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Things We Should Understand: The Aristocracy Is Eating The Peasants

Things We Should Understand: The Aristocracy Is Eating The Peasants

Authored by John Rubino via Substack,

Most people (especially most Americans)…



Things We Should Understand: The Aristocracy Is Eating The Peasants

Authored by John Rubino via Substack,

Most people (especially most Americans) still seem to view the events of the past half-century as more or less random.

Booms and busts erupting out of nowhere, impoverishing all but a handful of lucky elites. Political crises that end up dividing rather than uniting. Wars that cost fortunes and resolve nothing. Everything is bad, and nothing is related to anything else.

But of course that’s not true. Each of the above events serves the same purpose: to enrich a modern aristocracy at the expense of everyone else. And the endgame is looking even worse.

To see the scam play out, let’s go back to 1995. Two decades previously, in 1971, the US and by extension the world had ditched sound, gold-backed money in favor of “fiat” currencies that their governments, via their central banks, could create in infinite quantities out of thin air. The result was spiking inflation and exchange rate chaos in the 1970s and soaring government deficits in the 1980s.

By the 1990s it had become clear to the people running major governments and big corporations that unsound money would lead to unsustainable debt, which in turn would destabilize the financial world and bring about a hyperinflationary depression followed by a French Revolution-style reckoning for those responsible.

That generation’s elites were thus left with two choices:

  1. Return to the gold standard and avoid monetary collapse -- but at the cost of giving up the ability to create money at will.

  2. Or use their fictitious currencies to steal as much real wealth as possible from the peasants and let future elites deal with the eventual collapse.

They, as the sociopaths we now know them to be, chose the second strategy.

Here’s how they pulled it off:

The Greenspan put. In the second half of the 1990s there occurred a series of mini crises that in retrospect seem almost beneath notice, but at the time were big enough to provide a pretext for intervention. Russia, Mexico, Asian emerging countries and a hedge fund named Long Term capital Management all defaulted or otherwise threatened to cost major US banks painful amounts of money. In each case the Federal Reserve’s Alan Greenspan, along with the US Treasury, bailed out the threatened banks with cash or loan guarantees.

This made clear to Wall Street and its favored customers that any risk, no matter how outrageous, would pay off one way or another. If a bet worked, there would be fees and capital gains. If a bet failed – as in the 1990s mini crises – the Fed would step in and make its friends whole. And so the “Greenspan put” -- named for a financial instrument that traders use to protect against losses – came to dominate the financial world for the next twenty years.

The dot-com bubble and 9/11. With the banks now free to finance virtually anything, they chose in the second half of the 1990s to inflate a tech stock bubble in which pretty much any business with a “.com” its name or mission statement could get near-infinite funding. This “dot-com bubble” expanded beyond anything the US equity markets had ever seen, and then burst spectacularly in 2000.

A year later came the attack on the World Trade Center (which for the sake of a streamlined narrative we’ll assume was an actual terrorist event, not a false flag), which shook an already shaken national psyche to its core.

The aristocracy responded by cutting interest rates to record lows while expanding military spending dramatically. This was a two-fer, enriching the banks by making lending more profitable and the military contractors by ramping up orders for weaponry. The winners happily funneled some of their windfall into the reelection campaigns of pro-war, pro-easy-money politicians. The gap between rich and non-rich widened to a record.

The mortgage bubble. In the md-2000s, the previously mentioned record low interest rates inflated another bubble, this time in housing. Keeping with their favorite strategy of lending to anyone with a pulse, raking in massive fees, and dumping the risks onto unsuspecting investors, Wall Street banks made fortunes writing and securitizing subprime mortgages (see The Big Short for an entertaining look at that brief moment of financial and cultural insanity). Then house prices rose to unaffordable heights and the mortgage market imploded, the economy tanked, and the banks tipped into insolvency.  To which the government responded with a multi-trillion-dollar bailout, allowing the banks, with absolutely in-your-face hubris, to pay their top people record year-end bonuses in 2009. Meanwhile, the Fed introduced the magical policy of quantitative easing (QE), through which it created trillions of new dollars and used them to push interest rates across the yield curve to record low levels.

