New Rickards book!

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vnatale
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New Rickards book!

Post by vnatale » Wed Jan 13, 2021 12:07 pm

Missed it by a day. Came out yesterday.

Bought it a few minutes ago. Will start reading it tonight!

Vinny

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Re: New Rickards book!

Post by Hal » Wed Jan 13, 2021 2:55 pm

Awaiting your review :)
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Re: New Rickards book!

Post by boglerdude » Wed Jan 13, 2021 8:39 pm

I rely on vinny to watch cspan etc
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Re: New Rickards book!

Post by vnatale » Wed Jan 13, 2021 8:44 pm

boglerdude wrote:
Wed Jan 13, 2021 8:39 pm

I rely on vinny to watch cspan etc


I have it on now, with a repeat of this afternoon's speeches. In the next 15 minutes it will go off so I can read this book while listening to music.

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Re: New Rickards book!

Post by vnatale » Wed Jan 13, 2021 9:17 pm

I do LOVE his writings!

Below is what I highlighted from the Introduction. You will see that he says what many others here have contended.

Vinny

This book is about a virus that caused a global depression. More precisely, it’s about how our reaction to a virus caused a global depression. A virus can cause disease and pandemic, yet it cannot directly cause an economic collapse; that’s up to us.

We made many choices when the extent of the viral attack became clear. Those choices were informed and at times misinformed by science and economics. Since the virus was new and scientists were not in accord, choices offered by science were both muddled and contradictory. To say the economic choices were muddled and contradictory seems redundant. Still, scientists and economists acted mostly in good faith and always under extreme duress due to the suddenness and lethality of the disease. They did the best they could. It’s not clear another expert team would have done better under the circumstances.


Still, the suffering of virus victims and the caregivers’ sacrifice should not blind us to a different source of misery—the New Great Depression. Policy choices in the face of pandemic have caused the greatest economic collapse in U.S. history.


Comparisons to the 2008 global financial crisis, the 2000 dot-com collapse, and the 1998 financial panic miss the point. Those crises, while critical to those affected, were trivial compared with what’s upon us now. The first Great Depression, from 1929 to 1940, offers a better frame of reference, yet even that cataclysm does not capture the extent of what happened in 2020 and what is yet to come. The 89.2 percent stock market crash that occurred during the Great Depression played out in stages over four years (1929–32). The 60 million U.S. job losses in the New Great Depression have played out in just over four months, and more losses are coming.



What is a depression? Economists have no easier time answering that question than scientists who are asked if a virus is alive. At least scientists are still trying. Economists have given up on the idea of “depressions” and have banned the word from their lexicon. Such behavior is typical of economists, who bury their heads in the sand when facing a real-world problem. Still, depressions do exist; we’re in one now. And like viruses, they morph and evolve, ready to attack healthy economies the way a virus attacks a healthy cell. Both pandemics and depressions are rare. Finding economists with a working knowledge of depression dynamics is a singular challenge. The effects of depression can be devastating, even fatal. Just as scientists search for vaccines, economists search for policy solutions to remedy high unemployment, lost output, and collapsing world trade. Scientists don’t have all the answers at first, the view that a virus is a primitive life form from which other more complex forms of life evolved. Others believe that a virus is the result of devolution rather than evolution—that the virus had a predecessor, which was a higher form of life that simplified or devolved into what we see today. Another view is that viruses began as part of a living cell that separated and emerged with unique properties, yet not fully alive. Not knowing if a virus is even alive is just the beginning of humankind’s struggle with the microscopic foe.

What is known is that a virus is a master of replication. They do not do this on their own. Instead, viruses invade a living cell, take over the host cell’s energy and DNA, embed their own genes (coded in RNA, a less complicated form of DNA), and then, in effect, order the host cell to replicate the virus by the thousands. In time, the cell wall bursts, the virus copies are released, and the process continues, now on a far larger scale. A viral swarm has begun.

A virus is no more than an egg-shaped sheath with genetic code inside. The key to replication is what’s on the surface of the sheath. The influenza virus has two types of protuberance. The first is a spear made of hemagglutinin (“H”). The second is shaped like a prickly shrub and made of neuraminidase (“N”). The hemagglutinin spears bind to the target cell, “like grappling hooks thrown by pirates onto a vessel,” in Barry’s words, and begin the genetic invasion. The neuraminidase acts like a battering ram that breaks down sialic acid on the target cell’s surface. When the replicated viruses burst from the target cell, they would normally stick to the acid coating. Due to neuraminidase, the coating is destroyed and the new viruses are free to attack other healthy cells.

The H and N abbreviations are familiar to even casual observers of influenza outbreaks. Scientists have identified eighteen elemental shapes for hemagglutinin and nine for neuraminidase. The 1918 Spanish flu was type H1N1. The 1968 Hong Kong flu was type H3N2, still in circulation today. The precise HN structure of SARS-CoV-2 is unknown and is the object of intense research about the structure and behavior of the virus. This research is hampered by apparent rapid mutation of the virus even at this early stage of the pandemic.

What is a depression? Economists have no easier time answering that question than scientists who are asked if a virus is alive. At least scientists are still trying. Economists have given up on the idea of “depressions” and have banned the word from their lexicon. Such behavior is typical of economists, who bury their heads in the sand when facing a real-world problem. Still, depressions do exist; we’re in one now. And like viruses, they morph and evolve, ready to attack healthy economies the way a virus attacks a healthy cell. Both pandemics and depressions are rare. Finding economists with a working knowledge of depression dynamics is a singular challenge. The effects of depression can be devastating, even fatal. Just as scientists search for vaccines, economists search for policy solutions to remedy high unemployment, lost output, and collapsing world trade. Scientists don’t have all the answers at first, yet they have sound methods for finding answers. Economists don’t. That’s why the New Great Depression will last longer than the pandemic and have more persistent adverse effects.



Viruses are enigmatic yet well-studied by science, while depressions are real yet ignored by economists. In this book, we explore how the viral enigma emerged and how our response caused a global depression. We cannot blame the virus for the depression; we can only blame ourselves for our response to the virus. That response was the depression’s real cause. The consequences will linger long after the virus is contained.

A word on science. Some epidemiologists and immunologists complain that economic analysts should keep out of medicine. The science of viruses, influenza, vaccines, and pandemics is highly technical, takes years of specialized training to master, and requires clinical and laboratory experience to practice expertly. Of course.

Yet immunologists such as Dr. Anthony Fauci, an adviser to President Trump, showed no such restraint when it came to the practice of economic public policy. They claimed that they only made evidence-based recommendations and left economic policy to others. That’s untrue. When immunologists demanded the world’s largest economy be locked down to mitigate the spread of the SARS-CoV-2 virus, they were implementing the most profound economic policy change in history. You can’t have it both ways. Immunologists cannot fundamentally alter the U.S. and global economies, perhaps for decades, while insisting that economic policy makers keep out of immunology.

growth. If an economy is capable of 3 percent growth yet grows for an extended period at 2 percent, it’s experiencing depressed growth. Growth can occur during a depression, just as output declines can happen during an expansion. The key lies not in quarterly performance but in the long-term trend relative to potential.

John Maynard Keynes offered the best definition of depression: “a chronic condition of sub-normal activity for a considerable period without any marked tendency either towards recovery or towards complete collapse.”

Based on history and Keynes’s practical definition, we are now in a new depression that is more far-reaching than a mere technical recession. Depressions are as much psychological as numeric. Output and employment figures matter, but behavioral changes matter more. As growth returns, gains will start from such a depressed plane that the prepandemic output level will not be achieved for years. Unemployment will start to decline, yet from such high levels that hard times will persist for millions of workers for years to come. Numbers aside, behavioral changes will be profound and intergenerational. People will spend less and save more despite White House hectoring to borrow and spend “like the good old days.” Those days are over.

Viruses are enigmatic yet well-studied by science, while depressions are real yet ignored by economists. In this book, we explore how the viral enigma emerged and how our response caused a global depression. We cannot blame the virus for the depression; we can only blame ourselves for our response to the virus. That response was the depression’s real cause. The consequences will linger long after the virus is contained.

A word on science. Some epidemiologists and immunologists complain that economic analysts should keep out of medicine. The science of viruses, influenza, vaccines, and pandemics is highly technical, takes years of specialized training to master, and requires clinical and laboratory experience to practice expertly. Of course.

Yet immunologists such as Dr. Anthony Fauci, an adviser to President Trump, showed no such restraint when it came to the practice of economic public policy. They claimed that they only made evidence-based recommendations and left economic policy to others. That’s untrue. When immunologists demanded the world’s largest economy be locked down to mitigate the spread of the SARS-CoV-2 virus, they were implementing the most profound economic policy change in history. You can’t have it both ways. Immunologists cannot fundamentally alter the U.S. and global economies, perhaps for decades, while insisting that economic policy makers keep out of immunology.

In the fullness of time, the 2020 lockdown of the U.S. economy will be viewed as the greatest policy blunder ever. Lost wealth and income will be measured in trillions of dollars. Any gain in lives saved or damage avoided was inapposite, since equally effective policy choices were available but untried. There’s no evidence that epidemiologists considered lives lost to drugs, alcohol, suicide, and despair when they pursued policies that pushed 60 million Americans out of jobs.

From 1968 to 1969, the H3N2 strain of influenza A virus ravaged the world. Known then as the Hong Kong flu, it killed over 1 million people worldwide and over 100,000 Americans. It was the third-worst influenza pandemic on record, surpassed in fatalities only by the Asian flu (1957–58) and the Spanish flu (1918–20). Prominent fatalities included former CIA director Allen Dulles and Hollywood legend Tallulah Bankhead. President Lyndon Johnson was infected with the flu and survived. An Apollo astronaut, Frank Borman, became ill with the flu in outer space. It was a fierce pandemic with a tragic loss of life, yet there was no lockdown. Life in America continued as before. Scientists worked on a vaccine (which was finalized in August 1969), and the public relied on the scientists. Otherwise, life went on. Woodstock occurred during this pandemic. There was no social distancing at Woodstock.

This is not to say mitigation measures should not be used today. They should. Still, immunologists who want to shut down a $22 trillion economy should expect to hear from analysts who take a different view. I’ve read scores of peer-reviewed papers on epidemiology and economics as research for this book. Both fields are accessible to the educated layperson willing to make the effort to understand the science. I’m not an epidemiologist, but I’m not intimidated by science either. Perhaps two degrees from Johns Hopkins University immunized me from academic angst where natural science is concerned. Of course, I’m perfectly at home in the worlds of public policy and economic analysis.
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Re: New Rickards book!

Post by vnatale » Wed Jan 13, 2021 10:01 pm

The world is waiting for a Wuhan-born virus to run its course. That may never happen.



As explosive as the growth of new cases in China was, it is almost certainly an undercount and an official deception. The real spread in Wuhan and China was far worse. A study by the American Enterprise Institute using reliable travel data and reasonable assumptions on the infection rate estimates the number of COVID-19 cases in China at 2.9 million. Perhaps 200,000 Chinese died. Ample anecdotal and empirical evidence supports these estimates.

