Modern Central Banks' Business Is Misunderstood by The People

I am thinking about the Consumer Price Index which was designed to show the amount of inflation in the cost of living within the economy. That was before a certain Alan Greenspan came along. Mr Greenspan was a proponent of the benefits of sound money for society. He even wrote a paper on the matter.

For some strange undocumented reason, after Mr Greenspan became the Chairman of the Fed he underwent a character alteration and came up with the idea of making changes to the way the CPI should be calculated. Nowadays the CPI seems to be the index of all things which are not consumed and which do not undergo price increases. So after Mr Greenspan’s change of personality or philosophy, or whatever somebody said to him about his future prospects, - and after the very many following alterations since then in the way the CPI is calculated - the inflation measurement must be viewed with a certain scepticism.

This is not, of course, news to anyone who actually buys such luxuries as food, fuel, or such consumable goods, because their bank balance shows the real story, and highlights the fiction that the CPI has become.

So Shadowstats.com has made a business out of producing economic stats the old way, I mean using the methodology which existed more or less before Mr Greenspan came along, and all of his successors too. This CPI tells a different story from the official CPI.

Here is the Shadowstats chart for inflation using 1990 based methods:

So Mr John Williams of www.Shadowstats.com says that inflation would be 5% give or take, compared with the official CPI of under 2%, if changes since 1990 were set aside.

But look at this:

Here Mr Williams has set aside the CPI calculation changes going back to 1980 and viola! We can see that if the 1980 CPI formula were used it would be knocking around the 9% area which is just a little bit less than five times the official number.

Now the scholars and establishment figures on the whole take the position that the world has changed a lot since 1980, and the CPI must be calculated with revised formulae to take account of that.  Pooh! Pooh! Shadowstats! Though intuitively we acknowledge that they probably have a point, in that things have changed …. five times difference!

And if we look over to Wall Street, there also seems to be a universal acceptance of the new (post Greenspan) CPI there. However I wonder if the fact that the stock market rises all look much much more dramatic, if prices are prevented from (officially) rising faster than said stock market, has anything to do with Wall St.’s (public) preference in this metric? Say it ain't so, Mr Big Broker!

So with all that in mind I would like to remind readers that, if John Williams has a valid case, or even a semi valid one, but if we don’t believe Mr Williams’s exact figure, then inflation is running at an unknown multiple of what the government says it is, of some multiple of up to 5x. That's highly significant.

That sounds to me like classic financial repression, and capital control, so that stagflation can reduce the real value of the national debt. At this stage I will say that although I am using US metrics here, I consider that these points apply to all of the western countries, and the actions of their governments and Central Banks. So where I say “Fed” please assume I also mean ECB, BOE, and BOJ as a minimum.

So if inflation is depreciating money that things are priced in, what have we to go on when making investment decisions?

Here is a chart from Macrotrends which shows the Dow Jones Industrial Average during the stagflation during the 1970s recession period, which was a stagflationary time. The Dow is in blue, but if inflation is subtracted off from the Dow the resultant value is the red line.

http://www.macrotrends.net/1283/stagflation-impact-on-djia-returns

So that’s 16 years of the Dow apparently going sideways, but if you sold your stocks and went shopping with the proceeds the purchasing power of your money in the stock market had reduced mysteriously by 65%! That means that inflation was outpacing stocks by 3% each year for the 16 years, compounding to 65%. Note this is not saying inflation was 3%, it was 3% in excess of what stocks performed.

So what does the stock market look like when we detrend it by the CPI to show the “real” underlying performance?

I refer readers once again to Macro Trends. Please pay special attention to the period from 1966 to 1982.

http://www.macrotrends.net/1319/dow-jones-100-year-historical-chart

So in nominal terms, or using the official numbers, the Dow went sideways, and did not go down. But in real inflation adjusted terms it went down 65%. This makes it clear as to why it is that Wall St. shows us the official numbers for the Dow.

