Category: zerohedge

Authored by Alasdair Macelod via GoldMonmey.com,

The benefits of a deflation of prices brought about by a combination of sound money and markets free from government intervention have been demonstrated to be the best economic environment, the denial of which in favour of inflationary financing has led to repeated monetary and systemic failures.

This article explains how this has come about and puts the record on deflation straight. The development of macroeconomic theory had to deny the benefits of a deflation of prices, unbelievably telling us we need higher prices to stimulate our consumption.

Deflation and investment funded by savings is a far better, natural economic environment than the false gods of easy debt and money printing. There can be no return to the stability of gentle price deflation without seismic shifts in economic thinking and government responsibilities.

Introduction

Talk to any macroeconomist and he will tell you his greatest fear is deflation. He or she may have read Irving Fisher’s account of how in the 1930s deflation forced banks to liquidate loans by selling collateral into falling markets, driving asset prices lower still, accelerating further selling, undermining collateral prices even more, forcing banks to liquidate yet more collateral, driving prices lower still…

Deflation cannot be permitted, for fear of it developing into a self-feeding maelstrom. And to just to make sure, we must have inflation running at a positive 2%, and any dip below is a cause for concern. But is this actually true?

The answer is to be found in the vested interests in a modern economy. Today, critics of deflation are believers in intervention as a means of preserving jobs, convinced that the cause of failure is irrational free markets. Before interventionism took hold, economic failures were associated with cycles of bank credit. In those times, roughly before the early 1920s, deflation was widely understood to be a natural cleansing of past excesses, since they were always preceded by undue optimism and overt speculation. In England, Overend Gurney moved from the staid discount market into mismatching short-term finance into longer maturities, lending into the rail boom before collapsing in 1866. The failure of the City of Glasgow Bank in 1878, followed by Barings in 1890 established a twelve-year cycle of bank credit at that time. We may care to note that it is now twelve years since the Lehman crisis, giving a certain urgency to the current situation.

Banks have never been properly held to account for credit inflation and always resisted attempts to be so. Consequently, addressing the true cause of periodic deflationary slumps has always been ruled out. That left picking up the pieces after a credit-induced boom morphs into catastrophe as the only practical solution. And of course, this bailing out in the so-called public interest was what banks increasingly lobbied for, particularly in America.

The last cleansing deflation in the old-fashioned sense followed the First World War: in America it was brutal but short. It was the last time the US government refused to interfere, the gold standard at $20.67 to the ounce remained intact, and the roaring twenties ensued. But at the end of that decade, President Hoover had a different, hands-on approach.

Illustrating the difference of perspective, his predecessor President Coolidge said of Hoover, “That man has given me nothing but advice, all of it bad.” While Coolidge was unfortunately ignorant of what the Fed was doing with money, he was the last of the genuine free-trade presidents and Hoover the first interventionist. The change in policy was marked by the Wall Street Crash in 1929 and the subsequent years when the slump turned from being a short sharp correction into a prolonged depression.

A new breed of economists evolved with it. From a careerist’s point of view, there was no money nor influence to be gained in being a non-interventionist when your paymaster and the paymaster for your alma mater is an interventionist government. Classical economists who had argued for sound money and Say’s law were out in the cold. Rather like the climate change movement today, where objective, qualified meteorologists have been side-lined by a mixed bunch of science opportunists, an interventionist movement gained control of the economic agenda.

It was this movement that denounced deflation as the ultimate horror, supposedly brought about by a restrictive gold standard. Money now had to be flexible to manage the economy and avoid a repeat of the depression. Targeting prices, first implemented as a policy in the early 1920s by Benjamin Strong at the Fed, along with full employment have been written in stone as objectives for economic and monetary policies ever since. The consequence is debt has taken over from savings as the driving means of economic advancement. Today, the world has an estimated one quarter of a quadrillion dollars of debt, and we can now see this association of both money and debt creation accelerating both further and faster.

For practical purposes, debt is the other side of money-printing. With welfare-driven governments facing escalating commitments and static tax revenues, deflation appears to have been banished for ever.

Deflation and Humpty Dumpty

To think deflation is a danger at a time of accelerating monetary inflation appears to be preposterous. But Irving Fisher was right in one respect, and that is the cycle of bank credit ending in a tendency for credit to contract is always a problem, leading to regular systemic and banking crises in the manner he described. But today, this is counteracted by aggressive expansion of base money, with this cycle in anticipation of a bank credit crisis. So overall, deflation of aggregate money is simply a myth.

An additional problem is modern economists subscribe to the Humpty Dumpty school of definitions: “When I use a word it means just what I choose it to mean – neither more nor less”. They apply deflation mostly to prices, though correctly applied it is of the quantity of money. Google it, and the former comes up.

The error here is to describe the symptom and not the cause. Prices can fall for a number of reasons, monetary deflation being only one. The other principal causes, which are discussed below, are changes in savings behaviour and the effect of technology and competition.

Sticking with the price definition of deflation raises a further problem due to the immeasurability of changes in the general price level. Econometricians have progressively banished price rises by various means, so little or no inflation is recorded. If the price of a good rises, it is assumed consumers will find cheaper alternatives, so the price rise can be ignored. Technological improvements are the excuse to modify prices to take account of them. According to the US Bureau of Labor Statistics, in the twenty-two years from 1997 to 2019 the index value of a new vehicle rose by only 0.6%, while over the same period the average car price rose from $16,400 to $36,718, an increase of 124%. With tricks like this it is easy to see why independent analysts, such as Shadowstats.com and Chapwood Index estimate annual price inflation to have been running at roughly 10% in recent years while the official CPI rises by a goal-seeking 2%.

With statistical manipulation, official figures could even report price deflation when monetary or price inflation is significant. Unfortunately, it is the official CPI statistics that are accepted as the truth even though they are demonstrably incorrect. A narrative that condemns deflation and uses statistical manipulation permits the government and its licensed banks to use monetary expansion as an increasingly important means of funding and for the replenishment of bank reserves, despite consumers being progressively impoverished through higher prices without compensating increases in income.

