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Why Bankers Want Control of Ukraine | Zero Hedge

Why Bankers Want Control of Ukraine | Zero Hedge.

We all know about the important military consequences of controlling Ukraine to the US and Russia, but an equally important and overlooked topic is why bankers want control of Ukraine’s monetary supply and ultimately control of Ukraine through controlling its debt (the proposed $1 billion loan from the IMF). All major Western military invasions in the past several years – Somalia, Sudan, Afghanistan, Iraq, Libya and attempts in Syria – involved countries in which the Bank for International Settlements had not yet gained control of the monetary supply at the time of these invasions.

The international banking cartels represented by the World Bank, the IMF and the Bank for International Settlements are unhappy with their low level of influence in controlling the debt of emerging economic powers like China and Russia and know that they very well can’t directly declare war on Russia and China to effect regime change in order to obtain control of their debt as they accomplished with the aforementioned much smaller countries that didn’t have the military strength to withstand a US/EU/banking led invasion. However, these global banking cartels know that they can gain influence through regime change without direct military intervention in the 15 newly independent states of the former USSR a la John Perkin’s Confessions of an Economic Hit Man (or at least this was their first initial thought in Ukraine). Below, JS Kim of SmartKnowledgeU discusses the above neglected topic and the gravity of the growing military escalation in Ukraine at the current time.


Why Bankers Want Control of Ukraine | Zero Hedge

Why Bankers Want Control of Ukraine | Zero Hedge.

We all know about the important military consequences of controlling Ukraine to the US and Russia, but an equally important and overlooked topic is why bankers want control of Ukraine’s monetary supply and ultimately control of Ukraine through controlling its debt (the proposed $1 billion loan from the IMF). All major Western military invasions in the past several years – Somalia, Sudan, Afghanistan, Iraq, Libya and attempts in Syria – involved countries in which the Bank for International Settlements had not yet gained control of the monetary supply at the time of these invasions.

The international banking cartels represented by the World Bank, the IMF and the Bank for International Settlements are unhappy with their low level of influence in controlling the debt of emerging economic powers like China and Russia and know that they very well can’t directly declare war on Russia and China to effect regime change in order to obtain control of their debt as they accomplished with the aforementioned much smaller countries that didn’t have the military strength to withstand a US/EU/banking led invasion. However, these global banking cartels know that they can gain influence through regime change without direct military intervention in the 15 newly independent states of the former USSR a la John Perkin’s Confessions of an Economic Hit Man (or at least this was their first initial thought in Ukraine). Below, JS Kim of SmartKnowledgeU discusses the above neglected topic and the gravity of the growing military escalation in Ukraine at the current time.




Posted on February 25, 2014 by JimQ

“The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country. We are governed, our minds are molded, our tastes formed, our ideas suggested, largely by men we have never heard of.

This is a logical result of the way in which our democratic society is organized. Vast numbers of human beings must cooperate in this manner if they are to live together as a smoothly functioning society. In almost every act of our daily lives, whether in the sphere of politics or business, in our social conduct or our ethical thinking, we are dominated by the relatively small number of persons who understand the mental processes and social patterns of the masses. It is they who pull the wires which control the public mind.” – Edward Bernays – Propaganda


I find the quote above by Edward Bernays to be a perfect synopsis for everything that has come to pass over the last century. The world has become increasingly controlled by an invisible government of greedy Wall Street bankers, shadowy billionaires, immoral big business, crooked politicians, and the military industrial complex, with mammoth media conglomerates, purposefully using propaganda to manipulate and mold the minds of the masses in order to exert power and control over our lives. He wrote those words in 1928, when the only available forms of manipulation were newspapers and radio. Bernays would be ecstatic and delighted with the implements available today used by our corporate fascist state controllers as they deliver the electronic messaging guiding the public mind.