Now if readers would like to look once again at that Macro trends chart but this time please pay special attention to the period 2000 to the present. I give the link again for your convenience:

http://www.macrotrends.net/1319/dow-jones-100-year-historical-chart

So if we look at a newspaper DJIA chart we can clearly see that the large capital stocks are once again going sideways, and something like the official 1970s chart looked before inflation was deducted. But take note of this: if we look at an inflation adjusted chart the Dow is still going sideways! So either inflation is really toddling just under 2%, and the Dow is growing at 2% to cancel inflation out, or Mr Greenspan and his successors, Bernanke/Yellen (& counterparts overseas) are concealing something from us. That would be that while the Dow is officially going sideways, it’s purchasing power is doing what the inflation adjusted Dow did during the 1970s. It’s going down consistently in real terms.

But if the CPI doesn’t show inflation, we can’t look at a CPI adjusted Dow and see the decline can we? They know that, and that’s their motivation for doing what they do.

Let’s do a little calculating. I will choose a number for inflation which is half way in between Shadowstats two numbers. I will pick 5.5%. So if the Dow is going sideways since the year 2000, then we have endured 13 years of 5.5% inflation, while the Dow was going sideways. But when 5.5% is compounded for 13 years that is a real inflation of very close to 100% during the period.

So while your investments in stocks went sideways, the purchasing power of the money invested went down to 47% of it’s original value.

Let's remind and take one more look at that Dow chart for the 1970s. So if my conclusions above are correct, then the Dow for the past 13 years, in purchasing power,  looks like the red line, except it's down about 50% instead of 65%.

If the higher figure turns out to be the actual inflation, let's use 8% rather than 9%. Then "the take" from covert stagflation over the past 13 years was 66%. This is almost identical to the 1970s period, and stock owners, (or anybody else holding non appreciating assets) now retain only 34% of their spending power as it existed in the year 2000.

http://www.macrotrends.net/1283/stagflation-impact-on-djia-returns

Way to go Powers That Be! You really really deserve those fat paychecks and benefits! Uh ... if that was your actual aims all along, I mean. We'll get back to that presently.

This might explain why it is that so many senior people are still working long after their supposed retirement age.

But where did all that money go?

For a start it reduced the cost of paying off the national debt. As a bonus for the government, it makes the national economy work better for them. If prices rise, sales rise, and so does taxation calculated on those sales. That suits indebted governments looking for extra money.

So with all this in mind today, I looked up the duty of a “Central Bank” in Wikipedia and this is what it says today:

The primary function of a central bank is to manage the nation's money supply (monetary policy), through active duties such as managing interest rates, setting the reserve requirement, and acting as a lender of last resort to the banking sector during times of bank insolvency or financial crisis. Central banks usually also have supervisory powers, intended to prevent bank runs and to reduce the risk that commercial banks and other financial institutions engage in reckless or fraudulent behavior. Central banks in most developed nations are institutionally designed to be independent from political interference. Still, limited control by the executive and legislative bodies usually exists.

Well that’s interesting!

It seems to me, that like the way of calculating the CPI, the officially accepted duties of Central Banks seem to have changed. Maybe they haven’t changed much in intent, but as to degree. But whatever. It appears that the duties of modern Central Banks might be described more like this:

Central banks are the officially assigned agents of sovereign governments for the ongoing business of demonetizing whatever currency is in circulation, or in the possession of the people. The business is to reduce the value of circulated money by increasing it’s quantity covertly, and the newly issued money is then used for the governments unstated purpose. The Central Banker, the government, and colleagues receive large amounts of the new money first, before prices rise as a result of it’s creation, enabling a never ending secondary business of the purchasing of assets prior to inflationary rises in their prices. The secondary highly profitable business, being a legal practice with some similarities to insider trading, is never discussed.

Of course, this means that by design, longer term this causes the value of the money in circulation to trend towards a value of zero.

The Central Banks’ business model is to replace the devalued circulating money in the people’s possession with another newer type of money which is issued to replace it. Replacement is done approximately once every 30 years.  For new currency Central Bankers especially like money they can create for the lowest cost of production, eg paper, plastic, or nothing at all in the case of credit, provided they enjoy a monopoly of it’s supply. The supply is usually delegated to other commercial banks to carry out on their behalf, especially for money created as credit, ie debt on behalf of the people who borrow from those banks and receive the zero cost new money at a price which is called the interest rate for retail credit.

But what do I know? Maybe Wall Street have it right, and inflation is really 2%, and Central Banks really are the lenders of last resort!