Today, empirical evidence is ignored

Sound money, that is to say money which expands and contracts at the public’s bequest and not that of the state and its licensed banks, tends over time to lead to falling prices, not that the general level of prices can actually be measured and should remain no more than an economic concept. The clearest example is found in the extraordinary success of free markets in the nineteenth century, spearheaded by wise government in Britain.

Following the Napoleonic Wars the gold sovereign was introduced in 1817 and became the sheet anchor of Britain’s monetary system. Despite the disruption of cycles of bank credit, demand for them and the Bank of England’s gold substitutes in the form of its note issue was a matter for commerce and the public, crystallised in the 1844 Bank Charter Act. Sound money, with the state’s hands firmly bound by the gold standard, saw a small nation of some 27 million (1851) become the most prosperous and influential on earth by the end of the century in a price-deflationary environment.

Food prices fell. A four-pound loaf of bread, which was the food staple in 1810, cost over a shilling, falling to less than ten pence, or by over 20% by the late 1880s. Proceedings at the Old Bailey recorded that prices of manufactured goods fell significantly, particularly clothing. If hedonics had been applied to these prices, as is the custom today, they would have fallen even more due to the massive improvement in overall living standards and production processes from technological innovation.

The fall in prices was even more remarkable, given the gold discoveries at Sutter’s Mill in California in 1848, Australia in the 1850s and later, and in South Africa in the 1890s. Goldmoney estimates that above-ground gold stocks grew from 4,105 tonnes in 1816, when the Coinage Act declared the new sovereign as the sole standard of value and unlimited legal tender, to 23,685 tonnes at the outbreak of the First World War, an increase of 477%. The Californian gold rush produced a doubling of estimated annual mine output, which then remained generally steady until 1891, after which South African production doubled it again in the 1890s. While it would be an error to assume the only use for gold was monetary, there can be no doubt that the increased availability of gold represented significant potential for monetary inflation in the second half of the century.

Despite an inflation of gold stocks, the greatest economic progress ever recorded was in Britain during a period of continual price deflation. An important reason for this dichotomy was it was up to the public to determine the quantity of monetary gold, not the government, and the public only used what was actually needed for its circumstances.

For much of the time Britain was the only significant country on a gold standard, bimetallism with silver or silver standards predominating elsewhere until about 1870. At the outbreak of the First World War, over 80% of world shipping afloat had been constructed in Britain bearing testament of Britain’s economic prowess. And now we are told to believe deflation is bad for us.

Savings

There are a number of reasons the nineteenth century marked a significant improvement in economic conditions and living standards. Tax was low. The Income tax Act of 1842 reintroduced it at 2.9% on annual incomes over £150, equivalent today to about £50,000 measured by gold sovereigns. Ordinary people were permitted to accumulate wealth. But probably the most obvious consideration influencing future prices was an accumulation of savings.

Compared with today’s debt-driven economies, which are fuelled by monetary expansion and government intervention, the savings-driven economies of the nineteenth century required borrowers to bid up for investment capital from savers. Even if he managed to obtain loans for investment and working capital, a borrower with a poor business reputation would end up paying a high interest rate, putting himself at a competitive disadvantage.

Consequently, in a savings-driven culture a debtor’s behaviour of necessity becomes considerably more responsible towards savers’ funds than when debt is available through monetary inflation. Being funded through savings, industrial investment proceeded on the basis that borrowings must be repaid. A knowledge that the purchasing power of gold could rise over time was a further incentive to repay borrowed capital as quickly as possible. Mr Micawber’s Dickensian aphorism about spending within one’s means to avoid misery certainly applied.

Savings had two primary influences on prices. To the extent that they were immediate consumption withheld, in increase in savings lowered potential demand for consumer goods, thereby reducing the general level of prices compared with that at a lower savings rate.  Furthermore, savings were the feedstock for industrial and business investment, which improved quality and reduced unit costs.

Despite the inflation of above-ground gold stocks and therefore the availability of gold sovereigns and gold substitutes, the fact that prices fell is testament to the power of an unfettered free market economy to deliver benefits to the general public. It required a benign government strictly limiting its own drain on free markets to appreciate their importance, and nineteenth-century Britain had this in spades.

Britain’s pro-competitive government

Rather than record the entire economic history of the nineteenth century, it is sufficient to focus briefly on the principal actions of two prime ministers, Lord Liverpool and Robert Peel.

Lord Liverpool (1770-1828) navigated Britain back onto the gold standard in 1821, following its suspension during the Napoleonic Wars. At the time of the decisive parliamentary debate in May 1819, money in circulation consisted of almost entirely paper, which before the war in 1792 (five years before the gold standard was suspended in 1797) consisted of £30 million in gold and £20 million in paper. In 1819, despite trade having almost quadrupled it was still £50 million. While more efficient settlement systems and an increased use of discounted bills allowed money to circulate with greater ease, gold had virtually disappeared as circulating money, because as well as its inconvenience for settling trade gold had developed a premium in its value, driving it from circulation.

As Prime Minister, Liverpool oversaw the return from this situation to the pre-war gold standard. He was motivated by three considerations. First, while monetary inflation had enabled the government to finance the war, it could not be a permanent part of the economic system, the need for inflationary financing having passed. Second, the management of the currency should remain with the Bank of England, because it was not a matter to be entrusted to Parliament. And third, with gold having fallen from a 30% premium to paper to only 3%, it appeared eminently possible, if gradually done.

It would require a deflation of paper notes relative to gold to get the old standard to stick. The return to gold having been agreed is attributed to a decline in prices between 1819 and 1821. A six-month recession was recorded in 1819, commencing at the time of the parliamentary debate. But it is a mistake to attribute these conditions entirely to a return to the pre-1797 gold standard when the preceding post-war euphoria is taken into account, which lead to a brief boom. Whether these events or Liverpool’s policies are the reason, the reintroduction of the pre-1797 gold standard provided a background of monetary stability that lasted over ninety years.

