The High Cost of Inflation

by Jim Willie CB
Jim Willie CB is the editor of the "Hat Trick Letter"
March 30, 2006

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A rant is due, on the eve of the latest screwball USFed rate hike. While the USEconomy boasts of being advanced, sophisticated, and developed, the last three decades have seen a crippling dependence upon inflation for the generation of wealth. The cost of this inflation has begun to show itself as extreme, widespread, and overbearing on the middle class. The natural backlash comes in the form of economic decay, lost jobs, and reduced standard of living. The undue reliance of the financial engineering has as its central core power pack the monetary inflation machinery, which has undermined our national sovereignty. The pathogenesis of inflation as a disease has been motivated since the 1970 decade by an insistence on a "guns & butter" agenda. It has required an ongoing justification based upon shifting chapters of economic mythology to sustain its dishonest foundation, new definitions on what prosperity means, and even the means of how wealth is generated.

The consequences of debt export has only recently revealed a highly explosive, reckless, and delicate situation whereby foreign entities have embarked on asset acquisition, typical in any master creditor demanding liquidation and seizure. We will have to stay on watch for national foreclosures (see Detroit). The entire landscape must be recognized for what it contains, money which is no longer constitutionally valid. That is right, the USDollar would be rejected as invalid before the Supreme Court if any legitimate body had the stones to challenge it. Why bother? Because the fallout and disastrous path we find ourselves on is a direct result. In physics, we acknowledge that every action invites an equal and opposite reaction. Tainted money and heavy reliance upon inflation invite erosion and degradation of the entire economy and financial system. That is the reaction.

MOTIVATION
War as birthplace of inflation: Lyndon Johnson insisted on a national agenda of "guns & butter" which is a colorful clever phrase which means both military emphasis and a network of social programs. Not one, but both. In the late 1960 decade the USGovt decided to embrace both, and to run large federal budget deficits for the first time. Monetary inflation was born in the modern era. It is difficult to pinpoint the original seed of inflation as a cancerous disease. Some in the gold community point to the abrogation of the Bretton Woods Accord, and the departure from honest money as the source. Not me. That was the heart attack response. When the system founded in integrity degraded sufficiently, the prescribed medicine was monetary inflation by the inept, corrupt, and ill-advised economic counselors who led Richard Nixon astray. The LBJ Great Society in conjunction with the Vietnam War was the birthplace of monetary inflation. The United States blew a cool $1 trillion in Vietnam.

No discipline: The seed for the 1971 gold divorce decision was the urge, motivation, and execution of a bad plan found in extending far beyond what the nation could afford. Whether urged by world power, or by arrogance, or by blindness, it does not matter since the outcome is the same. We have permanently altered the USEconomy and bled the middle class to the break point. The United States commands a military whose budget is gigantic, whose shadow extends around the globe. The United States has promissory obligations for Social Security, Medicare, and Pensions which would put any company into bankruptcy, like well, General Motors or Ford Motors. The lack of discipline motivates exacerbation of the problem with evermore monetary inflation to fix the perceived problems. In good times we inflate, rationalizing that payback will come from increased prosperity. In bad times we inflate, rationalizing its necessary to underwrite future progress and recovery. We consistently enlist the US Federal Reserve as the underwriter of last resort. The USFed is now the underwriter of first resort, and intermediate resort also. They have sadly morphed into a monetary drug dealer.

A big bad business: Meanwhile, military adventure, bound in spun packages of exporting democracy, fighting terrorism, and promoting capitalism, has become our national "raison d'être" it seems. We cling to the Great Society begun by LBJohnson, even expanding it to include broader promises which no bank would finance in the private sector amidst the current balance sheet red ink. The system has gone amok in a clear sense with fraud cases in the courts, one every season. The corporate contributions to the inflation system are clear, both on the fraud side but also in a masked manner through stock issuance. Increasingly, mergers & acquisitions are financed by printed corporate money, namely stock shares created by private printing presses.

JUSTIFICATION
Necessary dogma: The path of the Rambling Wreck from Financial Tech requires heretical counselors, pied piper cheerleaders, and the cast of a thousand erratic elves. The USEconomy policy makers have been driven by a sequence of nonsensical lunacy, one chapter more absurd than the previous, addressed in "Economic Mythology" in Sept2004. Giving infected policy its impetus, if not permission much like promulgated defective dogma, has been a full generation of badly trained economics professionals. My bio reads "unencumbered by the limitations of economics credentials" meant as humorous but at the same time a solid true advantage.