Argentus Maximus

The author posts daily commentary on the gold and silver markets in the TFMR forum: The Setup For The Big Trade. More information about the author & his work can be found here: RhythmNPrice.

53 Comments

cliff 567's picture

1

again

prius_driver's picture

HAPPY MOTHER'S DAY!

Happy Mother's day everyone!

AlienEyes's picture

trace

3

.

edit: That would be your upper lip, conspiracy cow.  wink

Dagney Taggart's picture

Holding my nose from chestbeating monkey smell

Firth.

I wonder who Alan Greenspan's god is. I see his Jubilee year begins on September 25th. Maybe these moneychanger frauds will honor it but I have doubts. What a great opportunity for them to be seen as the world's saviors!!

The passport from a dead currency to a new currency is anything but the dead currency (and currencies linked to it). Mobile wealth like gold and silver are still the best though.

PS. Except that crap flows downhill.

silver66's picture

I'll need to re read this

two or three times. Very good work

Silver66

DeaconBenjamin's picture

some strange undocumented reason

For some strange undocumented reason, after Mr Greenspan became the Chairman of the Fed he underwent a character alteration and came up with the idea of making changes to the way the CPI should be calculated.

Perhaps not so strange that a devotee of Ayn Rand would find ways to ameliorate the automatic ratcheting upward of entitlements by gaming the method of calculation.

Actually, in 1987 when Greenspan took over, the role of CPI in determining automatic labor union wage increases was also more dominant than today.

renozep's picture

@ Argentus

Thanks for that.  As clear, concise and explanation as I've read.

Bollocks's picture

This is really worth watching

Please give it 5-10 mins and maybe you'll watch through to the end. It's not what you may think just from the title.

Argentus - excellent post. Yes, John Williams at shadowstats seems to be spot-on. I visit his site often. Great work, thank you for the time you've spent putting this together smiley.

Undecided's picture

Number 9

number 9, number 9, number 9

bollocks great video.

we are the misinformed miracle that is Christ

Mr. Fix's picture

Modern Central Banks' Business Is Misunderstood?

Aside from being a completely wicked organized crime ring hellbent on bankrupting the planet, and exterminating humanity,

which part exactly is misunderstood?

stackaloha's picture

great article

well presented as always sir, thank you! I have tried to explain this subject to people but they usually don't seem to want to understand.

sierra skier's picture

The central Bank and Government

Are geniuses at presenting failure in a manner that suggests success. I have not trusted the government numbers for well over a decade or two, but became much more aware of their lies during the last 10 years. Those folks in charge of the numbers will give us projected numbers out 20-30 years yet they can't even get close on our month to month GDP, CPI and employment numbers and then they will revise them shortly to something that is more to their liking or visa versa. They cheat with the rules, change the reporting specifications and make up whatever suits their needs.

I'm stopping before this turns into a rant.

Thanks argentus maximus for pointing out what I have been looking at for a long time.

Safety Dan's picture

Graphs of Central Bank Efforts..

Great job AM, I'm sure it will strike a nerve with the shills and trolls. Our CB, the Federal Reserve, is the only privately owned Central Bank. Stop and think about that one!!! Shills and trolls, load for bear as you read the graphs below.20130227_Bernanke.jpg

How does the US Inflation Calculator work?

Alternate Inflation Charts

Gold Inflation

Cumulative Inflation by Decade

Gold and Inflation

Kerbouchard's picture

Bollocks...

The video is amazing so far.  Utterly hooked!

DayStar's picture

Harvey's Up! (TFMR)

Get the Full-Harvey at:  http://www.tfmetalsreport.com/comment/404918#comment-404918