He never dreamed of television, the internet, social media, and the ability of corporations like Google, in full cooperation with the government, to censor the truth, while feeding misinformation and state sanctioned propaganda to the masses in such an efficient and effective mode. Compelling the masses to worship at the altar of technology, while idolizing the evil men running our largest banks and corporations, has been a prodigious success for the shadowy ruling power and their mass media propaganda agents. Mike Lofgren, former congressional insider and author of The Party Is Over: How Republicans Went Crazy, Democrats Became Useless and the Middle Class Got Shafted,describes these mysterious perfidious men as the Deep State:

Yes, there is another government concealed behind the one that is visible at either end of Pennsylvania Avenue, a hybrid entity of public and private institutions ruling the country according to consistent patterns in season and out, connected to, but only intermittently controlled by, the visible state whose leaders we choose.

My analysis of this phenomenon is not an exposé of a secret, conspiratorial cabal; the state within a state is hiding mostly in plain sight, and its operators mainly act in the light of day. Nor can this other government be accurately termed an “establishment.”

All complex societies have an establishment, a social network committed to its own enrichment and perpetuation. In terms of its scope, financial resources and sheer global reach, the American hybrid state, the Deep State, is in a class by itself. That said, it is neither omniscient nor invincible. The institution is not so much sinister (although it has highly sinister aspects) as it is relentlessly well entrenched.

Far from being invincible, its failures, such as those in Iraq, Afghanistan and Libya, are routine enough that it is only the Deep State’s protectiveness towards its higher-ranking personnel that allows them to escape the consequences of their frequent ineptitude. – Mike Lofgren, Anatomy of the Deep State

The techno-narcissistic American public has been manipulated into falsely believing their iGadgets, Facebook, Twitter, and thousands of Apps have made them smarter, freer and safer. As Goethe proclaimed, the majority of willfully ignorant Americans are hopelessly enslaved, while falsely believing they are free. Our controllers, through relentless propaganda and misinformation pounded into our brains by the government controlled education system and unrelenting messaging by their mass media co-conspirators, have molded the minds and opinions of the vast majority into believing government and mega-corporations are beneficial and indispensable to their well-being.

The overwhelming majority have been conditioned like rats to believe anything their keepers feed them. In order to keep society running smoothly, with little dissent, thought, opposition or questioning, the Deep State utilizes all the tools at its disposal to manipulate, influence, coerce, bully and bribe the populace into passive submission. They’ve trained us to love our servitude. The Inner Party sees this as essential to their continued control, power and enrichment, while keeping the Proles impoverished, ignorant, fearful and distracted with bread and circuses.


The key weapon in their arsenal of obedience is technology and the mega-corporations that control the flow of information disseminated to the hypnotized mindless masses. The United States has devolved into a society where a few powerful unelected unaccountable men, controlling the levers of government, education, finance, and media are able to formulate the opinions, tastes, beliefs, and fears of the masses through the effective and subtle use of technology. They have tenaciously and unflinchingly fashioned a technology addiction among the masses in order to keep them distracted, entertained and uninterested in thinking, gaining knowledge, or comprehending their roles and responsibilities as citizens in a purportedly democratic republic.

The mass media, along with their corporate compatriots – Microsoft, Apple, Verizon, AT&T, Comcast, Yahoo, Facebook and Google, gather vast amounts of data, emails, phone calls, texts, internet searches, spending habits, credit information, passwords, videos and private personal information from an agreeable, gullible and trusting populace. Americans have a seemingly infinite capacity for blindly counting on the government and the corporatocracy to use this data in an honorable and ethical manner. But, as Edward Snowden has revealed, the corporate fascist state is collecting every shred of data on every American in a systematic and thorough way. We have voluntarily surrendered our privacy, liberties, and freedoms to mega-corporations like Google and their techno-brethren, who then willingly collaborate with Big Brother NSA and allow unfettered access to this private information.

The U.S. Constitution along with the First and Fourth Amendments are meaningless to these deceitful entities. Our freedoms have dissipated at the same rate we have adopted the technological “innovations” of Facebook, Twitter, and Google. We are being monitored, scrutinized, tracked and controlled by the technology we have exuberantly purchased from the mega-corporations stripping us of our freedom. Technological “progress” has actually resulted in a colossal regression in freedom, liberty, independence, choice, and intelligent questioning of authority. We having willingly submitted to the google shackles of tyranny in exchange for being entertained and amused by Angry Birds, Words with Friends, facebooking, texting, tweeting, posting selfies and statuses, and linking in.