Hordes of bad economists: Numerous personal conversations with economics degree holders over the years have revealed to me an absolutely shocking display of ignorance regarding risk from debt in commerce, risk from debt in currency, lost control from foreign debt ownership, wreckage from pursuit of low-cost foreign solutions, insane reliance upon consumption instead of investment, acceptance of the entire lexicon of FedSpeak, and benign dismay of economic statistics. These people have been co-workers in industry, colleagues of friends, and acquaintances socially. One sure path to acceptance of chronic bad policy is to have it blessed by badly educated economics counselors. In fact, a full generation of badly educated economics professionals litters the WashDC and academic landscape. In a sense, the United States has "re-invented" economic theory. The movement coincides with the advent and growth of financial engineering, which is just a nice glib catch phrase for inflation & leverage. We have degraded into a nation of people who prefer the sweat-free work in the paper pushing game to the hard work in factories. We call this progress and the result of evolution. No way! It is evidence of financial cancer.

Cheer leaders reassure: The USFed justifies and denies the sickness with regular routine pronouncements, usually in talk of the next Soft Landing, despite never having fostered one. They serve as cheer leaders much like a mad scientist reassures his or her backer, worried sick over the monster being created in the lab downstairs, complete with nightly groans and wails. It is all progress, evidence of our sophistication. Horse puckies! We are being led down a path replete with insurmountable challenge and ongoing crisis to the point where crisis is considered normal.

DISEASE PATHOGENESIS
This will read like a sequence of integrally connected symptoms, a medical review.

Birth of inflation: With the launch of monetary inflation in the 1960 and 1970 decades, more money has entered the system. Back then, the USEconomy was much more a closed system. So when more money circulated, prices rose, wages rose, costs rose, as a new age was born whereby citizens became accustomed and acclimated to inflation as part of life and landscape. The cost of living rose to the point whereby the middle class has endured a 30% to 35% decline in real wages since the 1968 date, according to George Paulos and his work from "An Alternative Inflation Index" two years ago. Unions enforced tighter guarantees for wage growth and job security packaged in pension programs which offered health care assurances. In doing so, they set up entire industries to fail with the advent of globalization, that perceived panacea chock full of pain. One must point to inflated wages for US workers and corporations, which were rendered uncompetitive because of chronic inflation. The pain of lost jobs to Asian outsourcing has as its roots inflation doled out for decades.

Cancer waves in each decade: The first cancer wave was for high tech industries in the 1980 decade sent "offshore" to Asia along the famed Pacific Rim with its Asian Tigers, namely Taiwan, Korea, Hong Kong, Singapore. We said goodbye to the manufacturing sector's prized core, technology for computers, some telecommunications, telephony, and consumer electronics. The second cancer wave centered upon China after it was granted in 1999 the Most Favored Nation status by Clinton. Not only did entire additional manufacturing industries relocate after significant business investment in China, but service sector businesses relocated in India where English is much more the spoken language. Few realize that the largest English speaking democracy in the world is India. China has capitalized on the industrial buildup. They have wrested almost the entire world mfg function, with case in point the 150 mfg sites owned by Wal-Mart inside China. From consumer electronics to housewares, they are made in China. Moreover, China has an impressive broad government sponsored plan executed to secure patents via consulting firms and shell corporations. Years back the Sandia Labs left themselves vulnerable to numerous weapons designs and schematics stolen via the internet, as the USGovt contractors dropped their guard. We watch in dismay as over $60 billion per year in intellectual property is not paid by China to the United States. We watch in consternation the next cancer wave as foreign entities attempt to acquire critically important primary assets. This is not the childlike shopping spree by the Japanese in the early 1980 decade, as they purchased the Rockefeller Center, the Pebbles Beach Golf Club, and numerous overpriced Los Angeles commercial properties, only to find themselves "bag holders" when their assets cratered in value. This wave involves attempts to grab energy assets, port assets, telecommunications and airline companies, even perhaps the entire car industry, all highly critical.

