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Week Ahead – Between a Rock and a Hard Place

Inflation is a growing concern For years central banks have been operating under the assumption that inflation will eventually return to target while having…

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This article was originally published by Market Pulse

Inflation is a growing concern

For years central banks have been operating under the assumption that inflation will eventually return to target while having the flexibility to wait until the economy is fully ready for higher rates. That luxury is a thing of the past and many now feel stuck between a rock and a hard place.

Most are hoping that a modest tightening of monetary policy will begin the address the problem and buy them enough time for inflation to show itself to be as transitory as they believe. Some are taking more drastic action with larger rate hikes to quickly bring inflation under control. And then there’s the CBRT.

Next week it’s the ECB’s turn to shed some light on how it will deal with inflation which is running well above target, an unusual problem for the central bank after a decade in which the threat of deflation has been a much greater risk.

Earnings season keeps investors positive

ECB prepares for the end of PEPP

Lira slides as CBRT loses credibility


Country

US

The calm before the November 3rd Fed storm should have investors focus on the advance reading of third-quarter GDP, mega-cap tech earnings, and the final version of President Biden’s economic package.  The economy was dealt a blow from the delta variant but most of the lost growth appears to be pushed back to next year.  On Thursday, analysts expect the economy in the third quarter to slow from 6.7% to 3.0%, which is a reflection of current supply chain issues and not falling demand. 

Risk appetite has remained intact as Wall Street continues to overlook supply chain issues, surging commodity prices, and rising transportation costs, but that could change if inflationary pressures intensify.  The next round of mega-cap tech earnings from Apple, Amazon, Microsoft, and Facebook could change Wall Street’s expectation on how much pricing pressures are persisting. 

Optimism is growing that after some large concessions, Democrats will get Senators Manchin and Sinema on board with President Biden’s economic package.  The US economic outlook next year is still looking bright as pent up demand and more stimulus will spur growth.  

EU 

The ECB meeting next week is the obvious standout event as markets look for clues on how the PEPP program will be replaced when it expires in March and whether it will be tempted to follow other central banks in tightening monetary policy. Headline inflation may be above target but there appears to be a firmer belief than elsewhere that this is temporary and they’ll be back below before long. With that in mind, investors will be keen to know whether other stimulus measures will be introduced in March. They may have to wait until December though when new economic projections will be prepared.

UK

UK businesses and households are facing a squeeze over the next year from higher energy prices, taxes, prices and interest rates as the BoE prepares to raise interest rates to counter high supply-side driven inflation. 

That makes the Chancellors Autumn budget on Wednesday all the more important. While the governments focus in the coming years will have to be on paying for the pandemic, they won’t want to act too fast and turn an already sluggish recovery into something worse. 

Russia

The ruble rallied strongly after the Bank of Russia raised interest rates by 0.75% on Friday, surpassing expectations of a 0.25% or 0.5% hike. Clearly, unlike their Turkish counterparts, the CBR is taking the threat of inflation serious and is prepared to raise them further as it raised its inflation forecast at the end of the year to 7.4-7.9%, almost double its 4% target.

The announcement saw the dollar fall briefly back below 70 against the ruble for the first time since June last year. Higher rates and soaring energy prices have supported the currency in recent months and with more hikes and a possible winter crisis in the pipeline, it could remain in favour for some time.

The unemployment rate on Friday is the only notable release.

South Africa

PPI and trade balance releases are the only releases of note next week.

Turkey

The lira fell more than 3% to a record low on Thursday and has continued to slide on Friday after the CBRT cut rates by 2%, at least twice as much as markets expected. The move ends the debate, if there was one, that the central bank is being influenced by President Erdogan, whose long-held views that high-interest rates spur inflation are well known.

The central banks’ credibility under Şahap Kavcıoğlu is ruined and its only hope of avoiding further troubles down the road is inflation falling significantly and very soon. Even then, central bank credibility is important, as is the divide between politics and monetary policy and they are both irreversibly damaged under Kavcıoğlu. The lira could remain under severe pressure for some time.