[Side note: How exactly do low interest rates impoverish normal people and enrich the already wealthy? First, low interest rates make it hard for normal people who are trying to build a nest egg or survive in retirement with bank CDs and money market funds. As rates go down, these instruments pay less until, as in the last few years, they pay next to nothing. At the same time, low interest rates make financial assets like stocks, bonds and leveraged real estate — most of which are owned by the richest 10% of the population — more valuable. So … in a low interest rate environment the rich get richer and the non-rich fall behind. Just as the aristocracy intends.]

The everything bubble. QE turned out to be a hugely effective tool for shifting wealth from the bottom of society to the top. Starting in 2009, wages stagnated while corporate profits and stock, bond and real estate prices all soared. This was the “everything bubble,” where big tech, cryptocurrency, government bonds, SPACs, leveraged loans, and NFTs all attracted insane amounts of funding.  The party raged for a solid decade, until 2019, and the number of billionaires soared.

The pandemic. Then the scam took an even more sinister turn. (Hint: have you noticed who was left out of the previous feasts? That’s right, Big Pharma.)

By 2020, everything was wildly overvalued, and a huge bust was clearly in the cards. But before that could happen a virus, developed with US funding by a Chinese lab, “escaped” and caused a global pandemic. The world’s governments responded by locking down their economies (devasting small businesses while enriching e-commerce giants like Google and Amazon) and coercing their citizens into taking multiple doses of experimental vaccines, thus funneling literally hundreds of billions of dollars to Pfizer, Modena, J&J, et al. So Big Pharma finally got its turn at the trough.

The Ukraine war. Throughout the past few decades, the US has been starting and/or joining wars in countries with no obvious national security value. Why? Because war uses up weapons that must be replaced and scares those not at war into arming themselves to avoid being the Empire’s next victim. All of which makes the military industrial complex vastly richer. But none of those previous wars compares to what the US is doing in Ukraine. Apparently having decided that Russia needs to be destroyed at literally any cost, Washington has pumped over $100 billion of “aid” into its new Ukrainian proxy army, most of which is immediately recycled through General Dynamics, Raytheon, et al. Which then, of course, fund the campaigns of pro-war politicians from both parties. Have I mentioned that the political class is growing vastly richer along with the aristocrats that own them?

What’s next?
When viewed this way (that is, accurately) the reality of the scam is hard to dismiss. So the only question is what they’ll try next...

To be continued…

Tyler Durden Fri, 01/13/2023 - 07:20

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How much more financial pressure can Australian mortgagees take?

Talk to anyone on the street these days and the conversation will inevitably turn to how inflation is increasing their cost of living in some form or another….



Talk to anyone on the street these days and the conversation will inevitably turn to how inflation is increasing their cost of living in some form or another. Inflation has risen steadily since the beginning of 2022 despite the determined efforts of Reserve Bank of Australia (RBA) to bring it back towards its target range of 2-3 per cent.

In less than 1 year and 11 interest rate rises later, official interest rates have risen from 0.10 per cent to 3.85 per cent but inflation remains stubbornly high at 7 per cent. Interest rates have never risen this fast before nor from such a historically low level either.

As previously outlined in an earlier blog entry on Commonwealth Bank (ASX:CBA), the big four banks of Australia have just under 80 per cent of the residential property mortgage loan market. In “normal” economic times of rising interest rates, banks should be natural beneficiaries of these conditions. However, these are not normal times.

The business model of banks has generally stayed the same for centuries, i.e. borrow money from one source at a low interest rate and lend it to a customer at a higher rate. Today, the Australian banks generally get their funding from wholesale and retail sources. However, the banks were offered a one-off funding source from the RBA called the Term Funding Facility (TFF) during the COVID-19 period to support the economy. This started in April 2020, priced at an unprecedented low fixed rate of 0.10 per cent for 3 years with the last drawdown accepted in June 2021 for a total of $188 billion. Fast forward to today and the first drawdowns from this temporary facility have already started to roll-off which means that these fund sources need to be replaced with one of considerably more expensive sources, namely wholesale funding or retail deposits. As a result of this change in funding, bank CEOs have unanimously declared that net interest margins, and hence its effect on bank earnings, have peaked for this cycle despite speculation that interest rates may still rise later in the year.

Prior to the start of the roll-off of TFF drawdowns, the entire Australian banking industry engaged in cutthroat competition for new and refinancing mortgage loans in a bid to maintain or grow market share. In the aftermath of the bank reporting season, two of the big four banks have stated they are no longer pursuing market share at any price, with CBA and National Australia Bank (ASX:NAB) announcing they will scrap their refinancing cashback offers after 1 June and 30 June respectively.

