YOUGHAL, IRELAND – Sound a recall! Spike the cannon! Haul down the colors!
Sauve qui peut!
Yes, it’s time to turn tail and run. We’re outnumbered. Outgunned. Outfoxed. Outmaneuvered. And outsmarted.
We’ve been writing this Diary (previously known as the Daily Reckoning) for the entire 21st century… and then some.
Our battle has never been with conservatives or liberals, Democrats or Republicans… Keynesians or monetarists… Chicago boys or Austrians…
…Our fight is with claptrap, whether dressed in a fine Italian suit… or grimy overalls… whether from a Nobel-winning economist, or a neighborhood loudmouth…
…whether from a clown on the street… or a clown in the White House…
And it is a losing battle.
Over the entire time we have been writing, claptrap has increased, growing in power and popularity every year. We see it everywhere, but we confine our analysis to economics and finance, where there is plenty of claptrap to keep us busy.
Not that we know truth or have any better idea of what will happen than the next guy.
Nor have we any plan… or ism… (or hope) for making the world a better place. The best we can do is look for fraud, scam, and flimflam – and laugh at it.
And now we seem to have reached some kind of Maximus Summa… a ne plus ultra… for claptrap.
Just in Case
Over thousands of years, humans survived by following rules… principles… and customs. They could never know for sure what would happen (they couldn’t predict the future any more than we can.)
For all they knew, the next winter would be so mild, it would bring a glorious bounty of fruits and vegetables. But they stuck to the program, drying some meat and storing away some nuts – just in case.
But now, the latest thing – “just in case” is out the window. There’s no need for old-fashioned, time-proven principles; no need to follow the rules of yesteryear; no need for caution or restraint. And no reason to store any nuts!
Now, we can just do what we want and see what happens.
Generations of policymakers believed they could spend no more than they could raise through taxes or honest borrowing. Poor dumb sods. Now, we know… we can just spend, spend, spend… until something bad happens.
Just to recap…
We began writing in the late 1990s. Then, we ridiculed the dot-com bubble. People thought they could get rich because they suddenly had so much information available to them.
But suppose Julius Caesar had had an iPhone or George Armstrong Custer had had an entire set of the Encyclopedia Britannica? The right piece of information at the right time is essential. More than that is just a distraction and a burden.
We guessed that the internet would turn out to be a time-waster, like TV. So far, it looks like we were right. GDP growth rates are lower now than they were when people still used the U.S. Post Office.
The next big claptrappy thing was the War on Terror and the invasion of Iraq. Attacking foreign countries is rarely a good idea; this proved no exception.
All we got was $5 trillion more in debt… 35,000 U.S. casualties… an estimated 600,000 dead Iraqis… and more terrorists than ever.
Then came the mortgage bubble… which gave us a few laughs… (people thought they could “take out equity,” spend it, and still have the same house), followed inevitably by the Crisis of 2008-2009.
The problem in ’08 was that people had borrowed too much money. So, what do the geniuses at the Fed do? They panic and lend them more!
“Stimulus” was claptrap from the get-go. If you could make people richer by printing more money, Zimbabwe and Venezuela would be the richest countries in the world. Instead, they’re hellholes.
And now, we see what stimulus has done for the U.S.: $3.6 trillion of quantitative easing (QE) from the Fed… real rates at zero for 10 years… and $11 trillion of fiscal stimulus produced the weakest U.S. recovery ever.
The economy is so fragile that when the Fed took baby steps towards a more normal policy… putting the federal funds rate above the inflation rate, for the first time in 10 years… the stock market started to collapse…
…which, naturally, caused the Fed to panic again and foreswear any pretense of normalizing anything.
And now… none of these imbecilities has been renounced. Tech stocks and “unicorns” are partying again… just like it was 1999.
The warmongers are on the rampage again – targeting Iran for the next unprovoked attack… just like it was 2003.
The Fed is ready to cut rates again – just like it was 2008 (if only it had some rates to cut!) Republicans and Democrats are ready to spend, spend, spend… just as if they didn’t already have a trillion-dollar deficit…
…and now… if this weren’t enough… the jackasses have come up with an idea – Modern Monetary Theory (MMT) – so lame and irresponsible, it erases 5,000 years of painful lessons.
The feds control the money, say the MMTers. So, as long as nothing bad happens, they can print and spend as much as they want. And, since inflation is currently “subdued,” many MMTers say the feds aren’t spending enough!
You can readily see why this claptrap will be popular in Washington – with both parties. And yes, you can print, print, print… and spend, spend, spend… until something bad happens.
But sooner or later, you’ll wish you hadn’t.