Eyewitness accounts report that in a two-week period from March 23 to April 4, 2020, over five hundred urns of victim ashes were delivered to families in Wuhan every day. That data suggests 7,000 dead in Wuhan alone in a fairly brief period, compared with China’s official report of just over 4,700 dead in the entire country from November 2019 to October 2020. Both eyewitnesses and U.S. intelligence sources report that incinerators in Wuhan were in use twenty-four hours a day in March and April and as many as 45,500 corpses may have been cremated. The truth may never be known, because China has no interest in revealing the truth and every interest in hiding it from the world.



Italy was a warning to the rest of the world in part because earlier Chinese data was fabricated and could not be relied upon by policy makers as a guide. In contrast, Italian data was reliable and told a horrifying story of contagion and exponential spread. This was why other developed economies were late in implementing protective measures. Chinese data, although flawed, suggested containment was possible. The Italian data showed the epidemic was not contained in China and would spread explosively in other high-density environments. It was the unfolding disaster in Italy that finally put the United States and Europe on high alert. Still, it was too late. By early March, the virus had gone global and the explosion in caseloads hit Spain, France, Germany, and the United States in rapid succession. March 15, 2020, marks the date when the global caseload chart went vertical, forming a classic “hockey stick” shape. On March 15, the global caseload was 167,000. By March 31, just over two weeks later, the figure was 858,000. By October 1, 2020, there were over 32 million confirmed cases. Individual cities and countries were trying to flatten their curves. The global curve had not flattened at all.


Regardless of the pattern that emerges, all three scenarios can be mitigated by commonsense solutions such as social distancing, face masks, frequent hand washing, limiting crowd sizes, and voluntary self-quarantine by those most vulnerable, including those over sixty-five years old and those with respiratory problems, diabetes, or compromised immune systems. Neither scenario 1 nor scenario 3 would require extreme lockdown measures of the kind the U.S. economy (and economies abroad) have experienced over the course of March–October 2020.

The danger is that we experience scenario 2, in which our struggle in the first half of 2020 is just a glimpse of a greater horror to come. In that case, the return of extreme lockdown measures of the kind that were recently lifted should be expected.



The rise in global infected was relentless. Over thirty-two million confirmed cases and over 1,000,000 deaths were reported worldwide by October 1, 2020. By far the leader in global fatalities was the United States, with over 200,000 dead by early October. Over 53,000 died in New York, New Jersey, and Connecticut alone, over twenty-five percent of the United States total. What started in Wuhan had landed like a viral H-bomb in Times Square and devastated surrounding communities. It was hard to meet anyone in New York who did not know someone who had died or suffered badly in the viral storm.

Going forward, the best case is that we’ll see regional peaks in a single-peak pattern, followed by progressively smaller waves until the disease mutates to a manageable form. The worst case is that the October 2020 peak is followed in six months by a second wave of greater virulence, producing more violent deaths on a far greater scale. History and science suggest that the worst case cannot be dismissed; it may be the most likely.


Did the virus originally spring from a laboratory or a wet market? That question is an enduring mystery of the pandemic with immense implications for U.S.-China relations and, by extension, the global economy.

Responsibility for the initial handling of an outbreak rests with the leadership of the country where the outbreak originates. The best course is to act quickly, report honestly, and invite teams of international scientists to assist in containing the spread and treating the victims. Viral investigators can identify and isolate the pathogen. Research on vaccines and treatments can begin immediately. Every minute counts. This approach invites international team science in the best sense. The United States and other nations and international organizations, including the Red Cross and Red Crescent societies, were ready and willing to assist the victims in China and stop the spread of SARS-CoV-2.

China did not make use of this assistance. Its leaders were at first in denial, both at the provincial government level and within the Communist Party leadership. When they did react, in late December 2019, they took steps to cover up the disease.



Communist China’s chairman Xi did order Wuhan to take drastic measures on January 7 and locked down the city on January 23. By then it was too late. Millions of travelers had left China since the November 2019 outbreak and spread the disease to Seattle, Milan, and other cities around the world. The Chinese epidemic was now a pandemic. Scientists estimate that 95 percent of global infections would have been prevented if China had not engaged in its cover-up and had reached out to other nations for expert assistance.

China enlisted the help of the UN’s World Health Organization (WHO) to implement its cover-up. The WHO is headed by Director-General Tedros Adhanom Ghebreyesus, who was elected in May 2017 with strong political and financial support from Communist China and Tedros’s comrades-in-arms from Ethiopia’s revolutionary Tigray People’s Liberation Front. Tedros repaid his benefactors by spreading lies about the virus using his WHO platform.

On January 14, 2020, WHO issued an official tweet that said, “Preliminary investigations conducted by the Chinese authorities have found no clear evidence of human-to-human transmission of the novel #coronavirus (2019-nCoV) identified in #Wuhan, #China.” The tweet was a lie. China had been fighting the disease for months and saw evidence of human-to-human transmission in thousands of cases. There was no evidence to the contrary. The WHO simply parroted the Chinese party line.

On January 30, 2020, the WHO called the outbreak a “public health emergency” but refused to use the word “pandemic,” even though the disease had already spread to eighteen countries besides China at the time. The omission of the word “pandemic” was another WHO deception, since the global spread of the disease had already happened, and the pandemic’s path was clear based on China’s own experience. The WHO was little more than a Chinese propaganda channel.



China’s actions in suppressing the truth, using the WHO to promote its lies internationally, and expelling independent journalists are all consistent with the actions of someone with something to hide. What was China hiding?

What China wanted to hide was not the disease itself; that was impossible. China was hiding the source of the disease. This was an effort to deflect responsibility and neutralize trillions of dollars of damage claims. China needed to make the viral spread appear natural and unintended. China went further, using its new “wolf warrior” diplomacy, and blamed the United States for releasing the virus. Above all, China’s goal was to impede an inquiry into the real source of the virus. As long as there was no international investigation of the true source, China was free to propagate whatever version it liked.

There are two principal theories for the source of the virus at the time of its transfer to humans. The first is the “wet market” theory. The second is the “laboratory” theory. The difference matters greatly for the future of U.S.-China relations. The stakes for global commerce if communication between the world’s two largest economies breaks down could not be greater. These two virus-origination theories can be explored with available sources. This is a mystery that can be solved.


In sum, we know the Wuhan Institute of Virology possesses live bat coronaviruses, conducted risky experiments on bat-to-human transmission, and has deficient safety procedures.

The wet-market theory is anecdotal and cannot be proved or disproved without more investigation by virologists. China’s government has prohibited investigation by anyone except its own approved scientists. China caused the disappearance of individuals who dissented from the wet-market narrative and erased the social media posts of others. China lied repeatedly about the spread of the disease and the number of cases and fatalities. No investigation produced by Chinese officials alone can be relied on because of this documented pattern of cover-up and deception.



The laboratory theory has also come under attack. One article claims to show that SARS-CoV-2 could not have been bioengineered in a laboratory because the genetic data for the virus shows no sign of the use of reverse genetic systems that are a hallmark of genetic manipulation. Yet informed parties have not claimed the virus was bioengineered, only that it leaked from a laboratory through negligence. Most virology labs have large numbers of caged animals for experimental purposes. These animals may have had SARS-CoV-2 in a natural form and passed the virus to humans through blood, feces, or contact with other bodily fluids. Saying the virus was not engineered is not the same as saying it did not come from a lab. The widely cited article proves nothing with regard to the source of the virus. The study was partially funded by the Chinese government.

A more recent study (still pending peer review as of this writing) from Flinders University professor Nikolai Petrovsky, a prominent virologist, suggests that SARS-CoV-2 may be the result of a cell-culture experiment in a laboratory.



The most rigorously researched claim that the virus emerged from the Wuhan Institute laboratory and was bioengineered came from Chinese virologist Dr. Li-Meng Yan of the University of Hong Kong Medical Centre School of Public Health, which includes a reference laboratory for the World Health Organization.




There is clear consensus that the COVID-19 outbreak began in Wuhan in late 2019. There is also consensus that the SARS-CoV-2 virus was not bioengineered (with some opposing views). The consensus view is that the virus first existed in animals and infected humans through either zoonotic transfer or a petri dish. There is no consensus on whether that transfer took place by accident in a wet market or by accident in a laboratory, possibly the Wuhan Institute of Virology. There is clear evidence that the Wuhan Institute has live bat coronavirus strains today and has conducted risky experiments involving the possibility of transfer to humans in the past. There is also clear evidence that the earliest cases of COVID-19 in China had not visited the Huanan Seafood Market in Wuhan (the government’s claimed wet market).


, the evidence points strongly to a conclusion that the lethal virus leaked from the Wuhan Institute of Virology. We may never know for certain, unless secret Chinese archives are released in the decades to come, perhaps after a regime change.

Independent of whether the virus came from a wet market or a laboratory, China cannot disclaim responsibility for the economic damage caused and lives lost in the resulting global pandemic. Chinese involvement in the cover-up would constitute criminal culpability even if the virus came from the wet market. If the virus came from a lab, Chinese involvement in the cover-up constitutes a crime against humanity.
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Re: New Rickards book!

Post by vnatale » Wed Jan 13, 2021 10:49 pm

Worldwide, the Spanish flu carried off 40 million people, or two percent of humanity, equivalent to more than 150 million people today. . . . So why did this ferocious pandemic fail to wreck the economy? The answer is deceptively simple: for the most part, whether by necessity or choice, people barreled through.

—Walter Scheidel, Foreign Affairs (May 28, 2020)



Once the virus spread widely in the United States, an economic lockdown was imposed. Was a lockdown necessary given the behavior of the virus? The short answer is no, it wasn’t.

The lockdown of the U.S. economy and the end of social intercourse beginning in stages in March 2020 will be viewed as one of the great blunders in history. The lockdown was unnecessary, ineffective, and based on both official deception and bad science. The costs were not considered. Better alternatives were ignored. It was mostly unconstitutional. The American people were treated like not-very-bright children. The lockdown represented rule by experts operating outside their areas of expertise who were revealed to be not that expert even within their fields. Above all, it represented a failure of leadership, as politicians hid behind bureaucrats instead of widening the circle of cognitive diversity and leading from the front.


Some orders were fatal. On March 25, 2020, New York governor Andrew Cuomo issued an order to nursing home (NH) administrators that stated, “NHs must comply with the expedited receipt of residents returning from hospitals to NHs. . . .


This patchwork approach to closing and then reopening the economy as a form of disease control points to the first objection—it’s unnecessary and ineffective. Lockdowns don’t work.


There were ample alternatives to a total lockdown of the economy and social life that could have been implemented. There’s nothing wrong with voluntary social distancing, hand washing, and proper masks (most masks don’t work for their intended purpose or are worn incorrectly; some can work to prevent viral spread by those already infected who exhibit coughing and sneezing)


This brings us to the real reason for the lockdown, and the motivation for official fearmongering. The lockdown was never intended primarily to halt the spread of the virus. That’s impossible short of martial law and involuntary house arrest of the entire population. In fact, the spread of the virus is desirable in some ways because the fatality rate is quite low and herd immunity (large numbers of survivors with antibodies and immunity) is the best way to stop the pandemic, at least for now. The reason for the lockdown was primarily to “flatten the curve,” in the words of Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases.


