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Jim Cook



Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

Best of Bill Buckler
November 15, 2011
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A Reversal Of Economic “Orthodoxy”:

In the days of “growth” through debt creation - which ended in 2008 - any idea that the debt issued by governments might be “suspect” was a “here today - gone tomorrow” phenomenon. If it cropped up anywhere in the world, the full armoury of the international financial community was immediately deployed to overcome it. Sovereign debt was sacrosanct. It had to be. It was officially the backing for every national (and international in the case of the Euro) paper currency in the world.

There is no government in the world today that will ever “repay” its debt except in “money” which has seen its purchasing power gutted. There is no government in the world today which could even afford to service its debt at the interest rates being faced by the peripheral Euro nations. The risk of government borrowing is as old as the practice of government borrowing. Government borrowing itself (especially longer-term borrowing) is - in the words of Ludwig von Mises - “a vicious practice”. It always has and always will end up in the bankruptcy of the government and of all those who regarded its IOUs as being risk free. What is going on in markets today is a last gasp effort to maintain this “risk free” fiction.

Every day that the paper markets do not implode, the risk is “gone today”. The problem is that as the markets become ever more manic, it always comes back tomorrow. That is the future facing the paper markets. The roller coaster ride will get ever more manic until the mechanism breaks down completely.

The only way to avoid this is to discard the economic orthodoxy that debt is the route to economic “growth”. It isn’t, it is the way to penury. Ask any US underwater mortgage holder or food stamp recipient. Ask any Greek private citizen protesting outside their parliament. Ask any banker who has already begun to dump European sovereign debt paper despite the losses imposed. The time is coming when risk can no longer be put off until a tomorrow which is never supposed to become today.

Recent Events:

We have seen another manic two weeks on global markets as a European debt Apocalypse is staved off by the resignation of two heads of state and the imposition of a new round of “austerity” measures. We have also seen a central bank - the ECB - make the heretical statement that there is little if anything more they can do to prop up the sovereign debt of their governments.

The pressure on the ECB to succumb to full scale “quantitative easing” is immense and growing
continually. The universal market assumption is that they will break and print whole-heartedly. If the ECB does succumb, and it probably will, there is likely a huge “relief rally” waiting in the wings. We have seen many of those since 2008. They never last. This one, if it does come to pass, won’t either.


What’s Next?:

Italy and Greece have new heads of state and new governments. Meanwhile, the focus on sovereign debt now potentially moves back across the Atlantic as the countdown to the November 23 deadline for the Congressional “super committee” nears its end. The Privateer’s first issue of 2011 was titled: “The Year Of Truth Or Consequences”. There has been very little “truth” and the consequences are obvious. Right now, they are fixed in Europe. The question now is can the US last the year out before they move there.


.Ó 2009 – The Privateer

(reproduced with permission)


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