Robert Peel was important in two respects. He oversaw the introduction of the Bank Charter Act, which reformed the banking system so that the note issue became the preserve of the Bank of England, which would only be expanded with the full backing of physical gold. While the Act was designed to reinforce the gold standard, sadly it neglected to address the issue of unbacked bank credit.

His second act, the repeal of the Corn Laws in 1846 led by 1860 to the repeal of nearly all other tariffs, producing substantial economic benefits. It meant lower prices for food staples, giving factory workers, who previously had more or less only subsistence-level wages, free money to buy other things. In turn, this led to an expansion of manufacturing activity, lowering production costs even further. The abolition of tariffs was so successful that other countries, such as France, and the German-speaking states on the Continent followed suit.

The reintroduction of the gold standard in 1821 and the Bank Charter Act were designed to remove the temptation of inflationary financing from government, in accordance with Lord Liverpool’s policy. Peel’s removal of tariffs led to lower prices for goods. Together, they ensured a general deflation of prices that lasted until the First World War. It was a period of enormous success for Britain and her trading partners, not just in the Commonwealth and colonies, but it stimulated business in America and Europe as well. And all this from economic policies regarded today to be the greatest threat to the global economy.

Conclusion

The evidence from the past is that deflation of prices offers substantial benefits to consumers, businesses and savers. This article has very briefly shown why this is so by drawing on the experience of Britain in the nineteenth century, and there is no reason to believe that a similar deflationary situation would be any different today. Instead, one of the more obvious contemporary deceits which is paraded as a universal truth is that consumers benefit from higher prices because of the stimulant to business.

On every level this is plainly wrong. The inflationist argument has demolished both savings and personal wealth, leaving the average consumer worse off. It transfers wealth from producers to non-producers, notably the government, its licensed banks and speculators. The fact of the matter is inflationists seek to justify inflationism.

Today’s inflationism has its roots in the ebb and flow of bank credit, a problem unfortunately not addressed by the Bank Charter Act of 1844. More than any other error it led through successive credit cycles to the development of central banks and their attainment of the levers of monetary policy. It required the denial of classical economic theory and its replacement by a new breed of macroeconomist educated to justify the state’s increasing management of money and credit. In the process, reasoned economic theory was discarded in favour of the socialisation of money, and much else besides. Deflation had to be vilified to justify this new macroeconomic world.

It has led to our current situation, where without further monetary inflation governments would have to deliberately rescind most of the welfare provisions introduced since President Hoover became the first interventionist in 1929. Without further monetary inflation, the global banking system would face liquidity pressures likely to collapse it: in fact, these strains have already appeared in the US monetary system, forcing the Fed to inject large amounts of liquidity on a daily basis through repurchase agreements.

Without further monetary inflation, interest rates will immediately rise, bankrupting indebted businesses and consumers alike, who have become used to easy money never to be repaid.

All that further inflation achieves is to defer these outcomes, not stop them. There can only be one outcome from this macroeconomic fairyland, the collapse of unbacked fiat currencies. A return to sound money, free markets and prices set by the deployment of genuine savings will require shifts of seismic proportions.

A proper respect for the benefits of falling prices might have avoided the looming monetary and economic crisis.

CNN talking head Brian Stelter took first place in a “Liberal Hack” tournament that pitted the left’s most rabid media conspiracy theorists against each other in a ‘March Madness-style’ competition. 

VOTING BEGINS NOW FOR THE CHAMPIONSHIP MATCH OF THE FIRST ANNUAL SMUG INDUSTRIES LIBERAL HACK TOURNAMENT

(1) @brianstelter

vs

(2) @JRubinBlogger

— Comfortably Smug (@ComfortablySmug) February 3, 2020

Announced on Jan 23. by Twitter influencer Shashank Tripathi – known as ‘Comfortably Smug‘ – the contest featured 64 liberal journalists from MSM outlets such as the Washington Post, CNN and MSNBC. 

Stelter ‘beat’ the Washington Post’s Jennifer Rubin – whose ‘hackiness’ can be appreciated in the below example.

Presented without comment pic.twitter.com/gwRRR5engT

— Josh Hammer (@josh_hammer) February 4, 2020

The contest was in doubt on Monday, after Twitter temporarily suspended Tripathi for violating their rules on “abuse and harassment,” after tweeting “Where’s Hunter, fat???” right before the Iowa caucuses.

Smh the Biden campaign got Smug locked up until the Iowa caucuses start tonight pic.twitter.com/POjfjCdDfy

— SmugIndustries (@SmugIndustries) February 3, 2020

Authored by Aaron Kesel via TheMindUnleashed.com,

In the name of protecting the children, U.S. lawmakers and the Department of Justice want to ban end-to-end encryption, opening Internet users to a host of attacks on their privacy by not only the government but also malicious hackers.

Attorney General William Barr is claiming he wants to protect the children but his former law firm, Kirkland & Ellis, protected Jeffrey Epstein—one of the most serial child sex traffickers. And it turns out Barr’s own father, Donald Barr, was the headmaster of an elite New York City school that hired college dropout Epstein to teach math and physics.

Last week, Barr expressed at the White House Summit on Human Trafficking that encryption was aiding human traffickers. He said:

“We live in a digital age, and like everyone else, human traffickers are relying increasingly on digital communication and the Internet … and more and more, the evidence we rely on to detect and to deal with these predators is digital evidence,” Barr said. “However, increasingly, this evidence is being encrypted.

We all recognize that encryption is important in the commercial world to protect consumers like us from cybercriminals, but now, we’re seeing military-grade encryption being marketed on consumer products like cellphones and social media platforms and messaging services, and that means that we cannot get access to this data.

We just can’t have chatrooms and websites that are involved in grooming children victims or selling trafficked women — sites that are impenetrable to law enforcement—and we have to do something about this.”

Barr has previously said that technology companies using end-to-end advanced encryption and other security measures are effectively turning devices into “law-free zones.”

“As we use encryption to improve cybersecurity, we must ensure that we retain society’s ability to gain lawful access to data and communications when needed to respond to criminal activity,” Barr said in his keynote address at the International Conference on Cybersecurity at Fordham University Law School in Manhattan.