Dominant financial machinery: The financial sector takes slack up with heightened vigor, much like a slow galloping cancer. The US actually boasted in the 1990 decade of "financial engineering" as though it was a national advantage to possess protected tools for cancer spread. The lesson is quite simple, that if one chooses (individual, group, or nation) to produce wealth by means of financial alchemy, a horrendous natural response is invited. The same is true in the drug dependence world, as addicts need more drug supply, only to succumb to the ravaged body condition long after the house is destroyed. Rising prices reverse course, then crush not only value of income & assets, but also the downstream industries dependent upon such so-called production. See the mortgage industry, home building, real estate brokerage, property appraisal and title search. Notwithstanding, the financial carnage has spawned broad new businesses in bankruptcy, debt consolidation, debt counsel, and worker transition training. These might be regarded as the sewage effluent from financial engineering, much like the highly acidic and toxic sludge from a dirty industry. Which is better, toxic sludge or bankruptcy? The question is moot.

Housing dependence: Even as jobs are well along the path of being "dumbed down" for the last decade, as workers find jobs in retail and other low wage sectors like services, the population generally has come to rely upon their homes as their savings accounts. They send money into their stock accounts, save nothing, and pull money out of their home equity for spending purposes. Worse, on a national level one can make a highly credible argument that perhaps 50% to 60% of all consumer spending since the year 2001 has come from home equity extraction. If housing property values go into decline, or even stall, the entire USEconomy, fully dependent upon housing asset bubbles, will most assuredly go into decline and recession. The pathway thus has two signposts, one that wages are in decline (along with benefits), the other that in its place is wealth from the homestead asset, one's personal residence. This entire pathway is reckless, unprecedented in modern history, yet fully blessed by the economic counselors and other nitwits who have ushered in the Great Asset Economy paradigm, the latest in a long list of screwball business models endorsed by hacks and clowns working in WashDC and New York City. No longer is hard work, true talent, and diligence the potion for success, since opportunities are vanishing in the time-tested traditional sense. We have on a national level embraced the wonders of the housing boom and financial speculation. Even the name "housing boom" implies an astonishing ignorance that it extends from the monetary expansion (inflation) directed toward mortgage finance. Few seem to be aware that Fanny Mae is bankrupt, under liquidation and receivership. See a dedicated website on the subject of the Fanny Mae death spiral from a diligent subscriber.

R&D heart & soul departures: The most alarming trends to catch my eye in the last year are two. The outsourcing of Research & Development functions to Asia, and the death spiral of General Motors (probably Ford too). If intellectual property is the last bastion for the USEconomy, we must see R&D preserved and protected like national family jewels and heirlooms. Where are US engineers to find work? Dell has dispatched its R&D to Taiwan. Will telecom firms send R&D to China, where their mfg operations reside? Will car R&D functions in China crop up, with jobs posted in Detroit newspapers for US engineers? Doubtful, since China and the rest of Asia produce six times as many science and engineering graduates from colleges and universities annually, versus the United States. Not only is the US rendered vulnerable to high wages brought by chronic inflation, but we cannot compete with the sheer numbers in the trained Asian work force. Sure, the nation possesses plenty of research facilities, spanning across academia and elite institutions to corporate branches. They must be protected, not permitted to wither.

Death of Detroit carmakers: The trend is clear. The USEconomy is shedding the rich jobs and replacing them with crappy jobs. A national tragedy is unfolding. The entire US carmaker industry is at risk. What saved Chrysler might have been its near death experience in 1980. Saved by restructuring and grand changes to its corporate culture toward greater innovation, Chrysler actually left Daimler Benz to be the bag holder. Talk about selling out at the top! Nice job, Lee Iacocca, much to the resentment and chagrin of Germany. At least Mercedes has more access to showrooms, a pathetic prize in the transaction. It is no wonder to me that BMW and Audi would have no part in such a disastrous deal. Not only General Motors and Ford Motors are on their death bed, a long conveyor belt from hospital chambers to mortuary court rooms, but their entire list of parts suppliers are undergoing an implosion. See Delphi and Dana, who share workers in the United Auto Worker union. We might be witnessing yet another in a long list of bankruptcies whose path was painted by union contracts. The impact of GM and Ford debt on the bond market is severe, mostly bullish for USTreasurys in a curious way. Given its forewarning, the destructive of capital from bond principal loss might be offset by credit default swap contract gains. The most painful and critical casualty in the chronic inflation pathogenesis is the death of the US carmaker industry. It will not downsize; it will die. It will not suffer and shutter in a crisp sudden episode; it will decline and drag down numerous associated niche industries with it.