Turning our attention back to the average Australian, the big bank mortgage customers have been remarkably resilient. The Australian dream of owning the house you live in is still alive for now, with owners willing to endure significant lifestyle changes in a bid to keep up with mortgage payments. The big banks have reflected this phenomenon with a reduction in individual loan provisions and only a modest increase in collective loan provisions.

Time will tell how much more financial pressure Australian mortgagees can take, especially with the RBA still undecided on the future trajectory of interest rates. What has been agreed on by the big banks, is that things are not going to get easier. At least not in the short-term.

The Montgomery Funds own shares in the Commonwealth Bank of Australia and National Australia Bank. This article was prepared 29 May 2023 with the information we have today, and our view may change. It does not constitute formal advice or professional investment advice. If you wish to trade these companies you should seek financial advice.

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U.S. Breakeven Inflation Comments

I just refreshed my favourite U.S. breakeven inflation chart (above), and I was surprised by how placid pricing has been. This article gives a few observations regarding the implications of TIPS pricing.Background note: the breakeven inflation rate is …



I just refreshed my favourite U.S. breakeven inflation chart (above), and I was surprised by how placid pricing has been. This article gives a few observations regarding the implications of TIPS pricing.

Background note: the breakeven inflation rate is the inflation rate that results in an inflation-linked bond — TIPS in the U.S. market — having the same total return as a conventional bond. If we assume that there are no risk premia, then it can be interpreted as “what the market is pricing in for inflation.” I have a free online primer here, as well as a book on the subject.

(As an aside, I often run into people who argue that “breakeven inflation has nothing to do with inflation/inflation forecasts.” I discuss this topic in greater depth in my book, but the premise that inflation breakevens have nothing to do with inflation only makes sense from a very short term trading perspective — long-term valuation is based on the breakeven rate versus realised inflation.)

The top panel shows the 10-year breakeven inflation rate. Although it scooted upwards after the pandemic, it is below where is was pre-Financial Crisis, and roughly in line with the immediate post-crisis period. (Breakevens fell at the end of the 2010s due to persistent misses of the inflation target to the downside.) Despite all the barrels of virtual ink being dumped on the topic of inflation, there is pretty much no inflation risk premium in pricing.

The bottom panel shows forward breakeven inflation: the 5-year rate starting 5 years in the future. (The 10-year breakeven inflation rate is (roughly) the average of the 5-year spot rate — not shown — and that forward rate.) It is actually lower than its “usual” level pre-2014, and did not really budge after recovering from its post-recession dip. (My uninformed guess is that the forward rate was depressed because inflation bulls bid up the front breakevens — because they were the most affected by an inflation shock — while inflation bears would have focussed more on long-dated breakevens, with the forward being mechanically depressed as a result.)

Since I am not offering investment advice, all I can observe is the following.

  • Since it looks like one would need a magnifying glass to find an inflation risk premium, TIPS do seem like a “non-expensive” inflation hedge. (I use “non-expensive” since they do not look cheap.) Might be less painful than short duration positions (if one were inclined to do that).

  • Breakeven volatility is way more boring than I would have expected based on the recent movements in inflation. The undershoot during the recession was not too surprising given negative oil prices and expectations of another lost decade, but the response to the inflation spike was restrained.

  • The “message for the economy” is that market pricing suggests that either inflation reverts on its own, or the Fed is expected to break something bigger than a few hapless regional banks if inflation does not in fact revert.

Otherwise, I am preparing for a video panel on MMT at the Canadian Economics Association 2023 Conference on Tuesday. (One needs to pay the conference fee to see the panel.) I have also been puttering around with my inflation book. I have a couple draft sections that I might put up in the coming days/weeks.

