Economics

Economics
Max and Stacy give you all the financial news you need as the Global Insurrection Against Banker Occupation gathers pace. Occupy Wall Street, Crash JP Morgan, Buy Silver and DEFINITELY visit MaxKeiser.com!
Updated: 10 hours 3 min ago

Short squeeze in Gold this week?

4-Jun-2017

Here’s my latest thinking on the short squeeze developing in #gold. This week's target $1300. #Silver looks good toohttps://t.co/gpSdI548tu

— James Turk (@FGMR) June 4, 2017

Does BBC Screen Guests and Coach Them on What To Say?

4-Jun-2017

BBC telling invited guests, off camera, "not to go too heavy on the Tories".

Clip courtesy of @AshBeechey pic.twitter.com/7UAzVHFJ0t

— Will Black (@WillBlackWriter) June 2, 2017

Yes. I can confirm that BBC instructs guests what they can and cannot say. The way this is managed is via several pre-interviews with different producers who listen to your answers to possible questions asked on air – and then repeat your answer in the words they want you to use – saying “wouldn’t it be more impartial to say…” with implication being, here’s what we want you to say – but in your own words. If it appears you aren’t playing along they cancel the booking. If you parrot what they want you might get asked back. When we presented our own show “The Oracle with Max Keiser” on BBC World – the BBC engaged in outright censorship and propaganda. We told them to sod off and cut ties with them.

[KR1079] Keiser Report: Dotcom Bubble 2.0?

3-Jun-2017

We discuss whether or not stock prices will zigzag lower for decades to come; or whether they will go out with a bang. In the second half Max talks to Karl Denninger of Market-Ticker.org about tech stocks and why they are rising so rapidly – are we in Dotcom Bubble 2.0?

Hahaha Bitcoin Price Now Double Gold Price

3-Jun-2017

The market cap of Gold is hugely, bigly, more but psychologically a nominal price move twice that of Gold gets press and press brings in more adopters and the virtuous cycle bolts higher.  Success begets success.

Projecting the Price of Bitcoin

2-Jun-2017

I’ve taken the liberty of preparing a projection of bitcoin’s price action going forward:

You see the primary dynamic is continued skepticism from the mainstream, which owns essentially no cryptocurrency and conventionally views bitcoin and its peers as fads, scams and bubbles that will soon pop as price crashes back to near-zero.

Skepticism is always a wise default position to start one’s inquiry, but if no knowledge is being acquired, skepticism quickly morphs into stubborn ignorance.

Bitcoin et al. are not the equivalent of Beanie Babies. Cryptocurrencies have utility value. They facilitate international payments for goods and services.

The primary cryptocurrencies are not a scam. Advertising a flawless Beanie Baby and shipping a defective Beanie Baby is a scam. Advertising a mortgage-backed security as low-risk and delivering a guaranteed-to-default stew of toxic mortgages is a scam.

The primary cryptocurrencies (bitcoin, Ethereum and Dash) have transparent rules for emitting currency. The core characteristic of a scam is the asymmetry between what the seller knows (the product is garbage) and what the buyer knows (garsh, this mortgage-backed security is low-risk–look at the rating).

Both buyers and sellers of primary cryptocurrencies are in a WYSIWYG market: what you see is what you get. While a Beanie Baby scam might use cryptocurrencies as a means of exchange, this doesn’t make primary cryptocurrencies a scam, any more than using dollars to transact a scam makes the dollar itself a scam.

Bubbles occur when everyone and their sister is trading/buying into a “hot” market. Bubbles pop when the pool of greater fools willing and able to pay nose-bleed valuations runs dry. In other words, when everyone with the desire and means to buy in and has already bought in, there’s nobody left to buy in at a higher price (except for central banks, of course).

At that point, normal selling quickly pushes prices off the cliff as there is no longer a bid from buyers, only frantic sellers trying to cash in their winnings at the gambling hall.

While a few of my global correspondents own/use the primary cryptocurrencies, and a few speculate in the pool of hundreds of lesser cryptocurrencies, I know of only one friend/ relative /colleague / neighbor who owns cryptocurrency.

When only one of your circle of acquaintances, colleagues, friends, neighbors and extended family own an asset, there is no way that asset can be in a bubble, as the pool of potential buyers is thousands of times larger than the pool of present owners.

I discussed The Network Effect last year: The Network Effect, Jobs and Entrepreneurial Vitality (April 7, 2016):

The Network Effect is expressed mathematically in Metcalfe’s Law: the value of a communications network is proportional to the square of the number of connected devices/users of the system.

