Feeds:
Posts
Comments

Archive for the ‘Financial Markets’ Category

Jerome Powell, Federal Reserve Chairman.

“We print it [money] digitally.  So as a central bank, we have the ability to create money digitally. And we do that by buying Treasury Bills or bonds or other government securities.  And that actually increases the money supply.”

I probably shouldn’t be, but I often am, amazed an God’s providential timing in providing illustrations of points I plan to talk about.  As I’ve been thinking about this series of posts, I planned this week to write about the Fed and the process of money, more properly currency, creation. 

In one respect, the process the Fed uses to bring currency into being is fairly easy to grasp.  On the other hand, it is so obviously fraudulent that it shocks people when they hear about it. “That simply can’t be.” is, I think, a fairly common reaction. 

In the Lord’s providence, and quite apart from any planning by me, it so happened that Jerome Powell, the Chairman of the Federal Reserve, was interviewed on 60 Minutes last Sunday by correspondent Scott Pelley of CBS News.  You can watch the full interview and ready the transcript here.  In my opinion, Pelley did a good job asking important questions of Powell, especially concerning the process by which the Fed prints money.  At one point, Pelley asked Powell about the Fed’s response to the coronavirus (CV) crisis, and Powell ticked off a list of the Fed’s market interventions.  Here’s what was said next,

PELLEY: Fair to say you simply flooded the system with money?

POWELL: Yes. We did. That’s another way to think about it. We did.

PELLEY: Where does it come from? Do you just print it?

POWELL: We print it digitally. So as a central bank, we have the ability to create money digitally. And we do that by buying Treasury Bills or bonds or other government guaranteed securities. And that actually increases the money supply. We also print actual currency and we distribute that through the Federal Reserve banks.

There you have it.  The Fed chairman admitting on national television that the Fed creates money and uses it to buy, “Treasury Bills or bonds or other government guaranteed securities.”  He also noted that this activity, “actually increases the money supply.” 

What I would like to do in today’s post is to examine these statements – Powell’s saying that the Fed “creates money” and that this act “actually increases the money supply” – in greater detail.  Just how does the Fed create money and what are the effects of “increasing the money supply” on our daily lives? 

Read Full Post »

The_Phillip_Medhurst_Picture_Torah_122._Abraham_purchasing_Ephron._Genesis_cap_22_v_16._Hoet (2)

Abraham purchasing the cave of Machpelah from Ephron by Phillip Medhurst. Courtesy of Wikimedia Commons.

Abraham weighed out the silver for Ephron which he had named in the hearing of the sons of Heth, four hundred shekels of silver, currency of the merchants.

  • Genesis 23:16

In his lecture “Money, Freedom and the Bible,” John Robbins argued that the manufacturing of money was not a proper function of government, because there is no warrant for this in Scripture.  The Bible charges the civil magistrate with the duty to punish evildoers and reward the good.  There is no mention of anywhere in Scripture of God granting civil governments the right to manufacture money.

The first time I heard this many years ago, I was shocked by this idea.  “But all governments manufacture money,” I thought to myself.  “If the government didn’t supply money, who would?” I continued.

Of course, my initial objection can be answered by pointing out that simply because a thing is done does not logically imply that it ought to be done.  In the 18th century, David Hume famously made this point.

Secondly, concerning who would supply money in the absence of governments, the answer to this is the market would take care of this.  As Robbins noted in his lecture, there is such an example of this in Genesis 23, where Abraham pays for the field to bury Sarah by weighing 400 shekels of silver, “currency of the merchant.”  Note that it was not the currency of Pharaoh, nor the currency of the King of the Hittites that Abraham weighed out.  It was the currency of the merchants.  That is to say, it was a unit of money that arose from the common practice of the free market.  Importantly, it was not a government issued currency, neither was it the product of a government licensed central bank.

For that reason, that it arose in the marketplace and was privately managed by the merchants who used it, the shekel weighed out by Abraham was an honest unit of money.  The same cannot be said for sovereign currencies of our day.  Not only do they fail to maintain purchasing power, but they are deliberately designed to lose value over time.  To this author’s knowledge, there is not one honest currency in use today, including, and perhaps especially, the U.S. Dollar.

Last week’s post titled “This is Going to Hurt, Part 1: Honestly Facing our National Bankruptcy,” discussed the disastrous economic numbers coming out as a result of the government’s response to the coronavirus pandemic.  Please note, I did not write, “the disastrous economic numbers coming out as a result of the coronavirus pandemic,” but, “the disastrous economic numbers coming out as a result of the government’s response to the coronavirus pandemic.” It is not the Chinese coronavirus that caused over 30 million Americans to lose their jobs in the past six weeks, it is decision, more accurately decisions, of various government officials that have led to this disaster.

But oddly, as I also noted, the stock market has rebounded even as economic activity has made record declines.  How can this be?  The short answer to this question is money printing on a mind-blowing scale by the U.S. Federal Reserve, the central bank of the United States.

My purpose in this post is to lay out in non-technical language what a central bank is and what it does.  In subsequent posts, I shall illustrate the unbiblical, immoral nature of central banking by looking in detail at the origin, the workings and the disastrous effects Federal Reserve (the Fed) policy has had on our nation.