“Encryption reliably protects consumers’ sensitive data,” Brett Max Kaufman, a senior staff lawyer in the Center for Democracy at the American Civil Liberties Union said. He added,

“There is no way to give the F.B.I. access to encrypted communications without giving the same access to every government on the planet. Technology providers should continue to make their products as safe as possible and resist pressure from all governments to undermine the security of the tools they offer.”

Now Congress is seeking to ban companies from using end-to-end encryption and impose penalties for businesses that use it. Barr, Sen. Lindsey Graham (R-SC), and Sen. Senator Richard Blumenthal (D-CT) are targeting encryption with a new draft bill called the “Eliminating Abusive and Rampant Neglect of Interactive Technologies (or EARN IT) Act.” The act would modify the Communications Decency Act’s Section 230 to make companies liable in state criminal cases and civil lawsuits over child abuse and exploitation if they don’t follow practices set by a national commission according to Engadget.

That commission would be known as the “National Commission on Online Child Exploitation Prevention,” would be comprised of 15 people, and led by the Attorney General who just so happens to be Barr himself. This new government organization would also include the Chairman of the Federal Trade Commission, the Secretary of Homeland Security, and 12 others handpicked by members of Congress. The Commission would be tasked with recommending “best practices for providers of interactive computer services regarding the prevention of online child exploitation conduct.”

Riana Pfefferkorn, a member of the Stanford Law School’s Center for Internet and Society, wrote in a blog post that the bill threatens the constitutional rights of online communication platforms and their users in a solid evaluation of the bill. Pfefferkorn explained:

“While the EARN IT Act is ostensibly aimed at Section 230, it’s actually a sneaky way of affecting [encryption laws] without directly amending it. This bill has a number of extremely serious problems, too many to fit into one blog post. It is potentially unconstitutional under the First, Fourth, and Fifth Amendments, for one thing.”

If passed the law would also require companies like Telegram to allow backdoor government access to encrypted information which would also provide a “golden key” vulnerability for malicious hackers—something that Barr doesn’t appear to understand.

The EFF wrote:

“Throughout his term as Attorney General, William Barr has frequently and vocally demanded “lawful access” to encrypted communications, ignoring the bedrock technical consensus that it is impossible to build a backdoor that is only available to law enforcement. Barr is far from the first administration official to make impossible demands of encryption providers: he joins a long history of government officials from both parties demanding that encryption providers compromise their users’ security.”

Even government officials in the FBI and DOJ aren’t convinced Barr is doing the right thing by seeking to ban encryption, according to the Wall Street Journal.

In 2018, the FBI lied and inflated the number of encrypted phones it said were connected to ongoing criminal investigations. The Bureau incorrectly stated time and time again that 7,800 phones were blocked from investigators. The Washington Post later reported that those figures were more like 1,000 to 2,000. The FBI blamed a “programming error” for the discrepancy.

Modern law provides enough legal means making EARN IT an unnecessary escalation on Section 230 which protects small companies more than the big giants. Currently, if an Internet company finds that an individual or group is using its platform to distribute child sexual abuse material, federal law already requires them to provide that information to the National Center for Missing and Exploited Children and to cooperate with law enforcement investigations.

At a time when coronavirus is spreading across Asia and other parts of the world, Dyson has patented a wearable air purifier that can also be used as headphones, reported Bloomberg.

The patent specifies, that the headphones will filter the air to the user. It noted that “air pollution is an increasing problem, and a variety of air pollutants have known or suspected harmful effects on human health.”

A Dyson spokesman told Bloomberg, in an email response, that the company is “constantly creating disruptive solutions to problems, which means we file a lot of patents. If and when a product is ready, we’ll happily go through it, but until then, we don’t comment on our patents.” 

The “wearable air purifier” was first reported by Bloomberg several years ago. The patent describes how the device works: 

Both earcups contain a motor that’s connected to a fan-like propeller measuring 35-40mm. Each spin at about 12,000 rpm to draw about 1.4 liters of air per second into the headphones through a filter that particles — typically dust and bacteria, although not specified in the patent — cannot penetrate. The filtered air then journeys down each side of the mouthpiece, meeting in the middle, where a perforated air vent jets about 2.4 liters per second of clean oxygen toward the wearer’s mouth. However, there is no reference to a battery, or any illustration where one might fit.

Revelations of the patent come at a time when wearable purifiers could become a big hit in Asia for several reasons: instead of wearing virus masks – people might be able to use wearable air purifiers, but there was no mention in the patent about the device’s effectiveness against airborne diseases. Another reason why the technology could become big in Asia is because air quality is poor.

Last Oct., Dyson ditched its efforts to build an electric car. The company could soon focus on wearable air purifiers. 

President Trump will award Rush Limbaugh with the Presidential Medal of Freedom, the highest civilian award in the country, after the conservative radio icon announced that he has been diagnosed with advanced lung cancer, according to Politico.

Limbaugh, 69, shocked his fans on Monday with the news, telling listeners that his treatment plan means “there are going to be days when I’m not able to be here.”

Limbaugh and Trump are friends, as the two have been seen golfing together on numerous occasions.

A Florida resident himself, Limbaugh has repeatedly been spotted golfing with Trump at the president’s Mar-a-Lago beach club and dining at the clubhouse afterwards.

Trump told network anchors earlier Tuesday that he was saddened by the news of Limbaugh’s diagnosis and had extended a last-minute invitation for him to join the first lady in the gallery at the State of the Union, according to four people familiar with the conversation. The president also said he plans to award the Medal of Freedom to Limbaugh as soon as next week. –Politico

According to the report, Trump was visibly “shaken up” by the news while speaking with reporters, and “kept mentioning that he and Limbaugh saw each other in West Palm Beach, Fla. as recently as December, when the president was in town for an extended holiday stay.”

“He said he told Rush, ‘You look great – like you’ve lost weight,’ but that Limbaugh didn’t say anything at the time about his health,” this person said, Politico reports.