What was not clearly explained (except in scientific journals) was that total infections and deaths would be about the same over time with or without the lockdown. Until a vaccine is created the virus will spread. Flattening the curve means elongating the curve. The peak load is lower, but the duration is longer. Total cases and fatalities are defined by the total area under the curve, not by the height of the curve at a particular point. A lockdown that flattens the curve does reduce peak patient load on the health-care system, yet it will not reduce total infections and fatalities in the long run. In fact, the lockdown may increase fatalities by delaying herd immunity, which is the only source of immunization and reduced exposure in the absence of a vaccine.

This real rationale of reducing the peak load is revealed in the medical literature. Dr. Michael Mina, associate medical director of clinical microbiology at Boston’s Brigham and Women’s Hospital, said, “I think the whole notion of flattening the curve is to slow things down so that this doesn’t hit us like a brick wall. It’s really all borne out of the risk of our health care infrastructure pulling apart at the seams if the virus spreads too quickly and too many people start showing up at the emergency room at any given time.”

Reducing the peak load on an overburdened health-care system is a legitimate policy goal. Some victims will die if they cannot receive prompt medical care. Still, there were solutions to this problem other than destroying the U.S. economy. Lockdowns could have been limited by location and time to those areas most likely to be overwhelmed. Care facilities could have been surged in the form of hospital ships and temporary hospitals (as was done in New York City and Los Angeles). Doctors and nurses could have been shifted from low-risk areas to areas of greater need (a common practice during the 1918 Spanish flu). An extreme nationwide lockdown was not needed and did not help.

Even if the case for a broader lockdown was stronger because of the peak load problem, why was this not explained clearly to the American people? Experts and politicians hid behind their flattening charts without making it clear that they were aiming for timing differences, not a long-term reduction in cases or fatalities. Fear was their most effective weapon. Trust was the first victim.


Another rationale for the lockdown was that it would buy time to create a vaccine. The costs of shutting down the economy would be offset by the lives saved once a vaccine was ready for mass inoculations. This would render the virus almost harmless, end the pandemic, and allow for a relatively risk-free reopening of all facets of the economy.

There’s only one problem with this vaccine rationale. An effective vaccine is highly unlikely to appear.




It is true that many fatalities from COVID-19 are due to influenza or pneumonia. A new vaccine for either disease would help reduce fatalities from COVID-19. Any one of a number of new drugs under development that reduce discomfiture, improve breathing, or treat severe symptoms are valuable and will make the disease more manageable. Hopefully, those drugs will work as expected. Yet they are not cures. HIV-AIDS is an apt comparison. There are drugs that, when taken in combination, reduce the side effects of AIDS, mitigate symptoms, and allow sufferers to live long and relatively normal lives, provided the drug regimens are followed. That’s a blessing. Yet there is no cure for AIDS.




The implication of these studies is that even if a vaccine is developed, it may be of limited effectiveness if any antibodies produced disappear within weeks. The research should be continued and supported by all means. Yet buying time for research was never a good reason to destroy the economy.

Perhaps the greatest fault of the experts who pushed the lockdown is their utter failure to consider the costs. It would be one thing if the lockdown were free or involved relatively minor inconvenience. In that case, even small gains relative to expectations might have been worth the cost. But lockdowns are not free.

The destruction of over $4 trillion in asset value and the loss of $2 trillion in economic output was the cost of the lockdown. Perhaps epidemiologists and virologists are so embedded in the world of science that they have no familiarity with the real world of economics. If so, it was the obligation of political leaders to take charge and balance competing considerations. The doctors mostly exceeded their authority and the politicians failed to stop them.

Economics aside, there are a host of other costs that argue against a lockdown. The first is immunity loss. While we were all working from home (if we could) to avoid SARS-CoV-2, we were also evading a long list of other viruses and bacteria that we routinely encounter. Those encounters help us to maintain immunities. By staying in place, our immune systems have now weakened. As we venture out again, those viruses and bacteria will be waiting for us. Many will sicken and die because we have squandered our immunities.

The lockdown was implemented to save lives from COVID-19. That’s possible in the short run and doubtful in the long run. Yet how many died to save lives?


What about the social costs of the lockdown?


Estimates for additional deaths from other drug use, alcohol use, suicide, and domestic violence all attributable to the deleterious effects of the lockdown suggest that perhaps 50,000 or more deaths will result from all causes (drugs, alcohol, suicide, domestic violence) as a direct consequence of the lockdown.


Lockdown costs don’t stop with the trillions of dollars of lost wealth and tens of thousands of lockdown-related deaths. Many have died from heart attacks and cancer by deferring needed medical procedures for fear of contracting COVID-19 in hospitals. There are deleterious mental and physical health outcomes from loneliness, isolation, and despair. Educational progress, especially among the young, was set back. Communities were being destroyed. Entrepreneurs were arrested for cutting hair or opening gyms. Constitutional rights to the free exercise of religion and to life and liberty were denied without due process of law. Petty bureaucrats assumed dictatorial power over people’s lives at the federal, state, and local levels. And for what? This destruction of wealth, deprivation of rights, and degradation of communities have been supported by epidemiologists and virologists who know little of law, economics, or sociology and who were empowered by panicked politicians afraid to lead.



Policy makers calculate trade-offs between potential death and safety and efficiency every day. Lowering the speed limit to forty miles per hour would save lives, but we don’t do that because it’s costly and inefficient. If you’re really concerned about it, you don’t have to drive. Plant-safety rules are designed to protect workers, yet extremes are avoided because the work must go on. Workers receive training and are informed of the risks. If you find the risks unacceptable, you’re free to work elsewhere. The point is that these trade-offs are made continually both from a policy perspective and through individual choices. Krugman’s top-down, doctrinaire approach is typical of academia and shines a light on bureaucracy’s tendency toward totalitarian solutions. Reopening the economy will cost some lives and save others. Individuals may choose to remain home, and some should. That’s what liberty means.

Finally, what was the scientific basis for the lockdown in the first place? What was the origin of the lockdown plan that carried huge costs and produced so little apparent benefit?



What the CDC offered the country was a return to the Middle Ages.

The original sin in this entire policy sequence is that Robert Glass, coauthor of the 2006 paper, was not expert in disease.


The paper, blueprint, and update include headings such as “Behavioral Rules” and “Community Mitigation Interventions.” The 2017 final plan’s checklists include recommendations for “Temporarily closing schools,” “Modifying, postponing, or canceling large public events,” and “Creating physical distance between people.” The entire lockdown scenario was based on specifications worked out through the Bush, Obama, and Trump administrations based on a paper produced by a scientist who knew nothing about disease, behavioral psychology, or economics. This was bureaucracy run amok. And it became our reality, costing lives and destroying trillions of dollars of wealth.


At the same time that nonepidemiologists and bureaucrats were going full speed down the lockdown route, serious virologists and epidemiologists were warning that lockdowns don’t work. They were right. Henderson and his coauthors supported commonsense measures such as self-quarantine, hand washing, protective gear, and respiratory hygiene. They warned that extreme measures such as a national lockdown don’t work. Their conclusions were ignored by the CDC and President Trump’s Coronavirus Task Force. The American people paid the price.

The best explanation of the dynamics of a lockdown comes from author Laura Spinney in her history of the Spanish flu, Pale Rider. Spinney’s point is not that lockdowns can’t work; it’s that they don’t work because of coercion and mistrust. She writes:


Spinney wrote this in 2017, before COVID-19. She based it on the lessons of 1918. She recommended voluntarism, individual choice, and avoidance of police powers. She emphasized straight talk and trust. In 2020 leaders used mandatory, not voluntary rules. Police engaged in heavy-handed arrests and roadblocks. Official information gave false reassurance and ignored the dangers. Trust was thin at the beginning of the pandemic and nonexistent at the end. Official actions ignored the lessons of history and the counsel of common sense. The lockdown failure should have come as no surprise.

In the end, did the lockdown save lives? Yes. It probably cost more lives than it saved, yet it did save lives. Martial law would have saved more lives, at least in the short run. And it would have destroyed the country.

Counting lives is not the only test. Lives could have been saved with far less intrusive measures. The government’s lockdown plan left no room for voluntary action and common sense. It took no account of exogenous costs, including deaths of despair, reduced immunities, and trillions of dollars in lost wealth and lost output that could have been put to life-saving ends. Dramatic evidence that lockdowns don’t work emerged on October 2, 2020, when the White House announced that both President Trump and First Lady Melania Trump tested positive for the virus. The virus goes its way with or without a lockdown. The lockdown was unnecessary and ineffective. It was the ultimate failure of elite expertise. Alternatives were available. The lockdown was a world-historic blunder.
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Re: New Rickards book!

Post by vnatale » Wed Jan 13, 2021 11:15 pm

The New Great Depression dates from February 24, 2020. That’s the day the market broke sharply lower, and it did not look back until hitting bottom on March 23, 2020. That completed a precipitous 36 percent decline in the Dow Jones Industrial Average. February 24 was not the all-time high; that happened a few days earlier. And the decline to the March 23 low was not a straight line; there were some up days along the way.





Wall Street cheerleaders appearing on financial media were quick to point out that this 37 percent crash paled in comparison with the 89.2 percent crash in the Dow during the Great Depression. This statistic conveniently ignores the fact that the 89.2 percent crash took three years (1929­32). The Dow fell 17.2 percent in 1929, 33.8 percent in 1930, 52.7 percent in 1931, and 22.6 percent in 1932. The 37 percent COVID-19 crash didn’t take three years; it took less than six weeks. And there was no assurance that there was not worse yet to come.



These twenty-first-century contrivances are not sustainable. Passive investing and indexing run out of steam when there are no more active investors to engage in price discovery. Stock buybacks dry up when leverage is not available and corporate cash flows erode. Robots will be the only buyers ahead of a fall when real money moves to the sidelines. The coding crowd can move on to other pursuits. The Fed will find that money printing is not stimulus when velocity is crashing for psychological reasons that the Fed scarcely comprehends. The game is up. All that is left are the larger forces of pandemic, unemployment, and fear for the future.



Otherwise, they’ll work from home. That’s fine for employers. What about the empty office space; landlords’ rent; laid-off cleaning staff; lost sales at food trucks, street vendors, and restaurants; half-empty trains and buses; and lunch-hour shopping? That’s all gone, or reduced by perhaps 80 percent. Life will go on, yet ancillary jobs and output will not. This is the difference between depressions and recessions. In depressions, things don’t get back to normal because there is no normal anymore.



Outside certain localities for brief periods following natural disasters or catastrophes like the 9/11 attacks or the Civil War, this has never happened in U.S. history. There were business failures during the first Great Depression, yet no across-the-board lockdown. There was no widespread business lockdown during the 1918 Spanish flu pandemic (some large gatherings such as sporting events were banned in certain cities). An estimated 50 million to 100 million people died during the Spanish flu, yet the global economy continued and the postpandemic business expansion was strong in most developed economies. What has happened to the U.S. economy because of COVID-19 is unheard of.