TECHNOLOGY INSIGHT: THE RAPID ADVANCEMENT OF AI
By Jeff Brown, Editor, The Bleeding Edge
A group of independent technologists just announced that they built an artificial intelligence (AI)-powered facial-recognition system in NYC, solely from public sources. Total cost: $60.
To build the system, the group collected public images from three cameras overlooking Bryant Park in Midtown Manhattan.
This was simple… The camera feeds are streamed online for anyone to access.
They then ran the footage through Amazon’s Rekognition service – which is plugged into a public database of known people – and they were able to determine the daily routines of several individuals. In one case, they tracked a college professor as he made his way to lunch.
And they did this using public information… no laws were broken.
This speaks to how quickly AI technology has advanced… how inexpensive it is… and how it can be used for mass surveillance in metropolitan areas.
In fact, this experiment shows that we cannot walk outside in major cities anymore without being surveilled.
There are thousands of surveillance cameras in New York City, alone. And, according to researchers from Georgetown University, there’s more than a 50% chance that your face is already in a law enforcement facial-recognition database.
In the past, a human would have to watch the camera feed to identify people… making mass surveillance impossible. But with the rapid advancement of AI, everyone can be tracked in real time.
The technologists who built the Bryant Park surveillance system deleted all their data after publishing the story… But other entities may not be so kind.
– Jeff Brown
P.S. I want to share a project with you that’s still in its early stages. It’s a new publication called The Bleeding Edge. In these pages, I’ll show you the top technology trends on my radar. I’ll reveal what the mainstream media get wrong about the technologies of tomorrow, and I’ll show you which investing opportunities you need to pay attention to. To sign up for free, just click here.
TSA Runs Into Privacy Issues
The Transportation Security Administration (TSA) is looking to roll out a new, full-body scanner at an airport near you. They’ll be capable of screening passengers from up to 25 feet away. So, why haven’t we seen these new-and-improved scanners yet? It turns out, they might show a little too much…
Is This the Real Reason for Income Inequality?
Income inequality is a hot-button issue in the U.S. “Tax the rich,” some say. “Work harder,” others chime in. But maybe everyone is focusing on the wrong solution. As income inequality worsens, perhaps the target ought to be the Fed…
Here’s Why You Must Have Cash
While trading strategies aren’t our go-to beat in the Diary, plenty of readers are wondering “what now?” With markets like these, master trader Jeff Clark thinks readers should follow one simple rule: Have some cash.
Once the economy collapses, it will be built up once again by those who believe that they can create new markets and, “this time,” control them. For a time, they will.
Then, the people will come to the risk-takers and creators with a bill for the pathways and roadways that lead to and from their markets, factories, and offices, where the goods and services are produced; and other bills for the costs of supplying a public security force to protect their property from looting and pillaging by the rest of the hungry public, who have no resources to create and control markets and products on their own.
And this is how governments are born. So the bills will keep coming, and eventually, it will happen again. The cycle of economies matches the cycles of lives.
– Marshall T.
There is no real trust fund to run out of money. For years, the income from Social Security taxes has gone into the government’s general fund. The so-called “trust fund” is just an accounting notation on the government’s balance sheet.
Benefits are paid from the general fund, which is already running a huge annual deficit. Benefits will continue to be paid because not paying them would be disastrous for the first administration to do that. The government will continue to create as much money as needed to sustain Social Security.
– Ira C.
Social Security was supposed to collect more than it needed, so those funds could be invested, compounded, and available to pay benefits in later years. But what was really done was that all excess funds over many years were “loaned” to Congress, which spent it all, covering its perpetual deficits.
And because Congress is now “borrowing” nearly $3 trillion from another part of the same government, it owes “interest” on that payable. Now, Social Security is earning “interest income” from Congress.
Around $100 billion a year, increasing annually. Not cash that can be used to cover real Social Security checks, although these intergovernmental accounting entries now make it appear that Social Security has “income” to add to its “trust fund.” When you see references to the fund’s “non-interest income,” this is a sly acknowledgement of the fact that the interest income isn’t actually real.
Not mentioned: without those accounting entries, Social Security ran out of cash eight years ago and has already accumulated a cash deficit of nearly a trillion dollars since then. The report of the theoretical trustees of this program actually reveals the future rapid escalation of this deficit in the trillions. In truth, Social Security has been broken for several years, with its condition worsening more than the “trustees” want the nation to understand.
– Bert M.
IN CASE YOU MISSED IT…
Bonner & Partners chief tech analyst, Jeff Brown, has uncovered an industry that could be worth $1 trillion within the next decade… making it seven times larger than the entire cancer drug industry.
And, according to Jeff, there are just three companies that hold all the necessary industry patents. Once these stocks explode, early investors could make a fortune.
This could be your chance to multiply your wealth several times over the next 12 months. But act fast… this offer ends soon. Read on here.
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