The Network Effect cannot be fully captured by Metcalfe’s Law, as the value of the network rises with the number of users in communication with others and with the synergies created by networks of users within the larger network, for example, ecosystems of suppliers and customers.

In other words, the Network Effect is not simply the value created by connected users; more importantly, it is the value created by the information and knowledge shared by users in sub-networks and in the entire network.

This is The Smith Corollary to Metcalfe’s Law: the value of the network is created not just by the number of connected devices/users but by the value of the information and knowledge shared by users in sub-networks and in the entire network.

In the context of the primary cryptocurrencies, the network effect (and The Smith Corollary to Metcalfe’s Law) is one core driver of valuation: the more individuals and organizations that start using cryptocurrencies, the higher the utility value and financial value of those networks (cryptocurrencies).

In other words, cryptocurrencies are not just stores of value and means of exchange–they are networks.

The true potential value of cryptocurrencies will not become visible until the global economy experiences a catastrophic collapse of debt and/or a major fiat currency. These events are already baked into the future, in my view; nothing can possibly alter the eventual collapse of the current debt/credit bubble and the fiat currencies that are being issued to inflate those bubbles.

The skeptics will continue declaring bitcoin a bubble that’s bound to pop at $3,000, $5,000, $10,000 and beyond. When the skeptics fall silent, the potential for a bubble will be in place.

When all the former skeptics start buying in at any price, just to preserve what’s left of their fast-melting purchasing power in other currencies, then we might see the beginning stages of a real bubble.

The wild card in cryptocurrencies is the role of Big Institutional Money. When hedge funds, insurance companies, corporations, investment banks, sovereign wealth funds etc. start adding bitcoin et al. as core institutional holdings, the price may well surprise all but the most giddy prognosticators.

The Network Effect can become geometric/exponential very quickly. It’s something to ponder while researching the subject with a healthy skepticism.

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Why trusting in the bigger picture gives you trust in gold

2-Jun-2017
  • Trump pulls out of Paris Climate Accord
  • Gold pauses ahead of non-farm payrolls data
  • In Gold We Trust 2017 released
  • Reports on the ‘Everything Bubble’
  • On average gold is up 5.88% ytd, since start of 2017.
  • Trump ‘was the trigger of the sudden reverse thrust of the gold price’
  • Reorganization of the global monetary order considered a ‘grey swan’

Trump’s announcement late yesterday that the US would be pulling out of the landmark 2015 Paris climate accord saw gold prices retreat. Markets are now awaiting the release of the non-farm payroll data. General consensus is that 210,000 new positions were added in May. However, this could be an underestimation given the stronger ADP number yesterday.

The Paris climate deal, jobs numbers, elections and terrorist attacks are all important ingredients in the tale of an economy. But they should not be considered individually when considering the gold price or gold investment. They all come together to form a far more complex story, which is the global financial and geopolitical system.

Yesterday Incrementum’s widely respected In Gold We Trust report was released. The authors do a stellar job of considering not only the wider picture but also what we can learn from history. This is refreshing in an age when many mainstream, day-to-day analyses look for individual bullish and bearish signs for gold, when in reality all the signs need to be considered together.

The report covers a multitude of angles and considers even more economic, financial and political factors. As we often conclude, investors should not focus on small events but rather look at what they all point to and why they are happening. This is in contrast to the mainstream media who often can’t be considered to do this. Perhaps we should not be surprised by this, an academic study released last month found journalists have ‘a lower than average ability to regulate emotions, suppress biases, solve complex problems, switch between tasks, and think flexibly and creatively.’ Oh dear!

Perhaps we can now understand a little better why we fail to spot much coverage in the mainstream of the underlying dangers in the financial system and how investors and savers can protect themselves. With this in mind we suggest you enjoy the highlights of the In Gold We Trust Report, below and continue to take the mainstream financial media with a pinch of salt.

Frustrated with gold? Blame Trump

The gold price was having a great time in the first half of last year. Long-term we believe we know where it is headed and it looked like, in 2016, that it was well on its way. Then something happened and it changed its mind. Why? Incrementum’s authors Ronald-Peter Stoeferle and Mark Valek argue that ‘ironically’ Trump ‘was the trigger of the sudden reverse thrust of the gold price.’

Read full story here…

 

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[KR1078] Keiser Report: Germany vs USA in era of deglobalization

2-Jun-2017

We discuss an era in which Germany once again is at the center of a major shift in global power in which a period of deglobalization accompanies one empire collapsing and another rising. We also discuss America’s ‘soft’ development versus China’s ‘hard’ development and whether or not this might deliver more peace than the world has seen in the past decades.