We are witnessing the widespread collapse of world trade. Contracting world trade measured by global exports (rather than national surpluses or deficits) was a defining condition of the first Great Depression. It’s happening again in the New Great Depression.




Second quarter U.S. GDP reported on July 30, 2020, was a disaster: the worst recorded economic performance in U.S. history. Real GDP fell 32.9 percent on an annualized basis; on a standalone basis (not annualized), GDP fell 9.5 percent, also the worst on record. Applying that rate of decline for a single quarter to a $22 trillion economy yields over $2.1 trillion in lost output in the second quarter. That does not compare to 2008­9. That does not compare to 1929­33. This fall was far worse. It’s the largest amount of lost output in a single quarter in the history of the United States. It amounts to $6,365 of lost income per person for every man, woman, and child in the United States. It comes to over $25,000 of lost income for every family of four. There has never been anything like it.


Buried in the second quarter GDP report was another sobering statistic: the inflation adjustment was negative 2.1 percent, which means deflation has arrived. Nominal GDP was actually worse than real GDP; the real number got a lift from the deflation. This means debtors, beginning with the United States itself, fared even worse than the economy because deflation increases the real value of debt. Persistent deflation points in the direction of default.





That’s $3,230 of lost income per person for every man, woman, and child in the European Union, or $12,900 of lost income for a family of four. This is comparable to the destruction at the end of World War II.



These forecasts are completely at odds with the “pent-up demand,” fast-growth narrative emanating from the White House. The IMF forecasts are likely far more accurate than those coming from the White House and are consistent with analyses from other expert sources.




Wall Street pundits point to the stock market as proof that the economy is bouncing back sharply and a strong recovery is right around the corner. The stock market did recover almost all of its pandemic-related losses with a strong performance from late April through early September 2020. Yet this says nothing about an economic recovery. The stock market is divorced from the real economy at this stage. Price discovery that does take place is conducted by robots programmed to “buy the dips,” chase headlines, and reinforce any form of momentum. The stock indices are dominated by a handful of companies that have been relatively immune to the hardship that is facing most individuals and firms. The April to September 2020 stock market speaks to the prospects for technology and finance, at least in the short run, yet says nothing about unemployment, growth, collapsing government cash flows, and the way forward.

The New Great Depression is here. The data tells the story. The stock market does not agree; it will eventually. The real story is told by the depression’s impact on people’s lives.
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Re: New Rickards book!

Post by vnatale » Wed Jan 13, 2021 11:42 pm

Americans may or may not be ready for the second wave of SARS-CoV-2, but they are certainly not ready for a second wave of layoffs and unemployment. It’s coming.

The pandemic-caused depression led to a layoff wave unprecedented in U.S. history. As remarkable as the number of layoffs was the speed with which they occurred. Unemployment in 2020 reached depression levels in three months, compared with three years during the first Great Depression. As bad as that was, some analysts were quickly relieved. At least the worst was over and the U.S. could look forward to recovering those lost jobs and getting to more typical levels of unemployment, if not the extraordinarily low levels of the prepandemic years. Yet the best evidence points to the opposite conclusion.

Unemployment reached 13.3 percent on May 31, 2020, and then fell to 7.9 percent by September 30, 2020. There’s no reason to believe the unemployment rate will decline sharply from that level or get anywhere near full employment for years. There are two reasons for this. The first is that the economy was weak before the pandemic. White House claims of “the greatest economy in history” were true only if you counted nominal GDP, in which case that claim is almost always true—and meaningless. What matters, and what Americans care about, is real growth, because that’s how jobs are created, businesses grow, and innovation takes place. Annual growth during the last expansion (2009–19) averaged 2.2 percent, the weakest expansion in U.S. history. Most annual growth figures were very close to that average, with no years showing even 3 percent growth. Importantly, there was no material difference between growth in the Trump years of the expansion (2017–19) and in the Obama years (2009–16). This 2.2 percent growth compares with 3.2 percent growth for the average of all expansions since 1980. In the 1950s and 1960s, the average annual growth rate was above 4 percent.

The U.S. economy was weak before the pandemic. Many businesses were barely getting by; many more were contemplating bankruptcy. The pandemic was a perfect opportunity for weak businesses to conduct mass layoffs, file for bankruptcy, close locations, or close their doors completely. The first wave of layoffs (March–June 2020) was hurried. The second wave of layoffs (from October 2020 through 2021) will be more studied.



Americans may or may not be ready for the second wave of SARS-CoV-2, but they are certainly not ready for a second wave of layoffs and unemployment. It’s coming.

The pandemic-caused depression led to a layoff wave unprecedented in U.S. history. As remarkable as the number of layoffs was the speed with which they occurred. Unemployment in 2020 reached depression levels in three months, compared with three years during the first Great Depression. As bad as that was, some analysts were quickly relieved. At least the worst was over and the U.S. could look forward to recovering those lost jobs and getting to more typical levels of unemployment, if not the extraordinarily low levels of the prepandemic years. Yet the best evidence points to the opposite conclusion.

Unemployment reached 13.3 percent on May 31, 2020, and then fell to 7.9 percent by September 30, 2020. There’s no reason to believe the unemployment rate will decline sharply from that level or get anywhere near full employment for years. There are two reasons for this. The first is that the economy was weak before the pandemic. White House claims of “the greatest economy in history” were true only if you counted nominal GDP, in which case that claim is almost always true—and meaningless. What matters, and what Americans care about, is real growth, because that’s how jobs are created, businesses grow, and innovation takes place. Annual growth during the last expansion (2009–19) averaged 2.2 percent, the weakest expansion in U.S. history. Most annual growth figures were very close to that average, with no years showing even 3 percent growth. Importantly, there was no material difference between growth in the Trump years of the expansion (2017–19) and in the Obama years (2009–16). This 2.2 percent growth compares with 3.2 percent growth for the average of all expansions since 1980. In the 1950s and 1960s, the average annual growth rate was above 4 percent.

The U.S. economy was weak before the pandemic. Many businesses were barely getting by; many more were contemplating bankruptcy. The pandemic was a perfect opportunity for weak businesses to conduct mass layoffs, file for bankruptcy, close locations, or close their doors completely. The first wave of layoffs (March–June 2020) was hurried. The second wave of layoffs (from October 2020 through 2021) will be more studied.

By 2010, total employment was back to where it had been in 2003, but no higher. It’s as if job growth had stood still for six years. Over the next ten years, the United States gained over 20 million jobs, first under the Obama administration, then during the first three years of the Trump administration. The long recovery (2009–19) was weak, but it was steady—the longest continuous economic expansion recorded in U.S. history.

Then came the New Great Depression. The United States lost over 60 million jobs from March to September 2020. Total employment is now back to levels last seen in the 1990s. It’s as if job growth had been on hold for three decades. This setback took only six months.

This level of job losses defies description. While it’s easy to recite statistics, it’s impossible to convey the human impact. Every job loss is an individual trauma, throwing each laid-off worker into a highly stressful situation: wondering whether they can feed their family, pay the mortgage, and meet obligations for health care or school tuition. When that trauma is expanded by perhaps seventy million (taking into account not just the unemployed worker but also her family members), one begins to get some sense of the magnitude of the collective trauma that has struck America.

An even longer perspective adds to the sense that we are in a new depression. Consider job losses in every recession since 1948, a comparison that includes severe recessions in 1973–75 and 1981–82 and the 2008 global financial crisis. Each of those three recessions was cited as the “worst since the Great Depression” at the time they occurred. That was true at the time; that truth was superseded by the later recessions, which got worse. While those record recessions stand out (along with severe recessions in 1949 and 1958), none bears comparison to the 2020 New Great Depression. Job losses now are greater than those in the last four recessions combined.

There’s an even more disturbing reality than total job losses. This is the income distribution of the newly unemployed. Less than 10 percent of 2020 job losses have hit those in the top 20 percent income bracket. About 55 percent of total job losses have hit those in the lowest 40 percent income brackets, with about 35 percent of total job losses concentrated in the lowest 20 percent income bracket alone.

Blue-collar jobs are the backbone of the real economy. These workers are the ones on whom we all depend for restaurant meals, hotel accommodations, dry-cleaning services, banking transactions, and the countless everyday interactions that make up our lives. Small and medium-sized enterprises (SMEs) contribute 45 percent of GDP and provide almost 50 percent of total employment. By gutting these jobs, we have gutted the U.S. economy in ways that may take a decade to repair.



Almost overnight, the 2020 New Great Depression slammed the LFPR down to 61.4 percent by September 30, 2020, about where it was in 1970. Again it was as if the U.S. economy had been transported in a time machine to where it was fifty years earlier. A half century of gains for women, minorities, and the disadvantaged were wiped out in the blink of an eye.

This news will get worse.


Productivity doesn’t move much in a mature economy. Still, it can change. Lately, productivity has been declining slightly for reasons economists don’t entirely understand. It may have to do with an aging demographic or the fact that we use technology to waste time instead of getting work done. Productivity is one reason that economic growth had been slow for the ten years prior to the pandemic.


Now labor-force participation has collapsed. The reported data have not caught up with the reality. LFPR is likely to fall further, to 61 percent or lower. This is partly because some currently unemployed will decide they are retired or can’t get jobs and simply drop out of the labor force.

These losses will not be temporary, as unemployment sometimes is. These losses will be permanent as skills, social networks, and references dry up. This is catastrophic. It means that even as businesses reopen and some unemployed get jobs back, others are never coming back to the workforce. Output will be permanently impaired even if productivity picks up a little. The drop in LFPR has been a cliff dive. The economy is underwater as a result; output will remain submerged, perhaps for decades.




As for a second wave of COVID-19, almost no official wants to talk about it publicly; few even understand what it means. A second wave of infections is not caused by a return of exactly the same virus. It is caused by a mutation or genetic recombination that can create a new variant even more lethal than the original form of the virus. History and science say we should expect it, yet almost no one is prepared. Most assumed the country would be past the plague by late 2020. There is no certainty in that forecast. A more lethal wave in 2021 is an open possibility.



As for a rapid economic bounce-back, the 2020 White House happy-talk brigade, led by economic adviser Larry Kudlow, said all will be well. They spoke of “pent-up demand” that will come roaring back to restore jobs and business profits in a matter of months. They spoke of a soaring economy in 2021. Don’t bet on it.

In the first place, many businesses that closed for the lockdown will never reopen. That’s not merely because of lockdown orders; it’s because they’re broke and out of business.


This trend toward more saving and less spending began in late 2019, even before the pandemic. It’s as if Americans saw the recent crash coming. Perhaps some did. It’s probably more reflective of the fact that the economy was weak even before the pandemic. What that means is that the spread should widen even more. Savings will soar and spending will contract sharply.

That’s a smart strategy for individual citizens worried about jobs and their portfolios. Still, it’s a disaster for economic recovery, at least in the short run. A high savings rate makes mincemeat out of forecasts from most media prognosticators and public officials. There will be no sharp, fast bounce-back for the economy. Growth will emerge, yet it will be slow. The recovery will be long, hard, and painful for affected individuals, entrepreneurs, and those seeking a job. College graduates in 2020 and 2021 will bear more than their fair share of the burden as entry-level job openings evaporate as employers struggle even to rehire the existing workforce.