China

Evergrande has paid an offshore bond coupon today, one day before the grace period expiry. That has removed the immediate financial contagion threat from Mainland markets and reduced weekend risk. It faces another coupon payment deadline on the 29th though and this story is probably not going away soon.

China has no significant data this coming week, but with the central committee meeting due on the 8th of November, authorities will be doing their utmost to ensure that markets remain “serene” until then.  

PBOC officials have expressed comfort that the Yuan is fairly priced at these levels, so strength may continue. With China needing to source energy stocks “at any cost” a strong Yuan is probably their favoured position.

India

The Indian rupee recovery continues, but the story is more a weak US dollar one than a strong rupee one. A strong US earnings season is causing dollar weakness and this story means the rupee rally may have more life in it. 

India is entering the holiday season over the next two weeks and market volumes are likely to decrease, potentially amplifying short-term moves. No significant data releases this week. 

Australia & New Zealand

The Aussie and New Zealand dollars rallied strongly as global risk sentiment improved thanks to a strong US earnings season so far. Melbourne and Sydney’s reopening will also lift sentiment and the huge New Zealand inflation number leaves the RBNZ 0.50% hike trade, pencilled in for next month, in full swing. Going forward both will continue to be buffeted by swinging sentiment shifts in overseas markets. 

Australia has inflation data this Monday and PPI and Retail Sales on Friday. The RBA had to intervene in the 3-year bond market to cap rate hikes as markets locally started pricing in a change in RBA guidance from ultra-dovish. 

New Zealand markets continue ignoring rising delta cases and are myopically focused on pricing in a large RBNZ hike next month. Although the trade is now crowded, kiwi outperformance will continue as long as global risk sentiment remains positive.

Japan

The Bank of Japan announces its latest policy decision next week on Thursday. However, there is little chance of any change before November’s FOMC and ahead of the Lower House election on October 31st. Electioneering will dominate the headlines in Japan next week, but despite the noise, the Nikkei is following the Nasdaq closely. It would take a huge shift in polling away from the ruling LDP to shift the narrative negatively into domestic markets. 

USD/JPY remains near 114.00 and continues to be a purely US/Japan rate differential play. With rates firming in the US, and Japan low forever, USD/JPY’s path of least resistance continues to be higher. 


Key Economic Events

Sunday, Oct. 24

Events

By-elections will be held for upper house seats in Japan’s Shizuoka and Yamaguchi prefectures

Bank of England policymaker Mann speaks at the 3rd Bund Summit, China Finance Forum 40 on a panel about “Asset prices, inflation expectation and exit from economic stimulus.”

Monday, Oct. 25

Economic Data/Events

The ASEAN Business and Investment Summit speakers include US President Biden and Chinese Premier Li Keqiang.

EU energy ministers hold an extraordinary council in Luxembourg to discuss rising energy prices in the bloc.

Germany IFO business climate

Mexico Unemployment

Singapore CPI

Japan leading index

Switzerland domestic sight deposits

Turkey real sector confidence

BOE policymaker Tenreyro speaks at an event hosted by CEPR and the central bank.

Tuesday, Oct. 26

Economic Data/Events

FDA advisory panel meeting may decide on whether children ages 5 to 11 could get a COVID vaccine

Bank of France Governor Villeroy de Galhau speaks at a sustainable finance event in Paris.

Canadian Prime Minister Trudeau may announce the new cabinet

Australia ANZ consumer confidence

China Bloomberg economic survey

Hong Kong trade

PPI: Spain, Sweden, Japan

South Korea GDP

Mexico international reserves

Japan bond purchases

Singapore industrial production

U.S. new home sales, U.S. Conf. Board consumer confidence

South Africa leading indicator

Finland unemployment

Wednesday, Oct. 27

Economic Data/Events

UK Chancellor of Exchequer Rishi Sunak to unveil the government’s autumn budget including new forecasts from the Office of Budget Responsibility.