  • Harvey: John Brimelow reports that premiums in India are now  $275.66 or a huge 21.37%.  The Indian Sensex roared higher with reports that the BJP party is well in the lead.  The 5 week election run will end next week and it is widely believed that the BJP party and its leader, Narendra Modi will win and he will become Prime Minister.  He will definitely abolish the gold/silver tax, and he is a good friend to our two precious metals. Shanghai gold closed with a premium of $2.83 per oz, providing a beautifully lit corridor for gold to travel from the London (and GLD) straight to Shanghai.
  • GoldCore: Gold held steady around $1,290/oz today, underpinned by strong chart support. Unless, it rises by some 1% today, it is set to fall marginally for a second week. Traders are likely to be nervous about being short gold due to the “event risk” given the significant continuing geopolitical tension due to the crisis in Ukraine. Despite the losses this week, the fundamentals remain sound. One of these key fundamentals are still ultra loose monetary policies. This week heard confirmation that the monetary policies of the Federal Reserve, ECB and Bank of England are set to remain ultra loose and in the ECB’s case may become even looser.
  • GoldCore on Bail Ins: EU finance ministers are nearing political agreement on how the EU’s firewall fund could provide direct aid to banks after bail-ins, Dutch Finance Minister and chairman of eurozone finance ministers, Jeroen Dijsselbloem has said. The European Stability Mechanism’s (ESM) direct bank recapitalization tool and bail-ins have been developing for nearly two years. Dijsselbloem said there was broad support for his latest proposal, which sets conditions for when and how bail-ins and the bank-aid tool will be usable in 2015. “We made very good progress” Dijsselbloem told reporters in Brussels after he led a meeting of his euro-area counterparts. The plan “will allow ministers to seek, where necessary, a parliamentary mandate in view of a political decision which we can then take before our next regular meeting of June 19,” he is quoted as saying by Bloomberg. Once the Bank Resolution and Recovery Directive is fully in force from the start of 2016, not only a bank's shareholders but also bondholders and even large depositors will lose money before government or euro zone money could be used to save a bank from collapse. However, it seems likely that in the event of another Northern Rock, Bear Stearns or worse Lehman Brothers like systemic crisis that the EU would expedite the ESM and bail-in legislation.
  • Ted Butler: If you could identify the most undervalued investment asset in the world that would be another way of saying you had identified the world's best investment opportunity. That’s the case with silver because it is the cheapest investment asset to own and it is likely destined to be the best investment opportunity over time. Forget the fact that silver is at or below its primary cost of mine production or how scarce and rare it is or how much it has dropped from three years ago. The way to determine what the world's most undervalued asset might be is by comparing it to all other assets. Start by dividing silver's price into gold's price. The higher the ratio, the more undervalued is silver. At 66 to 1, silver is a bargain compared to gold. Due to silver’s steep price drop over the past three years, it is now cheaper relative to every other asset in the world. That includes its sister precious metals like platinum and palladium and assets that don’t usually come to mind like copper, oil, the stock market, bonds and the dollar. Right now silver has never been more favorably priced compared to all other investments.
  • Chris Powell (GATA): King World News has monetary metals-related interviews with Sprott Asset Management CEO Eric Sprott, in two parts, here:  http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/5/9_Eri... http://tinyurl.com/lb2333n And with London metals trader Andrew Maguire [DS: With news about silver] here:  http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/5/9_Mag...
  • Chris Powell (GATA): The daily gold price fixings in London may be serving mainly to inject into the market through bullion banks a "synthetic supply" of gold leased from central banks, the Tocqueville Gold Fund's John Hathaway tells Kitco News in an interview this week. The fix's archaic nature, Hathaway adds, is an advantage to its participating banks, which are always essentially short the metal. The price-setting process should be more transparent, he says.
