The separation of money and state

IMF headquarters

"So what do you think should be done?" I often get this question after I presented my case against our fiat money system, and I sense there is a trace of frustration in it, a bit along the lines of, you are telling us that we are in quite a mess but you offer no policy prescriptions. That is a fair point, I guess. Most writers who lament the economic ills of our time usually have a bag of policy advice on offer. Indeed, whispering new policy ideas into the ears of those in power is what most of these writers aspire to. I … [Read more...]

“When they stop buying bonds, the game is over.”

Floating currency symbols

I took the title for this blog from an interview that James Turk of the GoldMoney Foundation conducted with Eric Sprott, a Canadian fund manager. You can see it here. (I also recommend you have a look at this interview with Doug Casey.) I think the quote is a succinct summation of the role that the bond market, and in particular the market for government bonds, now plays in this crisis. As you know, I would not touch bonds with a barge pole, especially government bonds. After 40 years of unending fiat money expansion, the … [Read more...]

Bitcoin, gold and the demise of fiat money

Falling 100-dollar bills

I am intrigued by the Bitcoin experiment - the attempt to launch a virtual currency as an alternative to the current global patchwork of local state fiat monies. Bitcoin has recently been hotly debated in the online community and among libertarians, and has now aroused the interest of the mainstream media and the political establishment.  Bitcoin's challenges seem to be mainly operational - related to computer and internet security and cryptography, which is of paramount importance to the Bitcoin project. These are areas in … [Read more...]

The Inconvenient Truth about Sovereign Debt

Panthenon

The efforts of our political leaders to socialize the fallout from the financial crisis by means of the balance sheets of the government and the central bank, and to thereby sustain an illusion of normalcy, have guaranteed that the financial crisis is now morphing into a sovereign debt crisis - a process that is unfolding at different speeds globally but that in many places is well advanced already. On a long enough time line, everywhere is Greece. Crises clarify things. When the cash runs out and the chimera of harmony and … [Read more...]

Why We Are Facing an Inflationary Depression

Zimbabwe Hyperinflated bank notes, 2008

Is the global 'recovery' faltering? Is the United States economy heading for a 'double-dip'? These are the headlines after recent disappointing economic data releases, in particular the weak employment report last Friday. Truth be told, there never was a proper 'recovery', if the term is to denote a process of true healing, of fundamental betterment. Recessions occur because of economic imbalances - and the imbalances that caused the financial crisis and the following recession are predominantly still with us. The few … [Read more...]

Billionaire Defender of the Statist Quo

Buffett & Obama

Psychologists should have no problem explaining our tendency to readily attribute success in investing or trading to skill and not luck. This tendency is rather pronounced and one of the reasons behind the now frequently decried 'bonus culture' in the finance industry. I remember many instances where one or two good years in the markets were enough to elevate a young trader in the eyes of his bosses, his peers and most certainly himself to the status of certified market genius whom the firm had to stop from defecting to the … [Read more...]

U.S. Government Bankruptcy – The Finance Establishment Is Getting Nervous

screenshot of Bill Gross on TV

No, dear reader, I am not developing an obsession with Bill Gross, America's most prominent bond manager. I know I wrote about him just recently but this morning I already received a number of messages from friends in the bond business alerting me to another missive from the famed 'bond-king'. Here it is. So this Schlichter File deals again with the views of Mr. Gross but I hope to put a different spin on things. In his latest investment outlook Mr. Gross tells us that the U.S government is bankrupt and will most likely … [Read more...]