Gold to benefit from Uncertainty thanks to Twitter and UK elections

1-Jun-2017
  • Gold hits five-week high
  • Reaches $1,273.74/oz, highest since April 25th
  • Sterling recovers after UK polls point towards a hung Parliament
  • Expected Fed-tightening capped gains
  • 90-dead in Kabul, further signs of increasing tension in Middle East
  • Trump expected to pull out of Paris Accord and Trump’s anti-Iran axis already feuding

Yesterday gold hit $1,273.74/oz, a level not seen for five weeks. Analysts point to some safe-haven demand for the yellow metal on account of the geopolitical tensions, upcoming UK elections and tomorrow’s non-farm payroll data.

We suggest investors look beyond data releases and political peacocking, and instead look at what the greater picture shows which is uncertainty on all fronts.

All about the Federal Reserve

Amongst mainstream financial analysts, all eyes appear to be on the expected Federal Reserve rate hikes. Thomson Reuters data shows traders see an 87% chance of a 25-basis-point hike at the next Federal Reserve meeting, this month.

Softer economic data of late, may mean that the Janet Yellen and her team might not be so keen to ramp up rates this month. Investigations into Russia’s alleged involvement in the 2016 U.S. election and possible collusion with Trump’s campaign also have clouded the prospect of a rate hike next month. The plan was for two further rate hikes this year in order to tighten the central bank’s balance sheet.

Fed policy tightening is expected to be negative for gold. But times might be changing as we note that in both December and March, following rate rises, gold decided to rally. This might be on account of expectations of over-tightening by the Fed and which would tip the country into a recession. Good news for gold.

Should the Fed over tighten, then they are likely to return forward guidance. As we know this is a great environment for the gold price due to increased inflation and a weaker currency.

Jitters over UK elections

In what feels like groundhog day for many UK-voters, there will be an election next week. To listen to the international media one could be forgiven the election is about Brexit. It is a general election which has consequences far beyond Brexit negotiations. Many of these consequences are unknown, which suggests a positive environment for gold regardless of the outcome.

When the election was initially called it seemed as though Mrs May’s election was a dead cert, however the polls suggest it might not be so easy. This morning news of a YouGov poll commissioned by the Times show Mrs May has a battle ahead of her. YouGov found the Conservative lead has slipped dramatically in recent weeks and is now within the margin of error. In April, when the election was first called, the Tories had a 24-point lead over Labour.

Read full story here…

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Jim Rickards on the Golden Conspiracy

31-May-2017
  • Hedge fund, PhD statistician claims gold market is “the most blatant case of manipulation”
  • PhD: “Statistically impossible unless there’s manipulation occurring”
  • Gold serves as political chips on the world’s financial stage.
  • Price is being suppressed until China gets the gold that they need
  • Gold will go higher when all central banks ‘confront the next global liquidity crisis’
  • ‘When that happens, physical gold may not be available at all.’

Jim Rickards: The Golden Conspiracy

Is there gold price manipulation going on? Absolutely. There’s no question about it. That’s not just an opinion.

There is statistical evidence piling up to make the case, in addition to anecdotal evidence and forensic evidence. The evidence is very clear, in fact.

These are the opening lines of Jim Rickards’ piece ‘The Golden Conspiracy’, an op-ed that may surprise even the most seasoned followers of gold markets.

Gold and silver price manipulation is not a new topic to regular readers. For years the idea that precious metals markets are subject to more than just free market forces has been dismissed by the mainstream. Many have referred to gold and silver manipulation as topic fodder for the conspiracy and deep web forums. This is despite evidence to the contrary.

In the last eighteen months or so what was dismissed as anecdotal tales of manipulation has finally been recognised by the regulators and lawmakers as something very real and serious. Fines have been doled out and regulators have been slowly implementing new rules.

But what if the manipulation goes above institutions that can be called to account? Can they be fined? Can it be somewhat controlled by the authorities? What if it is a country doing the manipulation? Rickards believes it is.

‘…where is the manipulation coming from? There are a number of suspects but you need look no further than China.’

Role of China

Previously we have been excited about China’s role in the gold market. In April last year they launched yuan denominated gold bullion trading. We not only expected this to further boost its power in the global gold and forex markets but to also lead to increased transparency and reduce price manipulation.

However the country is not only keen to increase transparency in the market for their own long-term gain, they have short-term goals as well – to increase their gold reserves.

