DAILY NEWS Sep 13, 2013 2:56 PM - 0 comments

Ned Goodman and the 'Botox Economy'

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2013-09-13

Ned Goodman, president and CEO of Dundee Corp., spoke about the perils of quantitative easing at the Toronto Resource Investment Conference on Sept. 12. He made the following remarks, as recorded by The Northern Miner:

Ned Goodman: I have a lot to say and I will give you my biases, no problem there. I believe I'm a sensible man and as a sensible man I've been told by my mother, actually, that even though you don't know the hour or the place of your demise, but you do know, that without a doubt, it's going to come.

So as a sensible investor, I'm ready for the day that the United States Empire crumbles and that's a hint as to where I'm going … I know that nothing lasts forever and the environment that we're in could change, but we do not know anything other than nothing lasts forever and right now it looks like whatever is happening is speeding up, not slowing down. But I expect and hope to be here to watch it happen.

The slide that is on there [on the auditorium screen] is nothing more than to show you that the fixed income market since 1962, which is when I started my career, has had some unbelievable long runs, we're not talking of short-term things, we're talking about long-term things. And I've watched interest rates from 1962, when I started my career, I’ve watched interest rates go up to 15.8% in the late 1970s; lived through those inflationary days in the late 1970s; and then watched in absolute amazement that bonds outperformed stocks for over 30 years.

So nothing is going to happen to fix what we've got right now in a very short period of time. Something is going to happen, I don't know what it is, but when I'm thinking about what's going on amidst the global and Middle East chaos that we have, and the violence around the world, and problematic economics that are in existence, and the financial news that emanates from the United States, Europe and the United Kingdom, our world is all screwed up. It's screwed up in a manner that I don't think we've ever seen before. So the traditional economist has a lot of trouble and that's why you see so many different views.

So without any certainty, or reason for optimism or confidence of investors, yet the stock markets of the world appear to be blind to the news of the day. Nevertheless I've not been more concerned about the future for overall investment at any time in that entire period that you see there since 1962. While I definitely remain an optimist by nature, there are times when rationality takes over my psyche and questions optimism. I remain positive towards those kinds of investments that will retain inflationary protection like infrastructure, real estate and other hard assets such as gold and commodities.

We are fortunate and unfortunate that we live next door to the richest country in the world, and supposedly the most democratic, as established by its Constitution, but not necessarily by its president. But if you search through economic history books, you'll never find another instance similar to the United States currently. This is all brand new stuff. With their dollar serving as the world's reserve currency, while backed solely by paper on which is written: "In God we Trust, you should too." I Trust in God, but not the paper.

In addition to today's environment, we have a new country, I’m calling Europe a country, with its own currency, which they promised when they put it out that they would never print any more, but it has the same kind of backing as the U.S. dollar has; nothing other than, the backing of these currencies is that, don't worry, if we need any more, we'll print some more. And therefore you shouldn't worry, you'll get your interest cause we'll just print some and when you need to get your money back we'll print more. The British are all confused about it and maybe that's why they had to reach out to Mark Carney, and maybe he's going to help them. But at the same time, the Chinese are collecting U.S. dollars and gold. And what are they doing with it? They are spending it as fast as they can. They have hired or brought into the system, prominent businessmen, nonpolitical businessmen, giving them the actual advice that it's important that they find some place to spend these U.S. dollars — three and a half trillion dollars.

I was fortunate enough to have a private luncheon meeting with Warren Buffet and a few other people and the question came to Buffet: "What is going to happen when the Chinese want all their money back? And they're going to ask to have their bonds cashed in?"'

And Buffet let out this huge guffaw, big laugh, drinking his cherry coke, and he said, "It's never going to happen." And the questioner said, "What do you mean?" He said there's no way that the Chinese, who are very, very smart people, are going to take a piece of paper that says so long as you hold this, we will pay you 3% interest in our dollars, in exchange for a piece of paper that tells them they should trust in God and get nothing. And that's not what is happening. The Chinese are cashing in their bonds to other countries who are using it as currency.

When he visited the United States in 2011, the then-president of China, Hu Jintao, said the current international currency system is a product of the past. The monetary policy of the United States has a major impact on global liquidity and capital flows and therefore the liquidity of U.S. dollars should be kept at reasonable and stable levels. He then commented on the 2008 financial crisis, which is the crisis we are all living with right now. It hasn't ended. And just like 1929 is a date that everybody remembers, as I remember when I graduated from university and told my mother I was going to become an investment counselor and she said: "Do you know what happened in 1929?" Yes I did, but she lived through it.