  • Zero Hedge: USPS UNABLE TO MAKE $5.7B RETIREE PAYMENT W/OUT REFORM. "The Postal Service is working diligently to improve its finances by streamlining our network to improve efficiency, reduce operating costs and increase revenue, which was up $379 million over the same period last year — the third straight quarter of revenue increase," said Postmaster General and Chief Executive Officer Patrick Donahoe. "Despite aggressive cost-cutting actions, however, we will still incur annual inflationary cost increases of approximately $1.2 billion each year, and First-Class Mail volume continues to decline," added Donahoe. "We haven't been making the retiree health benefit prefunding payments because we can't".
  • Tyler Durden: Wall Street has a problem. In all their excitement about how terrible Q1 was - and ths how awesome Q2 and beyond will be - it forgot to check in with the firms that were busily stacking inventories in their snow-covered factories around the nation. Wholesale inventories rose 1.1% in March (which is still in Q1 remember) - smashing expectations for the 3rd month in a row (all in Q1 remember) and the 2nd biggest spike in 2 years. Each time we have seen such a spike, the following months saw a notable decrease. Desk chatter is already of a 0.3% boost to Q1 GDP and a 0.2% cut to Q2 GDP - just as hope was getting going once again.
  • Greg Hunter on Syria: The Al-Qaeda backed rebels are on the run in Syria. They have retreated from a major city in Syria. This is a blow to the rebels cause, and it will make the Assad regime just that much harder to unseat. General Wesley Clark said, years ago, that the plan was to topple Middle East governments and Syria was on the list. I don’t think it’s over, but the plan to rearrange the ME has been interrupted.
  • Chip Tatum (chiptatum.com): Las Vegas Sands casino CEO, Sheldon Alderson, is alleged to have personal involvement in crimes admitted to by the Sands Corporation. Sands is a group of Nevada based, International gaming companies
  • Dr Paul Craig Roberts (PaulCraigRobert.org): In April 2014 wedding guests at at the San Luis Hotel in Galveston, Texas, were set upon without reason by 34 crazed goon thug cops. The guests, including the father of the bride and the bride’s brother were brutally beaten and maced along with many guests including 13 who were arrested for asking, “what is going on?” The brother was so badly injured by the goon thugs that he had to be rushed via helicopter to a hospital. The mayhem resulted from an off-duty goon thug witnessing a guest walk outside with an alcoholic beverage, thus violating the city’s “open container” law. Instead of advising the guest of the open container law and recommending that he step back inside, the goon thug called the cops who arrived on the scene in mass and enjoyed themselves by beating up the wedding party.
  • Silver Doctors: Comex warehouse inventory shows there is little 3.6 moz 2009 to 400k in 2013 shows a gigantic Comex depletion and GLD depletion show 70%+ reduction in gold inventory from the main western reservoirs of publicly available gold. Do not be surprised with the depleted inventories in the West if gold breakout does not playout in the remaining months of 2014. The high end asset market in art and real estate has cooled off. Chinese hot money purchases of San Francisco real estate have cooled substantially. Eric Sprott expects a rough summer for the stock market and the Fed will respond to that with reduced tapering and more QE. A good sized number of American families do not have a paycheck coming in and 65-70% of the American economy depends upon what no longer exists.
  • SRSrocco (SRSroccoreport): Canadian silver production declined significantly in the first two months of 2014 compared to last year. The huge drop off in production was due to the closure of two base metal mines and one primary silver mine in 2013. Silver production in Canada declined from 119.5 metric tons (3.84 million oz) in January and February 2013, to 70 metric tons (2.25 million oz) in the first two months of 2014. Here we can see that overall production declined nearly 50 metric tons or 41% y.o.y. (year over year). The fall in silver production came from the closure of Glencore Xstrata’s Brunswick and Perseverance zinc mines in Eastern Canada which produced 350,000 metric tons of zinc in 2011. Canada’s silver production peaked in 2002 at 44.1 million ounces and is estimated to fall to 15 million ounces in 2014.