“Rush just signed another four-year contract. He just wants four more years, OK?” said Trump.

Limbaugh said on Monday that he first noticed something was wrong during the second week in January, and was confirmed to be cancer by “two medical institutions” on January 20th.

Authored by Michael Johnston via Evergreen Gavekal blog,

“To expect the unexpected shows a thoroughly modern intellect.”

– Oscar Wilde

“Those who have knowledge, don’t predict. Those who predict, don’t have knowledge.”

– Lao Tzu, 6th Century BC Chinese Poet

A century ago, the Roaring Twenties were an era marked by economic prosperity, technical innovation and societal progress. Following the end of the Great War  (now known as WWI) and “The Forgotten Depression” (which occurred between 1920 and 1921 when GDP plummeted by 24%), the stock market surged for the better part of the decade, jumping 250% through late-September of 1929.

Source: Bloomberg, Evergreen Gavekal

During this period, the first working televisions were invented, the American home became “networked” and connected to the electrical grid and indoor plumbing, the first cross-Atlantic flight was successfully navigated, and the first jukeboxes were introduced. Additionally, urbanization led to more densely populated cities, the widespread adoption of the internal combustion engine led to a proliferation of motor vehicles, and the development of electrical machinery spread to households and the manufacturing sector. This great transformation led to a sharp rise in productivity and fundamentally altered the size and organization of households, workplaces, and the lives of women. Unfortunately, the bustling party came to an abrupt halt on October 28th and October 29th of 1929 – infamously known as Black Monday and Black Tuesday – when the stock market crashed -13.47% and -11.73% respectively. As most are aware, this precipitous decline ushered in the start of the Great Depression, which stands as the longest, deepest, and most widespread depression in modern history.

In many ways, the 2010s were as astonishing as the majority of the 1920s in terms of financial prosperity, technological innovation, social development and, yes, rampant speculation. Following the Great Recession in the late 2000s, the stock market surged to close the decade at record-highs (up 385% from its 2009 low point), several blue-chip stocks joined the “trillion-dollar club”, and fringe investments such as Bitcoin led to truly ungodly returns for early speculators adopters (up an eye-popping 8,900,000%).

Technology has also flourished over the past decade, ushering in technological innovations and products that have fundamentally altered the way humans interact and conduct business. In the 2010s, the cloud computing market exploded, billions of devices were connected to the cloud through the Internet of Things (IoT), Virtual Reality (VR) and Augmented Reality (AR) revolutionized perceptions of the physical world, advances in Artificial Intelligence (AI) and Machine Learning (ML) created new fascinations and fears around the boundaries of the digital world, and the space race took on new meaning and became a private competition amongst several of the world’s most prominent billionaires. To think that at the turn of the last decade 4G networks didn’t exist, products such as the iPad, Apple Watch, Amazon Alexa, and Oculus hadn’t been released, and applications such as Snapchat, Airbnb, Instagram, Uber and Lyft hadn’t taken off is truly remarkable and underscores just how dynamic the last ten years have been in terms of technological progress.

But, before getting too far ahead of ourselves with the comparisons, it’s worth noting that there were plenty of differences between the economies of the Roaring Twenties and the second decade of the 21st century. One major difference is that the federal government ran a budget surplus every year of the 1920s, whereas the federal government ran a budget deficit every year of the 2010s.

Additionally, total debt and federal government spending were a much smaller percentage of GDP in the 1920s than they were in the 2010s, productivity growth surged in the Roaring Twenties but languished over the past decade, wage growth grew at a significantly faster clip in the Roaring Twenties than in recent memory, and the US population ballooned in the 1920s but has stalled of-late.

Regardless of how you perceive the last decade, and what comparisons you draw to decades-of-past, by many measures the 2010s were one of the most financially, technologically, socially, and politically dynamic decades in human history. As we kickoff the first week of a new decade, one question that many pundits and economic commentators have examined recently is whether we will roll into the 2020s continuing with many of the previous decade’s trends, or whether we are in store for something entirely different. Some have even speculated we could be on the cusp of another Roaring Twenties.

While it is impossible – and downright foolish – to attempt to predict the future, as we turn the page on a very remarkable decade and look towards the period to come, there are several “tipping points” that will have a significant impact on how the next ten years unfold. In the rest of this article, we will dissect seven of these tipping points and their potential consequences.

Tipping Point #1: Fiat or Digital Currency?

Fiat currency is money issued by the government and regulated by a sovereign authority such as a central bank. Fiat currencies (such as the US Dollar, Pound or Euro) derive their value from the forces of supply and demand in the market. One risk facing these currencies is that they become worthless due to hyperinflation as they are not linked to any physical reserve. Venezuela is one prime example of how pumping an endless supply of money into the system has resulted in the devaluing of a fiat currency. While this form of tender is usually stable and controlled, economic recessions over the years have highlighted several deficiencies with fiat money. With the recent rise of cryptocurrencies such as Bitcoin and Ethereum, one risk for fiat currency is that during the next recession, central banks will face blowback that could spark an entirely new monetary system based – at least in part – on digital currencies.

Tipping Point #2: Globalism or Nationalism?

While free trade and a globalized economy have been positive for many corporations and developing nations in the 20th and 21st century, the working- and middle-classes of several developed countries have suffered as a result. This has led to a sudden rise in nationalism over the last few years. And, while most industries and national economies have become so intertwined that it is almost impossible to completely reverse course, new policies and trade wars have attempted to curtail the momentum. The US, UK, France, Hungary and Italy are ground zero for this debate, and the result of several upcoming elections will likely dictate whether the 2020s are an era characterized by increasing globalism or narrowing nationalism, with broad implications for both the global economy and local economies.

Tipping Point #3: Automation or Evolution?

According to PricewaterhouseCoopers (PwC), AI, robotics and other forms of smart automation have the potential to contribute up to $15 trillion to global GDP by 2030. This windfall will generate demand for many new jobs, however, it also has the potential to displace many existing occupations (see chart below).