So Hu Jintao went on and said that the global institutions had failed to fully reflect the changing status of developing countries and the world economy and finance. He went on to suggest that what China and most of the G21 is a reliable, disciplined and apolitical unit of account for global trade. Let us not forget that he was the leader of the country with the largest holding of global foreign exchange reserves and effectively speaks for China and another 143 members of the International Monetary Fund who have accumulated in excess of five and a half trillion in U.S. currency, $3 trillion of which is held in U.S. dollars directly and another $1.5 billion in others.

So as we look forward into the future and see the kinds of things that are going to happen, we wonder about a lot of things. This is the Big Mac versus the CPI chart. You can see that starting in 1985 McDonald's hamburger used to cost a buck and a half. Today that same McDonald's hamburger costs $4.35. If we used the phony inflationary numbers that are put out by the U.S., put out by the Federal Reserve and whoever does the calculation, it should be $3.35. Now that is minor compared to what John Williams — Dr. Williams who writes Shadow Stats Statistics — says that the current rate of inflation in the United States is not 2%, as Mr. Bernanke tells us every day, but it's more like 8 or 9 percent and maybe even higher when you play around with it. So what you're getting from the United States is a bunch of lies.

This is an undervalue/overvalue [chart] for the S&P 500. You can see the S&P 500 is in fair-value territory. It's not being undervalued, it's in fair value. This is the Toronto version of it, likewise in fair value territory, that's everything. Now look at the Canadian 30-year bond [chart] and it is a little overvalued. Bonds should not be in your portfolio, quite simple. Buffet said it two years ago— they're dangerous to your wealth. Now here's the materials [chart], and this is where you lump in all kinds of fertilizers, all kind of metals, and everything — it doesn't have a big enough chart to get to the undervalue [portion] where it really trades at. It gets better. This is the diversified mining and metals [chart] and it, too, is in grossly undervalued territory.

Now this is the banks [chart]: Now, some of you probably saw the newspaper article that said "Ned Goodman sold all his banks and is buying gold." Well now you know why. It was an easy decision. The banks are over-valued, they are a protected species. And they make money under any circumstance, but they are overvalued and they pay dividends and people are frightened of everything else, so the banks are overvalued and gold is grossly undervalued — grossly undervalued, very undervalued.

And there is my view about the commodities model … You can see that big blue line is headed up for commodities and it goes back to 1932 and gold is at the top of it. I am comfortable that we are still in the supercycle for commodities and I'll tell you why.

Ayn Rand told us that as individuals we have innate mobility and our highest duty is to flourish by realizing our potential and we've got tremendous potential in this country and the people in this country. She also told us that we're able to develop and or join a culture that maybe is outside the norm and create wealth in profoundly different ways.

So I believe gold is scarce. It is hard to find. It is very difficult to extract. And it is valuable. The world needs a new gold standard in order to provide us with a true, positive outlook for the world's investment climate, which today is in very, very, severe disorder. Its ability to create monetary stability, predictability and investment objectivity would be a boon and a blessing, and this from Jim Grant? We could have a monetary system whose exchange rate would be fixed and business could be conducted on a global basis without even concern and guessing about what the politicians and policy mavens are going to do with the value of our money.

More than five years have passed since the Great Recession. The so-called Great Recession of 2007 and 2008. And at least three years have passed since what the U.S. has been calling a recovery. And there is no recovery. There's been a lot of back-patting stuff going on in Washington … but it's all a farce. It's illusion. It's all illusions of someone playing with numbers. Von Mises talked about illusions and I'll talk about that in a minute.

The market has been stubbornly testing new nominal so-called highs for months and is up over 85% from the bottom. Yesterday they made a big change to the Dow. The Dow is a 30-stock index. They're going to take out three of them, top numbers and three of the bottom numbers, and put in new names into the Dow. But what happens to ETFs these days is the automatic necessity for the ETFs to bring their portfolio back to where they say it's going to be. So they buy all the new ones that have been put in and they sell all of the old ones that have been taken out, and guess what? The Dow is up over 100 today. It's down a little today. And the Dow is going to go up, and I'm sure we'll hear, "The world is great! The Dow went up! Look through all this trouble the Dow is going up, we should be happy!"