The depth of the new depression is clear. What is unclear to most observers is the nature and timing of the recovery. The answer is that high unemployment will persist for years, and the United States will not regain 2019 output levels until 2023; growth going forward will be even worse than the weakest-ever growth of the 2009–19 recovery. This may not be the end of the world, yet it is far worse than the most downbeat forecasts. The evidence to support this outlook is in plain sight.



That’s the reality of a depression. It’s not about continuously declining GDP. A depression is an initial collapse so large that even years of high growth don’t dig the economy out of its hole.



Some causes of this weak growth were discussed above, including a second wave of layoffs, government incentives to delay a return to work, bankruptcies, a collapse of world trade, a growing work-from-home business model, declining labor-force participation, and recursive functions whereby weakness begets weakness in upstream supply chains. Still, there’s another factor that may dominate these trends and ensure low growth—that factor is high savings.



Based on the most rigorous study available, our projections of slow growth for several years are too modest. The best evidence points to slow growth for thirty years.


All of these elements—more layoffs, more bankruptcies, feedback loops, and a spending strike in the form of higher savings—mean the recovery will be slow and unemployment will stay high. There will be no V-shaped recovery. There are no green shoots, despite what you hear from the media. We are in the New Great Depression and will remain so for years.
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Re: New Rickards book!

Post by Hal » Thu Jan 14, 2021 4:59 am

Great summaries Vinny,

Keep up the good work!
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Re: New Rickards book!

Post by vnatale » Thu Jan 14, 2021 11:33 am

Hal wrote:
Thu Jan 14, 2021 4:59 am

Great summaries Vinny,

Keep up the good work!


Thanks. It was such excellent, compelling reading, that it kept me awake until almost 3:30 AM.

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Re: New Rickards book!

Post by vnatale » Thu Jan 14, 2021 2:49 pm

https://koanewsradio.iheart.com/content ... -pandemic/



Colorado's Morning News
Navigating Financial Uncertainty Amid and Post Pandemic
Jan 14, 2021





We talk with James Rickards, author of "The New Great Depression: Winners and Losers in a Post Pandemic World" about how to navigate things financially in 2021 amid all the uncertainty.
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Re: New Rickards book!

Post by vnatale » Thu Jan 14, 2021 2:52 pm

https://www.financialsense.com/podcast/ ... hk.twitter

January 13, 2020 – Jim Rickards, author of a new must-read book The New Great Depression, discusses Covid vs. its policy response, the winners and losers in a post-pandemic world (the subtitle of his book), and how we need to think differently about what a depression actually is given what we see today.
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Re: New Rickards book!

Post by vnatale » Thu Jan 14, 2021 2:57 pm

https://app.hedgeye.com/insights/93947- ... hedgeye-tv

01/08/21 03:27 PM EST

WEBCAST | The New Great Depression: Winners & Losers In A Post-Pandemic World
Takeaway: This webcast aired on January 14, 2021

Hedgeye CEO Keith McCullough hosted a free webcast with bestselling author James Rickards discussing the current economic and market outlook and important implications for investors.
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Re: New Rickards book!

Post by vnatale » Thu Jan 14, 2021 2:59 pm

http://www.futureproofshow.com/2021/01/ ... mic-world/


Winners & Losers in a Post-Pandemic World (ft. author & economist Jim Rickards)

2021 is one of the years with more uncertainty than just about any other in recent memory, and one of the areas people are most unsettled is the economy. That’s why we wanted to turn to Jim (AKA James) Rickards.

He’s the Editor of Strategic Intelligence, a financial newsletter. He’s also The New York Times bestselling author of quite a few books, including Aftermath (2019), The Road to Ruin (2016), and quite a few others. He is an investment advisor, lawyer, inventor, and economist, and now he’s out with The New Great Depression, a new book on the winners and losers in a Post-Pandemic World. We wanted to have James on because we all need a bit of guidance in figuring out the direction things will be going as we exit this pandemic period.
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Re: New Rickards book!

Post by vnatale » Thu Jan 14, 2021 3:00 pm

https://www.washingtonpost.com/business ... story.html


Energy
Analysis
Gold’s Ups and Downs
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Re: New Rickards book!

Post by vnatale » Thu Jan 14, 2021 8:41 pm

What is the public-policy response to the New Great Depression and the pandemic that caused it? In broad terms, there has been a massive monetary-policy response in the form of guarantees, money printing, and surging liquidity where needed. There has been an unparalleled fiscal-policy response involving increased unemployment benefits, soft-money loans to support payrolls, and bailouts of afflicted airlines, hotels, resorts, and other industries badly damaged in the depression. Behind these multitrillion-dollar deficit- and debt-monetization efforts is an ersatz economic mélange called Modern Monetary Theory (MMT), which purports to alleviate concerns about debt sustainability. Until recently, MMT was a fringe view with some support on the far left. Today it is de facto the economic law of the land even if most of the legislators who enshrined MMT have never heard of it.


The need to spend money in response to the economic shock from the COVID-19 pandemic has moved Modern Monetary Theory from the fringes of economic policy to a place at center stage. Modern Monetary Theorists such as Bard College professor L. Randall Wray and investor Warren Mosler offer a curious blend of progressivism and a pre-Keynesian concept called chartalism. MMT advocates are a small but ascendant clique who offer the world what the world wants most—free money.


Modern Monetary Theory is old wine in new bottles. The old wine consists of the belief that the value of money is created by government dictate and the volume of money is unlimited because government offers citizens no choice but to use their money as payment for taxes. As long as government money is the only medium with which to pay taxes, citizens must acquire that approved form of money to avoid incarceration for tax evasion. It’s a closed system with no escape. The new bottles consist of hitching MMT to a wish list of progressive programs such as Medicare for all, free tuition, free child care, and a guaranteed basic income. In years past, these policy proposals were easily derailed by experts who said, “We can’t afford it.” Today MMT advocates reply, “Yes, we can,” with a patina of theoretical respectability. Caught in the middle are legislators who formerly had some intuitive sense that there were limits on deficit spending (even if liberals and conservatives disagreed on what those limits might be) and now see no limits at all, provided spending addresses short-term problems caused by the pandemic and economic depression. Members of Congress who voted for $3 trillion of new deficit spending between March and July 2020 might not have heard of MMT, yet that is what they espoused by their actions.

The brightest advocate for MMT is Professor Stephanie Kelton of Stony Brook University. Her views are encapsulated in her new book, The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy (2020).


Kelton is honest about the need for state power to make this system work. She writes, “Only the state, through its power to make and enforce tax laws, can issue promises that its constituents must accept if they are to avoid penalties.” She does not explicitly say penalties include property confiscation and imprisonment for nonpayment of taxes, yet that is the unavoidable implication. State power is the root of state money.

It is true that state power can proclaim the kind of money acceptable for payment of taxes. It is true that citizens may regard the declared form of money as money in order to pay taxes and avoid prison. It is true that a central bank and a treasury can work together in a condition called “fiscal dominance” to monetize unlimited government debt and support unlimited government spending. Finally, it is true that government spending goes into someone’s pocket and enriches that individual or company by that amount of spending, at least temporarily.

MMT fails not because of what it says but because of what it ignores. The issue is not whether there is a legal limit on money creation but whether there is a psychological limit.

The real source of money status is not state power; it’s confidence. If two parties to a transaction have confidence that their medium of exchange is money, and others regard it as such, then that medium is money in the wider society. In times past, money consisted of gold, silver, beads, feathers, paper tokens, and diverse badges of confidence.

The difficulty with confidence is that it’s fragile, easily lost, and impossible to regain. MMT’s great failing is that it takes confidence for granted. Reasons for ignoring confidence range from overreliance on quantitative models to overreliance on state power. As for the former, ignoring psychology because it does not fit neatly into quantitative equilibrium models is no less than willful ignorance. As for the latter, one need only consider the long history of failed states, which today include Venezuela, Somalia, Syria, Yemen, Lebanon, and North Korea. State power is not absolute and it is not permanent.

MMT’s other blind spot is velocity or turnover of money. Velocity is scarcely discussed in MMT literature. Only by ignoring velocity can MMT champions such as Kelton and Wray wish away hyperinflation as confidence in state money erodes. The reaction to lost confidence in one form of money is to spend it as fast as possible or acquire another form. This behavioral adaptation, not money printing, is the real cause of inflation. Confidence and velocity are inversely correlated and together are the Achilles’ heel of MMT.


MMT’s intellectual failings will become apparent in the next several years. This could play out as persistent deflation (because MMT policies cannot create growth) or as inflation (as MMT policies destroy confidence in state money). Likely both will emerge: deflation first, followed by inflation.

For now, the importance of MMT is not that it works (it doesn’t) but that it provides a cloak of credibility for Congress to spend unlimited amounts and for the Federal Reserve to monetize that spending. Both monetary policy and fiscal policy are in overdrive to “stimulate” the U.S. economy in the face of the New Great Depression. Neither money printing nor spending provides stimulus, for reasons explained in the following sections. The academic lip gloss of MMT does not change that result.


The combination of real rate hikes and effective rate hikes (through QT) meant the Fed was engaged in an extreme form of monetary tightening in 2015–18 in what was still a weak economy. Of course, the Fed did not understand this due to its deficient forecasting ability.



Put simply, the world was in a dollar-liquidity crisis five months before the pandemic and new depression hit home. The pandemic was a force multiplier on what was already a financial crisis, albeit one not well understood by nonspecialists in government bond markets.


The Fed is capable of only one task—inflating stock market valuations as needed. Stock market investors have taken note and respond accordingly. Pumping up stock markets is not part of the Fed’s dual mandate (price stability and maximum employment), yet the Fed is good at it.


No doubt the Fed will create as many funds and facilities as needed to keep markets liquid and keep the banks open. The difficulty is that none of these programs provides stimulus or creates jobs. None of them will return the economy to trend growth (even the weak 2009–19 trend growth). They will keep hedge funds and banks from failing, and they will keep trading markets from freezing up in the short run. Yet these programs are not a source of jobs or growth.

The reason for this world-historic litany of failure by the Fed can be reduced to one word—“velocity”—the turnover of money.



It turns out that velocity is not constant, contrary to Friedman’s thesis. Velocity is like a joker in the deck. It’s the factor the Fed cannot control. Velocity is psychological: It depends on how an individual feels about her economic prospects. Velocity cannot be controlled by the Fed’s printing press. That’s the fatal flaw in monetarism as a policy tool. Velocity is a behavioral phenomenon, and a powerful one.


This brings us to the crux. The factors the Fed can control, such as base money, are not growing fast enough to revive the economy and decrease unemployment. The factors that the Fed needs to accelerate are bank lending and velocity in the form of spending. Spending is driven by the psychology of lenders and consumers, essentially a behavioral phenomenon. The Fed has forgotten (if it ever knew) the art of changing expectations about inflation, which is the key to changing consumer behavior and driving growth. It has almost nothing to do with money supply, contrary to the nostrums of monetarists and Austrian School economists.


