Gold News

Charlie's Credit-Fed War

How counterfeit capital found its way into every life and story of the last 44 years...
WE REPEAT our guess, writes Bill Bonner in this entry to his Diary of a Rogue Economist.
It will probably take a real crisis in the stock market to bring the Fed back into the QE business. Then we'll see the real fireworks of a bubble market.
In the meantime, money changes hands in a world filled with economists, central banks, newspapers and TV. What people believe about it, and what they see and hear, affects what they think of the money in their pockets and what they do with it.
We have noted how far the post-1971 credit machine has reached – even into the editorial meeting of a scurrilous Parisian satire rag.
Two Muslims, radicalized by the Pentagon's credit-funded wars in the Middle East, murdered French cartoonists.
Previously, it was hard to give away a subscription to Charlie Hebdo. Now, people line up at kiosks to buy it...and single issues are offered on eBay for $2,000.
Our head spins.
We read our email. Many readers are skeptical. Are we blaming all the world's ills on the fiat money system?
No. Not all of them. But today's monetary ills?
Yes. Almost all are the fruit of the massive global credit bubble.
We have no useful advice regarding most of the world's malaises. There will always be murderers and fanatics. There will always be booms and busts. There will always be stupidity, corruption and Democrats. Bad music. Bad wine. Bad architecture.
Once we get started on the world's woes, we hardly know where to stop.
As for most of what happens on Planet Earth – or even in our own household – we know very little...and understand even less.
But we've been watching, studying and analyzing the world's monetary system for lo these many years. That, too, will never be completely understood by the mind of man. But there are parts of it that come into focus – like the outline of a distant island through the fog – that we can barely make out.
Our job is to tell you what we see. And what we see is a looming disaster.
The post-Bretton Woods monetary system – in which money, unanchored from gold, became a foggy concept...and the Dollar became a pure IOU from someone we don't know – is a fraud.
The Dollar is not real money. It represents no real work, savings or wealth. Civil servants can create it at will. As much as they see fit.
"Capital" is counterfeit, too – it often has no real resources behind it. It is nothing more than pieces of green paper. Or worse – the ghost of electrons passing through space.
And what about the saver?
He must think himself a fool. For all his self-discipline...his forbearance...his willingness to forgo immediate satisfaction in return for greater returns later...what does he get?
That, too, is the product of the credit bubble.
The authorities regard honest workers, savers and investors as chumps. The average American worker earns less than he did before the crisis of 2008 began.
And there are fewer workers. Sixteen million adults have been added to the US population over the last five years. The number of jobs, meanwhile, has fallen by 2 million.
And yet, the unbacked paper Dollar – the foundation of the entire world economy – is rising in value.
Can you believe it?
These new Dollars creep through the entire structure of the material world like kudzu along an Alabama highway. And now they strangle everything.
But we are rambling, raving and ranting, aren't we?
No. We are coming up to an important insight...and we are staggered by it.
Hardly anything has happened in the last 44 years that wasn't in some way perverted...or at least this strange new system.
You bought a house?
You enjoyed the credit offered by this new money.
Why was the house available at its price?
Because the entire system functioned on this new credit.
Where did you get the money to buy it?
Didn't that, too, come from the credit-financed economy?
Or should we talk politics?
We once worked alongside Grover Norquist (a long time ago)...trying to contain the growth of government.
First, we sued the government on behalf of America's children, claiming it was unconstitutional to bind young people to debt they had neither incurred nor enjoyed.
That suit was thrown out.
Then we tried to pass a constitutional amendment requiring balanced federal budgets. That came close to passage. But when Ronald Reagan was elected president our supporters melted away.
An amendment was no longer necessary, they believed; they had their man in the White House.
When that failed, Grover came up with "The Pledge." Aspiring members of Congress signed a promise. They would not vote for more taxes.
Grover believed that, if tax revenue could be denied to it, the government could be contained. But he had not reckoned on the credit bubble; it boosted incomes and capital gains, raising tax revenues for Washington.
And it made it possible for the feds to borrow at low rates, thereby making tax increases less important. Neither President Obama nor President G.W. Bush had to raise taxes to pay for their wars in the Middle East; they could borrow the money at ultra-low rates!
Easy money has made over the whole world economy in its own image.
What a sight it is!

New York Times best-selling finance author Bill Bonner founded The Agora, a worldwide community for private researchers and publishers, in 1979. Financial analysts within the group exposed and predicted some of the world's biggest shifts since, starting with the fall of the Soviet Union back in the late 1980s, to the collapse of the Dot Com (2000) and then mortgage finance (2008) bubbles, and the election of President Trump (2016). Sharing his personal thoughts and opinions each day from 1999 in the globally successful Daily Reckoning and then his Diary of a Rogue Economist, Bonner now makes his views and ideas available alongside analysis from a small hand-picked team of specialists through Bonner Private Research.

See full archive of Bill Bonner articles

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