US wholesale inventories, U.S. durable goods

Bank of Canada (BOC) rate decision: Expected to keep interest rate steady at 0.25%

New Zealand trade, ANZ business confidence

Australia CPI

China industrial profits

Germany GfK consumer confidence

Thailand manufacturing production index, capacity utilization

Mexico trade

Russia industrial production, CPI (weekly)

France PPI

Turkey trade, economic confidence

EIA Crude Oil Inventory Report

Thursday, Oct. 28

Economic Data/Events

US Q3 Advance GDP Q/Q: 3.0%e v 6.7% prior, initial jobless claims

BOJ rate decision: No change in policy expected, could lower growth forecast for this year and raise 2022 forecast

Japan retail sales

ECB rate decision: No change to policy, possibly setting up December as pivotal meeting for a decision on APP; President Lagarde holds a post-rate decision press conference

Eurozone economic confidence, consumer confidence

Germany CPI, unemployment

Australia export and import price indexes

Singapore unemployment

Russia forex and gold reserves

Sweden GDP, retail sales

South Africa PPI

Apple and Amazon report earnings after the bell

Turkey central bank Governor Kavcioglu discusses inflation 

EU economy and finance ministers meet online to talk about the implementation of the recovery and resilience facility.

Friday, Oct. 29

Economic Data/Events

G-20 joint finance and health ministers meet before the weekend leaders’ summit

US consumer income, University of Michigan consumer sentiment

Eurozone GDP, CPI

UK mortgage approvals, money supply, consumer credit

Germany GDP

Czech Republic GDP

Mexico GDP

France GDP, CPI

Italy GDP, CPI

Poland CPI

Russia unemployment

South Africa trade balance, private credit, money supply, budget balance

Japan unemployment, Tokyo CPI, industrial production, housing starts

Australia retail sales, private sector credit, PPI

Singapore money supply

India fiscal deficit, eight infrastructure industries

Hong Kong money supply, budget balance

New Zealand ANC consumer confidence

Thailand trade, BoP, trade, foreign reserves, forward contracts

Russia consumer data

Sovereign Rating Updates

– Germany (Fitch)

– Czech Republic (S&P)

– Poland (Moody’s)

– Norway (Moody’s) 

– Italy (DBRS)















Author: Craig Erlam

Economics

Berkshire’s Charlie Munger: Market “Even Crazier” Now Than During DotCom Boom

The Australian Financial Review reports that Munger said Friday that he believes the markets are wildly overvalued in places and that the current environment…

…[The Australian Financial Review reports that Munger said Friday that he believes the] markets are wildly overvalued in places and that the current environment is “even crazier” than the dotcom boom of the late 1990s that subsequently led to a bust. He is not wrong.

This post by Lorimer Wilson, Managing Editor of munKNEE.com, is an edited ([ ]) and abridged (…) excerpt from an article from zerohedge.com for the sake of clarity and brevity to provide you with a fast and easy read. Please note that this complete paragraph must be included in any re-posting to avoid copyright infringement.

1. Investor demand for U.S. technology stocks amid the pandemic has taken the Nasdaq 100 to a relative record against the Dow Jones Industrial Average…exceeding the peak set during the dot-com bubble.

2. On an absolute basis, US stocks have never been more expensive relative to sales.and never been more expensive relative to the nation’s GDP.

4. …Munger wishes cryptocurrencies had “never been invented,” and thinks the Chinesemade the correct decision, which was to simply ban them. In my country, English-speaking civilization has made the wrong decision, I just can’t stand participating in these insane booms, one way or another.”…

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The post Berkshire’s Charlie Munger: Market “Even Crazier” Now Than During DotCom Boom appeared first on munKNEE.com.