All this and more on...

The Harvey Report!  smiley!!smiley

http://www.tfmetalsreport.com/comment/404918#comment-404918

DayStar

Dagney Taggart's picture

I find it convenient to keep my interests.....

Mobile.

Kerbouchard's picture

Argentus

I forgot to add my kudos.  Great article.  Very succinct.

Safety Dan's picture

Latest Efforts of US Government Discussed - X22Report

Our government; 1) has a bill limiting journalist before congress, internet slow down 2) faked pictures of kidnapped girls - sex slaves, to have an American presence in Nigeria, 3) after Venezuela's natural resources 4) Ukraine's Crimea limited water supply 5) NATO Steps Up Hostilities over Ukraine (II) 6) EMP planning 7) Central Bankers starting war, in this 17 min video. 

Dagney Taggart's picture

@sierra & deacon

Regarding Idaho, I was just down in Coeur d'Alene a couple weeks ago and happened to listen to a rant about Californians. It was extended so I'll just skip to the end. The message basically was: Leave your politics back in your dying land if you're going there. Based on California Lawyer's writings, I have a good idea what that means. I hope you understand what that means too because the guy was pretty upset and had a pistol on his belt.

@deacon: Alan Greenspan has as much in common with Ayn Rand as the last American politician to claim to follow her philosophy, from what little I've heard from him. I think his name was Paul Ryan.

Bandwagon forming to the left. Don't expect us to form some pretentious Randian collective with any of them. We believe what we do out of self-preservation regardless of whether or not it's popular.

Turd Ferguson's picture

AM, great stuff!

MODERATOR

Thanks for this!

I can add one thing. The CPI was changed in 1992 for a specific reason... to lower calculated inflation, thereby lowering all future COLAs for those on Social Security. Without the change, it is estimated that most SS payments would currently be as much as 70% higher.

And to think, entitlement spending is out of control, regardless!

Dagney Taggart's picture

@Turd

Somebody had to pay for Iraq War #1.

That is an interesting twist. I'll make sure my retired American friends hear this.

tyberious's picture

New to me!

Get REAL with Jan Skoyles: Jim Rickards & James Turk Debating #Bitcoin & #Money

Posted on April 29, 2014 by Stacy Herbert

GetREAL: The fifth episode of the world’s first ever crowdfunded financial news show – Get REAL with Jan Skoyles – features a debate between Jim Rickards (author of Currency Wars and The Death of Money) and James Turk (founder of GoldMoney.com, publisher of the Free Gold Money Report and author of ‘The Money Bubble‘)

Read more at http://www.maxkeiser.com/category/videos/#smuKt9lUUv1Qjo6E.99

Spartacus Rex's picture

And The Band Played On...

Mark Twain once said:

“It is easier to fool people than to convince them that they have been fooled”

Which explains then, why people prefer to continually engage in cognitive dissonance rather than face the cold hard truth and risk coming to terms of their own culpability which enabled them to be duped in the first place.

There is an ancient Chinese proverb that goes:

“Wisdom begins by calling things by their correct name.”

The Int'l Criminal Banking Cabal are notoriously adept at getting their intended victims to accept into their vernacular the Banksters' deviously deceptive “euphemisms” / “wordart” / semantics, (otherwise called what it actually is: Propaganda) and the Banksters have been waging psychological and financial warfare against Countries and their people for literally hundreds of years.

John Adams had long ago pointed out here in America:

All the perplexities, confusion and distress in America arise, not from defects in their Constitution or Confederation, not from want of honor or virtue, so much as from the downright ignorance of the nature of coin, credit and circulation.” (“Circulation” in this circumstance otherwise called “Currency” or “Cash”.)

Even Adolph Hitler recognized how powerful, yet seemingly innocuous, propaganda works:

"Repeat a lie often enough and it becomes fact in the Public mind."     

Now ask yourselves, how many times have you found yourselves referring to Currency you hold as “Money”, or as “Dollars” (or Euros, Pounds Sterling, etc.) rather than truly opening One's eyes and clearly seeing the word “Note” inevitably at the top of such indicating that such are in fact IOUs, (ie “Obligations” / evidence of Debt being OWED) which is why in America, the PROPER way to refer such Currency is “Dollar BILLS” and anyone with a modicum of commonsense understands that a “Bill” is something Owed.

Yet here in America, it supposedly takes far too much effort to say “Dollar Bill” and so much easier to just say “Dollar”, as apparently America (and ALL other Central Bank owned and operated G-7 Countries) seems just as syllably bankrupt as they are financially. And heaven forbid anyone actually expending the effort to simply present their Currency to their Government and/or Banks and actually demand payment of such Debt OWED, even though in America, the Law still mandates that the Banks and/or U.S. Treasury still redeem the Currency into “Lawful Money” (See 12 USC 411)

And anyone who at this late stage of the Banksters' Fraud & Theft Ponzi Scheme still cannot connect the dots and realize that Currency is not Money, but in fact merely a “Claim” for Money, will find themselves buried at the bottom of a mountain of Sh*t when the Defecation Hits The Oscillation.

It's funny that while the U.S. Constitution does not give either the Congress or the Executive Branch via the U.S. Treasury any power or authority to counterfeit, yet no one cares to even question then, how is it even remotely possible in hell for Congress to give such a tyrannical power to the Int'l Criminal Banking Cartel which owns the “Phederal Reserve”?