Read full story here…

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How Debt-Asset Bubbles Implode: The Supernova Model of Financial Collapse

31-May-2017

When debt-asset bubbles expand at rates far above the expansion of earnings and real-world productive wealth, their collapse is inevitable. The Supernova model of financial collapse is one way to understand this.

As I noted yesterday in Will the Crazy Global Debt Bubble Ever End?, I’ve used the Supernova analogy for years, but didn’t properly explain why it illuminates the dynamics of financial bubbles imploding.

According to Wikipedia, “A supernova is an astronomical event that occurs during the last stellar evolutionary stages of a massive star’s life, whose dramatic and catastrophic destruction is marked by one final titanic explosion.”

A key feature of a pre-supernova super-massive star is its rapid expansion. As the star consumes its available fuel via nuclear fusion, the star’s outer layer expands. Once there is no longer enough fuel/fusion to resist the force of gravity, the star implodes as gravity takes over.

This collapse ejects much of the outer layers of the star in an event of unprecedented violence.

The financial analogy is easy to see: when rapidly expanding debt consumes a critical threshold of earnings (fuel), the equivalent of gravity (default, inability to service the enormous debt) triggers the collapse of the entire debt/leverage-dependent financial system.

As I explained yesterday, if earnings stagnate or decline while debt races higher, eventually earnings are insufficient to service the debt and default is inevitable. The other problem that arises as more and more of earned income goes to debt service is that there is less and less disposable income left to support consumer spending–the lifeblood of economies worldwide.

Once debt service absorbs a significant chunk of household earnings, recession is the inevitable result as spending collapses once more debt cannot be loaded on households. In other words, debt is limited by earnings. If earnings decline, or fall far behind the expansion of debt, eventually borrowers can no longer borrow more, or refuse to borrow more.

At that point, consumer spending falls and recession generates a self-reinforcing cycle of declining sales, profits, employment and wages. Recession further reduces the ability and appetite for more debt, and this acts as “gravity” in the super-massive debt-star.

Financial supernova collapse has two pathways which we call deflationary and inflationary. But the key point here is these are simply different pathways to the same result: the collapse of the financial system.

In a deflationary supernova, defaults–and the avoidance of additional debt–are the gravity that overwhelms the forces of expanding debt. Once the losses and risk are visible to all participants, the herd psychology changes, and participants no longer believe that central banks “are now the ultimate power in the Universe.”

Central banks can create currency and credit, but they can’t create earnings or productive real-world wealth. These are the limiting dynamics of any debt-dependent system.

The fantasy is that free money–limitless credit to corporations and Universal Basic Income to debt-serfs–will magically create earnings and expand productivity. But this FantasyLand exists only in overheated self-serving imagination: in the real world, free credit is used to buy back stocks and indulge in other financialization trickery, not invest in higher productivity.

And the debt-serfs scraping by on Universal Basic Income have no ability to borrow more and few means to generate meaningful productivity gains.

The other pathway to implosion is to print currency with sufficient abandon that debtors have enough money to service their debts. Emitting sufficient new free money to re-set all the unpayable debt destroys the purchasing power of the currency–a supernova implosion that is little different than the deflationary implosion. The inflationary pathway results in the destruction of the currency, impoverishing everyone holding the currency.

While the idea of debt jubilee is appealing to everyone who doesn’t own debt-based assets (mortgages, auto loans, student loans,etc.), it is anathema to those who do own most of the debt-based assets–who just happen to be the wealthy and powerful who run our pay-to-play “democracy.”

If history is any guide, the wealthy and powerful who run our pay-to-play “democracy” will never relinquish their wealth. Only a financial collapse can re-set the system.

The financial implosion triggers social and political upheavals. Recall that one person’s debt is another entity’s asset. When debt is blown off in either a deflationary or inflationary implosion, all the “wealth” represented by debt is also blown off.

So what survives a financial supernova? There are three classes of things that are still functioning after a debt/fiat-currency supernova: real-world tools/productive assets that were owned free and clear, and non-fiat-currency financial assets that are difficult for failed states and central banks to steal/expropriate.

The third class is human/social capital, i.e. the knowledge and experience in your head. Not only will my Skil 77 power saw still be around, so will my knowledge of how to be productive with this tool.

Proponents of precious metals and cryptocurrencies both see their favored assets as survivable assets that are difficult to steal/expropriate. It’s difficult to predict just how desperate failing Status Quo institutions will get as their debt-fiat-currency dependent “wealth” and “power” implodes, but we are probably safe in assuming they will get fanatically zealous about stealing/expropriating everything they can get their self-serving hands on before the tides of History wash them away.