There’s no doubt about the amount of deficit spending and its impact on critical debt ratios. There’s little debate about the necessity for this spending to keep the economy from spiraling into an even deeper depression than the one we are now witnessing. Yet spending is not “stimulus.” Congress is spending money as a temporary bridge until growth is revived, but such spending alone will not deliver growth.


The belief that deficit spending of any quantity at any time produces more growth than the amount spent is what lies behind the claim of “stimulus” in the congressional frenzy of trillion-dollar deficits now under way. This is a false belief.

In fact, America and the world are inching closer to what Carmen Reinhart and Ken Rogoff describe as an indeterminate yet real point where an ever-increasing debt burden triggers creditor revulsion, forcing a debtor nation into austerity, outright default, or sky-high interest rates.


Creditors grow anxious while continuing to buy more debt in a vain hope that policy makers will reverse course or growth will spontaneously emerge to lower the ratio. This doesn’t happen. Society is addicted to debt, and the addiction consumes the addict. The United States is the best credit market in the world and borrows in a currency it prints; for that reason alone, it can pursue an unsustainable debt dynamic longer than other nations. Yet history shows there is always a limit.

Those considering endgame scenarios agree a U.S. default (whether by nonpayment or inflation) is not imminent. This does not mean all is well. The salience of the Reinhart-Rogoff research is not the imminence of default but the weight of structural headwinds to growth.



Evidence is accumulating that developed economies, in particular the United States, are on dangerous ground and possibly past a point of no return.

The end point is a rapid collapse of confidence in U.S. debt and the U.S. dollar. This means higher interest rates to attract investor dollars to continue financing the deficits. Of course, higher interest rates mean larger deficits, which makes the debt situation worse. Or the Fed could monetize the debt (as the MMT followers would have it), yet that’s just another path to lost confidence. You cannot borrow your way out of a debt trap and you cannot print your way out of a liquidity trap. The result is another twenty years of slow growth, austerity, financial repression (where interest rates are held below the rate of inflation to gradually extinguish the real value of debt), and an expanding wealth gap. The next two decades of U.S. growth would look like the last three decades in Japan. Not a collapse, just a long, slow stagnation—another name for depression.


Modern Monetary Theory is an intellectual sham that celebrates the coercive power of the state and fails to credit the importance of confidence in the operation of a monetary system. Monetary policy fails because it ignores the behavioral root of velocity, relying on money creation and not comprehending why people refuse to spend money even when it’s offered up by the truckload. Fiscal policy fails because debt is so high already that citizens adapt their behavior to a world where default, inflation, or higher taxes are the only ways out. Those three paths have one factor in common—they augur more savings and less spending in preparation for the economic endgame. Over these three sinking ships hangs the specter of deflation.

The New Great Depression will produce powerful and persistent deflation, a result the U.S. Treasury and Federal Reserve fear more than any other economic outcome. Deflation is the most feared outcome because it makes the debt burden worse, yet it’s the most likely outcome because of the self-fulfilling liquidity trap.


Why, then, is the Federal Reserve so fearful of deflation that it resorts to extraordinary policy measures intended to cause inflation? There are three reasons for this fear.

The first is deflation’s impact on government debt.


The real value of debt increases, making repayment more difficult.

The second problem with deflation is its impact on the debt-to-GDP ratio.


The impact of sky-high debt-to-GDP ratios is a loss of confidence, higher interest rates, worse deficits because of the higher interest rates, and finally an outright default on the debt through either nonpayment or inflation.

The third deflation concern has to do with the health of the banking system and systemic risk.



In summary, the Federal Reserve prefers inflation because it erases government debt, reduces the debt-to-GDP ratio, and props up the banks. Deflation may help consumers and workers, yet it hurts the Treasury and the banks and is firmly opposed by the Fed. From the Fed’s perspective, aiding the economy and reducing unemployment are incidental by-products of the drive to inflate. The consequence of these deflationary dynamics is that the government must have inflation, and the Fed must cause it. The irony is that the Fed does not know how.

The New Great Depression will be characterized by powerful deflation, at least initially. This deflation will be the result of greatly increased savings, reduced spending, and falling money velocity. Lower prices will beget more saving, which will beget lower prices, and so on, in a classic liquidity trap and deflationary spiral. Workers who have lost their jobs, businesses that have shut their doors, and others who fear they will be next to suffer the same fate will be in no mood to borrow or spend. Deflation is the immovable object that defeats the combined forces of easy money and big deficits. Neither the Fed nor Congress will achieve their stimulus goals until they defeat deflation, an enemy they have not faced in such virulent form since the 1930s.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: New Rickards book!

Post by vnatale » Thu Jan 14, 2021 9:11 pm

and the outbreak of the Second World War in 1939. It’s too much to blame Hitler on the Spanish flu. Still, the evidence suggests some linkage between the virus and Wilson’s impaired mental health and at least certain outcomes that contributed to another war.

Famed psychiatrist Karl Menninger published an article in the American Journal of Psychiatry in 1924 titled “Influenza and Schizophrenia.” In his article, Menninger wrote, “Of the psychoses appearing in close conjunction with influenza, as observed during the 1918 pandemic, the schizophrenic syndrome was by far the most frequent.” Laura Spinney cites the case of heiress Nancy Cunard, “who caught the flu in early 1919, developed pneumonia, and was dogged by depression throughout her long convalescence.”

These and other sources make clear that the deleterious mental-health legacy of Spanish flu was lengthy and pervasive. In many cases that dysfunction emerged violently through murder, suicide, and domestic abuse. In other cases it persisted silently as depression, personality changes, or cognitive confusion. Even in its mildest form the flu conjured a darker more fatalistic muse expressed in writing, film, and painting, although it was not usually mentioned by name. The end of the Spanish flu, which outlasted the First World War, was a prelude to seventy years of turbulence through the Great Depression, the Second World War, the Holocaust, the advent of nuclear weapons, the Cold War, and crises in between. The legacy of the Spanish flu was a century of chaos.

Now, a century later, as we cope with COVID-19, are we facing a new legacy of anger, bitterness, and social disorder? Will the pandemic response of economic lockdown, something that was not done except in limited circumstances during the Spanish flu, cause its own trauma that impedes an economic recovery or makes one impossible? These questions have no definitive medical answer at this stage, yet as with Spanish flu, anecdotal evidence is disturbing. Any resulting dysfunction may be long lasting.

The mental-health damage from COVID-19 takes two forms, as was also true of the Spanish flu. The first is cognitive impairment caused by physical penetration of the central nervous system by the virus. The second is behavioral dysfunction caused by quarantine, isolation, and the psychosocial effects of the commercial lockdown. We consider these consequences separately.

There is preliminary clinical evidence that COVID-19 can cause serious neurological damage, in addition to the obvious damage to the lungs and other organs that has been widely reported. On March 31, 2020, the scientific journal Radiology published a study reporting the first case of “acute necrotizing hemorrhagic encephalopathy,” a rare condition, that was associated with COVID-19. This condition is a dangerous and potentially lethal inflammation of the brain characterized by seizures and cognitive



The virus has no politics; as discussed above, it’s not clear to scientists that a virus is even alive. The mental-health effects described in scientific and anecdotal evidence to date, including depression, anxiety, loss of social skills, and some tendency toward violence, apply to state agents such as politicians and police, as well as citizens, shopkeepers, and protesters alike. No one of any political persuasion is immune. That’s important because in a polarized society, the tendency is to single out bad actions of the “other side” and downplay the antisocial acts of those whom one supports. Antisocial behavior has political ramifications, yet the behavioral aftermath of COVID-19 is not political; it’s clinical and epidemic.



From defiant hairstylists to armed occupiers of a major city, the anger, frustration, and insurgence of Americans has come pouring out in a mere ninety days. The history of racism in America is centuries old and was institutionalized and embedded in American culture long after the 1865 adoption of the Thirteenth Amendment to the Constitution, which ended slavery. Yet there have been many racial injustices that did not provoke either the breadth of peaceful protest or the depth of violence seen after the killing of George Floyd. It’s too much to blame urban riots on COVID-19, just as it was too much to blame the Second World War on Woodrow Wilson’s bout with the Spanish flu. Antifa was long waiting in the wings. Yet it’s not too much to posit that fear of infection, the antisocial conditioning of quarantine and lockdown, and sheer uncertainty as to when or if the pandemic would end were contributing factors to nationwide social unrest on a scale not seen since the urban riots of 1968. Anxiety and depression are pervasive. If the Floyd killing was a match, lockdown fatigue was part of the kindling. Whether it’s a Dallas stylist defying a judge or a bat-wielding extremist defying the NYPD, Americans are suffering psychosocial effects caused by politicians who seized on the pandemic to play petty dictator.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: New Rickards book!

Post by vnatale » Thu Jan 14, 2021 10:00 pm

Cognitive dissonance is the best way to describe the behavior of most market participants today. On the one hand, the United States is experiencing its worst pandemic since the Spanish flu, the worst depression since the Great Depression, and the worst rioting since 1968 at the same time. On the other hand, major U.S. stock market indices recovered most of the February–March 2020 losses by early June; the NASDAQ Composite Index reached a new all-time high of 12,056 on September 2, 2020.



This thought experiment in cognitive dissonance demonstrates several essential facts for investors. The first is that you can make money in every kind of market. The idea that in bear markets you should quickly go to cash and move to the sidelines is untrue. That move will preserve wealth, yet an investor will miss out on profit-making opportunities that exist in bear markets. Unfortunately, investors are taught that stocks, notes, and cash are the only asset classes they can consider (and 401(k) plans are structured exactly that way). Yet there are liquid markets in property, private equity, alternative investments, natural resources, gold, currencies, fine art, royalties, insurance claims, and other asset classes. These asset classes don’t just add range to tired allocations between stocks and bonds; they add true diversification, which is one of the few ways to increase returns without commensurately increasing risk.

The second lesson from cognitive dissonance is that profit opportunities are manifest if you understand that markets are not about being right or wrong; they’re about information. There’s a myth that markets are efficient venues for price discovery that smoothly process incoming information and adjust continuously to new price levels before investors can catch up and take advantage. That has never been true, and it’s less true today than ever before. This “efficient markets hypothesis” was an idea dreamed up in the faculty lounge at the University of Chicago in the 1960s that has been propagated to generations of students ever since. It has no empirical support; it just seems elegant in closed-form equations. Markets are not efficient; they freeze up at the first sign of trouble. They do not move continuously between price levels; they gap up or down in huge percentage leaps. This can produce windfall profits for longs or wipeout losses for shorts. That’s life; just don’t pretend it’s efficient. Most important, the efficient-markets hypothesis was used to herd investors into index funds, exchange-traded funds (ETFs), and passive investing based on the idea that “you can’t beat the market” so you might as well just go along for the ride. That works for Wall Street wealth managers, who simply collect fees on account balances and new products. It does not work for investors who take 30 percent losses (or worse) every ten years or so and have to start over to rebuild lost wealth. You can beat the market using good forecasts, market timing, and a perfectly legal form of inside information. That’s what pros do. That’s what robots do. And everyday investors can do it too.



The fact is markets are more likely to be wrong than right in their forecasting. When markets get the forecast wrong, the gap between perception and reality can benefit investors.



