The US’s elite run the country into d estruction

Friday, 19 November 2021 — Baltimore, Maryland

[8 min read]

Dear Reader,

‘There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.’

Austrian School economist, Ludwig von Mises

The big showdown is coming. The moment of truth…when the Federal Reserve has to lay its cards on the table.

This moment, when it comes, will determine the success — or failure — of your investments for many years to come.

Will the feds voluntarily abandon their money-printing scheme? Or go on with it…until it results in a ‘total catastrophe’?

Fire or ice? A bang or a whimper? Inflate or die?

We think we know the answer. The feds will keep at it until the whole system blows up.

At least, that’s the answer we’ve been giving you for months…maybe years.

Reasonable outlook

Of course, a lot of people think we are wrong — including some people whose opinions we take seriously. They believe the Fed will eventually do the right thing — raise rates in order to pinch off inflation.

After all, the Fed is already talking about ‘tapering’, pledging to bring its ‘emergency’ measures to an end.

And Fed governors are not exceptionally stupid. They know their primary responsibility is to protect the US currency. And if they neglect their duty now…runaway inflation will be even harder, probably impossible, to control later, leading to poverty, crashes, riots, and revolution.

Surely, faced with a nightmare, they’ll wake up and do ‘whatever it takes’ to avoid it.

This seems like such a reasonable outlook and expectation, we sometimes wonder why we don’t believe it.

So let’s look more closely…

Clear vision

David Stockman, Ronald Reagan’s former budget Jefe, is of sound mind and clear vision. He sees the situation, as it has developed thus far, much as we do: the fake money and fake interest rates are ruining the country.

He sees, that the interests of the moneyed elite — on Wall Street and in Washington — are not the same as those of the ordinary working stiff on Main Street.

The former benefit from EZ money policies. The latter suffer, sooner or later, in the form of higher consumer prices.

But David is much less cynical than we are. He must have a sunnier disposition and more faith in the democratic system.

That is, he thinks that when push comes to shove, the feds will do the right thing, if only to hold onto power:

‘In short, in not too many months down the road a desperate White House will have no choice except to welcome in the next Paul Volcker, whoever that might prove to be, in order to douse the inflationary fires and forestall a monumental Democratic wipe-out in the 2022 mid-terms.’

Good politics

David knows a lot more about politics — and finance — than we do. Besides, he has a point we hadn’t fully considered.

Politicians are either in office, desperately hoping to stay there…or they’re out of office, trying to get in. If they are in power, they want people to feel good. If they are out, they want them to feel bad.

That is why, during the Trump years, the Democrat-leaning press portrayed the COVID-19 virus as an existential threat — it was just good politics.

On Tuesday, we noted that the Democrats may be changing course. They are in power now…they may stand a better chance of remaining in power by putting the voters in a better mood.

Instead of making everyone fearful and panicky, as they did during the last two years, they may now want to see COVID-19 ‘in the rearview mirror’.

Superpower

But the inflation problem is very different from the COVID problem.

The latter was caused by nature (apparently)…and there really wasn’t much the authorities could do about it. So not doing much about it now won’t make much of a difference.

Inflation, however, is caused by the government itself, for the purpose of shifting money from the public to the elite. And you can’t make it go away just by ignoring it.

EZ money — printing press money — is the ‘superpower’ of the ruling elite. With it, they can pay for their jackass programs…pay themselves good salaries…fund their pet projects…and reward their donors and supporters…

The trouble is, of course, that it leads to price increases. Voters get annoyed. And then, the ruling party is on the spot. It will lose the next election if inflation gets worse…

Monetary restraint?

But what can it do? Here’s David again:

‘…the Fed has truly painted itself into a corner. On one side is the rock of an egregiously inflated stock market that has the potential to implode like never before if the Fed is forced to move precipitously and unexpectedly into an inflation-fighting mode. On the other is a rapidly accelerating inflationary trend in wholesale and labor markets that will give it no choice except to belatedly lurch toward monetary restraint for the first time in more than a decade.’

How likely is that?

Probably not very.

First, because there is no Volcker.

The top candidate to replace Jerome Powell as head of the Federal Reserve is Lael Brainard. She is from the Bernanke-Yellen school, not the Volcker school. She is being considered for the post precisely because she is ready to go along with even more money printing.

Second, it ain’t 1979 anymore.

Then, the US economy could afford a major recession and debt liquidation. Now, it can’t.

The Fed’s key lending rate has been below zero for most of the last 11 years. Now, Wall Street…the federal government…households…and businesses…owe US$85 trillion. They desperately need super low rates to stay solvent.