“Technological progress has merely provided us with more efficient means for going backwards.” Aldous Huxley – Ends and Means



David versus the Nameless, Faceless Goliath Robot

“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” – Upton Sinclair – I, Candidate for Governor: And How I Got Licked



My enlightening encounter with the nameless, faceless $52 billion “non-evil doing” behemoth entity known as Google, over the last month, has clarified my understanding of how the invisible governing body of the Deep State uses the power of the all-mighty dollar to suppress dissent and obscure the truth. My inconsequential libertarian minded blog that attracts 15,000 visitors per day has been up and running for the last five years. I started my own blog because I didn’t want to deal with ongoing censorship of my articles by Wall Street sellout blogs such as Seeking Alpha, Minyanville, and Financial Sense.

Their salary/living depended upon them not publishing articles critical of Wall Street and the government. My intention has never been to make a living from my blog. Any donations or incidental advertising revenue allowed me to upgrade my server capacity to handle more visitors. I’m certainly not averse to making money, but the sole purpose of my blog has been to try and open people’s eyes to Wall Street criminality, political corruption, media propaganda, and the perilous financial state of our country. Therefore, I was pleasantly surprised when Google approved my website for ads in December.

I will admit my site has been essentially an un-moderated free for all going back to the very beginning in 2009. I do not believe in censorship or false civility. I attempt to induce anger and outrage with every article and post. These are desperate times and anger is the appropriate reaction. The country is on a burning platform of unsustainable policies and practices which threaten the future of our society. I’m pissed off and I want others to be just as pissed off. The regular commenters are intelligent, critical, opinionated, and not afraid to unload with both barrels on fellow regulars or newbies. The language is often strong and the posting of pictures and images adds to the frat house like atmosphere. Regular contributors include doctors, farmers, engineers, business owners, accountants, teachers, waitresses, students, homemakers, soldiers, spies, and retirees. The wild-west nature of the site is not a secret to anyone who has ventured a peek. I assume Google did a review of the site before approving it for their Adsense program.

I started running Google ads on my site in early December. My site operated as it always had. The $30 per day in ad revenue was welcome, as it helped defray my server and security expenses. I experience a surge in visitors whenever I publish an article that gets picked up by fellow truth telling alternative media websites like Zero Hedge321 GoldWashington’s BlogSteve QuayleMonty PelerinDoug Ross,Market OracleDollar CollapseTF Metals and several others. I published an article called The Retail Death Rattle on January 20 which obliterated the false government and mainstream media recovery storyline and skewered the delusional incompetent CEOs of mega-retailers. It struck a nerve as it generated the highest visitor count in history for my site. It was even picked up by Wall Street Journal owned Marketwatch. My articles are highly critical of Wall Street, the Federal Reserve, corrupt Washington politicians and the feckless captured legacy media, but they usually fly under the radar of the ruling class. On January 22 Google disabled my ads for “policy violations”. This is the vague non-specific description provided by the non-human policing bot:

Scraped content

It’s important for a site displaying AdSense to offer significant value to the user by providing unique and relevant content, and not to place ads on auto-generated pages or pages with little to no original content. This may include, but is not limited to:

  • ·copying portions of text content from other sources
  • ·websites dedicated to embedded videos from other hosts
  • ·websites with gibberish content that makes no sense or seems auto-generated
  • ·templated or pre-generated websites that provide duplicate content to users.

Sexual content

Google ads may not be placed on pages with adult or mature content. This includes, but is not limited to, pages with images or videos containing:

  • ·Strategically covered nudity
  • ·Sheer or see-through clothing
  • ·Lewd or provocative poses
  • ·Close-ups of breasts, buttocks, or crotches

Over the last five years I have received exactly ZERO complaints from other websites or authors about re-posting their articles, with full attribution and links, on my website. No one can accuse my site of not having unique and relevant content. I have permission to post articles from Zero Hedge, Charles Hugh Smith, Michael Snyder, Jim Kunstler, David Stockman, John Mauldin, Doug Casey, Paul Rosenberg, Fred Reed and dozens of other brilliant truthful journalists detailing our societal decay. Was there some Kate Upton bikini Gifs and provocative Salma Hayak pictures scattered within the 200,000 comments made on the site in the last five years? Guilty as charged. It seems Google reviewers can’t see the hypocrisy of running ads to meet young bikini clad Asian girls, while disabling ads because there a few bikini pictures on the website. I suspected my article had drawn the Eye of Sauron in my direction and this was the response.



