They’re secretive for a reason
Oct 5th, 2014 by Ken Hagler

The Sane Case for Audit­ing the Fed. What is it about the Fed that inspires such sol­i­dar­i­ty among its crit­ics? Ever since its cre­ation dur­ing the Woodrow Wil­son era, it’s been a favorite tar­get of every­one from right-wing con­spir­acists who fear the Fed is sim­ply anoth­er cog in an inter­na­tion­al Jew­ish bank­ing con­spir­a­cy to left-wing pop­ulists who see it as both a cause and effect of glob­al­ized cap­i­tal. Because it con­trols the mon­ey sup­ply of the planet’s biggest econ­o­my and because it oper­ates so opaque­ly, it’s an obvi­ous place to project all sorts of anx­i­eties about large, imper­son­al forces beyond our reach that sharply affect, if not actu­al­ly con­trol, vir­tu­al­ly all aspects of our dai­ly lives.

But one needn’t wade into the fever swamps of con­spir­a­cy to see the Fed as an inher­ent­ly prob­lem­at­ic insti­tu­tion. The cen­tral bank is explic­it­ly tasked with the fun­da­men­tal­ly incom­pat­i­ble duties of con­duct­ing sta­ble mon­e­tary pol­i­cy, pro­mot­ing full employ­ment, act­ing as a lender of last resort, and reg­u­lat­ing the banks it works with. Good luck with all that. Also, while it’s tech­ni­cal­ly inde­pen­dent, the fed­er­al gov­ern­ment exerts mas­sive polit­i­cal pres­sure on the Fed and appoints its chair and board of gov­er­nors.


Reid hasn’t explained exact­ly why he won’t allow a vote on the bill, which has 30 co-sponsors. He’s keep­ing his rea­sons secret, which means that the Fed’s secrets are safe for at least a lit­tle while longer. And that trust in gov­ern­ment will keep shrink­ing, just like the val­ue of a dol­lar has over the life of the Fed­er­al Reserve. [The Dai­ly Beast]

That drop in the val­ue of the dol­lar is the main rea­son the Fed­er­al Reserve exists–it’s the orga­ni­za­tion respon­si­ble for loot­ing the sav­ings of peo­ple who use dol­lars though infla­tion. The gov­ern­ment nat­u­ral­ly wants to hide that. Con­sid­er the link at the end of the quot­ed sec­tion of the arti­cle: it shows an “infla­tion cal­cu­la­tor” which, by default, shows that an item bought for $20 in 1913 would cost $480.51 in 2014. How­ev­er, it uses the US government’s “Con­sumer Price Index,” a sta­tis­tic specif­i­cal­ly intend­ed to hide the real rate of infla­tion.

For­tu­nate­ly, it’s easy to find out how much $20 in 1913 is real­ly worth today. In 1913, a US $20 coin had .9675 troy ounces of gold. That’s worth $1,147.07 today–which means that the US gov­ern­ment, through the Fed­er­al Reserve, has stolen well over twice the amount that they’re will­ing to admit to through infla­tion. It’s hard­ly sur­pris­ing they don’t want too much scruti­ny.

The Economic Future
Aug 7th, 2011 by Ken Hagler

Hyper­in­fla­tion Spe­cial Report (2011) [Shad­ow Gov­ern­ment Sta­tis­tics]

A detailed look at what’s like­ly to hap­pen to the econ­o­my in the near future. The site where this is post­ed takes var­i­ous promi­nent government-published sta­tis­tics that are wide­ly accept­ed as reflect­ing the state of the econ­o­my, and deter­mines what they would be based on the way the gov­ern­ment used to cal­cu­late them in the past before chang­ing them to hide the true eco­nom­ic sit­u­a­tion from the chumps vot­ers.

How safe is the dollar?
Jul 31st, 2011 by Ken Hagler

I’ve observed that some peo­ple have the idea that the US dol­lar is a safe store of val­ue, and that if you buy $10 mil­lion worth of US trea­suries, “you can assume that the mon­ey you put into the US is going to still be there when you need it.” I couldn’t rec­on­cile this idea with my own mem­o­ry of chang­ing exchange rates, so I decid­ed to do a bit of dig­ging into his­tor­i­cal exchange rates.