If they take my Skil 77 power saw, what are they going to do with it? Sell it for pennies to a crony of the central state? How will removing my ability to be productive help sustain their imploding regime? Removing productive capacity and suppressing my willingness to be productive will only hasten the collapse of their failed regime.

The Venezuelan Bolivar is the model of currency collapse: this is not some long-ago history–this is the present:

And how much did expanding debt boost productivity? Oops! Rapidly expanding financialized (i.e. unproductive) debt is Kryptonite to productivity.

Expanding credit has fixed everything! That’s precisely what the Imperial managers think just before the debt supernova implodes.

Federal debt has tripled–no problem, let’s triple it again, and then triple that.There is no upper limit on how much currency the Empire can borrow or print, right? “We are the ultimate power in the Universe now,” etc.

Gravity eventually overpowers financial fakery. Central banks can add zeroes to currency and the super-wealthy can use their unlimited lines of credit to buy up everything in sight, but when the Empire collapses, the debt-assets of the super-wealthy are blown off in the supernova along with all the other artificial constructs of our corrupt, corrupting, rapacious, exploitive system.

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[KR1077] Keiser Report: ‘NIRP Refugees’

30-May-2017

We discuss ‘NIRP refugees’ and ‘reverse Yankees’ as a consequence of what the central banks have wrought. In the second half, Max continues his interview with Craig Hemke of TFMetalsReport.com about bitcoin, yen, dollar and gold.

Wait Until You Hear What The Federal Reserve Is Getting Away With Now

30-May-2017

The Fed is now paying interest on so-called ‘excess reserves’ held at the Fed. Those ‘excess reserves’ include a huge chunk of money held there by foreign banks who are only too happy to receive 1% on their holdings from the Fed given that their own central banks are paying 0%, or even negative rates.

The money that the Fed pays these foreign banks is deducted from the amount remitted to the US Treasury at the end of each fiscal year.

It’s this simple: foreign banks are being paid billions of US taxpayer dollars and not one single person in the US got to vote for or approve of that action.

Click here to read the full article

Gold-backed Currency Launches in Dubai

30-May-2017
  • New gold-backed currency OneGram launched
  • Backed by one-gram of gold, uses blockchain technology
  • OneGram is first in wave of new Shariah, tech-savvy gold products
  • 2017 sees big changes for gold thanks to Shariah gold and blockchain
  • Gold investors should prepare for tightening in supply
  • Bitcoin and shariah gold demand suggest change in retail investor thinking

Technology, shariah gold and bitcoin point to changing views

Ramadan Kareem rang out across Dubai and the rest of the Muslim World this weekend as the holiest month in the Islamic calendar began. For 29-30 days over a billion Muslims around the world practice sawm (fasting), charity (zakat) and salat (prayer). This period is a time of spiritual reflection, increased devotion and worship as well as a time to come together with loved ones for both the break fast meal (Iftar) and pre-fast meal (Suhur).

Ramadan is obviously observed in different ways around the Muslim world. Here in Dubai a non-Muslim will experience a place full of both celebration and reflection, with events happening every evening that are there to welcome everybody. The month also sees a number of companies launching Ramadan promotions ranging from bank accounts (free banking for six months, anyone?) to spa treatments (2-for-1 massage?) to huge packs of dates (the first food to break the fast).

As part of the celebrations, a new gold-backed currency has been launched, here in Dubai. It is a new currency known as OneGram (OGC) backed by one gram of gold and can be used for digital payments. There is a fixed number of OGCs and digital transaction fees (minus admin costs) will be reinvested to buy more gold. According to the managers, “the amount of gold backing each OGC will increase with time.”

OneGram has been launched by a private company of the same name. The company claims to offer a proof-of-stake blockchain that is ‘’further anonymized’ than Bitcoin. Reports state that ‘developers employ zero-knowledge dual-key stealth addresses and ring signature protocols toward ‘instant, untraceable, unlinkable, trustless transactions.’

Shariah Gold Standard

In December we witnessed the launch of the Shariah Gold Standard. Announced in Bahrain by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) and the World Gold Council, the Standard is the first ever set of guidelines for the 2 billion Muslims looking to invest in gold-based financial products.

Read full story here…

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What’s going on with bitcoin?

29-May-2017
  • Bitcoin hits $2,700, a 500 fold increase in five years and doubling in price since May 1st.
  • Previous surges – in 2011 and 2013 – have been followed by dramatic crashes
  • Significant premiums seen in Asia, over USD price
  • Total cryptocurrency market cap reached over $90bn, last week
  • Market remains small and volatile
  • Comparisons between bitcoin and gold are old, invalid and misleading
  • Both bitcoin and gold offer opportunities to diversify away from corrupt financial system

What’s going on with bitcoin?