Speaking truth to power during these perilous times has repercussions. But I decided to make a good faith effort to follow their rules.

I had made almost 15,000 posts over the last five years. Over the next week I scanned the site and archived posts that included articles from mainstream media websites, along with a hundred or so bikini pictures. You never deal with a human being when attempting to satisfy the Google Gestapo. Identical canned appeal denial responses are issued from Google Central with no clarification or effort to help you understand their reasoning.


Thank you for providing us with additional information about your site. However, after thoroughly reviewing theburningplatform.com and taking your feedback into consideration, we’re unable to re-enable ad serving to your site at this time, as your site appears to still be in violation.

When making changes, please note that the URL mentioned in your policy notification may be just one example and that the same violations may exist on other pages of your website. Appropriate changes must be made across your entire website before ad serving can be enabled on your site again.

If you’d like to have your site reconsidered for participation in the AdSense program, please review our program policies and make any necessary changes to your webpages.

We appreciate your cooperation.


The Google AdSense Team

There must have been some miscommunication within the Google Gestapo, as the ads were re-enabled after one week and my third appeal. A newbie, who didn’t get the memo, must have mistakenly activated my ads. Regular commenters and contributors were confused by what they could and couldn’t post on the site, as was I. The iron fist of the Google Stasi came down once again within a week, with the identical policy violation notice. I made the assumption that since the site was declared in compliance as of January 29, I only had to address anything posted since that date.

I had purged the site of any and all risqué pictures, so I knew that wasn’t a real issue. I thoroughly reviewed every post made since January 29 and archived or edited them to leave no doubt I was meeting Google’s vague guidelines. I continued to have my appeals rejected. I then went back a year and archived hundreds of other posts. By the fourth appeal rejection, I realized I would never meet their standard because it wasn’t really about violating Google content policies. It was my libertarian, anti-government, anti-Wall Street, anti-Mega-Corporation, anti-Surveillance State views that were the real issue. They were attempting to make me “not understand” or write about the creeping corporate fascist paradigm overtaking the country by making my Google salary dependent on “not understanding”.

Once I understood this truth, I was set free to provoke and prod the nameless, faceless Google entity and prove beyond a shadow of a doubt their true purpose. Their appeal form allows 1,000 characters for your response. Along with the actions I had taken, I began to question the integrity of the Google apparatchik “reviewer”, as it was clear the site was not in violation. I had archived over a thousand posts and tens of thousands of comments. I challenged the man behind the Google curtain to provide me with proof the site was still in violation. I must have struck a nerve, as out of the blue I received a new violation notice.

Violent or disturbing content

AdSense publishers are not permitted to place Google ads on pages with violent or disturbing content, including sites with gory text or images.

Now this was funny. My site focuses on the financial, political, and social decay of our country. It in no way advocates or promotes violence. It has no graphic images or gory videos. If Google is attempting to suppress videos of revolutions occurring in Venezuela, Ukraine, and Syria from being seen by citizens of the world, their credibility is zero. If Google is attempting to suppress videos of police brutality against citizens or the police state locking down an entire city while violating the Fourth Amendment, they prove themselves to be nothing more than a fascist propaganda tool of the State. This violation notice was laughable, but I decided to call their bluff one last time. I spent three days and archived 14,000 out of the 15,000 posts ever made on my site. All that remained were my main articles, published on dozens of other sites with Google ads active, and original content produced by myself or other approved contributors. There was no violent content, scraped content, or sexual content on my website.