The market has been stubbornly testing these so-called highs for months, but when you take your eyes off the stock markets and corporate profits for just a second, you find everything is falling apart. Cities are going bankrupt. Pensions are going to disappear from coast to coast as soon as the bills come due, roads are crumbling, bridges are collapsing, the United States is living in a police state that has spent nearly $17 trillion of its future wages.

The Americans don't even have a high-speed rail train. You go to countries like Korea you have high-speed trains; you go to China they have high-speed rail trains. The United States doesn't have them. They're living in 100 years ago. The official unemployment rate is supposedly dropping, while in fact fewer Americans are employed than at any time in the last thirty years. How do they do it? Simple. You get unemployment insurance, you are deemed to be unemployed. As soon as you can't get a job after a certain period of time, you get taken off the unemployment payments and now you’re counted as "employed". Still unemployed.

So the unemployment numbers are totally phony, they are not real. If you average the monthly gains for jobs, you get around 179,000 jobs added per annum. But 225,000 is what they really need. So since the recession began in Dec. 2007, there are 5.8 million fewer full time jobs and 2.8 million more part-time jobs. In other words, anyone who finds full-time work is an exception to the norm. Seventy-six percent of Americans are living paycheck to paycheck. Fifty percent have less than a three-month cushion. Forty-six percent have less than $800 in savings. Twenty-two percent have less than $100 to their name. And 27% have no savings at all. And this is all happening while corporate earnings of course are going up.

Why the disconnect? Well, the politicians and the Fed have abandoned their constituents to cater to lobbyists and donors, etc. So, while corporations are doing well, the people aren't. The share of the economy being paid in wages is very small, as it fell lower and lower it goes to owners and to boardroom salaries and directors. We're seeing the results of a nation's and President Obama's focus exclusively on making corporate health look good at the expense of everything and everyone else.

Now it's time to give you a bias. One of my biases is I think that President Obama and his position will turn out to be the worse president the United States has ever had in its whole history. I think his total plan is to get rid of the Republican Party. Now, I have to say, they're helping him, because if he gets rid of the Republican Party, and if he keeps taking from the rich to give to the poor, and the poor are the ones who vote for you, you will have more votes, so you're going to keep taking from the rich to give to the poor.

The other thing that happens when you keep taking from the rich to give to the poor is the rich become poor and they'll vote for you too. So this is a design. And some will say, well, he can't become another president, he's served two terms and the Constitution says you can only serve two terms. But his wife can serve. His wife can run for President in 2016. She's smarter than he is and a hell of a lot better looking than he is, and she will get not only the Black vote but the entire women vote. And the entire democratic vote. So I think that’s his whole plan. Now it's a bias, I have no proof, it’s just a gut feel. I hope I'm wrong. But we're in a recession.

David Stockman wrote a book. He worked with Ronald Reagan and he wrote a book called The Great Deformation and he said that his view was that we are at the shadow era, the Keynesian endgame of a failing, bankrupt, paralyzed state. The fact that so many voices of the establishment are at pains to shut him down provides me with the view that he might be right.

Will the U.S. dollar collapse? The pressure on the dollar will reflect not only the financial crisis inflicted on us, the U.S., in 2007 and 2008, and further to the president, but also includes the significant weakening of the U.S., a change to the negative on geopolitical status. It is said that God rules in Heaven and that's part of trust in Him. Money rules on earth. But even the Devil dances for gold.

So temporary prosperity at the cost of long-term prosperity is what the United States is going through right now. Federal pension plans are un-funded. The country is running large deficits that don't do much good for the economy. He spends it somewhere. Running monetary policies that improve conditions today but will worsen future conditions as a result. Social security and Medicare are unsustainable programs created by the grandparents of the country, sustained by the parents of the country, but will kill the young people with their costs. The Obamacare is not going to help the country. Obamacare front-end loaded taxes and back-end loaded benefits are not going to do their job. States and municipalities have played with their pension assumptions for years, often in generous benefits they could not afford. Tax policy encourages debt rather than equity, creating industries that over-borrow, and there are many of them. So the country is in a mess, the world is in a mess.

The current challenges to the U.S. and world economies are the onset of longer term problems of government, of consumer debt, too much debt, too much government debt, the rebalancing of that debt, and the structural inflation that will require very serious stabilization. And the cure for inflation is always deflation … And Mr. Bernanke is going to have that decision to make pretty soon. Now, nearly US$17 trillion will hurtle towards US$30 trillion very soon, and soon to be 150% of the GDP, those are David Stockman numbers, And that rules out any prospect of any great bargain that can happen. The U.S. fiscal collapse will likely play out incrementally, just like a Greek-Cypriot tragedy, and a carefully choreographed crisis over the debt ceiling, etc. etc.