Email subscription: Go to 

(c) Brian Romanchuk 2023

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“What’s More Tragic Is Capitalism”: BLM Faces Bankruptcy As Founder Cullors Is Cut By Warner Bros

"What’s More Tragic Is Capitalism": BLM Faces Bankruptcy As Founder Cullors Is Cut By Warner Bros

Authored by Jonathan Turley,

Two years…



"What's More Tragic Is Capitalism": BLM Faces Bankruptcy As Founder Cullors Is Cut By Warner Bros

Authored by Jonathan Turley,

Two years ago, I wrote columns about companies pouring money into Black Lives Matter to establish their bona fides as “antiracist” corporations. The money continued to flow despite serious questions raised about BLM’s management and accounting. Democratic prosecutors like New York Attorney General Letitia James showed little interest in these allegations even as James sought to disband the National Rifle Association (NRA) over similar allegations. At the same time, Black Lives Matter co-founder Patrisse Cullors cashed in with companies like Warner Bros. eager to give her massive contracts to signal their own reformed status. It now appears that BLM is facing bankruptcy after burning through tens of millions and Warner Bros. cut ties with Cullors after the contract produced no — zero — new programming.

Some states belatedly investigated BLM as founders like Cullors seemed to scatter to the winds.

Gone are tens of millions of dollars, including millions spent on luxury mansions and windfalls for close associates of BLM leaders.

The usual suspects gathered around the activists like former Clinton campaign general counsel Marc Elias, who later removed himself from his “key role” as the scandals grew.

When questions were raised about the lack of accounting and questionable spending, BLM attacked critics as “white supremacists.”

Warner Bros. was one of the companies eager to grab its own piece of Cullors to signal its own anti-racist virtues.  It gave Cullors a lucrative contract to guide the company in the creation of both scripted and non-scripted content, focusing on reparations and other forms of social justice. It launched a publicity campaign for everyone to know that it established a “wide-ranging content partnership” with Cullors who would now help guide the massive corporation’s new programming. Calling Cullors “one of the most influential thought leaders in American public life,” Warner Bros. announced that she was going to create a wide array of new programming, including “but not limited to live-action scripted drama and comedy series; longform/event series; unscripted docuseries; animated programming for co-viewing among kids, young adults and families; and original digital content.”

Some are now wondering if Warner Bros. ever intended for this contract to produce anything other than a public relations pitch or whether Cullors took the money and ran without producing even a trailer for an actual product. Indeed, both explanations may be true.

Paying money to Cullors was likely viewed as a type of insurance to protect the company from accusations of racial insensitive. After all, the company was giving creative powers to a person who had no prior experience or demonstrated talent in the area. Yet, Cullors would be developing programming for one of the largest media and entertainment companies in the world.

One can hardly blame Cullors despite criticizism by some on the left for going on a buying spree of luxury properties.

After all, Cullors was previously open about her lack of interest in working with “capitalist” elements. Nevertheless, BLM was run like a Trotskyite study group as the media and corporations poured in support and revenue.

It was glaringly ironic to see companies like Warner Bros. falling over each other to grab their own front person as the group continued boycotts of white-owned businesses. Indeed, if you did not want to be on the wrong end of one of those boycotts, you needed to get Cullors on your payroll.

Much has now changed as companies like Bud Light have been rocked by boycotts over what some view as heavy handed virtue signaling campaigns.

It was quite a change for Cullors and her BLM co-founder, who previously proclaimed “[we] are trained Marxists. We are super versed on, sort of, ideological theories.” She denounced capitalism as worse than COVID-19. Yet, companies like Lululemon rushed to find their own “social justice warrior” while selling leggings for $120 apiece.

When some began to raise questions about Cullors buying luxury homes, Facebook and Twitter censored them.

With increasing concerns over the loss of millions, Cullors eventually stepped down as executive director of the Black Lives Matter Global Network Foundation, as others resigned.  At the same time, the New York Post was revealing that BLM Global Network transferred $6.3 million to Cullors’ spouse, Janaya Khan, and other Canadian activists to purchase a mansion in Toronto in 2021.

According to The Washington Examiner, BLM PAC and a Los Angeles-based jail reform group paid Cullors $20,000 a month. It also spent nearly $26,000 on meetings at a luxury Malibu beach resort in 2019. Reform LA Jails, chaired by Cullors, received $1.4 million, of which $205,000 went to the consulting firm owned by Cullors and her spouse, according to New York magazine.

Once again, while figures like James have spent huge amounts of money and effort to disband the NRA over such accounting and spending controversies, there has been only limited efforts directed against BLM in New York and most states.

Cullors once declared that “while the COVID-19 illness is tragic, what’s more tragic is capitalism.” These companies seem to be trying to prove her point. Yet, at least for Cullors, Warner Bros. fulfilled its slogan that this is all “The stuff that dreams are made of.”

Tyler Durden Sun, 05/28/2023 - 16:00

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