My ninth and final appeal was denied. I then proceeded to write an FU Google post on my website and inform my readers and contributors they were unshackled from the Google Evil Empire of Censorship. I’m in the process of restoring all of the posts I had archived. Some might argue that Google is just exercising their rights under our free market capitalism system. I would argue free market capitalism does not exist today. The unholy alliance of big banks, big corporations, big military and big media has created a state run by the few for the benefit of the few. They use their control of the purse strings to manipulate minds, crush dissent, and censor through bullying and bribery.

Once I mentally liberated myself from their financial control, I was able to see their game. They essentially wanted me to purge the site of every anti-establishment example of free speech and First Amendment rights I had ever written, in order to kneel before the altar of $$$ in the Church of Google. Google would be perfectly fine if I converted my website into a chat-fest where I discussed the details of the upcoming Kim and Kanye wedding, pondered deep issues regarding the benefits of gay marriage, conducted polls on who The Bachelor will choose to be his betrothed this season, mused about what Hollywood stars will wear at the Academy Awards, and debated who will win the fourteenth season of American Idol. The Google money would flow freely as I contributed to the dumbing down and sedation of the masses. I have chosen not be a Judas that sells out my readers and the American public for 30 pieces of fiat to the Google Pharisees and the American corporate fascist surveillance empire.

This was not the first time the Deep State attempted to silence my anarchistic viewpoint. On June 5 Edward Snowden, American hero and patriot, released the first of thousands of documents detailing the traitorous actions of the NSA, Obama, Congress, the Judicial branch, and the corporate media. Snowden revealed the government, in cooperation with Google, Verizon, Facebook and a myriad of other technology/media companies, was collecting metadata and conducting mass surveillance of every American in violation of the Fourth Amendment, a clearly illegal form of search and seizure.

On June 19 I penned an article titled Who Are the Real Traitors? In the article I declared Obama, James Clapper, Dick Cheney, Diane Feinstein, Peter King and a plethora of other politicians, faux journalists, and talking media heads as the real traitors of the American people. The article achieved wide distribution through my usual channels and must have again drawn attention in Mordor on the Potomac. Two days later anyone with McAfee or Norton security were receiving false warnings about a malicious virus on my site. Long time readers in the military informed me the site was now blocked by the Department of Defense as a dangerous website. Other long-time readers informed me their corporations were now blocking access to the site. The site was inundated by denial of service attacks. It slowed to a crawl and was virtually inaccessible. I’m sure it was just a coincidence.

I was forced to switch server companies and hire an anti-hacking company to protect the site, thereby increasing my cost to run the site by a factor of 10. Even though the companies I hired confirmed there were no malicious viruses on the site, Norton continued to scare Internet Explorer users from reading my site for the next eight months. How the $8 billion Symantec (owns Norton) entity could rationalize this false warning on only $80 billion Microsoft’s Internet Explorer, seems suspicious to me. The warning would not appear if you accessed the site with Mozilla Firefox, even if you employed Norton security. Norton makes it virtually impossible to appeal their false danger rating. I’m sure thousands of people were scared away from my website by these unaccountable corporate entities, working on behalf of the all-powerful state. Lofgren’s Deep State or Bernays’ Invisible Government hate the truth. They despise anyone who attempts to open the eyes of the public to their deception, criminality, and propaganda.

Google has become a tool and partner of the Deep State. Enrichment of the state within the state is their sole purpose. Google’s Don’t Be Evil motto, originated when they were a fledgling company in 2000, has become a farce as they have descended into the netherworld as the information police for the ruling despots. They are now a humungous corporation with near monopoly control over the flow of information, searches, emails, and internet advertising. They know more about you and your habits than you do. They attempt to control freedom of speech at the point of a wire transfer. Fall into line or no advertising blood money for you. Not only do they suppress viewpoints through advertising revenue bullying, they manipulate their search engine results to hide the truth from the masses. Google search engines filter, block and bury blog posts that contain content or information it deems incompatible with the message of its corporate fascist co-conspirators. Its oppressive corporate practices on behalf of its evil partners are an abridgment of the freedom of speech, perversion of the truth, and active attempt to mold the minds of the masses.


One of the most intelligent and cleverest contributors to my website, Nick (aka Stucky), summed up the evil entity known as Google in this pointed comment on my website:

There is an Entity out there who knows every search you ever made.