Whatever it takes

Third, the current inflation rate is, let’s say, 6%. In order to get ahead of it, as Volcker did, the Federal Funds Rate — the interest rate charged to banks on unsecured loans borrowed overnight — would have to go much higher (it’s currently 0.08%).

In the late 1970s, consumer price inflation was running at about 13%. In order to stop it, Volcker realised he couldn’t just follow inflation…he had to get ahead of it. So he put the Fed’s key rate at 20%.

A similar move today would leave the Federal Funds Rate at about 10%.

Imagine what a 12,400% increase — from 0.08% to 10% — would do to the leveraged traders…the options gamblers…the crypto market…and the millions of zombie businesses and households that rely on cheap finance.

And imagine the Fed’s reaction to the inevitable crash. Would it just sit tight, like Volcker, as the stock market sank?

In February 1980, Volcker stood stock stiff, as the Dow fell to around the price of a single ounce of gold. If that were to happen today, it would be the equivalent of a 95% wipeout in the stock market.

What Fed…what president…what Congress would allow it?

Isn’t it more likely that the Fed’s back would bend…and it would immediately signal that it was ready and willing to provide ‘whatever it takes’ to revive the economy?

No choice

Fourth, a half century of fake money and a decade of below-zero lending have softened Americans’ minds…and erased the habits that made them rich.

A ‘Volcker’ today would get no respect and no support — neither from the public, nor from the press, politicians, the deep state, the clergy, economists…or any other influential group.

Fifth, and most important…the elite control the government. The government controls money policy. And the power and wealth of the US's elite rests on a foundation of fake money and fake interest rates.

‘Nuff said.

In short, the Democrats will have no choice. They could not ‘pull a Volcker’…even if they wanted to.

And the country will stay on course for destruction.

Regards,

Bill Bonner,
For The Rum Rebellion

When you catch someone lying, it tells you a lot about them.

Even if it is a lie over a little thing, it suggests they will also be prepared to lie over something much bigger.

That’s why I believe you should never trust a liar.

That was certainly my motto in politics. If you caught someone out in a mistruth, even if you didn’t call them on it at the time, it told you a lot about their character.

I remember when one senior member of the government told me I should make amends with a particularly untrustworthy colleague. I was told:

‘We all know he is treacherous and untrustworthy but it is better to have him on side 80% of the time.’

It was a policy of appeasing the crocodile hoping he won’t eat you.

My response to that approach was:

‘If I assume he will always betray me then all the surprises will be to the upside, whereas you will trust him on something important and it will destroy you.’

Those words proved prophetic as that senior Liberal lost his leadership over such misplaced trust.

It works the same in the world outside politics.

If a business is caught not telling the truth about their product, how can you believe anything they say?

Take for instance, the report providing a six-month data update from their vaccine trials. They said 15 of the vaccinated and 14 of the unvaccinated people had died.
It now turns out that the real numbers were 21 of the vaccinated and 15 who received the saline shot.

In total, there were nine more deaths during the trial than Pfizer told us about — six of those among the vaccinated group.

Both group trials comprised around 22,000 people and most passed away from cardiovascular-related problems.

Here’s the original data released in the report by Pfizer.

While there’s a lot of detail in this report and previous reports released, they go to show that the Pfizer vaccine seems to do very little to reduce overall deaths.

And apparently, because the control group were vaccinated at the end of the trial, the long-term efficacy or dangers of these vaccines remain unknown.

It’s as if they didn’t want a study of the long-term impacts to be available.

This, of course, makes a mockery of the claims that these vaccines have been subject to long-term trials and are without long-term side effects.

The truth is they simply don’t know.

However, that lack of knowledge hasn’t stopped billions of doses being rolled out at a cost of hundreds of billions of dollars, even though the data available shows it doesn’t make much difference to death rates.

Some may conclude, based on the trial evidence, the vaccine makes things even worse. Could that explain why the data released by Pfizer was inaccurate?

Perhaps it was a simple mistake made by a multibillion-dollar company in one of the most important medical tests ever done.

In an update released by the US FDA, the figures are even more worrying. That data showed the mortality rate among the vaccinated group was almost 50% higher than the placebo group.

Although we don’t know what these test subjects died of, the FDA reassuringly tells us that none were considered related to the vaccine.

That said, without any knowledge of the long-term implications of these vaccines on the health of the recipients, who’s to say whether the deaths are related to the vaccine or not?

After all, if we aren’t told the truth about the little things, why would they level with us over the bigger ones?

Best,

Cory Bernardi,
For The Rum Rebellion

PS: To sign up to Cory’s free weekly email, Cory Bernardi Confidential, click here.