Source: PwC

Less educated workers will be most vulnerable to these changes and will be at risk of having manual and routine tasks replaced by machines. If projections for widespread automation live up to the hype, it will force workers to adjust, retrain, and seek education in STEM subjects (science, technology, engineering, math) to keep pace with the evolving job market. The question becomes, will workers evolve quickly enough or will job automation outpace re-education? The answer to this question will likely have a significant impact on key economic metrics such as the unemployment rate and wage growth over the next decade.

Tipping Point #4: Data Privacy or Transparency?

Having a digital presence has evolved rapidly over the past decade. Just 10 years ago, it meant having a mobile phone number, email address and maybe a Facebook page. Now, many people’s digital presence extends to their smart watch, tablet, virtual assistant, car, Twitter account, LinkedIn page, Instagram, and much more. Security around data is currently at a premium, exacerbated by countless leaks and hacks that have distributed private information into the public sphere. In our increasingly connected world, the battle to determine what information should remain private verses public – and how to go about doing so – will likely intensify in the 2020s as areas such as the Internet of Things explode. It’s hard to imagine that the trend to collect information everywhere is going anywhere but towards a radically more open world. However, as privacy is shattered in the process, it is possible a wary populace takes action to curb seemingly unchecked data collection practices.

Tipping Point #5: Demographic Explosion or Slowdown?

It is projected there will be 8.5 billion people living on the planet by 2030 – up from 7.3 billion in 2015. The fastest growing demographic amongst this populace are those 65 years or older, which will make up a remarkable 1 billion people by 2030. Due to longer anticipated life expectancies, rising healthcare costs, and financial insecurity, a much larger percentage of this group is expected to continue working past what has been the traditional retirement age and into their “golden years” (which may end up decidedly tarnished for millions of them). Advances in technology and medicine are key contributors to longer life-expectancy; however, longer, healthier and happier lives could end up reserved for those at the top of the economic pyramid, rather than the majority who fall into the middle class – potentially exacerbating an already fragile co-existence between classes. While most high-income countries continue to extend life expectancy, a troubling trend has emerged in the United States. In 2010 US life expectancy plateaued and in 2014 began reversing, dropping for consecutive years. This is despite the US spending more on health care per capita than any other country in the world. In fact, the US expends a stunning 2% more of GDP on healthcare than any other leading country. This amounts to about $500 billion of “excess” healthcare costs with life expectancies actually below peer nations. A recent study points to drug overdoses, suicides, alcohol-related illnesses and obesity as the main perpetrators of this alarming trend. Furthermore, while most global estimates point to longer life-expectancy and a rapidly growing population, a continuation of this trend may put pressures on the environment that could slow or change the expected outcome.

Tipping Point #6: Climate Crisis or Control?

Speaking of the environment, one of the most pertinent topics of this era is whether we are heading down a one-way path towards climate disaster. Like many matters, politics will likely dictate various local and international responses to the issue. Wherever you stand on the topic, this will undoubtably be one of the most important and fiery matters over the next decade, with potential ramifications for everything from the auto industry, to the oil and gas industry, to the renewable energy industry, to the agriculture industry.

Tipping Point #7: Urbanization or Ruralization?

It is estimated that nearly two-thirds of the ballooning global population will live in cities by 2030, creating large mega-cities, as well as small- and medium-sized metropolises. However, there are several countervailing forces that could tip the scales away from mass urbanization – chief among them are the changing nature of work. Several studies show that telecommuting and remote work are on the rise with over 53% of professionals working remotely for at least half of the work week. As several factors, such as the cost of living, have applied pressure on living in large cities, a rise in remote jobs have allowed workers to live further away from the workplace. In fact, as the Wall Street Journal reported, millennials aged 25 to 39 are continuing to trade big city life for suburban life, pointing to potentially waning – rather than roaring – urban growth. 

The more we learn about how the Iowa Democratic Party handled the 2020 Iowa Caucus, the more we suspect that this massive malfunction wasn’t simply an accident.

First, as we reported earlier, the New York Times revealed that the IowaReporterApp (as it was called) was supposed to allow precinct captains to seamlessly report their results to party officials in Des Moines. Instead, the app failed to relay accurate data from the precincts, leading to a chaotic result further muddied by Pete Buttigieg’s decision to declare himself the winner, demonstrating some ace media manipulation and earning him the nickname “Pete the Cheat” among bitter Sanders supporters who are probably jealous that they didn’t think of that first.

The Iowa Dems have promised to release partial results after 5 pm ET, though the Biden campaign is already working hard to make sure that doesn’t happen.

But the more we learn about the rollout of IowaReporterApp, the more we suspect that this wasn’t an accident, but rather a deliberate attempt to scuttle a primary that most polls showed would be won by the insurgent socialist Bernie Sanders. It’s difficult to overstate the party leadership’s antipathy for Sanders.

Which is why this report from Vice caught our eye. Between Vice and the NYT, reporters’ conversations with precinct captains suggest that the flaws with the app were apparent even earlier than the state party would admit. Multiple Iowa Democratic county chairs said they had struggled to use the app, which they were forced to download from the TestFairy as it was still unfinished on the day of the caucus. Alternatively, when they tried using the phone system that has been used to record caucus results for decades, the lines seemed to be perpetually busy. 

One precinct captain said they were kept on hold for more than an hour relatively early in the evening, at a time when the line should have been dead, or at least relatively inactive.

Here’s another unsettling detail from the NYT story: Shadow, the sketchy, Buttigieg and Biden-linked company that developed the app, has also been contracted to develop projects for the Nevada Democratic Party (which will hold the next caucus after a handful of earlier primaries), as well as by multiple presidential campaigns (including Buttigieg and Biden). Shadow’s involvement in building the app was kept secret by Democratic officials for reasons that weren’t immediately obvious to us.

But the most damning detail from the Vice report comes from the head of a pro-transparency group who said he warned the DNC weeks ago that the app would fail – but the Dems went ahead and used it anyway, despite the fact that it was virtually guaranteed to fail.