The Entity knows all about your emails, the content and address.

The Entity knows what you buy online and how often.

The Entity is developing software to predict what you will buy next.

The Entity can now even watch you, and know where you are, and what you are doing.

The Entity even knows your habits.

The Entity has enormous resources and stacks of cash.

The Entity shares your information with Lesser Entities … and also The Big Evil Entity that rules us all.

The Entity makes the NSA, CIA, FBI, DHS, and their ilk look like Lightweight Chumps.

The Entity hates you. You are just a means to an end.

The Entity is building a Profile all about you.

The Entity will soon know you better than you know yourself.

Welcome to Google, the most evil Entity on the planet.

As a society we have fallen asleep at the wheel. We’ve allowed ourselves to be lulled into complacency, distracted by minutia, mesmerized by technology, turned into consumers by corporations, pacified by financial gurus and Ivy League economists, and fearful of our own shadows. Surveillance, censorship and propaganda are the tools of the oppressive state. Free speech and truthful revelations about the Deep State are a danger in the eyes of our oppressors. Words retain power and can change the hearts and minds of a tyrannized citizenry willing to listen. V’s speech to London in the movie V for Vendetta, with slight modification, captures the essence of how Google fits into the evil matrix we inhabit today.

Because while the truncheon may be used in lieu of conversation, words will always retain their power. Words offer the means to meaning and for those who will listen, the enunciation of truth. And the truth is, there is something terribly wrong with this country, isn’t there?

Cruelty and injustice…intolerance and oppression. And where once you had the freedom to object, to think and speak as you saw fit, you now have censors and systems of surveillance, coercing your conformity and soliciting your submission. How did this happen? Who’s to blame? Well certainly there are those who are more responsible than others, and they will be held accountable. But again, truth be told…if you’re looking for the guilty, you need only look into a mirror.

I know why you did it. I know you were afraid. Who wouldn’t be? War. Terror. Disease. There were a myriad of problems which conspired to corrupt your reason and rob you of your common sense.Fear got the best of you and in your panic you turned to the government and their banking/corporate patrons. They promised you order. They promised you peace. And all they demanded in return was your silent, obedient consent.

I choose not to silently and obediently consent to the will of the Deep State. Google will not silence me. We are in the midst of a Fourth Turning and I will try to do my small part in sweeping away the existing social order and trying to replace it with a system that honors and follows the U.S. Constitution. In Part 2 of this expose of evil, I’ll provide further proof of Google’s hypocrisy, censorship, and willing participation in spying on the American people. I’m beginning to understand the major conflict which will drive thisFourth Turning – The People vs The Corporate Fascist State.


WARNING: The National Security Agency is recording and storing this communication as part of its unlawful spying program on all Americans … and people worldwide. The people who created the NSA spying program say this communication – and any responses – can and will be used against the American people at any time in the future should unelected bureaucrats within the government decide to persecute us for political reasons. Private information in digital communications is being shared between Google, Facebook, Verizon and the government. It will be used against you when it suits their purposes.

Central Bankers: Inflation is God’s Work – Ludwig von Mises Institute Canada

Central Bankers: Inflation is God’s Work – Ludwig von Mises Institute Canada.

Friday, February 21st, 2014 by  posted in Uncategorized.

Inflation is always somebody else’s fault. Ludwig von Mises called out finger pointing central bankers and politicians decades ago in his book, Economic Policy. “The most important thing to remember is that inflation is not an act of God, that inflation is not a catastrophe of the elements or a disease that comes like the plague. Inflation is a policy.”

In the fall of 2007, Gideon Gono blamed his country’s inflation rate of 4,500 percent on “the differences that Zimbabwe has had with its former colonial master, the UK,” and added, “we are busy laying the foundations for a serious deceleration programme.” Deceleration? A year later inflation was 231 million percent.

Money printing didn’t have anything to do with it according to the central banker. Droughts began to be more frequent in the 2000’s and Gono believed  ”there is a positive correlation between the drought and inflation.” Dry weather, he told New African magazine, has, “got a serious bearing on our inflation level.”