Author: Lorimer Wilson

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Economics

Now Or Never: The Great ‘Transition’ Must Be Imposed

Now Or Never: The Great ‘Transition’ Must Be Imposed

Authored by Alastair Crooke via The Strategic Culture Foundation,

A new wave of restrictions,…

Now Or Never: The Great ‘Transition’ Must Be Imposed

Authored by Alastair Crooke via The Strategic Culture Foundation,

A new wave of restrictions, more lockdowns, and – eventually – trillions of dollars in new stimmie cheques may be in prospect…

Were you following the news this last week? Vaccine mandates are everywhere: one country, after another, is doubling-down, to try to force, or legally compel, full population vaccination. The mandates are coming because of the massive uptick in Covid – most of all in the places where the experimental mRNA gene therapies were deployed en masse. And (no coincidence), this ‘marker’ has come just as U.S. Covid deaths in 2021 have surpassed those of 2020. This has happened, despite the fact that last year, no Americans were vaccinated (and this year 59% are vaccinated). Clearly no panacea, this mRNA ‘surge’.

Of course, the Pharma-Establishment know that the vaccines are no panacea. There are ‘higher interests’ at play here. It is driven rather by fear that the window for implementing its series of ‘transitions’ in the U.S. and Europe is closing. Biden still struggles to move his ‘Go-Big’ social spending plan and green agenda transition through Congress by the midterm election in a year’s time. And the inflation spike may well sink Biden’s Build Back Better agenda (BBB) altogether.

Time is short. The midterm elections are but 12 months away, after which the legislative window shuts. The Green ‘transition’ is stuck too (by concerns that moving too fast to renewables is putting power grids at risk and elevating heating costs unduly), and the Pharma establishment will be aware that a new B.1.1.529 variant has made a big jump in evolution with 32 mutations to its spike protein. This makes it “clearly very different” from previous variants, which may drive further waves of infection evading ‘vaccine defences’.

Translation: a new wave of restrictions, more lockdowns, and – eventually – trillions of dollars in new stimmie cheques may be in prospect. And what of inflation then, we might ask.

It’s a race for the U.S. and Europe, where the pandemic is back in full force across Europe, to push through their re-set agendas, before variants seize up matters with hospitals crowded with the vaccinated and non-vaccinated; with riots in the streets, and mask mandates at Christmas markets (that’s if they open at all). A big reversal was foreshadowed by this week’s news: vaccine mandates and lockdowns, even in highly vaccinated areas, are returning. And people don’t like it.

The window for the Re-Set may be fast closing. One observer, noting all the frenetic Élite activity, has asked ‘have we finally reached peak Davos?’. Is the turn to authoritarianism in Europe a sign of desperation as fears grow that the various ‘transitions’ planned under the ‘re-set’ umbrella (financial, climate, vaccine and managerial expert technocracy) may never be implemented?

Cut short rather, as spending plans are hobbled by accelerating inflation; as the climate transition fails to find traction amongst poorer states (and at home, too); as technocracy is increasingly discredited by adverse pandemic outcomes; and Modern Monetary Theory hits a wall, because – well, inflation again.

Are you paying attention yet? The great ‘transition’ is conceived as a hugely expensive shift towards renewables, and to a new digitalised, roboticised corporatism. It requires Big (inflationary) funding to be voted through, and a huge parallel (inflationary) expenditure on social support to be approved by Congress as well. The social provision is required to mollify all those who subsequently will find themselves without jobs, because of the climate ‘transition’ and the shift to a digitalised corporate sphere. But – unexpectedly for some ‘experts’ – inflation has struck – the highest statistics in 30 years.

There are powerful oligarchic interests behind the Re-Set. They do not want to see it go down, nor see the West eclipsed by its ‘competitors’. So it seems that rather than back off, they will go full throttle and try to impose compliance on their electorates: tolerate no dissidence.