Markets did not see the crash coming in 2008. And they did not see the crash coming in 2020. That’s not what markets do. Understanding what’s coming next is up to you.


How can you beat the market? There are three steps: Get the forecast right, get the policy reaction function right, and trade ahead of both.



It is essential to stay informed and be nimble.

The Wall Street mantra of “set it and forget it” is a great way to lose money.




This technique (“stay informed and stay nimble”) is not limited to the stock market. It can be applied to every asset class, including bonds, private equity, and gold. I continually run into people who are surprised by a particular recommendation I make. They say, in effect, “Six months ago you said the opposite!” That’s right. Ideas that were perfect six months ago may have performed as expected, producing significant profits, and now the time has come to close out the position, pocket profits, and try something new. This is particularly true in currency and commodity markets, where dollar prices can be range bound and subject to predictable reversals. The EUR/USD exchange rate may move between $1.00 and $1.60, but it will not go to zero like a bankrupt company or to exorbitant heights like Apple. Reversing course around critical pivot points is an essential trading technique. Markets change, conditions change, and news changes daily. You need to switch your portfolio mix in at least some respects to outperform markets.


This is not day-trading (which I do not endorse).


Instead it’s a medium-term outlook (six months forward) with continual updating. This does not mean a position can’t be profitable for five to ten years. It can. Nonetheless, you should be evaluating positions on a rolling six-month-forward basis to provide time to get out of the way of an oncoming train if needed. Markets don’t do this well; they tend to get run over by the train and take investors down with them. Yet individual investors can execute this strategy with the right models and the right forward-looking trades.



A word on diversification: It works. Diversification is a sure way to improve returns without adding commensurate risk. The problem is most investors don’t understand what diversification is, and neither do their wealth managers.



When you make investment decisions, remember you’re not competing with other investors; you’re competing with robots.

That’s good news because robots are dumb. They do exactly what they’re told. When you hear the phrase “artificial intelligence,” you should discount the word “intelligence” and focus on the word “artificial.” Robots are programmed with code developed by engineers in Silicon Valley, many of whom have never set foot on Wall Street. They use large data sets, correlations, and regressions, and they read headlines and content for key words. When certain key words are encountered, or when price action deviates from a predetermined baseline, the robot is triggered and executes a buy or sell. That’s about it.



That’s why we have history. Robots assume that the people who utter the key words know what they’re doing, but they don’t. The Fed has the worst forecasting record of any major economic institution; the IMF is no better. Official forecasts should always be listened to and never relied upon. The officials in charge have no idea what they are doing. The robots’ massive databases may have a huge volume of data, but they don’t go back very far in time. Twenty or thirty years is not enough to form a good baseline. Ninety years is better. Two hundred years is better still. Robots routinely “buy the dips,” chase momentum, and believe the Fed. When you know that robots are leading markets over a cliff, you can front-run the inevitable correction and profit from the robots’ blind spots. Once again, you profit from the gap between reality and perception.

A word on insider trading: It’s legal (most of the time). Insider trading involves using material, nonpublic information to trade ahead of big moves and beat the market. It’s illegal only if you steal the information or receive it from someone who breached a trusted relationship



output is always changing based on updated information and conditional correlations.

To summarize:

Use models that work (as described below).

Update continually (with a rolling six-month horizon).

Diversify (across asset classes, not within one asset class).

Acquire proprietary inside information (legally).

Use market timing (to beat the crowd).

Front-run the robots (they’re not that smart).

Own the perception gap (reality always wins in the end).

Be nimble.




The prior section described the defective models used by policy makers and Wall Street wealth managers. So what forecasting models actually work?

Our model-construction technique uses four branches of science that are consistent with reality and can also solve for uncertainty. The first branch is complexity theory.



The second branch in model construction is Bayes’ theorem, a formula from applied mathematics.




The third branch is history. Academic economists and Wall Street analysts despise history or simply ignore it because it can’t be quantified and used in equations.



The fourth branch is behavioral psychology.



The fusion of complexity + Bayes’ + history + psychology in the new models is just a beginning. From there one can construct cognitive maps consisting of nodes (individual cells that represent critical factors or tradable results) and edges (lines connecting the nodes in a dense network). Separate maps are created for each market or asset class (interest rates, stock indices, currencies, commodities, etc.). These maps are constructed under the guidance of subject-matter experts who have the best grasp of relevant factors. The edges are given a direction (A —> B) and assigned a weight. Some edges are omnidirectional due to recursive functions (A <—> B). The nodes contain coded instructions based on a new branch of applied mathematics. Finally, the nodal processing is populated with both market data and plain-language reading ability from massive news feeds more sophisticated than mere headline readers. Edge weights and nodes are updated continually to reflect market and political conditions. The tradable output node is typically geared to a six-month horizon, which can be lengthened or shortened as needed.

This is our predictive analytic system. It’s not for day traders. The new models can’t tell you what will happen tomorrow. They can tell you what will happen in six months. That allows an investor to trade ahead of markets, which is the key to consistent risk-adjusted profits and excess returns. And it’s the key to avoiding meltdowns.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: New Rickards book!

Post by vnatale » Thu Jan 14, 2021 10:01 pm

WHAT ARE THE MODELS TELLING US?
Here’s a summary of our predictive analytic views for the postpandemic world of 2021 and 2022:

Deflation (or strong disinflation) will prevail.

Stocks have not hit bottom.

Interest rates will fall further.

Bonds will continue to rally.

Gold will go significantly higher.

The COVID-19 recovery will be slow and weak.

Unemployment will remain near 10 percent.

Commercial real estate will fall further.

Residential real estate is an attractive opportunity.

The dollar will be strong in the short run, weaker by 2022.

Oil will surprise to the upside based on output reductions and sanctions.



As fourth-quarter 2020 data emerges, and as the reality of slow growth, rising bankruptcies, nonperforming loans, persistent high unemployment, and deflation are taken into account, stocks will fall back to earth and the perception/reality gap will close. The improved models project the Dow at 16,000 and the S&P 500 at 1,750 by late 2021, with some outperformance in the defense, natural resource, and technology sectors.




Why gold?

That’s a question I’m asked frequently. I sympathize with the interlocutors. The fact that people don’t understand gold today is not their fault. Economic elites, policy makers, academics, and central bankers have closed ranks around the idea that gold is taboo. It’s taught in mining colleges, but don’t dare teach it in economics departments. If you have a kind word for gold in a monetary context, you are labeled a “gold nut,” a “Neanderthal,” or worse. You are excluded from the conversation.



Nixon’s announcement was a big deal. Still, he intended the suspension to be temporary, and he said so in his announcement. The idea was to call a time-out on redemptions, hold a new international monetary conference similar to Bretton Woods, devalue the dollar against gold and other currencies, then return to the gold standard at new exchange rates. I confirmed this plan with two of Nixon’s advisers who were with him at Camp David in 1971 when he made the announcement.



Now, with gold trading freely, we saw the beginning of bull and bear markets; these don’t happen on a gold standard because the price is fixed.

The two great bull markets were 1971–80 (gold up 2,200 percent) and 1999–2011 (gold up 760 percent). Between these bull markets were two bear markets (1981–98 and 2011–15). Yet the long-term trend is undeniable. Since 1971, gold is up over 5,000 percent despite two bear-market episodes. Investors worried about day-to-day volatility in gold prices and occasional drawdowns are likely to miss this powerful long-term dynamic.

The third great bull market began on December 16, 2015, when gold bottomed at $1,050 per ounce after the prior bear market. Since then, gold’s dollar value has gained over 90 percent. That’s significant, but still a modest gain compared with the 2,200 percent and 760 percent gains in the last two bull markets. This pattern suggests the biggest gains in gold prices are yet to come.




Where does gold go from here?

The price of gold is driven by three principal factors. The first is safe-haven buying, the so-called fear factor. This is actuated by geopolitical developments, financial warfare, market collapse, and the new pandemic. The second factor is the level of real interest rates, itself a function of nominal rates and inflation. Gold has no yield and competes with cash equivalents for investor dollars. When real rates are higher, cash becomes more attractive. That’s a headwind for the dollar price of gold. The third factor consists of fundamental supply and demand. Gold is no different from other commodities in this regard. If supply is abundant and demand is weak because of poor sentiment, that’s a headwind for the dollar price of gold. At any point in time, these three factors can align or not. All three might push for a higher gold price, all three might push gold lower, or the vectors may be mixed, with one or two factors acting as headwinds while a third gives gold a boost.



What will drive gold out of its recent pandemic consolidation pattern and push it firmly over $2,000 per ounce and headed higher? There are three drivers.

The first is a loss of confidence in the U.S. dollar in response to massive money printing to bail out investors in the pandemic. If central banks need to use gold as a reference point to restore confidence, the price will have to be $10,000 per ounce or higher. A lower price would force central banks to reduce their money supplies to maintain parity, which is highly deflationary.

The second driver is a simple continuation of the gold bull market. Using the prior two bull markets as reference points, an average of those gains and durations would put gold at $14,000 per ounce by 2025. There is no necessary connection between the prior bull markets and the current one, but their history does offer a useful baseline for forecasting.

The third driver is panic buying in response to a new disaster. This could take the form of a second wave of infections from SARS-CoV-2, failure of a gold ETF or the Commodity Exchange to honor physical delivery requirements, or an unexpected geopolitical flare-up. The gold market is not priced for any of these outcomes right now. It won’t take all three events to drive gold higher. Any one will suffice. None of the three can be ruled out. These events or others would push gold well past $2,000 per ounce, on the way to $3,000 per ounce and ultimately higher for the reasons described above.



Physical gold bullion will move from $2,000 per ounce past $2,500 per ounce by early 2021. From there, further gains to $14,000 per ounce by 2025 are likely. That will produce 700 percent gains over the next four years. Shares of well-run gold-mining firms are likely to produce 2,000 percent gains over the same time period, with a six-month lag to advances in the bullion price.




Unlike physical gold, which is an element (atomic number 79) the same in all times and places, no two real estate parcels are alike. This makes real estate valuation more art than science.


Commercial real estate will rebound, but not soon. Whatever the long-term prospects are, there’s no point in investing until the bottom is in sight. No one can call an exact bottom. Still, we have enough information to know the bottom won’t be before late 2021 at the earliest. It will take time for rent renegotiations, relocations, bankruptcies, evictions, and the work-from-home revolution to emerge in the form of lower prices. This is a sector to keep an eye on and for which to keep some dry powder in terms of cash and leverage available for opportunities. Patience will be rewarded compared with jumping in too soon.


In summary, commercial real estate that has not hit bottom yet will present attractive investment opportunities on a selective basis in late 2021. Residential real estate is attractive today, subject to seasoned talent in the offering management companies and desirable locations away from older cities and toward low-tax, low-cost regions.


Cash is the most underrated asset class in the mix. This is a mistake by investors, because cash will be among the best-performing asset classes for the next two to three years.

The reason cash is disparaged is because it has a low yield. That’s true; the yield is close to zero. Yet that truism misses several points. The nominal yield may be zero, yet the real yield can be quite high in a deflationary environment.


Another underrated advantage of cash is optionality.