In Gono’s dilluded mind,inflation was about the weather, lack of support from other nations, and political sanctions. He had nothing to do with the hyperinflation in his country. “No other [central-bank] governor has had to deal with the kind of inflation levels that I deal with,” Gono told Newsweek. “[The people at] my bank [are] at the cutting edge of the country.”

These days in Argentina its not the weather and political sanctions causing prices to rise, its businesses engaging in commerce. President Cristina Fernández de Kirchner is urging her people to work “elbow-to-elbow” with her government to stop companies from looting the people with high prices. Two weeks ago the government devalued the peso by 20 percent but it is private businesses that are stealing from working people with price increases.

Posters of retail executives have been plastered around Buenos Aires. For instance, Wal-Mart Argentina’s president Horacio Barbeito has his mug on a poster with the caption, “Get to know them, these are the people who steal your salary.”

Kirchner’s cabinet chief Jorge Capitanich calls economists who point to government policies as inflation’s culprit “undercover agents.”  He implies that these economists are the tools of business. “Argentines should know that independent, objective economists don’t exist,” Capitanich claims. “I want to say emphatically that when unscrupulous businessmen raise prices it has absolutely nothing to do with macroeconomic variables.”

In 2012 the president of Argentina’s central bank, Yale-educated Mercedes Marcó del Pont, said in an interview, “it is totally false to say that printing more money generates inflation, price increases are generated by other phenomena like supply and external sector’s behaviour.”

So while its central bank prints, the Kirchner government has enlisted the citizenry to work undercover in the fight against rising prices. A free smartphone application is encouraging Argentines to be citizen-cops while they shop.

The app is a bigger hit than “Candy Crush” and “Instagram.” President Kirchner wants “people to feel empowered when they shop.” And, they do. “You can go checking the prices,” marveled Analia Becherini, who learned of the app on Twitter. “You don’t even have to make any phone calls. If you want to file a complaint, you can do it online, in real time.”

“Argentina’s government blames escalating inflation on speculators and greedy businesses,” reports Paul Byrne for the Associated Press, “and has pressured leading supermarket chains to keep selling more than 80 key products at fixed prices.”

However, businesses aren’t eager to lose money selling goods. Fernando Aguirre told Chris Martenson that with price inflation running rampant, “Lots of stores don’t want to be selling stuff until they get updated prices. Suppliers holding on, waiting to see how things go, which is something that we are familiar with because that happened back in 2001 when everything went down as we know it did.”

In his Peak Prosperity podcast with Aguirre, Martenson makes the ironic point that when governments print excessive amounts of money, goods disappear from store shelves. In a hyper-inflation the demand for money drops to zero as people buy whatever they can get their hands on. Inflation destroys the calculus of profit and loss, destroying business, and undoing the division of labor.

Aguirre reinforced Martenson’s point. Describing shelves as “halfway empty,” in Argentina he said,  “The government is always trying to muscle its way through these kind of problems, just trying to force companies to stock back products and such, but they just keep holding on. For example, gas has gone up 12% these last few days. And there is really nothing they can do about it. If they don’t increase prices, companies just are not willing to sell. It is a pretty tricky situation to be in.”

Tricky indeed.  “It would be a serious blunder to neglect the fact that inflation also generates forces which tend toward capital consumption,” Mises wrote in Human Action. “One of its consequences is that it falsifies economic calculation and accounting. It produces the phenomenon of illusory or apparent profits.”

Inflation is also rampant at the other end of South America.  Venezuela inflations is clocking in at 56 percent. Comparing the two countries, Leonardo Vera, a Caracas-based economist told the FT, “Argentina still has some ammunition to fight the current situation, while Venezuela is running out of bullets.”

Fast money growth has also led to shortages such as “newsprint to car parts and ceremonial wine to celebrate mass,” reports the FT.

Venezuelan president Nicolás Maduro is using the government’s heavy hand to introduce a law capping company profits at 30 percent. Heavy prison sentences await anyone found hoarding, overcharging, or “destabilising the economy.”  Hundreds of inspectors have been deployed to enforce the mandates.