(more…)

Read Full Post »

Yahoo_Limit Down_2020_03_22_802pm

Yahoo finance reports US stock futures in ‘limit down’ status on Sunday, 3/22/2020.  Worth noting is Yahoo’s attribution of the crisis to the “coronavirus crisis.”  This is incorrect.  Our financial crisis is the responsibility of the Fed and those who justify and encourage its ungodly practices of debt creation, monetary debasement and bailouts.

“And we know that all things work together for good to those who love God, to those who are called according to his purpose.”

Romans 8:28

That was an interesting week.  Last week, I’m talking about.  The one where, if we are still working, we’re doing so from makeshift home offices, the one where governors are locking down the citizenry of entire states and shutting down their economies, the one where the financial markets continue of crash at a rate comparable to, or even exceeding, that of 1929, and this at a time when the Fed is printing more funny money faster than it ever has.

It would seem that Humpty Dumpty indeed has fallen, and all the king’s horses and men are working feverishly to put him back together.  Will they succeed?  That depends on your definition of success.  It may well be that by printing enough money and bailing out not just individual companies, but entire industries, the powers that be may succeed in extending the current politico-financial system a bit longer.  Maybe another year of so.  Who knows?  Longer term, it is doubtful that the current governmental and financial structures currently in place will be able to survive in their current form.  Change is going to happen.

Just to give you a idea about how desperate some in the political establishment haver become, last week a member of Congress suggested  that the federal government provide every person in America – she did not say citizens, but every person in America, which includes, among others, illegal aliens – with a pre-loaded debit card in the amount of $2,000, which would be renewed with $1,000 per month for a year.  That works out to $660 billion for the first month, then $330 Billion for the next eleven months.  If I’ve done my math correctly, this works out to almost $4.2 trillion.

How does she plan to pay for it?  This Congresswoman, Rashida Tlaib (D-Mich.), wants the Treasury to issue two $1 trillion platinum coins, have the Fed purchase the coins, then have the Treasury sweep the funds into the Treasury General account, from which the money would be disbursed to “every person in America.”

This is nothing but a massive dollar devaluation scheme, not unlike what FDR did in 1933-34 when he forced everyone to turn in his physical gold, then devalued the dollar about 70% against gold.  The biggest difference is that Tlaib’s scheme would be far more aggressive in devaluing the dollar, meaning it would be massively inflationary.  This can easily be seen if we consider the current price os platinum and the amount of investment grade platinum that is currently available.  The current price of platinum in US dollars is $618.61.  According to this article, there are about 8 million total ounces of investment grade platinum bullion available in the world.  At current prices, this means the total value of all investible platinum is about $5 billion.  If the US federal government used this entire 8 million ounces to mint two huge coins weighing 4 million ounces each, this implies that the dollar would be devalued against platinum to approx. 1/400 of its current value.  Put another way, platinum would go from $618.62 per ounce to around $247,444 per ounce.  Other prices would rise accordingly.  Put another way, the dollar would lose 99.75% of its value against platinum.  This is even enough to make an inflationist such as FDR blush.

Of course, it’s highly doubtful that, even if Tlaib’s scheme were put into practice, the coins – if you can call a 4 million troy ounce object a coin at all – would almost certainly be far smaller than in my example above.  This means that the devaluation of the dollar would be far greater than 99.75%

Further, Tlaib claims that her scheme is deficit-neutral, not requiring any new debt to be issued.  Perhaps I’m missing something here or have done my math wrong, but the cost of her program for one year is more than double the $2 Trillion value of her two proposed coins, so where does the other $2 trillion plus come from?

I went through the above exercise in some detail just to give you an example of the sort of absurd nonsense that passes for thinking among our leaders in Washington.  And while Tlaib’s scheme is ridiculous, it’s really not all that much more absurd than proposals being floated by the Trump administration.  Trump is talking about bailing out whole industries, having the federal government own stock of bailed out companies and sending checks to everyone as well.  President Trump himself has gone on record arguing for negative interest rates and quantitative easing.

As in 2008, so it is in 2020.  Government officials are running around with their hair on fire desperately trying to fix a debt crisis by, wait for it…taking on more debt!

(more…)

Read Full Post »

NYSE

The New York Stock Exchange. Jeenah Moon for The New York Times

But when he had spent all, there arose a severe famine in that land, and he began to be in want.

Luke 15:14

Coronavirus live updates:  Washington state weighs mandatory measures to contain outbreak” is the most recent headline on CNBC. As has been the case with countless other headlines over the past few weeks, it announces another possible government action, this time by the State of Washington, to combat the spread of coronavirus in the U.S.  My point in citing this headline is not to commend or to criticize Washington for its program, but merely to illustrate that coronavirus continues to be the lead story in the American press, a position that for the most part it’s held for at least a month.