Cybersecurity and voting experts said they were not surprised the app failed, and that the rollout of the app was so haphazard and irresponsible that its failure was a “predictable outcome.”

“We were really concerned about the fact there was so much opacity. I said over and over again trust is the product of transparency times communication. The DNC steadfastly refused to offer any transparency. It was hard to know what to expect except the worst,” Gregory Miller, cofounder of the Open Source Election Technology Institute, which publicly warned the IDP against using the app weeks ago, told Motherboard. “I don’t want to say I told you so, but…”

And even if nobody had specifically told the Iowa Dems that the Shadow-built app, which was rushed to be completed in under two months, best practices should have precluded its use, according to another cyber security expert. Matt Blaze, a professor of computer science and law at Georgetown, told the NYT that introducing apps like this in the middle of a complicated electoral process is seriously unwise. Most experts in the field should have understood that relying on Shadow’s app was a marked departure from best practices.

Any type of app or program that relies on using a cellphone network to deliver results is vulnerable to problems both on the app and on the phones being used to run it, he said.

“The consensus of all experts who have been thinking about this is unequivocal,” Mr. Blaze added. “Internet and mobile voting should not be used at this time in civil elections.”

Any technology, he said, should be tested and retested by the broader cybersecurity community before being publicly introduced, to test for anything ranging from a small bug to a major vulnerability.

“I think the most important rule of thumb in introducing technology into voting is be extremely conservative,” he said.

Shadow has reportedly released a statement apologizing for the errors, though some claimed that the twitter account that published the statement is a fake.

But even if they were genuinely contrite, the fact that they released the app through the TestFairy testing platform, which is typically used for apps that are still being beta tested, suggests an almost galling level of negligence.

Another cybersecurity expert quoted by Vice put it even more colorfully: he said the Dems had “opened a can of whupass on themselves” by robbing their primary process of whatever shreds of credibility remained after 2016.

“When you’re vetting an app for something like this, you need to do load testing, regression testing, pen testing,” Miller said. “It’s not just the app, it’s the deployment process. No one should ever deploy an app like this and have a popup that says this isn’t safe for your phone.”

“Everyone from bots to Republicans literally devoured this scene and sowed a lot of seeds of confusion and chaos. You don’t deliver an app days before the event and call it good. Not with this much riding on this,” Miller said. “In a system, in a world where we are questioning every aspect of elections and whether they can be trusted, why would you do anything to fuel a disinformation attack, and that’s exactly what the Democrats have done. They’ve opened a can of whupass on themselves.”

At this point, even if they release partial results Tuesday night, the malfunction will have already robbed Bernie Sanders of the front-runner momentum he would have gained had he won the contest, as numerous polls suggested he would.

The whole fiasco suggests the DNC still hasn’t learned the lesson from 2016. And with the Dems looking more incompetent than ever, some are already trying to revive the Trump-Russia tampering narrative. But after everything this country and its people have witnessed over the past three years, do they really expect people to believe that?

Here we go

Dems are blaming Dems stealing the election from Bernie on…Trump https://t.co/VIhCiPQ7lR

— John Cardillo (@johncardillo) February 4, 2020

Authored by Chris Hamilton via Econimica blog,

What is happening in China is really scary, both for those currently at risk and for the rest of us due to the lack of transparency.  Whether this is contained or metastasizes seems to really be in the balance, at this time.  The last time the world faced a global pandemic of epic proportions was the 1918/1919 Spanish flu.  While not of the Black Plague proportions, (which wiped out approx. 1/3rd of Europe’s population in a five year span as well as much of Eurasia), the Spanish flu influenza outbreak was horrific.  Obviously, the world population was far smaller at the time (less than 2 billion) and the world was far less interconnected by high speed transportation and open borders, that now exist.  Still, approximately 500 million were infected with Spanish flu (a quarter of the worlds population) and somewhere between 50 to 100 million perished due to the illness (between 3% to 5% of earths population). 

At present, if “just” 1% were to perish globally due to the Coronavirus, this would mean something like 75 million lost.  A similar outcome to that of the Spanish flu would mean something like the loss of 200 to 400 million persons…and a similar outcome to that of the Black Plague taking 1/3 of earths population is too macabre to even fathom.

This is dark stuff and hopefully nothing of previous pandemic proportions takes place, but seems important to roll-out the historical record to see how serious this could become.  Also very noteworthy of the Spanish flu, the bullseye of those killed was among the childbearing population, so the outsized impact on the under 65 year-old population was atypical.

Speaking of the Spanish flu, I wanted to show the impact that the 1918-1919 deaths had on US population growth and compare the inversely moving US debt to GDP ratio.  In the chart below, the yellow line is the annual growth of the US under 65 year-old population versus US debt to GDP (blue columns in periods of flat or declining debt to GDP, red columns in periods of rising debt to GDP).  The two are clearly inversely correlated…debt, once used for warfare, is now being substituted for decelerating population growth and declining potential for economic activity (absent more debt/lower interest rates).

Looking at the annual US population growth, the deceleration from 1790 to present isn’t hard to see, but the sharp collapse in growth due to influenza at the end of WWI takes a little closer look.  However, after the influenza was contained by 1920’ish, the under 65 year-old growth rate immediately recovered to trend growth before continuing its deceleration.

It just so happens that 2019 and 1918/1919 had something very important in common, they were the only years in US history with population decline among the under 65 year-old population.  As per the Census, (HERE), while the total US population grew by 1.55 million (0.48%) in 2019, all the net population growth came among the 65+ year-old population (which grew about 1.625 million). This means that in 2019, the under 65 year-old population declined by about 70 thousand.  The only time this ever occurred previously in US history was at the height of a global pandemic.  Yet, there was no pandemic in 2019…just a population unwilling to enter into parenthood at record proportions and immigration rates about half of what they were during the previous decade.  Of course, if a pandemic were to hit now with an under 65 year-old annual growth rate already below anything the US has ever experienced, the population declines would naturally be unlike anything the US has ever seen.