Foreign held debt: One of the numerous planks in the inflation apologist heresy is the harmlessness of large scale foreign ownership of US debt. My neighbors can be my creditor, as long as those neighbors continue to extend deeper lines of credit, as long as they understand and share my mindset, as long as they honor contract law such as copyright and patent, as long as doing so does not collide with their own interests, as long as they don't call in the debt at the most inopportune time, as long as they don't coerce huge concessions, compromises, and surrenders. More importantly, as long as they don't conclude my business will ultimately fall into ruin. Heck, as long as they don't compete on the military battle field, or interfere with the critical passageways that send needed supplies to our nation. When talking to me as a child, my father taught me that the federal debt is not so important since "we owe it to ourselves" which is no longer true. That argument has vanished curiously. The great mythology heresy spin machine has now updated their profane doctrine, and attempts to shove down our throats the teaching that "foreign ownership of our national debt is ok since our allies own it." Check the status, behavior, and patterns from China and the Persian Gulf lately, even Russia. No way!

Foreign debt purchase: We as a nation cannot continue to avert the coiled spring of natural consequence from exporting our debt securities. We ransom our future. The new pattern evident since the 1990 decade is for magnificent growth in foreign USTreasury Bond holdings. Outsiders own 45% to 48% of our entire federal debt issuance. Outsiders used to buy over half of new federal debt issuance, except we cannot be certain anymore. Holdings recorded out of the United Kingdom have become a lethal brew of hedge funds, OPEC brokered purchases, and illicit USFed agency fronts. Our USGovt and financial leaders (more like alchemist insane professors) seem to prefer less transparency even while they spout words to the opposite effect. As we find harmless the export of inflation, we prefer to deny the risk associated with doing so.

Fraudulent accounting: The USFed enlists foreign central banks to buy into the wondrous US asset foundation of our debt securities. With a wand we deem such debts as assets, claim their value as valid, trade them for hard goods built overseas, and account for such debts in balance sheets on the asset column, incredibly. The birth of Enron accounting emerged from the USGovt bookkeeping labs, with analysts and accountants alike busily conjuring up deceptive practices. See the USFed open market operations, see the gold lease accounting, see the federal deficit calculation, see the cost of living adjustment (COLA) figures. Like a wayward career criminal parent who criticizes children for their lies and theft, the USGovt prosecutes Enron, WorldCom, Adelphia, Tyco, and a gaggle of others, with hypocrisy. Govt accounting methods were taught to Wall Street, then sanctioned as legitimate, forgiven since we stole from ourselves. No longer, now from foreigners. The inflation era requires lies to perpetuate the game. Much like a staff of doctors to convince the patient that the cancer is "no big deal" and rather common and innocuous, we have a corps of hack economists who spout garbage analysis and phony accounting to support the frail fractured fraudulent system founded upon inflation. We must deem debt as assets, so as to claim possessed wealth and to avoid few if any assets at all. This is alchemy on its face, and witchcraft among the supporting cast.

Collusion with foreign authorities: In no way can the USFed on its own execute on its plan, perpetrate its financial crime, and perpetuate the game without full complicity among foreign central bankers. This involves full cooperation, coordination, and intervention in policy and overnight actions. This involves clandestine deals, like the less than transparent merger between JPMorgan and Sumitomo, the giant Japanese bank. This involves the Bank of Japan doing the US bidding to intervene in overnight rescues so as to assist an ailing USDollar. This involves the Euro Central Bank pretense and nonsense about not hiking more than one time last Jan2006 (one additional hike since then). This involves the mutual embrace of inflation by Japan, but to a lesser extent by European Union finance ministers. This involves hidden limits on currency movement being enforced by the ECB and BOJ, made evident only after repeated defense. This involves shady deals with official gold sales from central bank vaults, which are probably in violation of most legal statutes for their contractor agreements. The victim in the process is democracy itself, and free markets in particular. The end result is cronyism and aristocracy deeply engrained in wealth accumulation by illegitimate economic means. With enough private sector collusion, we invite the spread of Italian Fascism, a dreaded condition which leads to suffocation and erosion of the middle class, if not vanished liberties.

Spread of monetary syndicate: In other words, the policy to rely upon inflationary apparatus, to set its gigantic machinery into motion, this requires partners in economic crime, a syndicate of sorts. The US Federal Reserve is not honoring its contract with the US Congress. It denies a full accounting and disclosure in the interest of national security. Whose security? It denies the sale of the national gold treasure, a travesty. A syndicate implies tight cooperation in illicit business. The world's major central banks clearly qualify in such accusations. If not for cozy relationships with the power elite, who benefit from "first in line" status, the USFed and other co-conspirators would be removed from the scene. The syndicate extends to Saudi Arabia, where Prince Alwaleed enjoyed no-risk investment in Citibank years ago, which profited in the billion$ for him. The claim can easily be defended that the practice of monetary collusion has spawned a veritable syndicate at work which operates outside Congressional checks & balances. Liberty and free markets are at grave risk.