A 1978 essay “The Power of the Powerless” by then dissident and future Czech President Vaclav Havel begins mockingly that, “A SPECTRE is haunting Eastern Europe: the spectre of what in the West is called ‘dissent’”. “This spectre has not appeared out of thin air. It is a natural and inevitable consequence of the present historical phase of the system it is haunting.” Well, today, as Michael Every of Rabobank notes, “the West has polarisation, mass protests, riots, talk of obligatory vaccinations in Europe, and Yanis Varoufakis arguing capitalism is already dead; and that a techno-feudalism looms”. Now, prompting even greater urgency, are the looming U.S. midterms. Trump’s return (even if confined just to Congress), would cut the legs from under BBB, and ice-up Brussels too.

It was however, precisely this tech revolution, to which Varoufakis calls attention, that both re-defined the Democrat constituency, and turned tech oligarchs into billionaires. Through algorithmically creating a magnetism of like-minded content, cascaded out to its customers, it has both smothered intellectual curiosity, and created the ‘un-informed party’, which is the today’s Managerial Class – the party of the credentialed meritocracy; the party, above all, smugly seeing themselves as the coming era’s ‘winners’ – unwilling to risk a look behind the curtain; to put their ‘safe space’ to the test.

Perversely, this cadre of professionally-corralled academics, analysts, and central bankers, all insist that they completely believe in their memes: That their techno-approach is both effective, and of benefit to humanity – oblivious to the dissenting views, swirling around them, down in the interstices of the internet.

The main function then of such memes today, whether issued by the Pharma Vaccine ‘Command’; the MMT ‘transition’ Command; the energy ‘transition’ Command; or the global managerial technocracy ‘transition’, is to draw a ‘Maginot line’ – a defensive ideological boundary, a “Great Narrative” as it were – between ‘the truth’ as defined by the ruling classes, and with that of any other ‘truth’ that contradicts their narrative. That is to say, it is about compliance.

It was well understood that all these transitions would overturn long-standing human ways of life, that are ancient and deeply rooted and trigger dissidence – which is why new forms of social ‘discipline’ would be required. (Incidentally, the EU leadership already refer to their their official mandates as ‘Commands’). Such disciplines are now being trialled in Europe – with the vaccine mandates (even though scientists are telling them that vaccines cannot be the silver bullet for which they yearn). As one high ‘lodge’ member, favouring a form of global governance notes, to make people accept such reforms, you must frighten them.

Yes, the collective of ‘transitions’ must have their ‘Big, overarching Narrative’ – however hollow, it rings (i.e. the struggle to defend democracy against authoritarianism). But it is the nature of today’s cultural-meme war that ultimately its content becomes little more than a rhetorical shell, lacking all sincerity at its core.

It serves principally, as decoration to a ‘higher order’ project: The preservation of global ‘rules of the road’, framed to reflect U.S. and allied interests, as the base from which the clutch of ‘transitions’ can be raised up into a globally managed order which preserves the Élite’s influence and command of major assets.

This politics of crafted, credentialised meme-politics is here to stay, and now is ‘everywhere’. It has long crossed the partisan divide. The wider point here – is that the mechanics of meme-mobilisation is being projected, not just in the western ‘home’ (at a micro-level), but abroad, into American ‘foreign policy’ too (i.e. at the macro-level).

And, just as in the domestic arena, where the notion of politics by suasion is lost (with vaccine mandates enforced by water-cannon, and riot police), so too, the notion of foreign policy managed through argument, or diplomacy, has been lost too.

Western foreign policy becomes less about geo-strategy, but rather is primordially focussed on the three ‘big iconic issues’ – China, Russia and Iran – that can be given an emotional ‘charge’ in order to profitably mobilise certain identified ‘constituencies’ in the U.S. domestic cultural war. All the various U.S. political strands play this game.

