they seem to have forgotten that gold is money. Once the war on cash heats up — and certainly when that war is in full swing, out in the open — people everywhere will turn to gold as an alternative form of money. And then, once policymakers see the massive shift to gold, they will launch a war on gold also.
So my advice to people interested in gold is this: Get it now while you still can. What are you waiting for?
But it’s not just the government and banks that are doing everything they can to make it impossible for you to get your own money in the form of cash. Now they have a new partner — big business! It seems that businesses have their own war on cash. They hate handling it, and it’s expensive to transport, store and insure. More and more, businesses are refusing to take your cash.
This is just another form of discrimination against the poor who may not have banking accounts, or who rely on cheque cashing services and live pay cheque to pay cheque. It’s also aimed at you because it forces you into a digital system where your money can be hit with negative interest rates, service fees, account freezes, bail-in charges and other forms of theft.
When pigs are going to be slaughtered, they are first herded into pens for the convenience of the slaughterhouse. When savers are going to be slaughtered, they are herded into digital accounts from which there is no escape.
The war on cash may be a losing battle for you and me, but there is still shelter in physical gold, silver, land and other hard assets.
The key defensive play is to obtain your gold now, while you still can, before the war on gold begins.
As this realisation sinks in, it will create more demand for physical gold, which is already in short supply. That demand-driven tailwind for physical gold will take gold mining stocks much higher.
These scenarios are more disturbing, and the tempo more rapid, than I imagined just a short time ago.
The time to position yourself in gold and gold miners is now; don’t wait. Regards,
Jim Rickards,
For The Daily Reckoning

More on Globalisation and your Wealth

An interesting article by Bill Bonner - Phony Money.

Get Ready for a New Crisis…in Corporate Debt
By Bill Bonner in Ouzilly, France
We’re going back to basics here at the Diary.
We’re getting everyone on the same page…learning together…connecting the dots…trying to figure out what is going on.
We made a breakthrough when we identified the source of so many of today’s bizarre and grotesque trends.
It’s the money — the new post-1971 dollar.

Imposter dollar

This new dollar is green. You can buy things with it.
Yes, it has lost more than 80% of its buying power since it was put in place.
But still, it’s not so bad.
Compared with the Argentine peso (current inflation rate: 47% a year), it is splendidly solid.
But the new dollar is an imposter. The old one was connected to gold at a fixed rate. And gold was anchored in the real economy.
The new dollar has no gold backing.
Billionaire investor Warren Buffett believes it’s silly to pay someone to take gold out of the ground…and then put it back in the ground and pay someone to guard it for you.
But Buffett misses a vital point: Real money is essential to building real wealth.
It’s what makes the economy operate smoothly. It helps us all decide when to buy and when to sell…when to invest and when to refrain from investing…and where to apply our scarce time and resources.

Real money, real value

Real money has real value.
Gold-backed money increased about as fast as the mining industry could extract gold from the ground — which was about the same rate as the economy was growing.
So, when people got more money, they had a claim on more real wealth.
But the new money was phony.
Governments and banks could add as much of this new money as they wanted. But it did not create or even track real wealth; it just took it away from those who owned it.
It was as if Baltimore Orioles owner Peter Angelos tried to increase attendance at Oriole Park by printing extra tickets.
Like a counterfeit ticket to a baseball game, the new money didn’t magically add a new seat to the stadium.
The Fed made funding readily available to the banks…and the banks lent lustily to their customers.
Each new bank loan created money that hadn’t existed before. Out of thin air. No additional wealth attached. Just credits.
That’s why some economists call this new system ‘Creditism.’ Because the new money is no longer based on real wealth, but on credit.
And the flip side of credit is debt.
You can see the problem already. There’s no limit to how much real money you can have. Each additional dollar represents additional wealth.
Credit money is different.
With credit, you know you can increase your spending dramatically. But you know, too, that there is a limit to how much you can borrow.
Eventually, you reach a point where you don’t have the cash flow to service the interest on your debt. Then it’s time to open the book to chapter 7. Or chapter 11. You are insolvent.

New credit crisis

With real money, the more you have, the richer you become.
But as the quantity of credit money increases, the economy becomes more and more vulnerable to a turn in the credit cycle.
As the quantity of debt increases, the quality decreases. That’s what’s happening with corporate debt now.
You’ll recall that, since 2008, corporations have been big borrowers. According to analysts at Goldman Sachs, corporate America has more than doubled its debt since the collapse of Lehman Brothers.
And that’s a big problem…
Here’s Michael Lewitt, editor of The Credit Strategist newsletter:

‘As of the end of August, 113 companies had defaulted on their debt in 2016, already matching the total number of defaults from 2015. The year-to-date default count was also 57% higher than a year earlier.
‘In case anyone is paying attention (it appears they are not), the last time defaults were this high was in 2009 when 208 companies failed during the financial crisis.’

Yes, get ready for a new credit crisis — this time centred on corporate debt.
‘But wait,’ you say, ‘the feds can print money. They can make sure we never again suffer a credit crisis. Right?’
Alas, no. They can’t create real money. They can only issue more tickets for seats that don’t exist. That is, they can only make the underlying problem worse, by lending more money to more people who can’t pay it back.
The first big crack in the credit money system came in 2008, when a giant fissure broke open between mortgage debt and homeowners’ ability to pay it.
House prices fell. One in 20 houses was in foreclosure by 2010…and the suicide rate had risen 20%.
And here’s the big, dirty secret of the system…and why the rich love it so much…and why they’re giving millions to Hillary Clinton to keep it going.