NATIONAL PRIORITY & AUTONOMY
Lost sovereignty: To claim that having foreigners owning a majority of our federal debt does not impair our national condition, to me is lunacy. Asia and the Persian Gulf do not resemble shylocks and loan sharks, to be sure. However, one should not claim we remain strong, viable, and of an independent spirit in the process. Foreigners also own a substantial portion of our mortgage debt and corporate debt. They own a large slice of our stock market. In the math field, an effective technique is to exaggerate a condition to the extreme, thus to expose the impact. For instance, if every US firm outsourced to China, India, and Mexico, then nobody in the USEconomy would be employed with a job. Our spendable cash would be from home equity extraction, with nothing left for debt service. That would be an absurdity, untenable, and illustrates the insanity of low-cost solution pursuit at the macro level. If all US federal debt was owned by foreign central banks and large foreign institutions, then all marching orders, all directives, all priorities would tilt toward the master creditor. That would also be untenable. The United States is losing its foundation, not just with the manufacturing sector but also in the creditor hierarchy. Inevitably, USGovt leaders, USFed leaders will be coerced into placating foreign interests and demands. It is only natural. Try to lend $100 thousand to a neighbor to start a business, and then keep hands off, yielding total control and autonomy to the startup proprietor. Try lending another $10 thousand every month afterwards, behold a string of bad decisions (like Medicare obligations, like pork projects in Congressional bills, like a war overseas on questionable grounds), then stand aside with continued full freedom granted to the reckless borrower. Foreign interests will gradually creep into critical decisions and policy. National sovereignty might be sacrificed without the public knowledge, with gradual lost control, and increased vulnerability. In the process, our national security might be compromised. In fact, one might wonder how national security would not be compromised. A debtor is not in charge of his or her own fate and pathway. To maintain the pretense otherwise in an exercise in pure folly. The United States must next advance the interests of our creditor nations, or else risk losing that valuable credit supply and support.

Failing empire: The USEconomy lacks commodity supply, most visibly crude oil and natural gas. It lacks credit supply, since domestic savings is non-existent. It lacks independence therefore. It does not lack a powerful military. However, the military experienced a shortfall of bullets last summer, and had to turn to foreign suppliers. Key magnet parts for "smart bombs" are required from Chinese suppliers in order to make the laser GPS guidance functional. Should we as a nation reduce costs for rifles by having them built in Mexico or Taiwan or Turkey? The Moslem world made an historical error in outsourcing weapons systems over a century ago. The flip side to globalization for a nation whose economic system runs in gargantuan record setting deficits, is that the debtor (United States) must become more aggressive in order to secure supplies (tangible and financial) from our supplier nations, our partners, as well as those nations that lie on the fringe of partnership and adversary. Our chronic inflation has led to dependence upon outsiders, barbarians at the gate, and undue concern for foreign priorities. We are in the process of losing our perspective, losing control, and losing our power. We "Export Inflation, Import Deflation" and expect to get away with it. An empire beholden to external sources is not strong. It must compromise so readily that it risks becoming an engrained constant policy. It cannot be independent and remain sovereign with integrity.

Friction & war inevitable: The combination of foreign dependence for both commodity supply and credit supply makes for a truly lethal mixture. We drive foreign made cars with foreign supplied fuels to buy finished products made by foreign workers, using foreign supplied money. We wage war on a foreign supplied credit card. Worse still, we need it to maintain a gluttonous lifestyle pockmarked by excessive food intake, excessive debt abuse, excessive energy usage, excessively sized homes. We must somehow convince the world to continue to believe in our national priorities, in our national mandate for freedom, in our national consumption. They cannot, or else they will not soon. At the same time, the United States has begun to protect itself from external control and interference. See the nixed Unocal deal by Chinese interests. See the altered Dubai Ports World deal by Middle Eastern interests. Watch the Lucent deal by French Alcatel interests. Friction is on the rise. More visibly and with spilled blood, warfare is on the rise in Iraq. Domestic marches and demonstrations are also on the rise internationally. Much debate surrounds the real motives for the Iraqi War. For those who claim energy supply was not a top priority in Iraq, may a frontal lobotomy be suggested. Few see war as a delayed fuse to inflation.