The rationale for the continued declining fertility rates and births appears to be the continued growth of federal debt well in advance of economic activity.  The mounting $23+ trillion in federal debt (and quadruple that in unfunded liabilities) will never be repaid and can’t honestly be serviced at anything but Federal Reserve dictated minimal interest rates.  Thus, the Fed continues to rig the interest rates, which rigs stocks and commodities…and the outcome is unnaturally high asset appreciation…which rewards elderly and institutional asset holders and punishes young, poor, and those absent assets.  Young and poor are suffering from costs of living rising far faster than incomes.  Marriage are being put off and the undertaking of childrearing is a choice that can simply be avoided with widely available birth control.  Simply put, it is the Federal Reserve coping mechanisms that are causing record low fertility rates as young adults are financially unable/unwilling to undertake children.  The Fed is preserving the present for the elderly and institutions at the expense of the young and poor present and future.

Clearly, a pandemic at this point in time would send the US in deep depopulation and likely send the Fed into QE++++ to avoid a free market determining asset prices.  The result of pandemic, and Fed induced costs of living continuing to skyrocket above incomes, would surely have further downward impact on US births (already down 12% since 2007…detailed HERE).

And what of the global picture and America’s ability to import growth via immigration?  The chart below shows the annual change in the global under 40 year-old population (excluding Africa…I exclude Africa due to low relative rates of emigration, low rates of income/savings/credit, low rates of consumption).  Blue columns are annual change in millions and red line is annual change as a percentage of world population, X-Africa).  1986 was peak annual growth of +53 million under 40 year-olds (a 1.2% increase).

It just so happens that in 2020, the growth of the global population (x-Africa) capable of present and future childbearing has ceased.  Female fertility rates beyond 40 years-old plummet and females are sterile by 45 to 50 years-old.  From this point on, every year there will be fewer persons capable of childbearing and obviously fewer children indefinitely (both x-Africa).  To this point, global annual births, excluding Africa, have been declining since 1989 and are down at least 15% from that ’89 peak…and perhaps as much as -20%, once all data for 2019 is available).

While the worlds over 40 year-old population may be facing overpopulation, the global under 40 year-old population (x-Africa or the part of the world that consumes 97% of everything) has begun depopulation.  And all this prior to any loss of life due to a potential pandemic.

US and global population data from US Census and UN World Population Prospects 2019…

Former South Bend Mayor Pete Buttigieg won Monday’s Iowa caucus with 26.9% of the state delegates, followed by Sens. Bernie Sanders in second (25.1%) and Elizabeth Warren in third (18.3%) according to Iowa Democratic Party (IDP) Chair Troy Price, after 62% of statewide precincts were finally counted.

Former Vice President Joe Biden, the Democratic ‘frontrunner’ if you believe national polls, came in fourth at an embarrassing 15.6%.

That said, Sanders won the popular vote with 27,088 vs. Buttigieg’s 23,666.

The results follow an embarrassing delay in reporting the Iowa caucus results was caused by a broken app developed by ex-Clinton and Obama staffers and bankrolled by a billionaire Buttigieg-backer, the IDP released ‘the majority of the results’ from Monday night’s mayhem.

After the controversial app from Shadow, Inc. failed miserably – preventing caucus site leaders from uploading the results at their locations, attempts were made to phone them in – only to wait on hold for more than an hour. One caucus chairman of a precinct in Story County was hung up on as he attempted to report their results.

“Well, Wolf, I have been on hold for more than an hour with the Iowa Democratic Party,” precinct captain Shawn Sebastian told CNN‘s Wolf Blitzer, adding “They hung up on me. They hung up on me.”

Oh my god@shawnsebastian, a Story County precinct captain, had been on hold with the Iowa Democratic Party for over an hour trying to report results.

CNN had him on to talk about the process. While on air, he got off hold.

Before he could get back to the call, IA Dems hung up pic.twitter.com/oIs7dC5buq

— jordan (@JordanUhl) February 4, 2020

The chaos was met by anger from the candidates’ campaigns – except Buttigieg, who declared victory and got out of dodge.

Former Vice President Joe Biden – who appears to have suffered a massive defeat based on preliminary estimates – effectively threatened to sue the IDP if they released the results before his campaign could see them. Bernie Sanders, meanwhile, reportedly sent 5 lawyers to meet with party officials after he sent operatives to polling locations to gather independent counts.

I am now hearing that the Sanders campaign sent workers to every caucus to record the live results.

The DNC was unaware of this. When their early tallies did not match the recorded results from campaign workers, his campaign had 5 lawyers contact the DNC. Now they’re meeting.

— 🌹 Salem Snow For Congress (@Salem4Congress) February 4, 2020

Meanwhile, Buttigieg has made significant gains at online betting site PredictIt, who is now within striking distance of Biden.

Authored by Jon Street via Campus Reform,

Hours after conservative talk radio host Rush Limbaugh announced he has lung cancer, University of California-Riverside Professor Reza Aslan took to Twitter to imply that the world would be a “better place” without Limbaugh in it. 

“Ask yourself this simple question: is the world a better or a worse place with Rush Limbaugh in it?” Aslan tweeted. 

While his initial tweet came in the form of a question, subsequent tweets from Aslan strongly suggest how he would answer the question. 

While claiming that he wasn’t “‘celebrating’ anyone’s diagnosis,” Aslan called Limbaugh a “curse upon this nation, a purveyor of hatred and racism who’s at the very least indirectly responsible for the mass suffering of countless people.”

One user replied to Aslan, stating that he “loathes” Limbaugh, but then asking if they “shouldn’t try to be better than him.”

Aslan responded by asserting that “we are better than him.” 

“A monkey eating its own shit is better than him,” Aslan continued. “The fact that a despicable racist evil human being is sick changes nothing about his nature as a despicable, racist, and evil human being.” 

Later confronted by the left’s “giddiness” on Twitter about Limbaugh’s diagnosis, Aslan says he “completely reject[s] the idea that one shouldn’t speak ill of bad people when those bad people are ill.” 

“And Rush Limbaugh is a bad person,” Aslan concludes.