Sup­pose a hypo­thet­i­cal rich Euro­pean has €10 mil­lion that he wants to keep safe as of July 31st, 2001. He puts it all into Dol­lars, which at the time gives him $8,752,050. Now, ten years lat­er, he decides to con­vert his dol­lars back into Euros, and he gets €6,137,480.09.

If our hypo­thet­i­cal Euro­pean had instead decid­ed to store his mon­ey in Swiss Francs (giv­en their rep­u­ta­tion as the least worth­less fiat cur­ren­cy), his €10 mil­lion would have got­ten him 15,127,900 Swiss Francs ten years ago. Con­vert­ing those Francs back into Euros today gets him €13,249,166.10.

Final­ly, let’s sup­pose I had €10 mil­lion on July 31st, 2001. I had to look else­where for the gold price in Euros ten years ago, but found that this would have got­ten 32,559.71 ounces of gold. Today, that would con­vert back to €52,544,860.

I think it’s pret­ty obvi­ous that if you’re look­ing for a safe place to store your wealth, the US Dol­lar is emphat­i­cal­ly not it. In fact, attempt­ing to safe­ly store wealth in any­thing oth­er than gold is a good indi­ca­tor that some­one either knows noth­ing at all about eco­nom­ics (which is actu­al­ly the norm for Amer­i­cans) or else is pro­found­ly stu­pid.

Inflation news
Oct 15th, 2009 by Ken Hagler

Today the price of the ice-blended mocha I buy reg­u­lar­ly at the Star­bucks down the street went up to $4.55. It was only $3.70 a cou­ple of years ago when I start­ed buy­ing them there reg­u­lar­ly. If I’m not mis­tak­en, that’s a year­ly price increase more than dou­ble the infla­tion rate that the Feds admit to.

Old post on the housing bubble
Nov 1st, 2008 by Ken Hagler

I came across this old post, writ­ten over six years ago on my old weblog:

Infla­tion con­tin­ues to fall as buy­ers keep the pres­sure up on sell­ers. This also means that a 3–4% wage increase this year and a 10% increase in hous­ing prices will have a major impact on real per­son­al income and wealth. Anoth­er three years of this and we will have repli­cat­ed the gains in real per­son­al wealth over the last two decades (for most Amer­i­cans — this is in con­trast to the rapid stock mar­ket dri­ven gains over the last 20 years for the nation’s wealth­i­est indi­vid­u­als). Nice. [John Robb’s Radio Weblog]

There are some prob­lems with this the­o­ry. The most glar­ing is that he’s treat­ing infla­tion as syn­ony­mous with some vague sta­tis­tic about con­sumer prices. In fact, infla­tion is an increase in the sup­ply of money–this may lead to an increase in prices, or it may not, depend­ing on oth­er fac­tors. The US has been inflat­ing its mon­ey sup­ply for years with­out prices going up much, because we send the mon­ey over­seas to pay for import goods. That can only work as long as over­seas sell­ers are will­ing to accept the dol­lars (or have no choice).

The hous­ing price increase is the result of anoth­er bub­ble. The Fed­er­al Reserve is still inflat­ing the mon­ey sup­ply, but now instead of the mon­ey going into smoke-and-mirror “dot com” stocks, it’s going into real estate. This is bad for any­one buy­ing a house now, because when the bub­ble bursts, they’ll be stuck with a house worth less than what they paid for it, but their mort­gage pay­ments will reflect the inflat­ed price.

To me, that’s even worse than los­ing mon­ey buy­ing lot­tery tick­ets dis­guised as stocks. At least you can just accept your loss and move on, instead of being stuck either mak­ing exces­sive pay­ments for 30 years on a house or else going through the has­sle of sell­ing it at a loss.

When I wrote that, it hadn’t occurred to me that those house buy­ers could legal­ly walk away, but as it turns out they could.

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