Introduction

Last week the bitcoin price hit $2,700. A 500-fold increase in five years and a doubling in price since the start of the month.

Most people are aware of bitcoin tangentially, few are really conscious of it day-to-day and even fewer people are actually in bitcoin. Other significant cryptocurrencies, such as Ether and Ripple have also been going great guns and these are even less prominent in the public domain.

If something such as bitcoin with such a small market cap and very little public awareness is doubling in price in less than a month, what does it mean? Why is it behaving like this? Is it in a bubble? Is it a scam? Does it means that you should be getting in on the act? And what does it mean for its contemporaries, such as gold?

We take a brief look at why the price has been climbing, what this means for the future of cryptocurrencies and, most importantly, what this says about gold.

Read full story here….

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Is Your Cost of Living Rising? Why the Elites Aren’t Worried About Inflation

28-May-2017

In our household, we measure real-world inflation with the Burrito Index: How much has the cost of a regular burrito at our favorite taco truck gone up?

The cost of a regular burrito from our local taco truck has gone up from $2.50 in 2001 to $5 in 2010 to $6.50 in 2016.

That’s a $160% increase since 2001: 15 years in which the official inflation rate reports that what $1 bought in 2001 can supposedly be bought with $1.35 today.

My Burrito Index is a rough-and-ready index of real-world inflation. To insure its measure isn’t an outlying aberration, we also need to track the real-world costs of big-ticket items such as college tuition and healthcare insurance. When we do, we observe results of similar magnitude.

Our money is losing its purchasing power much faster than the government would like us to believe.

According to official statistics, inflation has reduced the purchasing power of the dollar by a mere 6% since 2011: barely above 1% a year. We’ve supposedly seen our purchasing power decline by 27% in the 12 years since 2004—an average rate of 2.25% per year.

But our real-world experience tells us the official inflation rate doesn’t reflect the actual cost increases of everything from burritos to healthcare.

The cost of a regular taco was $1.25 in 2010. By official standards, it should cost a dime more. Oops—it’s now $2 each, a 60% increase, six times the official rate.

The cost of a Vietnamese-style sandwich (banh mi) at our favorite Chinatown deli has jumped from $1.50 in 2001 to $2 in 2004 to $3.50 in 2016. That $1.50 increase since 2004 is a 75% jump, roughly triple the official 27% reduction in purchasing power.

So let’s play Devil’s Advocate and suggest that these extraordinary increases are limited to “food purchased away from home,” to use the official jargon for meals purchased at fast-food joints, delis, cafes, microbreweries and restaurants.

Well, how about public university tuition? That’s not something you buy every week like a burrito. Getting out our calculator, we find that the cost for four years of tuition and fees at a public university will set you back about 8,600 burritos. Throw in books (assume the student lives at home, so no on-campus dorm room or food expenses) and other college expenses and you’re up to 10,000 burritos, or $65,000 for the four years at a public university.

University of California at Davis:
2004 in-state tuition $5,684
2015 in state tuition $13,951

That’s an increase of 145% in a time span in which official inflation says tuition in 2015 should have cost 25% more than it did in 2004, i.e. $7,105. Oops—the real world costs are basically double official inflation—a difference of about $30,000 per four-year bachelor’s degree per student.

Here’s my alma mater (and no, you can’t get a degree in surfing, sorry):

University of Hawaii at Manoa:
2004 in-state tuition: $4,487
2016 in-state tuition: $10,872

Sure, some public and private universities offer tuition waivers and financial aid to needy or talented students, but the majority of households/students are on the hook for a big chunk of these costs. And remember that many students are paying living expenses, which doubles the cost of the diploma.

If you think I cherry-picked these two public universities, check out this article.

So the divergence between real-world costs and official inflation isn’t limited to burritos; it’s just as bad in items that cost tens of thousands of dollars.

As for healthcare: feast your eyes on this chart of medical expenses.

According to official inflation calculations, the $12,214 annual medical costs for a family of four in 2005 “should cost” around $15,000 today.

Oops—the actual cost is $25,826, $10,826 higher than official inflation, which adds over $100,000 in cash outlays above and beyond official inflation in the course of a decade.

So let’s add the $30,000 per university student above and beyond inflation for two college students over a decade and the $100,000 in healthcare costs that are above and beyond inflation over that decade, and we get $160,000.