First in line

When the housing bubble popped, about $800 billion (our estimate) worth of housing went into foreclosure.
Houses are real assets. When owners couldn’t pay, the houses went to the banks that had lent the money against them.
These banks hadn’t built the houses. They never owned them. They never earned the money that they lent to buy them either.

Nor did the money come from savers who had deposited their money in the bank. It was money that no one ever earned. It was fiction.
But this didn’t stop banks using this fake money to capture real wealth — our houses.
And this is how the rich — heavily concentrated in the financial sector— get richer, thanks to the new credit money system.
It increases the values of their stocks, bonds, and real estate (thanks to low interest rates and Fed buying).
It increases corporate profits, too, by lowering financing costs (and incidentally reducing returns to savers) and by boosting credit-fuelled retail sales.
Most important — the rich are first in line when the counterfeit tickets are distributed.
Then you go to the stadium…and you find them sitting in your seats.
Regards,
Bill Bonner,
For The Daily Reckoning, Australia

Globalisation and your Wealth

 An interesting article from 'The Daily Reckoning' written by Jim Rickards. It makes one despair for the younger generations' welfare in the future. The financial Elites need to be stopped.

How Governments Can Kill Cash
By Jim Rickards, Strategist, Strategic Intelligence
It’s almost as if someone hit the ‘start’ button right around April 11 — the beginning of IMF Spring Meeting week — and the elites have been cranking out the inflation plans ever since.
Of course, inflation is just one part of the global elite plan. There’s a lot else going on that is aimed at destroying your wealth to solve the global debt problem.
We write about these developments in Strategic Intelligence. Here’s a quick overview to give you the picture.
The inflation plans described above may take a few years to implement. The elites are discussing them now to condition the intellectual environment for action later. Still, developments such as actual changes in fiscal deficits and issuance of more special drawing rights (SDRs) will take time.
In the meantime, the global elites are using negative interest rates to do the same thing as inflation — make your money disappear. One way to avoid negative interest rates is to go to physical cash. In order to prevent that option, the elites have launched a war on cash.
The war on cash has two main thrusts. The first is to make it difficult to obtain cash in the first place. US banks will report anyone taking more than US$3,000 in cash as engaging in a ‘suspicious activity’ using Treasury Form SAR (Suspicious Activity Report).
It is the same in Australia. Any transactions over AU$10,000 must be reported to Australian Transaction Reports and Analysis Centre (AUSTRAC).
The second thrust is to eliminate large-denomination banknotes. The US got rid of its US$500 note in 1969, and the US$100 note has lost 85% of its purchasing power since then.
With a little more inflation, the US$100 bill will be reduced to chump change.
The war on cash is old news, but there are new developments. On 4 May 2016, the European Central Bank announced that they were discontinuing the production of new 500 euro notes. Existing 500 euro notes will still be legal tender, but new ones will not be produced.
This means that, over time, the notes will be in short supply and individuals in need of large denominations may actually bid up the price above face value paying, say, €502 in smaller bills for a €500 note. The €2.00 premium in this example is like a negative interest rate on cash.
The whole idea of the war on cash is to force savers into digital bank accounts, so their money can be taken from them in the form of negative interest rates. An easy solution to this is to go to physical cash.
Yet if physical cash becomes scarce — or nearly worthless due to inflation — savers may pay a slight premium for large-denomination notes. Your premium disappears because the note pays no interest. The elites have actually figured out a way to have negative interest rates follow you from digital accounts to paper money.
Another solution to negative interest rates is to buy physical gold. But if the government has a war on cash, can the war on gold be far behind? Probably not.
Governments always use money laundering, drug dealing and terrorism as excuses to keep tabs on honest citizens and deprive them of the ability to use money alternatives such as physical cash and gold. When you start to see news articles about criminals using gold instead of cash, that’s a stalking horse for government regulation of gold.
Guess what? Back in May 2016, Bloomberg wrote an article on criminals using gold. This is one more reason to get your physical gold now, while you still can.
As if inflation, confiscation, and negative rates weren’t enough, the global elites are coordinating a new plan for global taxation. As usual, there’s a technical name for global taxation so non-elites won’t understand the plan. It’s called base erosion and profit shifting, or ‘BEPS’.
The BEPS project is being handled by the OECD and the G-20, with the IMF contributing technical support.
The website is worth a look. To paraphrase that famous line attributed to Trotsky, ‘You may not be interested in BEPS, but BEPS is interested in you.’
The global elite plan doesn’t stop there. There’s also the climate change agenda led by the United Nations. This agenda goes by the name United Nations Framework Convention on Climate Change (UNFCCC).
The science of climate change is a sticky topic. It’s enough to know that climate change is a convenient platform for world money and world taxation.
That’s because climate change does not respect national borders. If you have a global problem, then you can justify global solutions. A global tax plan to pay for global climate change infrastructure with world money is the end game.
Don’t think that climate change is unrelated to the international monetary system. Christine Lagarde almost never gives a speech on finance without mentioning climate change. The same is true for other monetary elites. They know that climate change is their path to global financial control.
That’s the global elite plan. World money, world inflation and world taxation, with the IMF as the central bank of the world, and the G-20 Leaders as the Board of Directors.
None of this is secret. It’s all hiding in plain sight.
All the best,
Jim Rickards,
Strategist, Strategic Intelligence