The aim is to ‘nudge’ domestic American psyches (and those of their allies) into mobilisation on some issue (such as more protectionism for business against Chinese competition), or alternatively, imagined darkly, in order to de-legitimise an opposition, or to justify failures. These mobilisations are geared to gaining relative domestic partisan advantage, rather than having strategic purpose.

When this credentialled meme-war took hold in the U.S., millions of people were already living a reality in which facts no longer mattered at all; where things that never happened officially, happened. And other things that obviously happened never happened: not officially, that is. Or, were “far-right extremist conspiracy theories,” “fake news,” or “disinformation,” or whatever, despite the fact that people knew that they weren’t.

Russia and China therefore face a reality in which European and U.S. élites are heading in the opposite direction to epistemological purity and well-founded argument. That is to suggest, the new ‘normal’ is about generating a lot of contradictory realities, not just contradictory ideologies, but actual mutually-exclusive ‘realities’, which could not possibly simultaneously exist … and which are intended to bemuse adversaries – and nudge them off-balance.

This is a highly risky game, for it forces a resistance stance on those targeted states – whether they seek it, or not. It underlines that politics is no more about considered strategy: It is about being willing for the U.S. to lose strategically (even militarily), in order to win politically. Which is to say gaining an ephemeral win of having prompted an favourable unconscious psychic response amongst American voters.

Russia, China, Iran are but ‘images’ prized mainly for their potential for being loaded with ‘nudge’ emotional-charge in this western cultural war, (of which these states are no part). The result is that these states become antagonists to the American presumption to define a global ‘rules of the road’ to which all must adhere.

These countries understand exactly the point of these value and rights-loaded ‘rules’. It is to force compliance on these states to acquiesce to the ‘transitions, or, to suffer isolation, boycott and sanction – in a similar way to the choices being forced on those in the West not wishing to vaccinate (i.e. no jab; no job).

This approach reflects an attempt by Team Biden to have it ‘both ways’ with these three ‘Iconic States’: To welcome compliance on ‘transition issues’, but to be adversarial over any dissidence to mounting a rules framework that can raise the ‘transitions’ from the national, to the supra-national plane.

But do the U.S. practitioners of meme-politics, absorb and comprehend that the stance by Russia-China – in riposte – is not some same-ilk counter-mobilisation done to ‘make a point’? That their vision does stand at variance with ‘the rules’? Do they see that their ‘red lines’ may indeed be ‘red lines’ literally? Is the West now so meme-addicted, it cannot any longer recognise real national interests?

This is key: When the West speaks, it is forever looking over its shoulder, at the domestic, and wider psychic impact when it is ‘making a point’ (such as practicing attacks by nuclear-capable bombers as close to Russia’s borders as they dare). And that when Russia and China say, ‘This is our Red Line’, it is no meme – they really mean it.

Tyler Durden
Sat, 12/04/2021 – 23:30







Author: Tyler Durden

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Precious Metals

Sound Money Is A Prerequisite To Peace, Prosperity, And Freedom

Sound Money Is A Prerequisite To Peace, Prosperity, And Freedom

Authored by Patrick Barron via The Mises Institute,

There are many good recommendations…

Sound Money Is A Prerequisite To Peace, Prosperity, And Freedom

Authored by Patrick Barron via The Mises Institute,

There are many good recommendations promoted by Austrian school economists for improving the economy. Although we enjoy successes periodically, most–such as deregulating trucking and airline pricing–involve eliminating previous government interventions. These successes are to be celebrated, of course. But no one can deny that government intervention into the economy has continued, despite these occasional success stories.

The reason Big Government has continued to grow is that it controls money production. Not only does government grow in terms of spending, regulations, and interventions everywhere (both internally and overseas), but it threatens our very freedoms. In other words, government’s control of money is diametrically opposed to peace, prosperity, and freedom and eventually will destroy our republican democracy. For this reason, returning to sound money–i.e., money that is created by the private market, is part and parcel of the market, and is controlled by no one–should be goal number one for every lover of peace, prosperity, and freedom. Nothing less than the survival of our western-style way of life is at stake.

