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Posts Tagged ‘The Fed’

Luther at the Diet of Worms, by Anton von Werner, 1877.

And it cast down truth to the ground; and it practised, and prospered.

  • Daniel 8:12

Truth is cast to the ground. 

I’ve thought about that quite a lot in recent years.  It seems as if the lie always prospers, while truth, it if even is heard at all, is quickly dismissed as nonsense and those who speak it as fools or worse. 

I was reminded once again of just how corrupt things have become after watching some of the shenanigans in the stock market last week with the big dust up over the Gamestop stock and how, supposedly, a group of small investors beat the big guys on Wall Street. 

I’ll not dive into the details of what took place, but on the surface we can say that at least one major hedge fund sustained significant losses when its short position on Gamestock was blown up by investors piling into the company’s stock and driving it to over $400 per share. 

For our purposes, what important to understand is that when an investor – either an individual or an institution such as a hedge fund – short sells a stock, he profits when the price goes down.  If the price goes up, the short seller loses money.  If the stock price goes way up, as was the case with Gamestop, the short seller loses a lot of money. 

When the losses were piling up for the big guys during the week, it didn’t take long for the weeping and gnashing of teeth to begin.  Billionaire hedge fund manager Leon Cooperman went on an epic rant on CNBC last Thursday, 1/28, saying, “The reason the market is doing what it’s doing is people are sitting at home getting checks from the government. This fair share, is a (bleep) concept.  It’s just a way of attacking wealthy people and I think it inappropriate and we all gotta work together and pull together.” 

Just how true is the narrative that a bunch of unemployed Robin Hood traders on their own drove up the price of Gamestop, thus inflicting heavy losses on some hedge funds, I cannot say for sure.  I have my doubts that things are what we’re being told, but, at the very least, Cooperman seemed to accept that narrative when he went on his rant last week.    

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RLL.Ep.42: Happy New Year 2021!
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A prudent man foresees evil and hides himself; The simple pass on and are punished.

  • Proverbs 27:12

Here we stand at the end of the Year of Our Lord 2020 and at the precipice of 2021.  My, how time flies.

When I was pondering what to write this week, it took some time, but it finally dawned on me that this would be my last Sunday post of 2020.  “Of course,” I thought to myself, “it’s time for my year-in-review post. Problem solved!”

Before launching into a review of 2020 and casting an eye toward the future in coming year, I would like to take this occasion to thank my Lord and Savior Christ Jesus for all the blessings he has brought into my life over the past year.  For the grace he has shown me in forgiving all my sins and patiently teaching me, for a job to pay my bills, for health to do that which I needed to and wanted to accomplish, for the love of family and friends.

It would be remiss of me not to mention how thankful I am for the Lord’s gracious provision in my life to write this blog.  I began blogging in March of 2009, so it won’t be long before I celebrate 12 years of posting online.  Most blogs make it only a few months.  That I have had the strength to sustain this work for so long is a testament, not to my skill or smarts or energy or anything in me, but to the calling and faithfulness of the Lord.  During my first five years of blogging, I posted occasionally.  Here a little, there a little.  It was in November 2014 that I prayed God would help me to reach the goal of posting at least once a week, and he heard me.  From that time until now, I have not gone a week without writing and posting at least one article.       

I thank God also for the opportunity to resume work on my podcast, Radio Lux Lucet.  I mentioned in last year’s end of year podcast that I wanted to start podcast again more regularly.  As it turned out, although I didn’t start out the year all that well, I have managed to string together about eight weeks in a row of podcasts, so that’s progress!

Finally, I would like to thank my readers for their support during 2020.  It is my prayer with each post that the name of God would be glorified and that my words would edify his people.  With every post, it is my goal to bring you perspective on the events of the day that you won’t be able to find just anywhere.  As John Robbins was wont to point out, the Bible has a systematic monopoly on truth.  This includes truth in the areas that I like to write about, namely, economics and politics.  The psalmist wrote, “I have more understanding than all my teachers: for thy testimonies are my meditation. I understand more than the ancients, because I keep thy precepts.”  Writing to Timothy, the Apostle Paul said, “All scripture is given by inspiration of God, and is profitable for doctrine, for reproof, for correction, for instruction in righteousness: That the man of God may be perfect, thoroughly equipped for every good work.” While I don’t claim to have greater understanding than all my teachers, I can testify to the fact that there is nothing that can prepare the Christian to take on the received “wisdom” of this world more than a solid grounding in the Scriptures.  All the truths of philosophy, politics, and economics are hidden in Christ Jesus.  And there is no other source to which Christion must repair to fight the good fight of faith against the lies of this world – and how many lies there are and how great! – than to the 66 books of the Bible.  It is from the Word of God that Christians must rebuke senators, judges, governors, presidents, prime ministers and popes for their sinful and foolish words and actions.  And this, the Apostle tells us, is a good work for which the Scriptures thoroughly equip the Christian man.  It is this good work I aim to do with each post.

