NORMANDY, France – A gentle reader reminded us that we haven’t given an update on Elizabeth since we returned to France.
So sorry. She is doing much better; thanks for asking. She’s walking around… though still a little fragile.
Elizabeth spent three weeks in bed following her fall from a horse. What did she do during that time when she was immobilized?
“I read a biography of Joseph Fouché by Austrian writer Stefan Zweig,” she told us. “It is magnificent. Zweig explores how politics really works.
“Fouché was in charge of suppressing resistance to the French Revolution. He was sent to Lyon, for example. The jails were full of people who were opposed to the revolution. Fouché took them out of the prisons, tied them in groups, and shot cannons at them.
“He had begun his career in the priesthood… and became a mass murderer. Like Stalin. Then, he was marked for the guillotine by Robespierre. But Fouché turned the situation around; Robespierre was sent to the guillotine instead.”[Editor’s Note: Paid-up Bill Bonner Letter subscribers will be able to read Elizabeth’s review in the next issue of Bill’s Book Club when it hits inboxes later today.]
In honest capitalism, you do what you can to get other people to voluntarily give you money. This usually involves providing goods or services they think are worth the price.
You may get a little wild and crazy from time to time, but you are always called to order by your customers.
That is true of honest banking, too. Back when such a thing existed, the job of an honest banker was to aggregate people’s savings and lend them to worthy borrowers. You make too many mistakes… your customers leave, and you go broke.
Politics is a different game altogether. It produces no wealth of any sort. So the only way you can prosper in politics is to connive, cheat, and steal – manipulating your friends… sidelining your enemies… and exploiting the public.
It is a game of taking wealth, not making it. And you have no customers… so there’s not much of a check on how out-of-order you can get.
Still, a politician is not always lying… not always stealing… and not always wrong. Occasionally, he blunders into honesty and slips into truth.
On Monday, for example, Republican presidential nominee Donald Trump said Fed chief Janet Yellen should be ashamed of herself for what she was doing to Americans and for creating a “false stock market.”
The financial press was quick to condemn Mr. Trump for “undermining confidence” in the Fed and the stock market. It was “irresponsible” to question the Fed’s integrity and its non-partisan mission, said the pundits.
Widely dismissed was the idea that Ms. Yellen was “playing politics” with the Fed by supporting the stock market to embellish President Obama’s last months in office… and help Democratic nominee Hillary Clinton slide into the White House after him.
But Mr. Trump is right: Politics is the Fed’s game.
No president has ever added to a nation’s wealth. Neither has any central bank.
Neither produces anything… nor offers a service… that anyone would willingly pay for.
Nor does either have to make a profit… or make payroll.
At best, a wise central banker – like a wise president – eliminates the errors of his predecessors, allowing an economy to recover. At worst, he doubles down.
Of course, Ms. Yellen should be ashamed of herself. But the shame is far deeper than Mr. Trump imagines. He thinks she is just “playing politics,” trying to get Hillary elected; actually, her crime is far greater.
Ultra-low interest rates do not create wealth. They just shift it around, from savers to borrowers. Borrowers pay less to service their debts; savers see their interest income disappear.
The biggest borrower in the world is the U.S. government. It is also the biggest beneficiary of the Fed’s EZ money policies. You can do the math yourself.
Were the feds forced to pay another 2% on the national debt, for example, it would be nearly $400 billion a year in extra interest payments. That is money the feds don’t pay… and savers don’t get.
It’s the grandest larceny on earth.
Super-low interest rates – aided and abetted by QE – also boost stock prices.
This creates the “false stock market” Mr. Trump is critical of.
Central banks are buying stocks to feed their QE programs as bonds dry up. The idea is to stimulate their economies; the result is to stimulate Wall Street.
Between them, the Bank of Japan and the Swiss National Bank own about $300 billion worth of stocks. And many of the Swiss National Bank’s holdings are listed in the U.S.
This, too, should be a source of deep shame for all central bankers.
Fed policies may not be designed to benefit Democrats or Republicans. But they are intended to prop up the entire class of Parasitocrats, chiselers, profiteers, zombies, and cronies that benefit from politics.
The Fed helps Wall Street steal hundreds of billions from middle-class savers…
…it favors powerful insiders with the lowest borrowing costs in 5,000 years…
…it connives to raise stock prices to the highest levels ever seen…
…and it collaborates with the Parasitocracy to keep the whole shebang going… at the expense of ordinary households.
An honest banker protects the public from bad money and bad debt. Ms. Yellen does neither.
That is a real shame.
Further Reading: Bill’s full warning about how the Fed is just a tool of the Deep State is available to read here.
BY CHRIS LOWE, EDITOR AT LARGE
If you own Treasury bonds… watch out.
Today’s chart is of the price of the 30-year Treasury bond.
It is particularly sensitive to rising inflation and interest rates… both of which cause bond prices to fall.
As you can see, after being in a clear uptrend, this month, that trend line has been broken.
And that suggests more pain ahead for bondholders.
Why Does Trump Keep Changing His Mind on Rates?
Yesterday, Donald Trump chastised Janet Yellen for keeping rates “artificially low.” But last November, he said the Fed should raise rates. And in May, he said raising rates would cause “very major problems.”
If You’re in Pittsburgh, You Can Now Hail a Self-Driving Uber
Ride-sharing app Uber is getting serious about self-driving cars. And starting tomorrow, it will debut its efforts by allowing select passengers in Pittsburgh to hail a ride in one of its self-driving cars.
Triggers for a Global Economic Meltdown
All signs point to a coming global meltdown. And a legendary international investor says one particular country is at the epicenter of several potential crises that will spark this worldwide disaster…
Yesterday’s Diary about the insanity of negative interest rates has gotten a ton of great feedback…
You guys are awesome. Keep up the good work. Your metaphor, “the hottest day in 5,000 years,” might have been better expressed as the “hottest day ever”
– John D.
Some people can shovel it, but man you WAX. Great stuff.
– Doug V.
Loved Bill’s Diary today, although I had to Google search half of the events and people he wrote about.
We must be ever diligent to remember that government exists by our consent… that our constitution is NOT a “living, breathing” document as “progressives” claim… and that cash is among the last vestiges of financial liberty available to a free society.
– Ken C.
If I believed that currency values were about to be worthless or near worthless, might I want to diversify my gold holdings with large corporations I believed governments would want to save?
Even if it’s a negative rate, would I still have value owning a bond in an important company? Or can they buy it back from me with worthless currency?
– Charles S.
When you buy bonds with a negative interest rate. Do you get an immediate tax deduction?
– Randall D.
Actually, Bill, someone did have the idea of paying to lend money, or expecting less when repaid: Parents. Since central banks can’t work out good ideas on their own, maybe this explains where they got that one.
The American retirement system is in danger of collapsing…
That’s why the think-tank at Palm Beach Research Group created Retirement “Plan B”… to make sure retirees never run out of money.