Here are a few examples of how unsound money progresses and masks its destructive power.

  • One, unsound money allows government to confiscate resources at will. For example, in 2020 America’s bloated military spent as much as the next eleven nations of the world combined. Of course, military spending went up in 2021 and will continue to increase in 2022. America’s annual budget deficit is projected to be somewhere between $1.84 trillion and $3.4 trillion, depending upon whether you ask the Biden administration or the Congressional Budget Office. All of this money is created out of thin air. Americans’ taxes will not increase enough to cover even a fraction of the Biden estimate, and there is no appetite in the bond market for more American debt. Therefore, the Fed will monetize the new debt onto its balance sheet. The resulting increase in base money will cause the prices of most goods and services to rise. This impoverishment of the American people through the hidden tax of inflation is possible only because money is completely fiat; i.e., produced out of nothing except the government’s printing press and computer terminals.

  • Two, unsound money masks the destructive power of government market interventions. An example is former President Trump’s tariffs on Chinese goods. According to a friend of mine, the data is irrefutable that the tariffs worked. Well, as Mark Twain said, there’s lies, damned lies, and statistics. What really is irrefutable is the economic law of opportunity cost; i.e., that choosing one thing means the giving up of another. Another is individual preference. The very fact that people must not be allowed to purchase Chinese goods means that they valued those goods to a higher extent than American goods. The reason does not have to be financial. There’s always service, availability, quality, etc. So preventing Americans from buying Chinese goods means less satisfaction for Americans. This is just one example. Another is keeping zombie companies in business through artificially lower interest rates means that capital is misallocated to less productive uses. There’s a whole panoply of labor laws that artificially raises the cost of American labor, reduces American productivity, and lowers business income. Some workers are priced out of the market through minimum wage and mandatory benefit packages. Business has less capital to invest for expansion. New business starts are discouraged. There’s something there for everyone! The destruction is masked by monetarily inflated GDP numbers, artificially suppressed Consumer Price Index (CPI) statistics, increased unemployment payments, and other government programs and manipulated data.

  • Three, and most importantly, Americans’ freedom is threatened. Government can print enough money to buy unlimited enforcers of its rules. More IRS agents. More agents for enforcing arbitrary rules of the Occupational, Safety, and Health Administration (OSHA). More agents for enforcing new environmental regulations and laws arbitrarily established by the Environmental Protection Agency (EPA). More Drug Enforcement Agency (DEA) agents. Perhaps even agents to confiscate guns.

Conclusion

Returning to limited government, creating a more free market order, having a less intrusive government, etc. requires sound money. Sound money is not a guarantee of a free society, but a free society is impossible without sound money.

I conclude with these quotes from The Quotable Mises. The last quote is especially pertinent to the point of this brief essay. (Emphases are mine.)

  • The gold standard alone makes the determination of money’s purchasing power independent of the ambitions and machinations of governments, of dictators, of political parties, and of pressure groups. The gold standard alone is what the nineteenth-century freedom-loving leaders (who championed representative government, civil liberties, and prosperity for all) called “sound money.”

  • All those intent upon sabotaging the evolution toward welfare, peace, freedom, and democracy loathed the gold standard, and not only on account of its economic significance. In their eyes the gold standard was the labarum, the symbol, of all those doctrines and policies they wanted to destroy.

  • The classical or orthodox gold standard alone is a truly effective check on the power of the government to inflate the currency. Without such a check all other constitutional safeguards can be rendered vain.

I do not want to close on a pessimistic note. Therefore, I offer this final quote from Ludwig von Mises, ever the optimist and ever the gentleman: “Every nation, whether rich or poor, powerful or feeble, can at any hour once again adopt the gold standard.”

Tyler Durden
Sat, 12/04/2021 – 19:30






Author: Tyler Durden

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