The precarious plight of the Main Street consumer has been obscured by the manner in which the state's unprecedented fiscal and monetary medications have distorted incoming data and economic narrative. The monetary policy has become an engine of reverse Robin Hood distribution. The question is how much longer can the equity bull market last? Just buy the equity market, whose central bank is the largest bond-buying program, is what they tell you. Essentially the only piece of investment wisdom you needed in the last 48 months.

It's been the Fed for the last four years, and in recent months the Bank of Japan's turn. And they [the Japanese] have just gone way out, and just said, we're going to create inflation. But it's a matter of time before the narrative is exhausted and the pendulum swings back.

Mario Draghi said he'd do anything to keep the ball rolling and he is doing everything and anything. There has been euphoria in the market. All this is causing people to be comfortable everything is great. But those market corrections that occur remind me of the importance of maintaining proper portfolio diversification, which has been my career for years. The financial future is the largest threat that we are looking at.

But if you listen to Ben Bernanke, and all the other central banks, you'll be told that inflation is not a worry. They want you to think that inflation is tame at 2%, a number they made up. Now I remember in the 70s, when the Federal Reserve was working with the inflation rates and the inflation rates went and Arthur Burns, the then central banker, said, well, the rate went up because there is a war in the Middle East and the price of oil is up and since we have no intention of trying to fix the war in the Middle East or control the war in the Middle East we take oil out of the inflation number, and energy has never been put back in. So the cost of energy is not in the inflation numbers.

Then there was a big problem on the shores of the ocean in Peru. The anchovies didn't show up. Every so often the anchovies decide they don't want to get caught so they don't show up. Well, anchovies are the main feed system in Latin America for the cattle and animals like that, so the net result was that food went up and the central bankers said, we have no control over the anchovies so therefore we have no control over the price of food therefore we take food out of the basics of counting inflation. And they still haven't put it back in. The anchovies come back every year and they still haven't put it back in.

So food doesn't count and the way they look at food now, even if it did count, they look at what you can replace it with. So if you can replace a steak with some ground meat, they use ground meat instead of steak. So the numbers they are giving to create this euphoria are incorrect.

So I passed by the Institute of Ludwig Von Mises, and he's a person that I have a lot of faith in reading and enjoy, and to summarize his work, he wrote that "monetary expansions like quantitative easing, confers no social benefit whatsoever. In fact, the reason why the government and its controlled banking system tend to keep inflating the money supply is precisely because the increase is not granted to everyone equally. They like that. Instead, the whole point of the initial increase is the government itself and its central bank. Other early receivers of the new money are favoured new borrowers of the politicians or the bankers but the banks themselves are contractors to the government. These early receivers of the new money, Mises points out, benefit at the expense of those down the line of the chain. It's a ripple effect. They get the money last, if they get it at all. So in a profound sense, monetary inflation is a hidden form of taxation, he was the first one to say that, and a hidden form of the redistribution of wealth to the government and its favoured groups.

So when interest rates can’t be dramatically lowered any further, or risk spreads significantly get compressed, the momentum begins to shift, not necessarily suddenly, but absolutely gradually; yields moving mildly higher, and spreads stabilizing and moving slightly wider. In such a mildly retiring, reflating world, unless you want to earn an inflation-adjusted return of minus two or three percent, which are offered by treasury bills in the United States, then you must take risk of some form, and that’s what Bernanke did when he brought interest rates down to zero, he caused the market to move to a riskier source of investment money and that’s why the stock market went up a little. But we’re realizing today how accurate Von Mises was in his predictions. He had these issues clear in his mind and he implicitly warned central bankers of losing money to its real meaning and of exposing the economy to the risk of currency devaluation.

This then is a scary procedure and now you saw in the newspaper yesterday, an article put out by the Globe or Financial Post, I’m not sure which one. It’s called "A Little More Happy." And you find that on a happiness questionnaire of 25 different countries, which include the United States and Canada, the United States people rank 17 out of 25, to be beaten by one, by Mexico at 16, to be beaten by another, Canada, who are six, I think we deserved it, but the United Arab Emirates were 14, so you have to think the people in the United States are recognizing exactly what is going on. …

I think the best descriptive of what’s going on is that we are living through a period of "Botox Economics." Botox, of course, is a toxin commonly used to improve a person’s appearance. Sometimes it works; however, the effect is only temporary and it sometimes gives you some significant negative effects. As the global financial and excessive debt crisis continues to roll along, it does so with financial botox, and that’s what Mr. Bernanke is giving us, a flood of money from the central banks and governments covering up previously unresolved and perhaps very serious problems and you can’t forget the famous Will Rogers statement: If stupidity got us into this mess, then why can’t it get us out of it?