Admittedly, the coronavirus story has proven difficult for this author to assess.  A big part of the problem is the lack of credible sources.  The Communist Chinese government is not necessarily the most reliable source of information concerning the state of affairs in the country.  Then again, the Western press, specifically the American mainstream media, is no better, at least in the opinion of this author. For example, two weeks ago the New York Times ran a “helpful” opinion piece titled “Let’s Call It Trumpvirus” which attempted to lay the blame for the current coronavirus crisis on the president.

(more…)

Read Full Post »

Coronavirus

CNBC headline on 2/21/20.  They want you to think it’s the Coronavirus that’s behind the stock market selloff, but the truth lies elsewhere.

“But we will certainly do whatever has gone out of our own mouth, to burn incense to the queen of heaven and pour out drink offerings to her, as we have done, we and our fathers, our kings and our princes, in the cities of Judah and in the streets of Jerusalem.  For then we had plenty of food, were well-off, and saw no trouble.”

  • Jeremiah 44:17

In his book Logic, Gordon Clark noted a number of informal logical fallacies.  On page 17, he mentioned, among others, a fallacy called in Latin post hoc ergo propter hoc, or as we would say it in English, “after this, therefore because of this.” This logical error, hereafter the post hoc fallacy, involves asserting that, because event B took place after event A, that A is what caused B.

Now it’s true that there can be a cause and effect relationship between an earlier event and a late event.  In Jeremiah 44, the prophet, speaking for God, states, “You have seen all the calamity that I have brought on Jerusalem…because of their wickedness which they have committed to provoke Me to anger.”  God makes it entirely clear in this passage that the prior disobedience of the people of Judah was the cause of his bringing judgment on Jerusalem.  We don’t have to guess at why the Babylonians leveled Jerusalem and burned the temple in 586 BC, God tells us explicitly both the cause and the effect.

Later in chapter 44, we get the reaction from the people to whom Jeremiah was prophesying.  As it turned out, they didn’t much care for his sermon. Part of their response to Jeremiah was a classic case of post hoc fallacy.  See if you can spot it.

But we will certainly do whatever has gone out of our own mouth, to burn incense to the queen of heaven and pour out drink offerings to her, as we have done, we and our fathers, our kings and our princes, in the cities of Judah and in the streets of Jerusalem.  For then we had plenty of food, were well-off, and saw no trouble. But since we stopped burning incense to the queen of heaven and pouring out drink offering to her, we have lacked everything and have been consumed by the sword and by famine (Jeremiah 44:17-18).

Did I say, see if you can spot it?  Reading this passage further, it seems to me that there are two post hoc fallacies to be found.  In the first place, the people argue that their burning incense and pouring out drink offerings were the cause of their prosperity when they were in the land, when, in fact, it was God’s grace that provided for them.  Second, they attributed their current state of exile to their worshipping the queen of heaven, when, in fact, the cause of their exile was God’s punishing them for their disobedience.

I bring up the preceding Biblical example of post hoc fallacy to introduce the main point of this post, which is to refute the linkage, put forward by mainstream financial reporters, the outbreak of the Corona virus in China is reason for the recent stock market sell off and spike in the price of gold.

(more…)

Read Full Post »

Financial Crisis

A prudent man foresees evil and hides himself, but the simple pass on and are punished.

Proverbs 22:3

The hits – negative economic news, that is – just keep coming.  To underscore what I mean by bad economic news, consider the following headlines from just last week:

Yet for all that, stocks hit a record high on Friday with the Dow closing above 28,000 for the first time.  CNBC’s headline on Thursday summed up the mainstream financial press’ exuberance quite well, “This is now the best bull market ever.”

How is it possible, on one hand, for there to be so much bad economic news and, on the other hand, for stocks to be hitting record highs?  We dealt with this topic last week, but this topic is of such importance that it bears additional commentary.  The answer to this question, to borrow a turn of phrase from one commentator I follow regularly, is that nothing’s real.  We have fake financial markets designed to manipulate your perception of reality.

(more…)

Read Full Post »

Financial Crisis

A prudent man foresees evil and hides himself, but the simple pass on and are punished.

    Proverbs 22:3

Dow hits record as stock market rally extends into 5th week” ran Monday’s AP headline. The same day, CNBC was even more ebullient, proclaiming “After Dow hits a record, analysts believe these stocks will lead the measure to its next milestone.” So what shall I say? The past three months I’ve been writing series talking about the ongoing financial crisis of 2008 and not only are the stock markets refusing to crash, they’re hitting records highs! To make matters worse, Yahoo reports that “Gold Suffers Worst Week in Three Years as Bulls Run for Cover.”

I guess I should just give up writing about financial matters, right?

Or maybe not.

You see, my thesis that the American economy has never recovered from the 2008 financial crisis is not based upon where the Dow or S&P averages close or the price action of gold and silver in a particular week.

As a Scripturalist, that is, as someone who believes that the Bible has a systematic monopoly on truth, I seek to analyze the markets and the overall economy, not by what the day’s headlines report, but by the propositions found in the Word of God.

When looked at in light of the Scriptures, we can see that what is hyped as the greatest economy ever is, in reality, a house built upon sand, which, in the opinion of this author, the coming economic storms will sweep away.

(more…)

Read Full Post »

Older Posts »

%d bloggers like this: