World Debt Is Rising Nearly Three Times As Fast

Some nasty dark clouds are forming on the financial horizon as total world debt is increasing nearly three times as fast as total global wealth. But, that’s okay because no one cares about the debt, only the assets matter nowadays. You see, as long as debts are someone else’s problem, we can add as much debt as we like… or so the market believes.

Now, you don’t have to take my word for it that the market only focuses on the assets, this comes straight from the top echelons of the financial world. According to Credit Suisse Global Wealth Report 2017, total global wealth increased to a new record of $ 280 trillion in 2017. Here is Credit Suisse’s summary of the Global Wealth 2017: The Year In Review:

According to the eighth edition of the Global Wealth Report, in the year to mid-2017, total global wealth rose at a rate of 6.4%, the fastest pace since 2012 and reached USD 280 trillion, a gain of USD 16.7 trillion. This reflected widespread gains in equity markets matched by similar rises in non-financial assets, which moved above the pre-crisis year 2007’s level for the first time this year. Wealth growth also outpaced population growth, so that global mean wealth per adult grew by 4.9% and reached a new record high of USD 56,540 per adult.

Total Global Wealth 2000-2017, Current Exchange Rates (Chart 1) | Total Global Wealth 2000-2017, Constant Exchange Rates (Chart 2)

This year’s report focuses in on Millennials and their wealth accumulation prospects. Overall the data point to a “Millennial disadvantage”, comprising among others tighter mortgage rules, growing house prices, increased income inequality and lower income mobility, which holds back wealth accumulation by young workers and savers in many countries. However, bright spots remain, with a recent upsurge in the number of Forbes billionaires below the age of 30 and a more positive picture in China and other emerging markets.

There are a few items in the Credit Suisse’s summary above that I would like to discuss. First, how did the world increase its global wealth at a rate of 6.4% in 2017 when world oil demand only increased 1.6%??

Global Oil Demand (2016-2018)

As we can see from the IEA – International Energy Agency’s Global Oil Demand table above, total world oil demand only increased 1.6% over last year. Thus, the rate of increase of global wealth of 6.4% in 2017 was four times higher than the 1.6% increase in world oil demand. I would imagine some readers would stand on their soapbox and emphatically claim that energy has nothing to do with wealth creation. Unfortunately, these individuals somehow lost the ability to reason along the way. And we really can’t blame them for making such an absurd remark because they probably believe their food magically appears on the Supermarket shelves.

Second, the financial wizards at Credit Suisse reported that global wealth also outpaced the population growth. What they are suggesting here is that the “Millenials” who (many) are becoming wealthier by sitting in front of a screen and clicking on a mouse than their grandparents (the poor slobs) who were mainly working in the manufacturing industry by producing real things.

Third, while the Credit Suisse analysts stated that the Millenials were facing some disadvantages, there was a bright spot with a recent surge in the number of Forbes billionaires below the age of 30. Well, ain’t that a lovely statistic. What once took an individual at the ripe old age of 55-70 years to achieve a billionaire status, now can be done right out of college. It’s probably not a good sign for the economy going forward that we are seeing more billionaires below the age of 30.

Global Debt Is Destroying Real Wealth

Okay, now that we know the global wealth reached a new record high in 2017, what about the other side of the story? You know… the debt. As I mentioned in my previous article, ECONOMICS 101 states:

NET WEALTH = ASSETS – DEBTS

Now, that equation above is a simple one… kind of like 2 + 2 = 4. However, the financial industry likes to focus on the assets and not the debts. But, according to a recent article on Zerohedge, Global Debt Hits Record $ 233 Trillion, Up $ 16Tn In 9 Months, the world added more debt in 2017 than total U.S. GDP:

Total Global Debt - All Sectors (2007-2017)

As we can see, total global debt increased from $ 217 trillion at the beginning of 2017 to $ 233 trillion in the third quarter of 2017. That is a $ 16 trillion increase in global debt in just nine months. While U.S. GDP hit $ 19 trillion in Q3 2017, if we add another quarter for the increase in global debt, it could surpass $ 20 trillion for the entire year.

So, even if global wealth surged in 2017, so did world debt. According to the data, global wealth increased by $ 16.7 trillion in 2017 while global debt expanded $ 16 trillion… nearly one to one. However, this is only part of the story.

If we look at the increase in total world debt and total global wealth over the past 20 years, we can see a troubling sign, indeed:

Total World Debt vs. Total Global Wealth

Since 1997, total global debt increased from $ 50 trillion to $ 233 trillion compared to the rise in global wealth from $ 120 trillion to $ 280 trillion. There are two disturbing trends shown in the chart above:

  1. Global Debt has increased 366% vs. 133% for Global Wealth since 1997
  2. Net Wealth was $ 70 trillion in 1997 versus $ 47 trillion in 2017

If we compared the percentage increase in global debt versus global wealth, global debt is rising at nearly three times the rate of global wealth. Furthermore, doing simple arithmetic by substracting DEBTS from ASSETS, global net worth fell from $ 70 trillion in 1997 to $ 47 trillion in 2017.

By putting the numbers together, right in front of our eyes, we can clearly see that the world is going broke by adding debt. Basically, we erased $ 23 trillion in Global Net Wealth in the past 20 years. However, I believe the situation is much worse than the figures shown above. For example, I came across an article several months ago on Zerohedge that also reported the increase in global debt, stated it did not include FX Swaps, etc. According to their data, Foreign Exchange Swaps likely exceeded $ 13 trillion. FX Swaps are more short-term debt instruments, but they are still debt instruments.

Moreover, we have no idea what other nasty debts or obligations are hidden out of sight of the public. Regardless, if we were just to include the FX swaps worth $ 13 trillion, the estimated net worth of Global Wealth would only be $ 34 trillion ($ 280 – [$ 233 +$ 13] = $ 34).

The Percentage Of World Gold Investment To Global World Assets Is Much Higher Than We Realize

Now, here’s how the financial situation gets really interesting. If we go by NET WEALTH, then the value of global gold investment as a percentage of world assets, IS MUCH HIGHER. According to the typical financial asset allocations, precious metals comprise approximately 1% of total global assets. The following chart shows that total global gold investment is valued at $ 3 trillion and silver at $ 51 billion (based on $ 20 silver, last year):

Total Value Global Gold & Silver Investment

Thus, $ 3 trillion in the value of world gold and silver investment equals a little bit more than 1% of the $ 280 trillion in global wealth. However, if we are clever and remove the debts, the real NET WEALTH is closer to $ 34 trillion. Thus, total world gold and silver investment comprises nearly 10% of GLOBAL NET WEALTH, or ten times higher than it is currently valued.

Furthermore, we must remember, physical gold and silver, purchased and held in one’s hand has no debt attached to it. Of course, this assumes that an individual didn’t take a loan out against their precious metals holdings. Thus, the precious metals have always been the highest quality stores of wealth for 2,000+ years… even though the Millenials forgot about them for the promise of millions of Crypto profits.

Unfortunately, the situation is much worse than what the figures in the charts above reveal. Why? Because, the only way that debts can be paid down is if we have another $ 233 trillion worth of profits from economic activity, correct? Now, I am not talking about $ 233 trillion in costs; I am talking about PROFITS. Big difference.

To pay back $ 233 trillion in debts, we have to burn one hell of a lot of energy… don’t we? That’s correct; we have to burn energy to create economic activity. And not just plain ole economic activity, PROFITABLE economic activity. Well, we are in BIG TROUBLE because we have been burning one hell of a lot of oil (95+ million barrels per day), but global debts are increasing faster than global wealth.

So, it’s just a matter of time before GRAND FACADE comes crashing down.

Precious Metals News & Analysis – Gold News, Silver News




Will the World Economy Continue to “Roll Along” in 2018?

Once upon a time, we worried about oil and other energy. Now, a song from 1930 seems to be appropriate:

Today, we have a surplus of oil, which we are trying to use up. That never happened before, or did it? Well, actually, it did, back around 1930. As most of us remember, that was not a pleasant time. It was during the Great Depression.

Figure 1. US ending stocks of crude oil, excluding the Strategic Petroleum Reserve. Amounts will include crude oil in pipelines and in “tank farms,” awaiting processing. Businesses normally do not hold more crude oil than they need in the immediate future, because holding this excess inventory has a cost involved. Figure produced by EIA. Amounts through early 2016.

A surplus of a major energy commodity is a sign of economic illness; the economy is not balancing itself correctly. Energy supplies are available for use, but the economy is not adequately utilizing them. It is a sign that something is seriously wrong in the economy–perhaps too much wage disparity.

Figure 3. U. S. Income Shares of Top 10% and Top 1%, Wikipedia exhibit by Piketty and Saez.

If wages are relatively equal, it is possible for even the poorest citizens of the economy to be able to buy necessary goods and services. Things like food, homes, and transportation become affordable by all. It is easy for “Demand” and “Supply” to balance out, because a very large share of the population has wages that are adequate to buy the goods and services created by the economy.

It is when we have too much wage disparity that we have gluts of oil and food supplies. Food gluts happened in the 1930s and are happening again now. We lose sight of the extent to which the economy can actually absorb rising quantities of commodities of many types, if they are inexpensive, compared to wages. The word “Demand” might better be replaced by the term “Quantity Affordable.” Top wage earners can always afford goods and services for their families; the question is whether earners lower in the wage hierarchy can. In today’s world, some of these low-wage earners are in India and Africa, or have no employment at all.

What is Going Right, As We Enter 2018?

[1] The stock market keeps rising.

 

The stock market keeps rising, month after month. Volatility is very low. In fact, the growth in the stock market looks rigged. A recent Seeking Alpha article notes that in 2017, the S&P 500 showed positive returns for all 12 months of the year, something that has never happened before in the last 90 years.

Very long runs of rising stock prices are not necessarily a good sign. According to the same article, the S&P 500 rose in 22 of 23 months between April 1935 and February 1937, in response to government spending aimed at jumpstarting the economy. By late 1937, the economy was again back in recession. The market experienced a severe correction that it would not fully recover from until after World War II.

The year 2006 was another notable year for stock market rise, with increases in 11 out of 12 months. According to the article,

Equity markets rallied amidst a volatility void in the lead-up to the Great Recession. Markets would make new all-time highs in late 2007 before collapsing in 2008, marking the worst annual returns (-37%) since the aforementioned infamous 1937 correction.

So while the stock market consistently rising looks like a good sign, it is not necessarily a good sign for market performance 6 to 24 months later. It could simply represent a bubble forming, which will later pop.

[2] Oil and other commodity prices are recently somewhat higher.

Recently, oil prices have been too low for most producers. Now, things are looking up. While prices still aren’t at an adequate level, they are somewhat higher. This gives producers (and lenders) hope that prices will eventually rise sufficiently that oil companies can make an adequate profit, and governments of oil exporters can collect adequate taxes to keep their economies operating.

Figure 4. Monthly average spot Brent oil prices, through December 2017, based on EIA data.

A major reason for the recent upward trend in commodity prices seems to be a shift in currency relativities for Emerging Markets.

Figure 6. Figure from Financial Times showing currency relativities based on the MSCI Emerging Market currency index.

While the currency relativities for emerging markets had fallen quite low when commodity prices first dropped, they have now made up most of their lost ground. This makes commodities more affordable in Emerging Market countries, and allows them to do more manufacturing, thus stimulating the world economy.

Of course, if China runs into debt problems, or if India runs into problems of some sort, or if oil prices rise further than they have to date, the run-up in currency relativities might run right back down again.

[3] US tax cuts create a bubble of wealth for corporations and the 1%.

With low commodity prices, returns have been far too low for many corporations involved with commodity production. “Fixing” the tax law will help these corporations continue to operate, even if commodity prices remain low, because taxes will be lower. These lower tax rates are important in helping commodity producers to avoid collapsing as a result of low commodity prices.

The problem that occurs is that the change in tax law opens up all kinds of opportunities for companies to improve their tax situation, either by changing the form of the corporation, or by merging with another company with a suitable tax situation, allowing the combined taxes to be minimized. See this recent Michael Hudson video for a discussion of some of the issues involved. This link is to a related Hudson video.

Groups evaluating the expected impact of the proposed tax law did their evaluations as if corporate structure would remain unchanged. We know that tax accountants will help companies quickly make changes to maximize the benefit of the new tax law. This is likely to mean that US governmental debt will need to rise much more than most forecasts have predicted.

In a way, this is a “good” impact, because more debt helps keep commodity prices and production to rise, and thus helps keep the economy from collapsing. But it does raise the question of how long, and by how much, governmental debt can rise. Will the addition of all of this new debt raise interest rates even above other planned interest rate increases?

[4] We have been experiencing artificially low oil prices since 2013. This helps the economic growth to be higher than it otherwise would be. 

In February 2014, I published an article documenting that back in 2013, oil prices were too low for oil producers. If a person looks at Figure 4, oil prices were over $ 100 per barrel that year. Clearly, oil prices have been much too low for producers since that time.

Unfortunately, it looks like these artificially low oil prices may be coming to an end, simply because the “glut” of oil that developed is gradually being reduced. Figure 7 shows the timing of the recent glut of oil. It seems to have started early in 2014.

Figure 7. US Stocks of crude oil and petroleum products (including Strategic Petroleum Reserve), based on EIA data.

If we look at the combination of oil prices and amount of oil in storage, a person can make a rough estimate of how this glut of oil might disappear. Quite a bit of it may be gone by the end of 2018 (Figure 8).

Figure 8. Figure showing US oil stocks (crude plus oil products) together with the corresponding oil prices. Rough guess of how balance might disappear and future prices by author.

Of course, one of the big issues is that consumers cannot really afford high-priced oil products. If consumers could not afford $ 100+ prices back in 2013, how would it be possible for oil prices to rise to something like $ 97 per barrel by the end of 2018?

I am not certain that oil prices can really rise this high, or that they can stay at this level very long. Certainly, we cannot expect oil prices to rise to the level they did in July 2008, without recession causing oil prices to crash back down.

What the Economy Needs Is Rising Energy Per Capita

I have published energy per capita graphs in the past. Flat spots tend to represent problem periods.

Figure 9. World per Capita Energy Consumption with two circles relating to flat consumption. World Energy Consumption by Source, based on Vaclav Smil estimates from Energy Transitions: History, Requirements and Prospects (Appendix) together with BP Statistical Data for 1965 and subsequent, divided by population estimates by Angus Maddison.

The 1920-1940 flat period came shortly after the United Kingdom reached Peak Coal in 1913.

Figure 10. United Kingdom coal production since 1855, in figure by David Strahan. First published in New Scientist, 17 January 2008.

In fact, the UK invaded Mesopotamia (Iraq) in 1914, to protect its oil interests. The UK wasn’t stupid; it knew that if it didn’t have sufficient coal, it would need oil, instead.

There were many other disturbing events during this period, including World War I, the 1918 flu pandemic, the Great Depression, and World War II. If there are not enough energy resources to go around, many things tend to go wrong: countries tend to fight for available resources; jobs that pay well become less available; deflation becomes more likely; population becomes weakened, and epidemics become more likely. I wrote about the 1920 to 1940 period in a recent post, The Depression of the 1930s Was an Energy Crisis.

The 1980-2000 flat period included the collapse of the Soviet Union, in 1991. The Soviet Union was an oil producer. The Soviet Union collapsed after prices had been low for a long time.

Figure 11. Former Soviet Union oil consumption, production, and inflation-adjusted price, all from BP Statistical Review of World Energy, 2015.

Even many years after the collapse of the Soviet Union, population growth in former Soviet Union countries and its affiliates was much lower than in the rest of the world.

Figure 12. World population growth rates between 2005 and 2010. Source: https://en.wikipedia.org/wiki/List_of_countries_by_population_growth_rate

Lower population (through falling birth rates, rising death rates, or rising emigration) are a major way that economies self-adjust because of falling energy per capita. Economies tend to fix the low-energy per capita problem by adjusting the population downward.

Recently, we have again been hitting flat periods in energy consumption per capita.

Figure 13. World per capita consumption of oil and of total energy, based on BP Statistical Review of World Energy data and UN 2017 population data.

The slowdown in world energy consumption per capita in 2008-2009 was clearly a major problem. Oil, coal and natural gas consumption fell simultaneously. Oil consumption per capita fell more than the overall mix, especially affecting countries heavily dependent on oil (Greece with its tourism, but also the US, Japan, and Europe).

The recent shift in political strategy to more isolationist stances also seems to be the result of flat energy consumption per capita. It is doubtful that Donald Trump would have been elected in the US, if world energy consumption per capita had been growing robustly, and if wage disparity had been less of a problem.

The primary cause of the 2013 to 2016 flat trend in world energy consumption per capita is (Figure 13) is falling coal consumption (Figure 14). Many people think coal is unimportant, but it is the world’s second largest source of energy, after oil. We don’t have a good way of getting natural gas production to rise enough, to make up for loss of coal production.

Figure 14

Wind and solar simply do not work for solving our problem of flat or shrinking energy consumption per capita. After spending trillions of dollars on them, they make up only a tiny (1%) share of world energy supply, according to the International Energy Agency. They are part of the little gray “Other” sliver on Figure 15.

Figure 15. Figure prepared by IEA showing Total Primary Energy Supply by type from this IEA document.

Something Has to “Give,” When There Is Not Enough Energy Consumption per Capita

The predicament we are facing is that energy consumption per capita seems to be reaching a maximum. This happens because of affordability issues. Over time, the price of energy products needs to rise to keep up with the rising cost of creating these energy products. But if energy prices do rise, workers earning low wages cannot to afford to buy goods and services made with high-priced energy products, plus honor all of their other commitments (such as mortgages, auto loans, and student loans). This leads to debt defaults, as it did in the 2008-2009 recession.

At some point, the affordability problem can be expected to hold down energy consumption. This could happen in many ways. Spiking prices and affordability issues could lead to a worse rerun of the 2008-2009 recession. Or if oil prices stay fairly low, oil-exporting countries (such as Venezuela) may collapse because of low prices. Even if oil prices do rise, we may find that higher prices do not lead to sufficient additional supply because investment in new oil fields has been low for many years, because of past low prices.

As long as the world economy is expanding (Figure 16), individual citizens can expect to benefit. Jobs that pay well are likely to be available, and citizens can afford to buy goods with their growing wages. People who sell shares of stock and people who get pension benefits can all receive part of this growing economic output.

Figure 16. Author’s image of an expanding economy.

Once the economy starts to shrink (Figure 17), we start having problems with dividing up the goods and services that are available. How much should retirees get? Governments? Today’s workers? Holders of shares of stocks and bonds? Not all commitments can be honored, simultaneously.

Figure 17. Author’s image of declining economy.If world population is rising at the same time, the per capita “shrinkage” problem gets to be worse.

One obvious problem in a shrinking economy is that loans become harder to repay. The problem is that there is less left over for other goods and services, after debt plus interest is subtracted, in a shrinking economy.

Figure 18. Figure by author.

Changing interest rates can to some extent help offset problems related to higher energy prices and shrinking supply. The danger is that interest rates can move in the wrong direction and make our problems worse. In the lead-up to the Great Recession of 2008-2009, the US raised short-term interest rates, helping to puncture the sub-prime mortgage debt bubble.

Figure 19. Figure comparing Case-Shiller Seasonally Adjusted Home Price Index and Federal Reserve End of Quarter Target Interest Rates. See Oil Supply Limits and the Continuing Financial Crisis for details.

We now hear a lot of talk about raising interest rates and selling QE securities (which would also tend to raise interest rates). If growth in energy consumption per capita is already flat, these changes could make the problems that the economy is facing even worse.

Our Economy Works Like a Bicycle

Have you ever wondered why a two-wheeled bicycle is able to stay upright? Research shows that a bicycle will stay upright, as long as its speed is greater than 2.3 meters (7.5 feet) per second. This is the result of the physics of the situation. A related academic article states, “This stability typically can occur at forward speeds v near to the square root of (gL), where g is gravity and L is a characteristic length (about 1 m for a modern bicycle).”

Thus, a bicycle will be able to continue in an upright manner, as long as it goes fast enough. If it slows down too much, it will fall down. Our economy is similar.

Gravity plays an important role in determining the speed of a bicycle. If the bicycle is going downhill, gravity gives an important boost to the speed of the bicycle. If the bicycle is going uphill, gravity very much pulls back on the bicycle.

I think of the situation of an economy having rising energy consumption per capita as being very much like riding on a bicycle, speeding down a hill. The person operating the bicycle would not need to provide much extra energy to keep the bicycle going.

If energy consumption per capita is flat, the person riding the bicycle must provide the energy to make it go fast enough, so it doesn’t fall over. This is somewhat of a problem. If energy consumption per capita actually falls, it is a true disaster. The bicyclist himself must provide the energy necessary to push the bicycle and rider uphill.

In fact, there are other ways that a speeding bicycle is analogous to the world economy.

Figure 20. Author’s view of analogies of speeding upright bicycle to speeding economy.

The economy needs a constant flow of outside energy. In the case of the bicycle, the human rider can provide the energy flow. In the case of the economy, the energy flow comes from a mixture of various fuel types, typically dominated by fossil fuels.

Growing debt (front wheel) is important as well. It tends to pull the economy along, because this debt can be used to pay wages and to buy materials to make create additional goods and services.

In fact, the financial system as a whole is important for the “steering” of the economy. It tells investors which investments are likely to be profitable.

The gearing system of the bicycle plays a modest role in the system. Changing gears allows greater efficiency in the use of the energy that is available, under certain circumstances. But energy efficiency, by itself, cannot operate the system.

If the human rider does not provide sufficient energy for the bicycle to go rapidly enough, the bicycle glides for a while, and then falls over. The world economy seems to be similar. If the world economy does not obtain enough energy per capita, economic growth tends to slow and eventually collapses. The collapse can relate to the whole world economy, or to parts of the economy.

The Problem of Parts of the Economy Not Getting Enough Energy

We can think of the economy as being made up of many bicycles, operated by bicycle riders. At the beginning of the post, I talked about the problem of wage disparity. This issue occurred at the time of the 1930’s Great Depression and is occurring again now.

We might call wage disparity “too low a return on the labor of some workers.” In groups of animals in ecosystems, too low a return on the effort of these animals is what causes ecosystems to collapse. For example, if fish have to swim too far to obtain additional food, their population will collapse. It should not be surprising that economies tend to collapse, when the return on the efforts of part of their workers falls too low.

Wage disparity has to do with how well the operators of bicycles are doing. Are the operators of these bicycles receiving enough calories, so that they can keep pumping their bicycles fast enough so that the speed is high enough to remain upright?

If energy consumption per capita is growing, this greatly helps the operation of the economic system. If there is growing availability of inexpensive energy, machines of various types, including trucks, can be used to increasingly leverage the labor of workers. This increased leveraging helps each worker to become more “productive.” This growing productivity, thanks to growing energy consumption, allows more goods and services to be produced in total. It also allows the wages of the workers to stay high enough that they can afford to buy a reasonable share of the output of the economy. When this happens, “gluts” of unaffordable goods are less of a problem.

If energy consumption per capita is flat (or worse yet, falling), greater “complexity” is needed, to keep output of goods and services rising. Greater complexity involves more specialization and more training of individual members of the economy. Greater complexity leads to larger companies, more government services, and more wage disparity. Unfortunately, there are diminishing returns to complexity, according to Joseph Tainter in “The Collapse of Complex Societies.” Ultimately, increased complexity fails to provide an adequate number of high-paying jobs. Wage disparity becomes a problem that can cause an economy to collapse.

If there is not enough economic output, the physics of the economy tries to “freeze out” workers at the bottom of the hierarchy. Workers with low wages cannot afford homes and families. The incidence of depression rises. Debt levels of disadvantaged groups (such as young people in the US) may rise.

So the situation may not be that the whole world economy fails; it may be that parts of the economy collapse. In fact, we are already seeing evidence that this is taking place. For example, life expectancies for US men have been falling for two years, because of growing problems with drug overdoses.

Conclusions

In 2017, the world economy seemed to be gliding smoothly along because the economy has been able to get the benefit of artificially low energy prices and artificially low interest rates. These artificially low prices and interest rates have given a temporary boost to the world economy. Countries using large amounts of energy products, including the US, especially benefitted.

We cannot expect this temporary condition to continue, however. Low oil prices have already started to disappear, with Brent oil prices at nearly $ 69 per barrel at this writing. The trends in oil prices and oil stocks in Figure 8 are disturbing. If oil prices begin to rise toward the price needed by oil producers, they are likely to trigger a recession and a drop in world energy consumption, just as spiking prices did in 2008-2009. There is a significant chance of collapse in the next 12 to 24 months. It is hard to know how widespread such a collapse may be; it may primarily affect particular countries and population groups.

To make matters worse, our leaders do not seem to understand the situation. The world economy badly needs rising energy consumption per capita. Plans to raise interest rates and sell QE securities, when the economy is already “at the edge,” are playing with fire. If we are to keep the world economy operating, large quantities of additional energy supplies need to be found at very low cost. It is hard to be optimistic about this happening. High-cost energy supplies are worthless when it comes to operating the economy because they are unaffordable.

Many followers of the oil situation have had great faith in Energy Returned on Energy Invested (EROI) analysis telling us which kinds of energy supplies we should increase. Unfortunately, EROI doesn’t tell us enough. It doesn’t tell us if a particular product is scalable at reasonable cost. Wind and solar are great disappointments, when total costs, including the cost of mitigating intermittency on the grid, are considered. They do not appear to be solutions on any major scale.

Other researchers looking at the energy situation have not understood how “baked into the cake” the need for economic growth, rising per capita energy consumption, and rising debt levels really are. Rising debt is not an error in how the financial system is put together; a bicycle needs a front wheel, or it cannot operate at all (Figure 20). I have written other articles regarding why debt is needed to pull the economic system forward.

This economic growth cannot be “fake growth” either, where a debt Ponzi Scheme seems to allow purchases that real-life consumers cannot afford. Quite a bit of what is reported as world GDP today is of a very “iffy” nature. If China builds a huge number of apartments that citizens cannot afford without subsidies, should these be counted as true GDP growth? How about unneeded roads, built using the rising debt of the Japanese government? Or recycling performed around the world, because it makes people “feel good,” but really requires substantial subsidies?

At this point, it is hard for us to know where we really are, because every government wants to make GDP results look as favorable as possible. It is clear, however, that 2018 and 2019 can be expected to have more challenges than 2017. We have interesting times ahead!

Republished with permission by Our Finite World.




WORLD SILVER PRODUCTION: 3 Charts You Won’t See Anywhere Else

The rate at which global silver production increased over the past century is quite astonishing. When Columbus arrived in America (1492), the world was only producing 7 million oz of silver a year. Today, the world’s largest primary silver mine, Fresnillo’s Sauicto Mine, produced three times that amount in just one year (22 million oz, 2016). Yes, we have come along way in 500 years.

Just think about that for a minute. One silver mine last year produced three times the global amount in 1493. According to the U.S. Bureau of Mines 1930 Report on Summarized Data of Silver Production, the average annual silver production in the world from 1493 to 1600 was 6.9 million oz (Moz). If we look at the following chart, we can see how world silver production increased over the past 500+ years:

World Silver Production (Avg. Annual) 1493 - 2017

As we can see, average annual world silver production increased from 6.9 Moz during 1493-1600, to 13 Moz from 1600-1700, 18 Moz from 1700-1800, 51 Moz from 1800-1900, 274 Moz from 1900-2000 and a stunning 722 Moz from 2000-2017. Again, these figures represent the average annual silver production for each time period.

In the current period, 2000-2017, the world has produced 103 times more silver per year than from 1493-1600. However, the next chart shows the total silver production for each period. From 1493-1600, the world produced a total of 747 Moz of silver, compared to 13,000 Moz (13 billion oz) in just 18 years from 2000-2017:

World Silver Production 1493 - 2017

Now, the reason the last silver bar on the right of the chart is lower than the previous one has to do with comparing 18 years worth of silver production (2000-2017) versus 50 years (1950-2000). It took 50 years to produce 17,061 Moz during 1950-2000 versus 13,000 Moz in the 18 years from 2000-2017.

If we compare world silver production from the different periods, here is the result:

Percentage Of World Silver Production (1493-2017)

2000-2017 = 26.4%

1950-2017 = 61%

1900-2017 = 82%

While a little more than a quarter of all world silver production (1493-2017) was produced in the past 18 years, 82% were produced since 1900. That is a lot of silver. It turns out that 40.4 billion oz was produced from 1900-2017 out of the total 49.3 billion oz produced since 1493. Interestingly, more than half of that silver was consumed in industrial silver applications. I will be writing more about that in future articles.

The last chart I find quite interesting. If we go back a little more than a century, the United States was the largest silver producer in the world. In 1915, the U.S. produced 75 Moz of silver out of the total 189 Moz mined in the world that year:

United States vs. World Silver Production

Thus, in 1915, the U.S. produced 40% of all world silver production. Mexico came in second in 1915 by producing 39.3 Moz. However, U.S. silver production in 2017 will only be 34 Moz versus the estimated 870 Moz globally. Thus, U.S. silver production only accounts for 4% of world mine supply versus 40% back in 1915. What a change in 100 years.

Lastly, the U.S. imports approximately 22% of world mine production each year. That is 193 Moz of the total 870 Moz in 2017. While domestic mine supply is only 34 Moz, the United States has to import more than a fifth of global mine production to meet its silver market demand.

Precious Metals News & Analysis – Gold News, Silver News




How High Can It Go? Bitcoin Shocks The World By Crossing The $7000 Mark Less Than 1 Month After It Sold For $5000

Less than a month ago, Bitcoin was selling for less than $ 5000, but now it has smashed through the $ 7000 mark with seemingly no end in sight.  At this point Bitcoin has a total market cap of more than 100 billion dollars, and some analysts are suggesting that it could eventually go as high as a trillion dollars.  Cryptocurrencies overall are up an astounding 640 percent so far in 2017, and personally I regret not investing when Bitcoin was still in the very early stages.  I always thought that governments would eventually crack down and regulate cryptocurrencies out of existence, and that still may happen someday, but it hasn’t happened yet.

One of the great things about Bitcoin is that it represents a medium of exchange that is not controlled by the central bankers.  So when you use Bitcoin you are choosing to become less dependent on a system that is designed to financially dominate the entire planet.  Any way that we can become more independent is a good thing, and so I greatly applaud the use of cryptocurrencies.

But there are those that are warning that a major bubble is forming and that extreme downward price action will be coming at some point.  Needless to say, the upward momentum that we are witnessing at the moment is certainly not sustainable indefinitely.  The following comes from Breitbart

The price of Bitcoin smashed another record early Thursday morning — $ 7,000 for each unit of the digital currency.

As of 7 AM Eastern time, BTC is selling for $ 7,191.16, according to data from Coinbase. Bitcoin — which is minted by a decentralized network of miners, not a governing body — hit this latest benchmark with a single-day increase of nearly $ 640, only 13 days after it first became valued at $ 6,000. If an individual bought 1 BTC exactly one month ago, it has grown $ 2,902.33 or +67.67% in value.

Anything that goes up that fast is eventually going to come down, and those that invest at $ 7,000 could end up seeing the price fall back several thousand dollars.  Or, the euphoria surrounding Bitcoin cold propel it through the $ 10,000 mark and make all of the skeptics look like idiots.

We just don’t know, and that is part of the charm of Bitcoin.

And according to Bloomberg, soon investors will be able to trade Bitcoin futures…

The digital currency got new impetus this week after CME Group Inc., the world’s largest exchange owner, said it plans to introduce bitcoin futures by the end of the year, citing pent-up demand from clients. Skeptics including Themis Trading say the rally is evidence that the software-created asset is a bubble that should not be given regulatory cover.

Of course Bitcoin is not the only major cryptocurrency that is out there.  In fact, there are rumblings that Amazon is about to start promoting Bitcoin’s chief competitor

Ethereum, the top digital currency behind Bitcoin, has plunged in price as Bitcoin enjoys its massive surge, falling from a 24-hour high of $ 301.41 to $ 277.82 Thursday morning.

However, this Tuesday, Amazon bought the domain names amazonethereum.com, amazoncryptocurrency.com, and amazoncryptocurrencies.com, fueling speculation that it may get into the action on decentralized digital currencies. Ethereum is not just a currency like Bitcoin but an app development platform — the Windows or OSX of blockchain. The domain purchase could be a sign that Amazon may join the Enterprise Ethereum Alliance — a group of large companies, including JP Morgan and Microsoft, putting their weight behind blockchain tech.

If Ethereum ultimately becomes the dominant cryptocurrency in the marketplace, what would that do to Bitcoin?

Or could it be possible that there is room enough for both of them?

The truth is that we don’t know what the future will hold.  Cryptocurrencies have never existed before, and there are so many variables at play.  The biggest variable is how national governments will respond to these alternate currencies, and I still believe that they will eventually make a move to heavily regulate them.

And unlike gold and silver, these cryptocurrencies do not have any intrinsic value.  The only reason that they have any value at all is because people believe they have value.  But for the moment the number of believers continues to rise, and this may be a factor in why the price of gold is relatively low right now.  This is something that Ron Paul commented on recently

“Does it represent real money to you?” Cambone further asked the former presidential candidate.

“Not to me, no, it doesn’t,” Paul answered. “But if it serves the voluntary exchanges of people, and serves the purpose of exchanging wealth, … it could act as if it were money ….” he stated.

“Some say Bitcoin is stealing the thunder away from gold,” Cambone continued, “and that’s one of the reasons the yellow metal is not rallying further. Do you agree with this?”

“I think that’s a very strong possibility,” he considered. “I am amazed,” he laughed, “at all the capitalization on these cryptocurrencies. It’s a huge amount of money,” Paul emphasized.

Once again, I greatly applaud the use of cryptocurrencies as a way to become more independent from the system.  I love the fact that mediums of exchange are being developed outside of the control of the central banks, and we should greatly resist any efforts by national governments to take control of these emerging new currencies.

However, as an investment these cryptocurrencies are exceedingly risky.

There are some that have already become quite wealthy by investing in Bitcoin at the very beginning, but there are others that will invest at the peak of the market and will get very badly burned.

As with all forms of investing, there will be winners and there will be losers, and timing is everything.

But we should all love the principles underlying Bitcoin and other cryptocurrencies.  To me, they are all about liberty and freedom, and the more liberty and freedom we have the better.

Michael Snyder is a Republican candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.

The Economic Collapse




Money creation in a post-crisis world

As many of you know, I have spent much of the last seven years explaining to anyone who will listen that banks do not “lend out” deposits or reserves. Rather, they create both loan assets and matching deposit liabilities “from nothing” by means of double entry accounting entries. Creating money with a stroke of the pen (or a few taps on a computer keyboard) is what banks do.

But this does not mean that the money that banks create comes from nowhere. It doesn’t. It is only created when they lend (or when they purchase assets, which is equivalent to lending). As Pontus Rendahl explains in a comment on my previous blogpost, what banks do is liquidity transformation – exchanging long-term illiquid assets for short-term liquid ones:

How do private banks create money? They create a deposit. A deposit is a Barclays-pound/Bank of America-dollar, or what not, that is traded and accepted as a means of payment at a one-to-one exchange rate with the underlying national currency. But as with currency pegs, such exchange rates can only be maintained if the bank has a healthy asset side on the balance sheet, and sufficient reserves.

But did the bank create this deposit out of nothing? No, it created the deposit out of an asset; a loan. That is not “out of nothing”. In fact, it’s very far from it; a more accurate description is that the bank converted an illiquid asset (the debtor’s future ability to repay) into a liquid one. If the bank did not create the deposit out of an asset, it would end up in a asset<liabilities situation. It would be insolvent.

This is not creating money “from nothing”. It is exchanging new money for assets. At the end of the lending transaction, there is an illiquid asset on the bank’s balance sheet that wasn’t there before, and an equivalent amount of new money in the customer’s demand deposit account. We could call this commercial bank QE, if you like – except that for commercial banks, it is not in any sense “unconventional” policy, as it is for central banks. For commercial banks, it is their entire purpose. If they didn’t do this liquidity transformation, they would not be banks.

All money that banks create is their own liability towards a third party – in other words, it is debt. This debt money is always backed by an equivalent claim on the income and, as a last resort, goods of a third party. The problem for banks is that the debt they owe to their customers as a consequence of lending is short-term and highly liquid, whereas the debt their customers owe to them as a consequence of lending is long-term and illiquid.

When the customer draws down a loan – or, for that matter, when a customer draws any money from their deposit account, whether or not it is created through lending – the bank must have sufficient cash, or liquid assets readily exchangeable for cash, to pay them. But banks don’t keep much in the way of liquid assets: after all, if they had to hold sufficient liquid assets to enable everyone to draw down the contents of their deposit accounts on demand, they wouldn’t be able to do much in the way of long-term illiquid lending. Therefore, although banks create money when they lend, they still need to borrow money when they make payments. It is bad accounting to assert that “banks create money when they lend” without recognising the funding problem caused by liquidity transformation.  Yes, lending creates deposits, but deposit drawdowns need to be funded with liquid assets – which for banks are by definition scarce.

So although we often say banks create money “from nothing”, what we really mean is that they create money from lending. And the purpose of the lending is completely irrelevant. Money created for purposes that Zoe Williams in the Guardian dubs “unproductive”, such as mortgage lending, is just as much money in circulation as money created for what she calls “productive” lending to corporations. Who are we to judge what is “productive” and “unproductive”? People who buy houses don’t just create work for lawyers and estate agents, they spend a lot of money on doing up their houses – money that people who rent often either can’t or don’t want to spend. They also free up money for other people to spend. If what you want is demand, mortgage lending sounds like a good bet.

This is not to say that the dominance of real estate lending is necessarily a good thing. It has unfortunate distributive consequences, since it pushes up house prices, pricing younger and poorer people out of the market. But it is more than slightly unreasonable to bash banks for expanding mortgage lending when the prevailing political belief is that everyone wants to buy their own house, media constantly talk up the market (when did you ever see news of a fall in house prices portrayed as a good thing?) and government actively intervenes to help people buy houses they can’t afford on their own. If government really wants banks to lend to businesses, it is sending entirely the wrong messages.

To my mind, the bigger problem is the extreme illiquidity of mortgage portfolios on bank balance sheets. Prior to the financial crisis, banks thought they had solved this problem, since securitising mortgages is another form of liquidity transformation. But the securitisation engine failed in 2007-8 and has never really revved itself up again. So banks are now stuck with large amounts of highly illiquid, long-dated assets on their balance sheets.

Of course, since the crisis regulators have worked hard to reduce the crippling illiquidity and constant risk of insolvency that arise from the nature of modern commercial banking. These days, banks have to keep more of their assets liquid, thus reducing the likelihood that a sudden run on their liabilities will force them either to tap central banks for emergency liquidity or sell assets at heavily discounted prices (fire sales) to raise liquid funds. And they also have to keep a larger gap between their assets and their liabilities, to reduce the likelihood of insolvency if the aforementioned fire sales, or a nasty drop in market prices, renders the market value of their assets insufficient to meet all the claims upon them. This gap is the “equity cushion” that is so often misreported in the media as “holding capital” or “setting money aside”. It is nothing of the kind. Bank capital is “own funds” – shareholders’ equity, retained earnings, debt convertible to equity. The whole idea is that the bank should be able to absorb a significant fall in asset values without defaulting on its obligations to its creditors. Whether these measures are sufficient to mitigate the extreme illiquidity and high insolvency risk of banks whose main activity is mortgage lending remains to be seen.

The central bank does for commercial banks what commercial banks do for their customers. It exchanges illiquid loans for newly created, highly liquid, risk-free money, which banks then use to pay their customers. It also acts as deposit-taker, accepting excess cash from banks that have more than they need to meet short-term payment obligations, and paying them interest on that money. And it is responsible for final settlement of payments cleared through commercial banks.

But if commercial banks can’t create money unless it is backed by assets, can central banks? This is a matter of fierce debate.

At present, they don’t. A central bank that creates money through open market operations is creating asset-backed money, since it is exchanging existing assets held by the private sector for newly created money. Similarly, the money created in QE is exchanged for existing assets held by the private sector, and is therefore also asset-backed. If a bank borrows reserves from the central bank, the accounting at the central bank is the same as if a commercial bank lends to a customer: new deposit in the commercial bank’s reserve account balanced by a new loan asset to be repaid at an agreed date, with interest. Assets that the commercial bank pledges in support of the loan do not appear on the central bank’s balance sheet, for exactly the same reason that the houses mortgagees pledge in support of their mortgages are off the commercial bank’s balance sheet: they are not owned by the bank, but the bank has a first claim upon them in the event of default.

But in fact, a central bank can create money that is not explicitly backed by anything. Unlike commercial banks, they can genuinely create money “ex nihilo”. The value of the money they create is maintained entirely by the credibility of the central bank/government combination.

Suppose our central bank decides to do “helicopter money”, which is a simple transfer of newly-created funds to the private sector. No assets are purchased, and because this is a central bank transfer, no debt is created. When a currency is not asset-backed (as in a gold standard), the money created by the central bank is redeemable only as more of itself, and is therefore not “debt” in any ordinary sense of the word. So the balance sheet entries for a helicopter money transaction would look very odd: huge quantities of zero-coupon irredeemable liabilities, and no assets. The central bank would be technically insolvent. Would this matter?

Arguably, no. The implied asset backing for helicopter money is the net present value of future expected tax receipts (for the Eurozone, read this as the collective future tax receipts of all current and future Eurozone governments.) This doesn’t mean that governments must always run primary surpluses: as central bank money is perpetual and irredeemable, and there is no interest to pay, the government could run sustained fiscal deficits far into the future without destroying the central bank’s implied assets. As long as the government is credible, the central bank should be able to do helicopter drops without destroying the value of the money it is dropping.

The risk arising from a central bank doing helicopter money while the government runs sustained fiscal deficits is inflation. Irresponsible money printing by an irresponsible central bank at the behest of an irresponsible government is rightly feared as a cause of hyperinflation. But there is a huge difference between an irresponsible fiscal authority mismanaging its finances and dominating the central bank, and a responsible fiscal authority and central bank that together choose a reflationary path that combines helicopter money and deficit funded investment. Of course, even if done by a responsible central bank, helicopter money should be inflationary, especially if accompanied by fiscal deficits: but that would be the whole point of doing it!

The combination of helicopter money with investment financed by large fiscal deficits should be extremely powerful. The helicopter money would provide a direct demand stimulus to the real economy, with money going to those who are most likely to spend it rather than to those who are rich enough to own assets, while deficit-funded fiscal investment would kickstart the supply side of the economy and prime the pump for private sector investors. Such an approach would force the central bank and government to cooperate while still preserving the distinctive remits of the central bank (demand management) and fiscal authority (supply side and distribution).

So why didn’t we do this after the 2008 crash? Simple. Fear of inflation. We preferred to court deflation than risk resurgence of inflation. Because of this fear, we did not provide the really powerful stimulus that the economy needed after the crash. We provided a much weaker stimulus in the form of QE, and then weakened its effect still further by embarking on premature and ill-considered fiscal consolidation. Instead of allowing the public sector to plug the gap left by the withdrawal of a wounded private sector, we tried to kick damaged banks into lending and damaged businesses and households into borrowing. We completely failed to deal with the widening inequality that arose from the combination of QE with fiscal austerity, and the destruction of hope that arose from ten years of stagnation, in some countries accompanied by very high unemployment, especially among the young. The price we are now paying for this abject failure of public policy is widespread political unrest. Some might say it is surprising it has taken as long as ten years for people to lose patience with the broken political establishment.

I have proposed here that helicopter money should be the central bank instrument of choice after a severe financial crisis. But that does not mean that all money should be delivered by helicopter. Those who propose “sovereign money” to replace money creation through bank lending appear to be driven by an irrational, though perhaps understandable, fear of debt. And they also, to my mind, place far too much faith in central planners, as this comment from Zoe Williams shows:

The nature of centrally created money should itself be opened up for debate, whose starting point is: if we agree that commercially created money is skewing the economy, can we then agree that it should be created by a public authority, even if we don’t yet know what that authority would look like.

No, Zoe, we can’t agree on that. Firstly, although I might agree that commercial bank lending can skew the economy (though you totally ignore the fact that government actively fosters this distortion) I don’t agree that the associated money creation necessarily skews anything. To my mind, QE, which gives money to the rich to spend on things that only the rich want, is far more distortionary – and QE is publicly created money.

Secondly, I don’t believe that any central authority is capable of deciding how much money the economy needs. Far better, in my view, to allow the amount of money in circulation to respond to private sector demand. The job of “central planners” is to regulate the bipolar swings characteristic of private sector money demand.

And finally – a warning. The “money tree” exists, but its fruit is not cost-free, no matter who creates it. We should be cautious about advocating completely unrestricted money creation by any institution, private or public.

Related reading:

Money creation in the modern economy – Bank of England

Money tree image from the BBC. 

Coppola Comment




How The Elite Dominate The World – Part 5: The Endgame Is Complete And Utter Global Domination

Do you want your children and grandchildren to grow up in a global socialist “utopia” in which everything about their lives is micromanaged by bureaucrats working for a worldwide system of government instituted by the elite?  To many of you this may sound like something out of a futuristic science fiction novel, but the truth is that this is exactly where the elite want to take us.  This is their endgame.  Their agenda has been quietly moving forward for decades, and if we don’t take a stand now, future generations of Americans could very well end up living in a dystopian nightmare with none of the liberties or freedoms that we enjoy today.

Bill Clinton’s mentor at Georgetown University, Dr. Carroll Quigley, wrote about this network of elitists in a book entitled Tragedy and Hope

In fact, this network, which we may identify as the Round Table Groups, has no aversion to cooperating with the Communists, or any other groups, and frequently does so. I know of the operations of this network because I have studied it for twenty years and was permitted for two years, in the early 1960’s, to examine its papers and secret records. I have no aversion to it or to most of its aims and have, for much of my life, been close to it and to many of its instruments…my chief difference of opinion is that it wishes to remain unknown, and I believe its role in history is significant enough to be known…because the American branch of this organisation (sometimes called the “Eastern Establishment”) has played a very significant role in the history of the United States in the last generation.

In other parts in this series, I have discussed the tools that the elite are using to achieve their goals.  In part I, I talked about how debt is used as a tool of enslavement, and in part II I explained how central banking is a system of financial control that literally dominates the entire planet.  Professor Quigley also mentioned this system of financial control in his book

“The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole.”

Today, a system of interlocking global treaties is slowly but surely merging us into a global economic system.  The World Trade Organization was formed on January 1, 1995, and 164 nations now belong to it.  And every time you hear of a new “free trade agreement” being signed, that is another step toward a one world economy.

Of course economics is just one element of their overall plan.  Ultimately the goal is to erode national sovereignty almost completely and to merge the nations of the world into a single unified system of global governance.

The United Nations is the apex of this planned structure, and the globalists are always looking for ways to transfer more power to this institution.  For example, that is what the Paris Climate Accord was all about.  Since the climate affects everyone, it gives the globalists a perfect excuse to argue that the world needs to “work together”.  The following comes from the official UN website

To address climate change, countries adopted the Paris Agreement at the COP21 in Paris on 12 December 2015. The Agreement entered into force less than a year later. In the agreement, all countries agreed to work to limit global temperature rise to well below 2 degrees Celsius, and given the grave risks, to strive for 1.5 degrees Celsius.

Implementation of the Paris Agreement is essential for the achievement of the Sustainable Development Goals, and provides a roadmap for climate actions that will reduce emissions and build climate resilience.

“Protecting the environment” sounds like a reasonable goal, right?

Well, when you click on the link for the “Sustainable Development Goals”, it sends you to a website where you can read about the 17 pillars of the plan to “end poverty, protect the planet, and ensure prosperity for all” that were agreed to by all of the members of the UN in September 2015.

This plan is also known as “Agenda 2030”, and when you dig into the details of this plan you quickly realize that it is literally a blueprint for global government.

Sadly, most Americans don’t realize this, and neither do they understand that this has been the goal of the elite for a very long time.  For instance, during an address to the General Assembly of the United Nations in 1992, President George H.W. Bush made the following statement

It is the sacred principles enshrined in the United Nations charter to which the American people will henceforth pledge their allegiance.

Say what?

Once you start looking into these things, you will see that the elite are very openly telling us what they intend to do.

One of my favorite examples of this phenomenon is a quote from David Rockefeller’s book entitled Memoirs

Some even believe we are a part of a secret cabal working against the best interests of the United States, characterizing my family and me as ‘internationalists’ and of conspiring with others around the world to build a more integrated global political and economic structure – one world, if you will. If that’s the charge, I stand guilty and I am proud of it.

As David Rockefeller openly admitted, they are “internationalists” that are intent on establishing a one world system.

Candidates for Congress are not supposed to talk about this stuff, but if I am elected I am promising to fight the globalists on every front.

We are literally in a battle for the future of our children and our grandchildren.  If the globalists have their way, American sovereignty will continue to erode and the United States will slowly but surely be merged into a one world system.

But that isn’t going to happen on our watch.  Those of us that love liberty and freedom are going to take this country back, and we will never stop fighting the insidious agenda of the globalists.

Michael Snyder is a Republican candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.

The Economic Collapse




How The Elite Dominate The World – Part 4: They Buy Politicians, And Incumbents Almost Always Win

Once we wake up to how the game is being played, then we will have a real shot at changing things.  For decades, the elite have been pulling the strings behind the scenes in both major political parties.  That is why nothing has ever seemed to change very much no matter which party has been in power.  The agenda of the elite has always seemed to march forward, and ordinary people like us have always been frustrated that we can’t seem to make a difference.  But now a shift seems to be taking place.  Donald Trump took on the establishment in both major parties, and he miraculously won the presidency.  Down in Alabama, the elite spent more than 30 million dollars to defeat Roy Moore, and he still defeated Luther Strange.  A political awakening is taking place, and I can’t wait to see what happens during the mid-term elections in 2018.

In Part I and Part II of this series, I talked about how the elite use debt as a tool of enslavement.  In Part III, I went over how the elite use the colossal media corporations they own to control what we think.  Today, I want to talk about their influence in the realm of politics.

In Washington D.C., it is well understood that the game of politics is all about the money.  If I win my election, and online polling suggests that there is a ton of enthusiasm for my campaign, I will be expected to spend most of my time on the phone raising money.  As a freshman member of Congress, at orientation it will be explained to me that I am supposed to spend approximately four hours a day doing fundraising, and that is why the House and Senate floors are so empty most of the time.

By law, members of Congress cannot make fundraising calls from their offices, and so both parties have huge call centers just across from the Capitol.  Especially around lunch and dinner times (because those are some of the best times to reach people), those call centers are packed as members of the House and Senate run through lists of potential donors.

And it isn’t just about raising money for their own campaigns.  As a freshman member of Congress I would be expected to raise at least $ 200,000 for the NRCC (the National Republican Congressional Committee).  If I don’t pay my dues, I would get into big trouble with party leadership.

But you know what?  I have already pledged that I am not going to participate in this very corrupt system.  If I am sent to Congress, I am going to spend my time doing the job that the people of Idaho sent me there to do.

So will Paul Ryan and the others in leadership get very upset with me for not “paying my dues”?

Of course.

But it is time for some of us to take a stand and do what is right.  Congress has become a cesspool of filth and corruption, and it is time to flush the toilet.

Because if we don’t fight this corrupt system, the influence of money in politics will just get worse and worse.  Today, the elite pour millions upon millions of dollars even into small campaigns, and in 2016 it took an average of more than 10 million dollars to win a U.S. Senate seat

While the White House may not have gone to the biggest spender, an awful lot of House and Senate seats did — as usual. And it was pricier than ever to win them.

This election cycle, an average winning Senate candidate had spent $ 10.4 million through Oct. 19 (reflecting the latest reports filed with the Federal Election Commission). That’s a $ 1.8 million increase over the same period in the 2014 cycle. By the end of last cycle, the number rose to $ 10.6 million, and a similar uptick is expected this time once post-election and year-end reports are filed.

Once you win, the pressure to raise money for your next campaign never ends.

The elite know this, and they use this pressure to influence votes.  Prior to a big vote, lobbyists will make it abundantly clear how they want certain members of Congress to vote, and if they vote the “right way” those members of Congress will be rewarded.

Just across from the U.S. Capitol there are clubs where fancy receptions are regularly held.  If you vote the “right way” on a particular bill, you may be invited to one of these receptions, and there will be big, fat donation checks waiting there for you.

Of course most members of Congress have learned how to play the game, and this is why it is nearly impossible to defeat incumbents.  Over the past six decades, the re-election rate for members of the House of Representatives has consistently been well over 80 percent, and according to the UVA Center for Politics incumbents actually did far better than that in 2016…

This election cycle, 393 of 435 House representatives, 29 of 34 senators, and five of 12 governors sought reelection (several of the governors were prohibited from seeking another term). Of those, 380 of 393 House members (97%), 27 of 29 senators (93%), and four of five governors (80%) won another term. These members of Congress and governors not only won renomination, but also won in November.

Since World War II, the overall success rate for Senate incumbents has been 84 percent, and the overall success rate for House incumbents has been 94 percent.

Incumbents are almost always armed with huge war chests and most of them have tremendous name recognition, and so toppling them is not easy.

Fortunately, there is no incumbent in my race because Raul Labrador is running for governor.  So the race is completely wide open, and right now my campaign has the most enthusiasm by far.  If you would like to help me flush the toilet in Washington, I would encourage you to visit MichaelSnyderForCongress.com.

If we don’t fight back, we will never break the stranglehold that the elite have on our political system.

Every generation of Americans has had to stand up and fight for liberty and freedom, and now it is our turn.  This particular battle will not be fought with guns and bullets, but rather with ideas, values and principles.

We are part of a movement that is sweeping the nation.  Good men and women are rising up to run in federal, state and local races all across the country, and it is absolutely imperative that we all get behind them and support them.

Michael Snyder is a Republican candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.

The Economic Collapse




How The Elite Dominate The World – Part 3: 90% Of What You Watch On Television Is Controlled By Just 6 Giant Corporations

How much is your view of the world shaped by what you see on television?  On average, Americans spend more than 150 hours watching television every month, and it is called “programming” for a reason.  If you allow anyone to pour ideas and information into your mind for five hours a day, it is going to change how you look at reality.  Everyone has an agenda, and every single news program, television show and movie is trying to alter your views.  Sadly, our society has become absolutely addicted to media, and the mainstream media is completely dominated by the elite.  In fact, about 90 percent of the programming that comes through your television is controlled by just 6 gigantic media corporations.  Most of us are willingly plugging ourselves into this “propaganda matrix” that is completely dominated by the elite for several hours each day, and that gives them an enormous amount of power over the rest of us.

In Part I and Part II of this series, I discussed how the elite use money as a tool to dominate the planet.  Today, we are going to talk about how they use information.  If you control what people think, then you control a society.  And through their vast media empires, the elite are able to shape how we all think to a frightening degree.

Just think about it.  What do we talk about with our family, our friends and our co-workers?  To a large extent, those conversations are about movies, television shows, something that we just saw on the news or a sporting event that just took place.  The reason why we talk about certain things is because the mainstream media gives those things attention, and other things we ignore because the mainstream media does not make them seem to be important.

The mainstream media literally sets the agenda for our society, and it would be difficult to overstate the power that is in their hands.  And as I mentioned above, the mainstream media is almost entirely controlled by just 6 colossal corporations.  The following list of these 6 corporate giants comes from one of my previous articles, and this is just a sampling of the media properties that they each own…

Comcast

NBC
Telemundo
Universal Pictures
Focus Features
USA Network
Bravo
CNBC
The Weather Channel
MSNBC
Syfy
NBCSN
Golf Channel
Esquire Network
E!
Cloo
Chiller
Universal HD
Comcast SportsNet
Universal Parks & Resorts
Universal Studio Home Video

The Walt Disney Company

ABC Television Network
ESPN
The Disney Channel
A&E
Lifetime
Marvel Entertainment
Lucasfilm
Walt Disney Pictures
Pixar Animation Studios
Disney Mobile
Disney Consumer Products
Interactive Media
Disney Theme Parks
Disney Records
Hollywood Records
Miramax Films
Touchstone Pictures

News Corporation

Fox Broadcasting Company
Fox News Channel
Fox Business Network
Fox Sports 1
Fox Sports 2
National Geographic
Nat Geo Wild
FX
FXX
FX Movie Channel
Fox Sports Networks
The Wall Street Journal
The New York Post
Barron’s
SmartMoney
HarperCollins
20th Century Fox
Fox Searchlight Pictures
Blue Sky Studios
Beliefnet
Zondervan

Time Warner

CNN
The CW
HBO
Cinemax
Cartoon Network
HLN
NBA TV
TBS
TNT
TruTV
Turner Classic Movies
Warner Bros.
Castle Rock
DC Comics
Warner Bros. Interactive Entertainment
New Line Cinema
Sports Illustrated
Fortune
Marie Claire
People Magazine

Viacom

MTV
Nickelodeon
VH1
BET
Comedy Central
Paramount Pictures
Paramount Home Entertainment
Country Music Television (CMT)
Spike TV
The Movie Channel
TV Land

CBS Corporation

CBS Television Network
The CW (along with Time Warner)
CBS Sports Network
Showtime
TVGN
CBS Radio, Inc.
CBS Television Studios
Simon & Schuster
Infinity Broadcasting
Westwood One Radio Network

If nobody tuned in to their “programming”, they would not have any power over us.

But according to a report put out by Nielsen, Americans are plugging into “the matrix” more than ever before.  The following is how our daily use of media breaks down by device

Live TV: 4 hours, 31 minutes
Time-Shifted TV: 33 minutes
Radio: 1 hour, 52 minutes
DVDs: 8 minutes
Video Game Consoles: 14 minutes
Multimedia Devices (Apple TV, Roku, etc.): 13 minutes
Internet on PC: 58 minutes
Smartphone: 1 hour, 39 minutes
Tablet: 31 minutes

When you total those numbers up, it comes to 10 hours and 39 minutes.

In essence, Americans are spending most of their waking hours plugged in to something.

And if you only add together “live television” and “time-shifted television”, Americans are spending an average of more than five hours each day just watching television.

Of course many of us spend countless hours on the Internet as well.  It has been estimated that 54,907 Google searches are conducted, 7,252 tweets are posted, 125,406 YouTube videos are viewed, and 2,501,018 emails are sent out every single second.

You may have guessed this already, but most of the news and information that we consume on the Internet is also controlled by the elite

Overall, the top 10 publishers — together owning around 60 news sites — account for 47% of total online traffic to news content last year, with the next-biggest 140 publishers accounting for most of the other half, SimilarWeb found.

The biggest online news publisher for the U.S. audience was MSN, owner of MSN.com, with just over 27 billion combined page views across mobile and desktop, followed by Disney Media Networks, owner of ESPN and ABC News, with 25.9 billion.

This is why the “alternative media” is so important.  All over America and all over the world, people are waking up and realizing that they aren’t getting the truth from the mainstream media, and they are hungry for truly independent sources of information.

The only way that we are ever going to be able to throw off the insidious system of control that the elite have established is by winning the information war.  We are literally in a constant battle for hearts and minds, and the good news is that we have made a lot of progress.  Over the past decade we have “red pilled” millions upon millions of people, but we still have a long way to go.

Faith in the corporate media is dwindling, and the elite are deeply concerned about this.  The Internet has allowed ordinary people like us to communicate on a mass scale, and this has never been the case before in human history.  We have a window of opportunity to fight back against the elite, and we must not let this opportunity pass us by.

We are literally engaged in a battle for the future of this planet, and let us never waver in our pursuit of victory.

Michael Snyder is a Republican candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.

The Economic Collapse




How The Elite Dominate The World – Part 2: 99.9% Of The Global Population Lives In A Country With A Central Bank

Even though the nations of the world are very deeply divided on almost everything else, somehow virtually all of them have been convinced that central banking is the way to go.  Today, less than 0.1% of the population of the world lives in a country that does not have a central bank.  Do you think that there is any possible way that this is a coincidence?  And it is also not a coincidence that we are now facing the greatest debt bubble in the history of the world.  In Part I of this series, I discussed the fact that total global debt has reached 217 trillion dollars.  Once you understand that central banks are designed to create endless debt, and once you understand that 99.9% of the global population lives in a country that has a central bank, then it finally makes sense why we have accumulated so much debt.  The elite of the world use debt as a tool of enslavement, and central banking has allowed them to literally enslave the entire planet.

Some of you may not be familiar with how a “central bank” differs from a normal bank.  The following definition of a “central bank” comes from Wikipedia

A central bank, reserve bank, or monetary authority is an institution that manages a state’s currency, money supply, and interest rates. Central banks also usually oversee the commercial banking system of their respective countries. In contrast to a commercial bank, a central bank possesses a monopoly on increasing the monetary base in the state, and usually also prints the national currency,[1] which usually serves as the state’s legal tender.

Over the past 100 years or so, we have seen central banks steadily be established all over the planet.  At this point, there are just 8 very small nations that still do not have a central bank…

-Andorra
-Monaco
-Nauru
-Kiribati
-Tuvalu
-Palau
-Marshall Islands
-Federated States of Micronesia

When you add the populations of those 8 nations together, it comes to much less than 0.1% of the global population.

But even though central banking is nearly universal, only a very small fraction of the global population can tell you how money is created.

Do you know where money comes from?

Here in the United States, most people just assume that the federal government creates money.  But that is not true at all.

Many are absolutely shocked when they discover that U.S. currency is actually borrowed into existence.  The federal government gives U.S. Treasury bonds (debt) to the Federal Reserve in exchange for money that the Federal Reserve creates out of thin air.  The Federal Reserve then auctions off those bonds to the highest bidder.

Since the federal government must pay interest on those bonds, the amount of debt that is created in these transactions is actually greater than the amount of money that is created.  But we are told that if we can just circulate the money throughout our economy fast enough and tax it at a high enough rate, then we can eventually pay off the debt.  Of course that never actually happens, and so the federal government always has to go back and borrow even more money.  This is called a debt spiral, and at this point we will never be able to escape it until we do away with this horrible system.

But why does our government (or any government for that matter) have to borrow money that is created by a central bank in the first place?

Why can’t governments just create money themselves?

Oops.  That is the big secret that nobody is supposed to talk about.

Theoretically, the U.S. government doesn’t actually have to borrow a single penny. Instead of borrowing money the Federal Reserve creates out of thin air, the federal government could just create money directly and spend it into circulation.

Yes, this could actually happen.  Back in 1963, President John F. Kennedy signed Executive Order 11110 which authorized the U.S. Treasury to issue debt-free “United States Notes” which were not created by the Federal Reserve.  These debt-free notes began to be issued, and you can still find them for sale on eBay today.  Unfortunately, President Kennedy was assassinated shortly after this executive order was issued, and the notes were not in production for long.

If we had ultimately fully adopted “United States Notes” and had phased out Federal Reserve notes, we would not be 20 trillion dollars in debt today.

The elite of the world love to get national governments deep into debt, because it enables them to enslave entire populations while making an obscene amount of money in the process.

Back in 1913, an insidious plan was rushed through Congress just before Christmas that was based on a blueprint that had been developed by very powerful Wall Street interests.  Author G. Edward Griffin did an extraordinary job of documenting how all of this happened in his book entitled “The Creature from Jekyll Island: A Second Look at the Federal Reserve”.  A central bank was established, and it was purposely designed to create a government debt spiral, and that is precisely what happened.

Since 1913, the size of the national debt has gotten more than 6,000 times larger, and the value of our dollar has declined by more than 98 percent.  Many conservatives are still under the illusion that we could get out of debt someday if we just grow the economy fast enough, but I have shown in another article that we have gotten to the point where this is mathematically impossible.

And most people are also operating under the false assumption that the Federal Reserve is part of the federal government.  But that is not accurate either.  The following comes from one of my previous articles

There is often a lot of confusion about the Federal Reserve, because a lot of people think that it is simply an agency of the federal government. But of course that is not true at all. In fact, as Ron Paul likes to say, the Federal Reserve is about as “federal” as Federal Express is.

The Fed is an independent central bank that has even argued in court that it is not an agency of the federal government. Yes, the president appoints the leadership of the Fed, but the Fed and other central banks around the world have always fiercely guarded their “independence”. On the official Fed website, it is admitted that the 12 regional Federal Reserve banks are organized “much like private corporations”, and they very much operate like private entities. They even issue shares of stock to the private banks that own them.

In case you were wondering, the federal government has zero shares.

According to the U.S. Constitution, a private central banking cartel should not be issuing our currency.  In Article I, Section 8 of our Constitution, Congress is solely given the authority to “coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures”.

So why in the world has this authority been given to a central bank?

The truth is that we do not need a central bank.

From 1872 to 1913, there was no central bank and no income tax, and it turned out to be the greatest period of economic growth in all of U.S. history.

But since the Fed was established, there have been 18 different recessions or depressions: 1918, 1920, 1923, 1926, 1929, 1937, 1945, 1949, 1953, 1958, 1960, 1969, 1973, 1980, 1981, 1990, 2001, 2008.

Abolishing the Federal Reserve is one of the core issues of my platform, and I have been writing about these things for the last seven years.

As I discussed yesterday, the elite use debt to enslave all of the rest of us, and central banking allows them to literally dominate the entire planet.

Until we abolish this debt-based system and go to a currency that is debt-free, we are never going to permanently solve our very deep long-term economic and financial problems.

But because they are so immensely wealthy, the elite are able to wield extraordinary influence in our society.  They control the mainstream media, our politicians and even global institutions such as the United Nations.  Anyone that would dare to question the validity of the current system is marginalized, and for a long time very few politicians around the world were even willing to speak out against central banking.

However, that is starting to change.  A new generation of leaders is rising up, and they are absolutely determined to break the stranglehold that the elite have on our society.  It won’t be easy, but if we are able to wake enough people up, I believe that we will eventually be able to free ourselves from this insidious system.

Michael Snyder is a Republican candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.

The Economic Collapse




How The Elite Dominate The World – Part 1: Debt As A Tool Of Enslavement

Throughout human history, those in the ruling class have found various ways to force those under them to work for their economic benefit.  But in our day and age, we are willingly enslaving ourselves.  The borrower is the servant of the lender, and there has never been more debt in our world than there is right now.  According to the Institute of International Finance, global debt has hit the 217 trillion dollar mark, although other estimates would put this number far higher.  Of course everyone knows that our planet is drowning in debt, but most people never stop to consider who owns all of this debt.  This unprecedented debt bubble represents that greatest transfer of wealth in human history, and those that are being enriched are the extremely wealthy elitists at the very, very top of the food chain.

Did you know that 8 men now have as much wealth as the poorest 3.6 billion people living on the planet combined?

Every year, the gap between the planet’s ultra-wealthy and the poor just becomes greater and greater.  This is something that I have written about frequently, and the “financialization” of the global economy is playing a major role in this trend.

The entire global financial system is based on debt, and this debt-based system endlessly funnels the wealth of the world to the very, very top of the pyramid.

It has been said that Albert Einstein once made the following statement

“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”

Whether he actually made that statement or not, the reality of the matter is that it is quite true.  By getting all of the rest of us deep into debt, the elite can just sit back and slowly but surely become even wealthier over time.  Meanwhile, as the rest of us work endless hours to “pay our bills”, the truth is that we are spending our best years working to enrich someone else.

Much has been written about the men and women that control the world.  Whether you wish to call them “the elite”, “the establishment” or “the globalists”, the truth is that most of us understand who they are.  And how they control all of us is not some sort of giant conspiracy.  Ultimately, it is actually very simple.  Money is a form of social control, and by getting the rest of us into as much debt as possible they are able to get all of us to work for their economic benefit.

It starts at a very early age.  We greatly encourage our young people to go to college, and we tell them to not even worry about what it will cost.  We assure them that there will be great jobs available for them once they finish school and that they will have no problem paying off the student loans that they will accumulate.

Well, over the past 10 years student loan debt in the United States “has grown 250 percent” and is now sitting at an absolutely staggering grand total of 1.4 trillion dollars.  Millions of our young people are already entering the “real world” financially crippled, and many of them will literally spend decades paying off those debts.

But that is just the beginning.

In order to get around in our society, virtually all of us need at least one vehicle, and auto loans are very easy to get these days.  I remember when auto loans were only made for four or five years at the most, but in 2017 it is quite common to find loans on new vehicles that stretch out for six or seven years.

The total amount of auto loan debt in the United States has now surpassed a trillion dollars, and this very dangerous bubble just continues to grow.

If you want to own a home, that is going to mean even more debt.  In the old days, mortgages were commonly 10 years in length, but now 30 years is the standard.

By the way, do you know where the term “mortgage” originally comes from?

If you go all the way back to the Latin, it actually means “death pledge”.

And now that most mortgages are for 30 years, many will continue making payments until they literally drop dead.

Sadly, most Americans don’t even realize how much they are enriching those that are holding their mortgages.  For example, if you have a 30 year mortgage on a $ 300,000 home at 3.92 percent, you will end up making total payments of $ 510,640.

Credit card debt is even more insidious.  Interest rates on credit card debt are often in the high double digits, and some consumers actually end up paying back several times as much as they originally borrowed.

According to the Federal Reserve, total credit card debt in the United States has also now surpassed the trillion dollar mark, and we are about to enter the time of year when Americans use their credit cards the most frequently.

Overall, U.S. consumers are now nearly 13 trillion dollars in debt.

As borrowers, we are servants of the lenders, and most of us don’t even consciously understand what has been done to us.

In Part I, I have focused on individual debt obligations, but tomorrow in Part II I am going to talk about how the elite use government debt to corporately enslave us.  All over the planet, national governments are drowning in debt, and this didn’t happen by accident.  The elite love to get governments into debt because it is a way to systematically transfer tremendous amounts of wealth from our pockets to their pockets.  This year alone, the U.S. government will pay somewhere around half a trillion dollars just in interest on the national debt.  That represents a whole lot of tax dollars that we aren’t getting any benefit from, and those on the receiving end are just becoming wealthier and wealthier.

In Part II we will also talk about how our debt-based system is literally designed to create a government debt spiral.  Once you understand this, the way that you view potential solutions completely changes.  If we ever want to get government debt “under control”, we have got to do away with this current system that was intended to enslave us by those that created it.

We spend so much time on the symptoms, but if we ever want permanent solutions we need to start addressing the root causes of our problems.  Debt is a tool of enslavement, and the fact that humanity is now more than 200 trillion dollars in debt should deeply alarm all of us.

Michael Snyder is a Republican candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.

The Economic Collapse