Thanks is also due to those who have graciously donated to support the work of this blog.  I greatly appreciate your kindness.

Special thanks is also owed to John Bradshaw, brother in Christ, friend and keen eyed and patient editor of my posts.  This blog is much better for your work.  Thank you.     

So, with all that said, what about 2020?

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Black Lives Matter protesters march through Portland, Oregon on Sunday, Aug. 2, 2020. (AP Photo/Noah Berger)

Your country is desolate, your cities are burned with fire: your land, strangers devour it in your presence, and it is desolate, as overthrown by strangers.

  • Isaiah 1:7

Is America under the judgment of God?  Many Christians think so, this author among them. 

Some of our largest, most prosperous and best-known cities are literally burned with fire and will take years to recover, if they ever do. Minneapolis, Portland, Seattle, Chicago and New York have seen massive riots and property destruction on a level that few Americans could have imagined just six months ago.  On the internet one can view the daily, destructive handiwork of Antifa in Portland and Seattle.  The Portland riots have been going on for three months now and show no sigh of abating.  In fact, the riots may be spreading, as there are reports just today (8/23/2020) that the sort of disturbances that have been going in the Portland have spread to Denver.       

Our political system is a mess.  The Democrats have veered off in a radical socialist/social justice direction.  So overt is their radicalism that it has caused concern even among some of the older, mainstream liberals in the party.  The Republicans, relatively speaking a saner bunch, have nevertheless lost their moorings in many ways.  There was a time, not all that long ago, when Republicans at least pretended to be the party of fiscal restraint.  Yet under President Trump debts and deficits have exploded and almost no one says a word.  When Representative Thomas Massie (R-KY) objected to the house passing the budget busting $2 trillion coronavirus stimulus bill without a vote, he was denounced by President Trump as a, “third rate Grandstander.”  Trump went on to say that Massie should be thrown out of the Republican party.  That was Massie’s reward for standing up for the Constitution.

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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.

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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!

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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.

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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.

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Eccles_2

The Eccles Building, the main office of the Federal Reserve in Washington, D.C.

And this is the condemnation, that the light has come into the world, and men loved darkness rather than light, because their deeds were evil.  For everyone practicing evil hates the light and does not come to the light, lest his deeds should be exposed.

  • John 3:19-20

The words from John at the top of this post are readily recognized by Christians as coming from Jesus’ dialogue with Nicodemus, the Pharisee who came to inquire of him one night.  The immediate application of Jesus’ words is, of course, to himself as the light who came into the world and was rejected of men, for they loved evil and feared lest their deeds should be exposed.

But while Christ said these words in the context of explaining his person and purpose for coming in the flesh to Nicodemus, his comments have a wider application.  They are a specific case of a broader principle we see in Scripture, that of the Christian principle of openness and honesty.  Those who love the truth do what they do in the open.  They let their light shine before men that others may see their goods works and glorify their Father in heaven.  On the other hand, those who practice evil, those who have something to hide, they do their work in the dark, fearing to be seen by men.

One application of the principle of openness and light is the Christian idea of government as a servant of the people, not as their master.  When the disciples argued about who was the greatest, Jesus explained the Christian concept of leadership, which was radically different from the model the world offered.  Christ explained that the rulers of the Gentiles “exercised lordship” (lorded it over) them, but such was not to be the case among his followers.  Following Jesus example, those who would be first in the Kingdom of Heaven were to be servants of all.

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Eccles_2

The Marriner S. Eccles Federal Reserve Board Building in Washington D.C.

“[T]he Fed has one power that is unique to it alone: it enables the creation of money out of thin air.”

    – Ron Paul, End The Fed

The welfare state, the warfare state and the loss of liberty.

Inflation, extreme income inequality and the destruction of the middle class.

Exploding federal debt, skyrocketing federal deficits and a financial system on the brink of failure.

What do all these things have in common? To one degree or another, they are all the effects of the Federal Reserve System, more commonly known as the Fed, America’s central bank.

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