CONCLUSION - WEIMAR BUZZ
Integrity to be challenged: It has long been a Von Mises belief that in the wake of tainted money comes lost integrity, honesty, and honored rules of the game. The entire statistical factory in WashDC has become a charade. This makes perfect sense when viewed against the "fallible mankind" backdrop. If a group of people can counterfeit with impunity, a few will eventually do so. If a government can counterfeit with temporary reprieve from consequences, it will do so from the outset. Nobody should trust the consumer price inflation, the GDP economic growth, the productivity level, the unemployment level, the savings rate, or any statistic which has been adjusted for inflation. An entire fallacious statistical system has been put in place, one which fortifies the national agenda of "wealth generation through inflation" and "economic progress through housing bubble," each a travesty in dogma. At the same time, an absurd emphasis of soft statistics like consumer confidence and business expectations has shifted into full practice. If time tested statistics all stink on ice, why not emphasize bogus statistics?

USFed as Weimar Politburo: We must perceive the US Federal Reserve as the modern day equivalent of the Soviet Union Politburo. Tactics complete with dominant bullying, threatened closure of our markets to foreign exporters, coercion for consistent inflationary accommodation abroad, such are typical within our central bank. It is given far more respect than it deserves. It has presided over the colossal decay of the USDollar value, and the unprecedented erosion of jobs through outsource. Their business experience is easily challenged. Their economics credentials are built upon faulty training in the field, since the slippery ground of debt serves as the accepted capstone of both our economy and currency. USFed governors are devoted to inflation as the engine for growth. The USFed Chairman is an avowed advocate of printing money at virtually no cost, of managing the Treasury yield curve, and even dumping money on household lawns. My label for the post is the Secretary of Inflation, complete with disrespect. Inflation is deeply engrained in our national DNA, our genetic code, our entire psyches. We are repeating the Weimar hyper-inflation with our own style, at our own pace, in a new era. We do so not in a closed system known to Germany eight decades ago. We do so amidst global trade and global interdependence. We lure the rest of the world to play our reckless game, led by crusty old farts in our US Politburo, misled by the delusion that we can control the USEconomy any better than the Soviet Union did. We do a much better job, but the outcome might actually be more devastating and messy on a global scale. We leave no room for error, led by "The Green Ben Bernanke" and a highly inexperienced pack. In fact, we actually invite error by relying upon concurrent data to signal an end to interest rate hikes, when competent decisions might be directed by forward indicators. These clowns actually admit it, with no pretense of statistical expertise from reliable indicators. Convenient indicators are forced to the forefront.

Trade friction & warfare: The battle for US assets, the bidding war, has only begun. Resistance will be fierce and joined from many corners. We taunt China into upgrading their yuan currency, claiming on the delay issue, "they do so at their own peril." What nonsense, to pressure an exporting nation to supply finished products at a higher cost, to pocket the increased revenue, so that we don't enact a tariff and pocket the gains ourselves. The result will be higher imported product prices, a mild surge in consumer prices, and an effect on long-term interest rates. Nobody in his or her right mind believes the US mfg sector will win market share from more competitive prices due to yuan exchange rate changes. We have no mfg sector left, the consequent effect of economic policy folly. Foreigners will next want to purchase US assets, like any creditor wishing to control the business operations on a wider basis. Friction has begun, and is highly likely to worsen. Waged war only adds a flammable fuel into the geopolitical cauldron. My view is that exported inflation invites foreign control of assets and steady sacrifice of the government policy priorities. We are gradually making clear that foreigners are welcome to accumulate our USTBonds as promissory notes, but they are not so welcome to use them as legal tender to purchase our prized assets. Then why purchase these dubious USTBonds? Given the path we are on, a wider spread of war is leaps & bounds more likely than the spread of democracy. Inflation is out of control. So is the friction in its wake, which has spawned growing chaos. Nobody likes war, except killers and war profiteers. The gold price likes war from the safe haven. The crude oil price likes war from interrupted and destroyed supply. War is but a symptom of chronic inflation gone amok from decades past. By the way, there is nothing to stop China from using its nearly $1 trillion in reserves to build a powerful modern military, complete with navy and air force.

THE HAT TRICK LETTER COMBINES MACRO ANALYSIS WITH INVESTMENTS.

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Jim Willie CB

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