And that’s where we are, it’s all a bunch of stupidity today, because we’re living at a time and there does not seem to be a way out of this global monetary madness that exists right around the world. Everybody is over-indebted, everybody is trying to deleverage, everyone is printing money, and we haven no idea what the last piece is going to be.

So the gamble of the Federal Reserve policies to revive the U.S. economy — we may be heading in a direction that’s not totally comfortable. Ben Bernanke tries to operate on the basis that his job is really easy. I personally met with him, he does try to make it sound like it’s really easy, but when I asked the real difficult question and put my hand up, he doused me, and from then on in he said,"Why don’t we let someone else ask a question?", and I never got another question.

The use of zero interest rates and now unlimited quantitative easing, while easily understood, has already failed to deliver a better economic time for the United States.

So let’s go back to visions — we are old enough here to have seen the pictures of people in the 1930s lined up for food banks. They had to line up, get a little coin that gave them the right to get a bowl of soup. And that’s the picture of the Great Depression that we had in the 1930s. And these images play an important role in our recollection of a particular memory and that’s my mother telling me: "Do you know what happened in 1929?" She was a young girl in 1929 but she remembered that there was no money.

These images, they give us facts, they give us ideas for an event. For instance, consider this quick thought experiment. What is the first thing that comes to your mind when you think of the Great Depression? For me it was the iconic image of bread lines. Stretching for multiple city blocks, these images have been experienced through review of historical photos, some people have painted them, but they’re there and they’re in everybody’s mind.

If the collective tacit visualization of economic depression is that of breadlines, and today there are no visual breadlines, well then, surely things can’t be that bad. There are no breadlines. At the surface we do not see hungry Americans queued daily outside of soup kitchens.

Unfortunately like many things in our modern world, the reality of modern breadlines is found not in a glance at a city sidewalk, but requires some thoughtful unearthing. Today in the United States there are breadlines. They are modern breadlines. They are long, the ranks are hungry, and the lines are growing at a staggeringly rapid rate. We do not see these lines as they are, much like the modern world, digital. The symbolic image of a Great Depression-era breadline is woefully outdated. We need to update that technology because the world is quite different today than it was in the 1930s.

Contemporary American breadlines stem from something called Supplemental Nutrition Assistance program, otherwise known as SNAP, and currently there are 47.5 million people in 23 million households that receive SNAP benefits. That’s a lot of people. There are only 300-odd million that are in the country. It’s roughly one out of six and a half Americans and over 20% of households that receive these SNAP benefits. The legacy food stamps program in the United States was rebranded, rebranded from food stamps to SNAP in the 2008 Farm Bill, just slipped it in, nobody really saw it. And in this rebranding effort, all references to stamps or food coupons were removed from the legislation in favour of "credit" or "electronic benefit transfer," known as EBT.

In function, SNAP works as a monthly allowance whereby the beneficiary can use credits for food at SNAP-approved retailers. The beneficiary uses an EBT card, it’s like a credit card, which functionally acts as a debit card that draws down a monthly allowance. The card is meant to reduce the stigma of having to use stamps at a cash register — reduce the stigma of how badly the U.S. economy really is.

What it also does is hide from public view these people standing in line, because they don’t. They just shop and come to pay, they can buy lobster, they can buy anything they want, they are just limited as to how much credit they can get. So as the old technology of the 1930s — breadlines — is outdated, what is the modern e-bread line, what does it look like?

This 47.5 million Americans and 231,000 retailers, Walmart being one, but 231,000 retailers are authorized to accept these SNAP credit cards. So on average, that’s only 205 SNAP-enrollees per retailers, but when you look further, the number is actually quite higher, because of the 231,000 SNAP retailers, only 16% are supermarkets, and yet supermarkets captured 82% of all SNAP redemptions — all SNAP credit cards — so 82% is going to food for people who are given this. I could go on about this. It’s scary because you don’t know about it.

