Witches Brew: Fingers of Instability - Part III

By Theodore (Ty) Andros

The smell of economic NAPALM is in the air as the central bank printing presses have allowed mispricing, malinvestments and market imbalances to mushroom to EXPLOSIVE levels. Now the money printing is set to slow and some of the insolvent can be expected to fall to their doom as the tide of money recedes.

This has set the stage for a BLACK swan of unknown identity to set off the conflagration. The Black swans are too numerous to mention but we are going to identify a few of them in this edition of fingers of instability.

ECONOMIC Optimism abounds as dead cat bounces in Keynesian HEADLINE economic illusions provide those who live within the MAIN STREAM MEDIA matrix of misinformation HOPE. This is the vast majority of the public and investors in general. Of course nothing could be further from the truth, they really live in a world of willful blindness.

IN REALITY these people are the frog in the slowly boiling water of the unfolding depression which began in 2008. The depression masked by debt masquerading as economic growth first and wealth second. The bonds and money which have been printed out of thin air are just the next step in the unfolding SYSTEMIC insolvency which is MUSHROOMING on a daily basis.

Actually no wealth has been created (but GARGANTUAN future liabilities have been), it is just the opposite. It is the consumption of wealth and misallocation of capital to consumption rather than investment and creating a BOOM from credit expansion on grandest scale in history. The BUST will be equally SPECTACULAR!

Just this week it was announced that Japan’s government DEBT has surpassed 1 Quadrillion yen ($10 trillion US dollars and 200%+ of GDP), with most of the new debt/money PRINTED out of THIN AIR.

As we near the 1st birthday of QE to infinity the approximate total MONEY printed out of THIN AIR since its inception in September 2012 is $1 million million dollars ($1 trillion or $20,000 million per state). You would think an economic recovery should be in FULL swing.

The bottom line is that the Federal Reserve has bought approximately 110% of all treasury issuance since Jan 1. In fact, subtract Fed balance sheet expansion from GDP growth and a DEEP recession is clearly VISIBLE.

The money didn’t go into the economy; it went into the banks (FOREIGN and DOMESTIC) to relieve them of toxic mortgage securities and into treasuries to fund a MORALLY AND FISCALLY insolvent central GOVERNMENT IN Washington DC. The public and private sector have virtually left the arena for RISK FREE SECURITIES. Think about that… How far will GOVERNMENT bonds have to fall (yields rise) before investors will be attracted to them again?

All the treasury money went into consumption, and not a cent went into investing in the future. Most of the debt is to buy overpriced malinvestments, government debt and toxic bank assets which do not produce more that they cost and purely consumption by Something for Nothing societies aka Developed World Welfare States.

In addition to GOVERNMENT debt compounding at 6-8% over the last five years UNFUNDED LIABILITIES are compounding at almost double that rate:

These are socialized CENTRALLY PLANNED economies in all but name only, directly (state owned monopolies) or indirectly (regulated). They control all the means of production and confiscate most income either thru taxation or theft of purchasing power of the respective currencies through deficit spending of money printed out of thin air.

There has been no austerity where government spending is concerned since the Global financial crisis in 2007. GOVERNMENTS have exploded in size. Which Governments present as growth, to cut government will cut reported economic growth. Their growth has been funded by major new BORROWING, taxes and fees on every part of the societies they control.

Confiscation of incomes is now approaching virtually slavery for those that produce wealth. Take a look at the meager amounts are left to the citizens of the developed world’s Socialist/welfare states:

TOTAL Taxes range from 59 to 80% depending on where you look. This DOES not include government fees which are up 10 to 100% or the cost of runaway regulation discussed in the last edition of TedBits.

Ever wonder why the auto industry is free-fall in Europe? Gasoline in the United States averages $3.50 a gallon in Germany it is $12 dollars, the difference is TAXES. This is why business formation and industrial production is at multi decade lows. In Europe the entrepreneur is extinct and so too is REAL ECONOMIC growth; in the US the assassination in UNDERWAY!

In no country has spending actually been cut, just the rate of growth in spending. To fund EXPANDED government spending, promises to CONSTITUENTS (something for nothing societies, crony capitalists and special interest elites) taxes and fees have been raised on the private sectors and on the public at large.

There is no reason to create wealth in the developed world anymore as it will be confiscated for REDISTRIBUTION to special interest supporters. Do you think that might affect the behavior of producers and entrepreneurs? For supporters of socialist/progressive BIG government it is NEVER enough to fund their VOTE BUYING and corruption…

Its only small and medium size businesses that are paying TAXES as they are unable to INFLUENCE public servants for tax loopholes and regulatory FAVORS as BIG BUSINESS does with their lobbying.

In the United States the CIVIL war was fought to end slavery. To President Lincoln, the very idea of one person taking the fruits of another person’s labor IE: “SLAVERY” was VILE, immoral and repugnant and he went to war to end the practice. It still is in my mind.

Now the SOCIAL WELFARE governments throughout the developed world have implemented the same practice and call it FAIRNESS. Can you say George Orwell’s Animal Farm? There is no reason to produce wealth in these societies as to do so RESULTS in confiscation by the something for nothing societies which are cannibals of the worst sort.

ECONOMIC Growth will never resume until those that produce nothing or consume more than they produce are stopped from eating those that do!

“The democracy will cease to exist when you take away from those who are willing to work and give to those who would not.”

– Thomas Jefferson

REAL Wealth creation has and is now FLEEING to places OUTSIDE the grasp of the welfare states locusts and will continue to do so. Look at the size of the underground economies in Europe (courtesy of www.zerohedge.com):

Throughout the social welfare states, as taxes and regulation have RISEN to confiscatory levels, underground economies have mushroomed to average 22.1% of the EU economy to escape CONFISCATION and the TAXMAN. It set to rise further.

This is also why wealth creation as represented by manufacturing and intellectual property have moved to low tax JURISDICTIONS such as IRELAND, SWITZERLAND, Singapore, Hong Kong, Cayman Islands, and of course the biggest tax haven in the world: the UNITED STATES, etc.

Many in the main stream media call tax minimization (all done within the letter of the laws) NEFARIOUS and UNFAIR. Ha Ha. It nothing more nefarious then SELF PRESERVATION from thinly disguised social welfare state slavery called FAIRNESS! It is people and businesses FLEEING (looters with government guns) through whatever doors are available to them!!!

For wealth creators and international businesses it is either move to places that reward capital and wealth creation or become UNCOMPETITIVE in the global marketplace; aka OUT OF BUSINESS.

Businesses and entrepreneurs do not work for the government. They work for themselves, shareholders, employees and customers. The most important being the customer by providing more goods and services for less money for which they are REWARDED by earning the customers’ business.

Let me tell you something about corporate taxes: corporations don’t pay them, their customers do in higher prices and their employees do in lower wages.

Higher corporate taxes mean less job security and fewer jobs as money moves from productive activities in the developed world to the emerging world where they can STAY globally competitive. This is WHY the developed world’s ability to create wealth, jobs and economic growth has been HOLLOWED out over the last 5 decades as they FLEE the centrally planned socialist economies of the west.

Until the wealth confiscation, and crooked regulations (crony capitalism) are removed there will be no recovery in REAL terms, all economic growth is a measure of money printed out of thin air and false phantom growth done to HIDE what centrally planned socialist economies have DESTROYED in REAL wealth creation.

FAKE Phantom growth has mushroomed in the developed world. It is an illusion of business activity and GDP when none has occurred, such as free checking accounts, and imputed rent from fully paid for housing. Take a look at GDP when phantom growth is taken out:

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