In contrast, cash has no exit fee. If you have it, you can be the nimble investor who can respond on short notice to an investment opportunity others may have overlooked or not seen coming. Cash is your call option on every asset class in the world. Optionality has value that most investors don’t understand. Still, it’s real and adds to the value of your cash hoard.

Finally, cash reduces your overall portfolio volatility. The nominal value of cash is unchanged in all states of the world (although the real value can fluctuate, as explained above). A diversified portfolio contains volatile assets, including stocks, gold, and bonds. Cash reduces portfolio volatility compared with the volatility of those separate asset classes. Functionally, it’s the opposite of leverage, which increases portfolio volatility. There’s enough volatility in the world today. Cash smooths out portfolio returns and helps investors sleep at night.

In summary, cash is not a sterile asset. It has real yields in deflation, it offers holders the ability to be nimble, and it reduces portfolio volatility. That’s an attractive trifecta.

U.S. Treasury Notes


Maturities of five to ten years are a sweet spot offering good liquidity, slightly higher yields, and significant capital-gains potential.

The criticism of Treasury bonds, which we’ve heard with increasing shrillness for the past ten years, is that rates are so low they have nowhere to go but up. The bears recite the fact that we are at the end of the greatest bond bull market in history and are on the brink of a new superbear market. They advise you to dump bonds, go short, buy equities, and enjoy the ride.

At least, that’s what they did until March 2020. In fact, bond bears, including famous names such as Bill Gross, Jeff Gundlach, and Dan Ivascyn, have proved to be completely wrong. Interest rates are near all-time lows, while capital gains on Treasury notes have been historically large. Some of the lesser-known bond bears have been carried off the field feetfirst as their funds failed and investors fled.

What did the bond bears miss? They failed to grasp the critical distinction between nominal yields and real yields. It’s true that nominal yields have hit progressively lower levels for almost forty years. We’ve seen one of the greatest bond bull markets in history. As yields approached zero, it seemed as if the party must end. Yet real yields are not low at all; in fact, they’re quite high, which is one reason the stock market crashed in the fourth quarter of 2018 and again in the first quarter of 2020.


That said, can rates go even lower than they are today? The answer is they can, and they will. Lower rates bring the concept of negative rates into play.


In other words, the bull market in bonds has far to run, as long as deflation is a threat and real yields are too high to stimulate a recovery. Both conditions prevail today. The bull market in bonds is not dead. Long may she run.



The forgoing overview of market conditions, rigorous modeling, and accurate forecasting and the survey of asset classes provide visibility on an optimal portfolio asset allocation that is robust to deflation, is robust to inflation, preserves wealth in a continuing crisis, and provides attractive risk-adjusted returns in both the fast- and slow-recovery scenarios. It appears as follows:



Cash

30 percent of investible assets

Gold

10 percent of investible assets

Residential real estate

20 percent of investible assets

Treasury notes

20 percent of investible assets

Equities

10 percent of investible assets

Alternatives

10 percent of investible assets


Some caveats are in order. To start, the cash allocation may be temporary. It’s designed to offer optionality, yet the time may come in late 2022 when the investor will have greater visibility and wish to pivot to equities (if the recovery exceeds expectations), gold (if inflation emerges sooner than expected), or commercial real estate. Gold and Treasury notes come closest to the “buy and hold” category. Gains in gold will play out over five years, so there’s no need to change the allocation based on short-term volatility. Likewise, Treasury notes are a classic asymmetric trade. Rates may go down (as I expect), yet they almost certainly will not go up (as the Fed has promised), so you will either make money or retain wealth; the chances of losing are low. The equity allocation should be weighted to natural resources, mining, commodities, energy, water, agriculture, and defense. These are the true countercyclicals that will do well in bear markets and will outperform in bull markets. Real estate and gold are the inflation hedges. Treasury notes and cash are the deflation hedges. This portfolio offers true diversification, preserves wealth, is robust to shocks, and offers material upside potential. In an age of pandemic, depression, riots, and global threats, that’s as good as it gets.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: New Rickards book!

Post by vnatale » Thu Jan 14, 2021 10:18 pm

The COVID-19 pandemic and the New Great Depression, which are densely entwined, are more than just another episode in a long-running series of panics and crashes. One can easily make a list, starting with the 1929 stock market crash and first Great Depression, running through the October 1987 flash crash, the 1994 Tequila Crisis, the 1998 Russia-LTCM crisis, the 2000 dot-com crash, and the 2008 global financial crisis. Along the way the world suffered through the 1957 Asian flu, the 1968 Hong Kong flu, and the 2009 swine flu. The jaded observer might say there’s nothing new about market crashes or pandemics, what we’re going through has been seen before, and it’s not different. This too shall pass.

That’s a mistake. This convergence of viral and economic crises is different and worse. The first and most obvious difference is these crises are concurrent; in fact, one caused the other, with help from the misguided lockdown. There was no pandemic during the Great Depression. There was no market crash during the Asian flu. Those crises came sequentially, not concurrently. Now we have both a pandemic and a depression and are verging on social disorder as well. This is not mere coincidence. Complex system turbulence has a way of catalyzing turbulence in other complex systems. We saw a contained version of this in March 2011 in Fukushima, Japan, when an earthquake caused a tsunami, which caused a nuclear reactor meltdown, which caused a stock market crash. Four complex systems crashed into one another in a cascade of failures. A similar phenomenon is happening now with the pandemic, depression, and social unrest, except the scale is larger and it is not contained. This difference in scope and scale is not merely cumulative; it is exponential.



The 2020 pandemic-and-depression is a turning point because our lives will never be the same. It will take years for the full implications to play out, yet we will not return to business as usual. Depressions truly are different.

There is both good and bad in this new turning point. The bad is all around us. America was deeply polarized before the twin crises; she is more so now. Issues such as using masks to prevent the spread of the virus should have been confined to scientific quarters, with clear information provided to the American public. Instead, wearing a mask became a progressive conceit because it signaled respect for “science” and government control, while not wearing a mask became a conservative conceit because it signaled rejection of the nanny state and the embrace of “freedom.” This division carried over into the broader debate on the lockdown, the reopening, and the public-policy response of massive monetary and fiscal stimulus. Emerging disorder, from Seattle to Atlanta, is as much a symptom of the social disconnectedness that arose during the lockdown as it is a new cause for concern. There has been no shortage of irony. Those who favored open borders with Mexico suddenly applauded when the governor of Rhode Island ordered state police to detain drivers with New York license plates. Perhaps Rhode Island should build a wall. Of course, the virus didn’t care.

The good news is that the situation is so grave and the challenge so daunting that this may be a time for Americans to work together for the good of America rather than the good of an ideology. There were many contributors to Allied victory in the Second World War,



There was time enough for politics after the war. This cooperative approach requires leaders on both sides to put acrimony and bitterness aside. There’s no sign of this yet. Still, the crisis will linger and the needed comity may emerge in the fullness of time.


Before settling on a solution to the U.S. and global depression, one must first identify the specific source of the problem. America’s greatest economic problem today is debt.



To be clear, this is not about “paying off the national debt.” That’s completely unnecessary; the last time the United States was debt free was 1837. What is necessary is to make the national debt sustainable. The debt can grow in nominal terms as long as the real value of the debt is shrinking and the debt-to-GDP ratio is declining. Real growth can do this. Where real growth is not in reach, inflation and nominal growth work just fine.

So the problem is debt compounded by deflation. What is not clear is a way out of the wilderness, a solution to the new depression. Two presidents have found this solution—Franklin Delano Roosevelt and Richard Nixon—and the solution is there for the asking today. The solution is a dollar devaluation, not against another currency but against gold.


Deflation was the enemy; inflation was FDR’s friend, and FDR achieved inflation over the objection of banks and the Fed by raising the dollar price of gold. FDR ended his successful experiment in monetary policy in January 1934 with legislation that fixed the dollar price of gold at $35 per ounce, where it remained until 1971. The dollar price of gold rose 69.3 percent between March and December 1933. Measured by weight of gold, the dollar was devalued by 41 percent over the same period. A powerful inflationary wave had been created in just nine months.


FDR’s gold exercise was controlled and successful. Nixon’s gold exercise was ad hoc and a massive failure. FDR stimulated growth and helped the United States find its way out of depression. Nixon created chaos, including borderline hyperinflation and three recessions from 1973 to 1981. This history shows that intervening in the dollar-gold relationship is like working the control rods on a nuclear reactor. If you do everything right, the reactor is a useful energy source. If you make one mistake, you can cause a meltdown.


Besides, an increase in the dollar price of gold today does not require a new gold standard. The Fed could simply buy gold at progressively higher prices after making its intentions known in advance. This is a straightforward open-market operation using gold instead of Treasury notes. As the gold price increased, the dollar would be devalued (as would other currencies) and inflation would arrive like clockwork. The inflation would melt the debt, the depression would end, and real growth would resume. Don’t hold your breath waiting for this program. It’s beyond the comprehension of U.S. central bankers (although Russian and Chinese central bankers are hard at work buying all the gold they can source). You don’t need to wait for the central banks. You can buy gold yourself today. If the United States decides to raise the price of gold, you win. If the United States does not raise the price of gold, it will go up anyway because of debt and lost confidence in the dollar. Again, you win.

The pandemic will fade, perhaps not as quickly as some expect. A more lethal second wave is a possibility. Let’s pray it doesn’t happen. The depression will fade, but not anytime soon. Growth will be persistently weak; unemployment will be persistently high. Social life will resume, but it will not be the same. We’ll get used to it, but it won’t be the same. Social disorder will grow worse, at which point America will face hard choices about getting it under control. The one certainty is that the longer America waits, the harder those choices will be. The factor that will not fade freely is the debt burden. Debt leads to deflation, which worsens the burden. The answer is to use inflation to break the back of deflation. FDR showed us how to achieve that. His solution was gold. Our solution today is the same.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Hal
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Re: New Rickards book!

Post by Hal » Tue Feb 02, 2021 1:31 am

Hi Vinny,

Just received Rickards book in the mail. :D
And yes, I did sneak a look in the conclusion.

All comments welcome

PS: Also included a snippet from Rickards newsletter which I actually find is worth the fee.
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Re: New Rickards book!

Post by Hal » Thu Feb 18, 2021 5:10 pm

And this is the addendum for the Australian edition. Must say I was a little surprised to read this :o

1. Consider leaving the country
2. Your retirement fund will be taxed at a MUCH higher rate.

Not sure how the recommendation to hold gold/wine/cryptos would obviate the taxation risk. Would still have to pay capital gains tax upon its sale ???
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Re: New Rickards book!

Post by vnatale » Tue Mar 30, 2021 9:26 pm

Hal wrote:
Tue Feb 02, 2021 1:31 am

Hi Vinny,

Just received Rickards book in the mail. :D
And yes, I did sneak a look in the conclusion.

All comments welcome

PS: Also included a snippet from Rickards newsletter which I actually find is worth the fee.


Are you going to inform "Lux Second" that "Lux Second" will NOT be the first Australian to read it??!!

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Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: New Rickards book!

Post by vnatale » Tue Oct 25, 2022 10:34 pm

New one on its way!


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Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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