The fact is that there is also something else. There’s a piece in the U.S. Act, which is called Section 8. And Section 8 allows people like the people who get SNAP credit cards, to get a big portion of their rent paid if they live in a house that was previously under foreclosure and they rent it. And that’s a way of getting the world to say, "The economy must be getting better, look at how well housing is doing." So Blackstone goes out and buys several thousands of these foreclosed houses, mortgages them at Fannie Mae or Freddie Mac, a government mortgage, and then rents them to people who get Section 8 money, so the mortgage of course is guaranteed because it’s coming from the government. The mortgage is coming from the government, the rent is coming from the government, and the newspapers say, "Things must be good, the houses are going, they are being filled." And it’s all bullshit.

So in my view, the dollar is about to become dethroned as the world’s de facto currency. The new president of China, Zhang Jiping, his first visit on the day of his becoming president, was at his request to meet with Mr. Putin. And he immediately made a deal with Mr. Putin to get all the oil he needs, which he can buy in Renminbi.

Now a big part of the U.S. dollar being the world’s reserve currency is, at the time Nixon gave up the gold standard, he had Henry Kissinger as his advisor, and Dr. Kissinger very, very brilliantly convinced the Saudis that they must sell their oil in U.S. dollars and that’s the way the U.S. dollar became the reserve currency of the world because everybody needed oil and the only oil that was available in those days, we didn’t have shale, well we had the shale but we didn’t know how to use it, but everybody needed oil and they had to buy it with U.S. dollars. And that’s how the dollar got to where it is today.

It’s about to become dethroned as the world’s de facto currency. The closing words, that reporters reported from Zhang Jiping and Mr. Putin was shaking hands and we have an international partnership that is very important.

So you get China and Russia, and we’ve seen it now in the Syria thing, I could not think of something more ridiculous than trying to solve the Syria [crisis] by throwing a missile out from the Mediterranean and not knowing how many innocent people you’re going to kill because somebody else killed innocent people. It made no sense at all, but that was Mr. Obama’s game and he was going to do it. Frankly, the Israelis have bombed Syria four times in the last twenty-four months. You never read about it in the paper. They took out their nuclear plant. They took out their three warehouses of chemical weapons. No need for a missile, they just sent jets with pilots who dropped bombs.

So the dollar is becoming dethroned as far as I‘m concerned. In 1929 the supply of paper money was limited because it was backed by silver. Our current U.S. dollar is backed by nothing. So people would use the dollar because if they turned it in they’d get silver.

The Chinese have 3.5 trillion U.S. dollars and they’re spending these dollars as quickly as they can, and it will not be long before the rest of us and the U.S. will be thinking likewise. I do, as we buy things to protect our future purchase power. In the 1930s everyone wanted U.S. dollars, today everyone wants to get rid of them. Buying hard assets is what you will hear from many people in the business that I’m in. We’re headed to a period of stagflation, maybe serious inflation, but stagflation for sure, and the United States will be losing the privilege of being able to print at its will, the world’s reserve currency, a period that will be very inflationary. And I can tell you that before that happens, it’s likely gonna become quite ugly.

We are living through a very uncertain atmosphere and it’s all related to politics and money. And when interest rates and confidence turns overnight, investors are not rational, there’s no time when the truth takes place, China is the world’s largest debt holder, Japan is the second-largest debt holder, and they may have to act in their own interest later on. 1.6% interest rates are not deserved by the United States.

Problem is, the United States can’t afford to pay anymore. So they don’t deserve their bond rating and they’re probably going to lose it. Discretionary spending in the U.S. is 36% of government spending, there’s an excellent chance that the U.S. will soon determine to be in a recession once again. I believe they already are. It’s highly likely that they will be in one soon.

Seventy-five percent of their new jobs are low wage, part-time, and often government inspired. Unemployment is understated, real unemployment is probably closer to 15%. Even Walmart is suffering. The end result of higher government spending and full employment policy and the U.S. Federal Reserve’s obsession with interest rates, has been a roller coaster ride along a rising path — a rising path of inflation, which from time to time is brought under check, but each time it rises again … Since time immemorial, sovereign kings, emperors or elected politicians of any sort have used magic money to acquire things or wage wars and it just doesn’t work.

I’ll quote Jim Grant and I’ll close: "You’ll rifle through history books in vain to find another monetary era like this one. A reserve currency made of paper, nothing else, is one novelty. A pan-European currency also weightless is a second. Chronic and immense imbalancing, a deepening deficit in America, is the third."

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