Since deductions for education and healthcare don’t completely wipe out income taxes, the household has to earn close to $200,000 more over the decade to net out the $160,000 to pay typical college and healthcare costs above and beyond what education and healthcare “should cost” if inflation in big-ticket items had actually tracked official inflation.

$100,000 here, $100,000 there and pretty soon you’re talking real money in a nation in which median household income is around $57,000 annually.

So if a household’s income kept up with official inflation over a decade, that household would have to earn at least $20,000 more per year just to keep pace with real-world, big-ticket cost increases.

That’s the problem, isn’t it? If the household’s wages only kept up with inflation, there isn’t another $20,000 a year in additional income needed to pay these soaring big-ticket costs. So the shortfall has to be borrowed, burdening the household with debt and interest payments for decades to come, or the kids don’t attend college and the household goes without healthcare insurance.

Once again, real-world costs have soared at a rate that is almost six times higher than the official rate of inflation.

The reality is real-world inflation in big-ticket essentials is crushing every household that doesn’t qualify for government subsidies of higher education, rent and healthcare.

No wonder the political and financial Elites don’t care about inflation: their incomes have soared far above mere inflation. When you’re skimming millions, who cares about a mere $150,000 for a university education, or $25,000 for healthcare insurance?

Do you reckon the lobbyists for Big Pharma and the rest of the healthcare racket are spending millions lobbying politicians to slash the soaring costs of healthcare? Do you think all the universities collecting billions in government-guaranteed student loans are lobbying politicos to reduce loans to debt-serf students? Sorry, but that’s not how pay-to-play “democracy” works.

In pay-to-play “democracy,” the goal is to raise prices without improving service, and have the federal government enforce this racket on powerless debt-serfs.

If you want to understand why we’re fragmenting as a society, start by looking at the asymmetric burdens imposed by inflation. The Elites aren’t worried about inflation because they don’t even feel it. And since they rule to benefit the top 5%, they don’t really care what the bottom 95% are experiencing.

In other words, “Let them eat cake.”

Check out both of my new books, Inequality and the Collapse of Privilege ($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle, $8.95 print, $5.95 audiobook) For more, please visit the OTM essentials website.

[KR1076] Keiser Report: Bitcoin Stealing Gold’s Thunder

27-May-2017

We discuss the argument that progressives should back building weapons for the job creation. In the second half Max interviews Craig Hemke of TFMetalsReport.com about bitcoin stealing gold’s thunder.

Bitgold Founder: Don’t Forget to Sell Your Bitcoin & Buy Gold & Silver

26-May-2017

Expert Insider James Turk Is Quietly VERY BULLISH On Gold & Silver Right Now:

  • “I Think We’re Seeing the Start of a Short Squeeze!”
  • Don’t Forget to Sell Your Bitcoin Later This Year & Buy Gold & Silver
  • Big Money is Bullish: This Is the Way Bull Markets Get Started! 
  • Backwardation is Back! 

Turk Explains This Short Squeeze Is Being Driven By Longs Looking for PHYSICAL METAL…

Silver Bullion In Secret Bull Market

26-May-2017

Silver Bullion In Secret Bull Market

by Sean Broderick of Uncommon Wisdom Daily

Do you think silver is poised to go higher?

I sure do. That’s because I’m watching what is going on in the world’s silver ETFs. I’m also watching the mountain of forces that are piling up to push the metal higher.

Look at this chart. It shows all the metal held by the world’s physical silver ETFs (black line). And all the metal held by the world’s physical gold ETFs (blue line) …

I showed you this same chart last week. Since then, silver ETFs have added another 8 million ounces. At the same time, gold ETFs have added only 56,000 ounces.

In fact, since late April, silver ETFs have added 31 million ounces of the metal. Gold ETF holdings over that time frame have zigged and zagged. But those are basically flat.

Kind makes you go “hmm,” doesn’t it?

Why is someone stocking up on all that silver?

I can think of a few reasons why …

  Silver ore in mines is getting less-rich. That makes sense, because miners dig up the rich stuff first. And silver, like gold, is a depleting asset. That’s why primary silver miners’ average yield has fallen from 13 ounces per ton in 2005 to 7.4 ounces per ton in 2016. This is a 43% decline in just 12 years.

  Silver is an industrial metal. Half of silver demand is for industry. It will be affected by China’s economic and industrial outlook. Both of those are improving. Though silver demand dropped last year, it is zig-zagging higher.

  Global silver production keeps falling. In fact, silver production fell more than demand last year. That is probably why prices went up 9.3% last year.

The Silver Institute reported that global silver production peaked in 2015. It takes years to bring a new silver mine online. And let me tell you, there aren’t a lot of new silver projects around.