Oh, that's right. The Bankster wordsmiths have gotten the edumacated sheople to accept a new wordart term / euphemism called “Fractional Reserve Banking” into their vernacular and “Voila” through the mystical power of cognitive dissonance, the people can longer connect the dots and realize that counterfeiting and “fractional reserve banking” are in fact and indeed one and the same!

And while anyone with even a modicum of commonsense could realize that whenever any entity can create virtually at will more Notes or Claims against the actual existing Money Stock in the Economy without having produced anything, or have anything to back up the newly created Notes/Claims against that Money Stock, then the “value” of all previously existing and outstanding Notes /Claims against the Money Stock must go DOWN. But then the Banksters have even created a wholly new euphemism for that ( ie “Inflation”) No, No they tell the sheople, this is not the result of counterfeiting the currency through fractional reserve banking, it is this strange and mysterious new phenomena called “Inflation” but not to worry, not only do we have the very best “Economists” from the very best Universities that our fiat currency can buy working on a solution, but the very best politicians and bureaucrats working in D.C., that we can buy and pay for in fiat currency as well.

However Argentus Maximus currently knows that before Alan Greenspan sold out and went over to the dark side, Greenspan correctly pointed out:

“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation.” Excerpt from Gold and Economic Freedom by Alan Greenspan [written and published in a newsletter called The Objectivist in 1966 and later reprinted in Ayn Rand's Capitalism: The Unknown Ideal ]

While some may find comfort by keeping themselves amused or otherwise“occupied” by perusing all the different charts and graphs regularly put out by countless “experts” and look to same for some presumably sage advice to determine just how bad they are getting clipped by this “Inflation”, however those who still retain and exercise their God given commonsense simply realize that it is imperative to get the hell out of the Int'l Criminal Banker Cartel's fraudulent fractional reserve banking system.

So while the wise are able to recognize the oldest Law of Nature given to mankind since Adam and Eve were evicted from the Garden of Eden ( ie Produce or Perish), and thus actually perform useful work to provide for themselves, their families, and take necessary steps to accumulate and save tangible wealth for any lean times as well as old age, the Banksters and their liberal cronies which sadly make up the “status quo”, whether they be on Wall Street, or merely any Public Servant from the POTUS on down all the way to the local dogcatcher, whose public salaries, benefits and retirement are wholly based upon maintaining the current fraudulent counterfeiting system of “fractional reserve banking” / ie debasing the Currency, lest they find themselves taking a monstrous hit to their standard of living, and more likely than not, all but the upper echelons being immediately laid off, and as well, where does that leave all those enlisted in the Free Sh*t Army who have grown wholly dependent on Food Stamps, Welfare, Rent Vouchers, and the Socialist Security Scam for their retirement, and there is suddenly no mystery as to why nearly everyone is actively engaged in cognitive dissonance, and why the Banksters have seemingly no problem in easily enlisting so many people in pushing for the fraud and theft to continue until it finally collapses due to its sheer magnitude, far outstripping what little output by fewer and fewer remaining producers is left. But WTH...

Federal%20Reserve.jpg

sierra skier's picture

Dagney

I caught that trip to Coeur d'Alene in your post a little while back for your silver run. During our three trips there in the last year we have heard the rant and spoken with plenty of folks. We live in the mountains in Ca., not the crowded cities full of lost liberals. We have been warned not to import the politics we are escaping but have no issues with that because we have fit right in with most of the folks we have meet. Heck I moved out of the south land 40 years ago to get away from those politics.

We have been just as upset about the south land liberals moving to our local and changing the demographics up here over the years. They have proceeded to ruin our local area so I am familiar with what he is thinking. I have been packing for a dozen years now myself (my wife is legal to pack in 35 states as well) so a firearm creates no worries but offers something familiar for us to chat about.

We intend to enhance and reinforce the more conservative state of mind of the folks up there and have been told by many that we will fit right in with them and they wish more transplants held solid conservative beliefs like us. We are used to the rural style of living and embrace the opportunity to fit in to a new area while shedding the burden of overly Liberal politics. We have numerous friends up there and have meet many great folks in the area already. We have been warmly welcomed by most of the folks we have meet.

Thanks for the heads up however and after our relocation perhaps we could get together for a cup of coffee and a chat during one of your shopping runs south.
 

Pining 4 the Fjords's picture

Gold and land and price manipulation

Argentus article inspired me to do some research (truly outstanding work AM!), and I thought I would share my simple results.

Basically, we all know that in normal times, gold acts the "thermometer of money creation", and both for its intrinsic value and as a hedge against the financial repression AM outlines in this excellent piece, gold usually keeps pace or even outpaces currency devaluation.  And yet, since the massive attack of September 2011, it has not.

Now those of us who are in the manipulation camp believe we know why-  those who benefit most from the money creation scheme outlined in this article have a STRONG vested interest in hiding its effects, from the gamed CPI to artificially low interest rates, to controlling paper price of gold, etc.  But it occurred to me that perhaps gold isn't the only thing that might show this, and if the price of gold is being gamed as it surely is, maybe we could find another proxy-measure for the financial repression discussed here... something that acts like gold would act, if gold were not so heavily manipulated.

I realized that farmland would share many qualities with gold and could be an excellent comparison. Farmland is a long-term store of value, and because it produces a crop it also has intrinsic value.  Sales data are available, and it is so widely traded on such an individual basis (there are no effective institutions that can control or manipulate its price) that farmland might well act quite similarly to how gold would act... if gold were allowed to trade freely.

So I found a reliable dataset (the Iowa Farmland Value Survey) and charted the results against gold.  The line chart shows average farmland price per acre, for each year for the last ten years:

I find it fascinating how the price of farmland tracked the price of gold incredibly closely in terms of percentage gain year over year... right up until September 2011.  To me, this shows clearly that the scale and intensity of PM manipulation was ratcheted up considerably starting at that time (as many of us who have followed these markets have sensed) and that it was successful in "breaking the relationship" between financial repression and gold price, at least for now.  They were not able to do the same to farmland prices, however, and the continuing rise in price clearly reflects the ongoing process of currency devaluation.  In short, farmland is doing what gold is supposed to do, presumably because gold (through paper manipulation) is easily controlled, while farmland sales and prices are not easily controlled.

This also suggests to me that the snap-back for gold could be quite something.

Dr Jerome's picture

Farmland

Great chart Pining!

Living in rural Ohio from 2000 to 2012, I watched the price of tillable land go from $1500 per acre to well over 10K per acre--some areas selling for up to 18K per acre where the soil is excellent. The local farmers were somewhat distressed because wealthy investors were driving the price up--according to the gossip. They would purchase large parcels with cash, then rent the land to the local farmers to grow corn or soybeans, earning about 3% per year (after property tax) with the investment. 

Not a bad place to park millions of dollars when you don't trust Wall Street.

Lintltj5's picture

Farming

Excellent comparison of the two Pining! A friend of mine was forced to sell off a good deal of his stack to pay for unexpected medical bills for his son. He was a bit upset about having to do it, but said the health of his son obviously takes priority over metals.

We talked a few weeks later and he told me that he had bought a few acres to build on, but had not replenished his stack. In the ensuing conversation, I reasoned with him that in essence he had replaced it in a sense because he had purchased a plot of land which he planned to farm. The value in monetary terms would most likely go higher and in terms of production value of the  land it would be a great source of potential wealth, as he now owns the means of productions and can store or save capital off that land. That capital need not be just money, but food, energy, etc. 

Get in on it while it's still there to be had!

El Gordo's picture

Why can't we find Libertads anywhere?

I like the Libertads and always have to pay an arm and a leg for them, but lately I just can't seem to find any.  Are they that scarce, or is there a secret Libertad society somewhere that buys them all up and keeps them off the market?

(That's not Libtard, it's Libertad).

Dagney Taggart's picture

Excellent, Pining et al.

If the state is drowning in debt, isn't the farmland and all real estate defenseless against taxation? How would that play out.

Sure the tax might be passed off to the consumer (assuming grain overproduction that can be sold at market). But what if the consumer cannot pay for the increase in their grain price and it costs too much for the farmer to just feed himself and family off his own land?

Bollocks's picture

Wow that's really interesting Pining!

You really could be on to something there yes. Great work!

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