Looking at that earlier chart of silver ETFs, the recent demand trend looks clear. (Up!) Now ask yourself, “What happens when silver demand goes higher?”


Last year, the physical deficit was 52.2 million ounces, according to Thomson Reuters. That was the third deficit in a row. And that trend is not about to change anytime soon …Well, when you put together rising demand and falling supply, you get a deficit.

Read full story here…

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Inflation Isn’t Evenly Distributed: The Protected Are Fine, the Unprotected Are Impoverished Debt-Serfs

26-May-2017

The Consumer Price Index (CPI) measure of inflation is bogus on a number of fronts, a reality I’ve covered a number of times: though the heavily gamed official CPI is under 2% for the past four years, the real rate is 7% to 12%, depending on whether you happen to live in locales with soaring rents/housing and healthcare costs.

Revealing the Real Rate of Inflation Would Crash the System (August 3, 2016)

The Disaster of Inflation–For the Bottom 95% (October 28, 2016)

But the other reality is that inflation is not evenly distributed throughout the economy or populace: many people have little exposure to the crushing inflation of healthcare and higher education. For these people, inflation is a non-issue or a minor impact on their wealth, income and lifestyle.

Those fully exposed to the skyrocketing costs of healthcare insurance and higher education are being reduced to impoverished debt-serfs.

The key factor here that is missed in the official CPI is the relative size and impact of each cost input. Televisions, for example, have plummeted in price as LCD screens have become commoditized.

But how often does a household buy a new TV? Every four years? Every five years? And how big a difference does a $50 or $100 drop in the cost of a new TV make in their lifestyle?

Items that decline in price are modest slices of household budgets, while items that are soaring higher every year are big-ticket expenses that dominate household budgets. So a new TV drops in price by $100. If you buy a new TV every four years, that’s $25 savings per year. Big Freakin’ Deal: that deflationary price “bonus” means you can buy one extra pizza.

Meanwhile, households exposed to the actual cost of healthcare are absorbing increases of $5,000 or more annually. $5,000 increases every year add up: $5,000 + $10,000 + $15,000 + $20,000 = $50,000 was extracted from the household budget over the four-year period.

The household paying the unsubsidized cost of higher education is paying tens of thousands of dollars more for the same marginal-value education. Where a four-year college degree once cost the equivalent of a new car (i.e. $30,000), now it costs the equivalent of a house ($120,000 and up).

So a retiree with a small fixed-rate mortgage in a state with Prop 13 limits on property tax increases who qualifies for Medicare may complain about modest increases in co-pays for office visits and medications totaling a few hundred dollars annually, a young self-employed couple might be facing thousands of dollars in rent increases, healthcare insurance costs, childcare expenses and so on–each a big-ticket item with a crushing impact on household spending and debt.

Households protected from actual big-ticket inflation by subsidies or luck (i.e. buying a house 30 years ago when prices were a fraction of today’s prices) have no experience of real inflation. Only the unprotected, unsubsidized households struggling to pay rising rents, soaring college tuition and fees and skyrocketing healthcare insurance premiums have an unmediated experience of the real inflation ravaging the the U.S. economy.

If you’re on Medicaid, Medicare or your premiums are mostly paid by your employer, you have no idea of the system’s actual costs. The self-employed aren’t subsidized, so we are exposed to the full inflation rate of healthcare, in which the costs of medications are jacked up by 4,000% because, well, Big Pharma has a free hand, thanks to our pay-to-play “democracy”.

Getting that often-worthless diploma now requires debt-serfdom, enforced by your private-profits-are-guaranteed, losses-are-dumped-on-the-taxpayers federal government. Needless to say, the government is here to help you–help you become a debt-serf whose serfdom enriches state-cartel cronies.

We’re supposed to accept that because TVs are cheaper,the rate of inflation is near-zero. Meanwhile the unsubsidized costs of big-ticket items are rising by thousands of dollars annually.

My insightful colleague Lance Roberts prepared this devastating chart that shows how debt-serfs deal with soaring prices–they borrow more to fill the widening gap between what they earn (stagnating) and the cost of living (skyrocketing).

The inside-the-Beltway crowd that dominates Washington and the overpaid technocrats that dominate our financial skimming machine are both protected from the true ravages of inflation, so our corporate media never mentions the impact on the unprotected. Our job is to shoulder the higher prices by taking on more debt.

Welcome to debt-serfdom, the only possible output of the soaring cost of living for the unprotected many who are ruled by a hubris-soaked, subsidized Protected Elite.

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