The results will be predictable. “With every new control, the parallel, or black market, dollar will keep going up, and so will the price and scarcity of milk, oil, and toilet paper,” says Humberto García, an economist with the Central University of Venezuela.

Don’t expect the printing to stop any time soon. Central bankers believe they are doing God’s work. “To ensure that my people survive, I had to print money,” Gideon Gono toldNewsweek. “I found myself doing extraordinary things that aren’t in the textbooks. Then the IMF asked the U.S. to please print money. The whole world is now practicing what they have been saying I should not. I decided that God had been on my side and had come to vindicate me.”

It seems disasters wrought by inflationary policies must be experienced again and again, as “Inflation is the true opium of the people,” Mises explained, “administered to them by anticapitalist governments.”

The practice of central banking is the same around the world. The only difference is in degree. Before he destroyed the Zimbabwean dollar Gono looked to America for inspiration. “Look at the bridges across the many rivers in New York and elsewhere,” Gono told New African, “and the other infrastructure in the country that were built with high budget deficits.”

The Zimbabwe, Argentina, and Venezuela inflations may seem to be something that happens to somebody else. But Mr. Aguirre makes a point when asked about 2001, when banks in Argentina, after a bank holiday, converted dollar accounts into the same number of pesos. A massive theft.

“Those banks that did that are the same banks that are found all over the world,” Aguirre says. “They are not like strange South American, Argentinean banks–they are the same banks. If they are willing to steal from people in one place, don’t be surprised if they are willing to do it in other places as well.”


Douglas E. French is a Director of the Ludwig von Mises Institute of Canada. Additionally, he writes for Casey Research and is the author of three books; Early Speculative Bubbles and Increases in the Supply of Money, The Failure of Common Knowledge, and Walk Away: The Rise and Fall of the Home-Owenrship Myth. French is the former president of the Ludwig von Mises Institute in Auburn, Alabama.

Dan Ariely: Why Humans Are Hard-Wired To Create Asset Bubbles | Peak Prosperity

Dan Ariely: Why Humans Are Hard-Wired To Create Asset Bubbles | Peak Prosperity.

Our evolutionary programming often works against us
by Adam Taggart
Saturday, February 15, 2014, 12:25 PM

Renown behavioral economist Dan Ariely explain why humans are biologically wired to make irrational decisions when money is involved. It’s a case of our evolutionary wiring interfering with the decisions we face in a modern world very different from the one our ancestors adapted to.

For instance, he explains how one of the easiest phenomena to create in a lab are valuation “bubbles”. Our vestigial herding instinct encourages us to imitate the actions of those around us (e.g. bidding for a particular asset), which then strengthens that signal for others (leading to even higher bidding), resulting in behavior not justified by the underlying fundamentals of reality (asset prices destined to crash).

In this podcast, Chris and Dan explore the human cognitive triggers that have led us to our third major bubble in 15 years (tech stocks, housing, credit) and why our natural programming often works against our best interests. In certain cases, like the banking sector, bad decision-making has become so ingrained in our institutions that Ariely thinks the “clean slate” approach is our best option should we have the courage to deploy it:

In very general brushstrokes I think that most bankers are in fact inherently decent people. We just put them in situation in which their conflict of interest is tremendously high and their social norms are incredibly dysfunctional.

When you hear bankers talking about their customers as Muppets, for example, they are forgetting who they are serving. They are hired by the rest of us to do a particular job; and they forget this. And then they have terrible conflicts of interest.

Imagine that I give you a world in which, if you can adopt a particular perspective on life, you could get $5 Million as a bonus. Wouldn’t you start believing that world? And then everybody around you is doing the same thing, and you have some justification for it by talking about financial market theory and so on. All of a sudden you could see how you could take good people and you could put them in this distorted way — in the same way that we talked about how global warming is probably the perfect storm for inaction — I think Wall Street is the perfect storm for allowing people to rationalize their own selfish motivations as if they are serving other people.

It is really, really terrible because we have not done anything to change the way we pay bankers. And we have not changed anything in terms of the code of ethics and morality.

On the consumer side, there is a tremendous loss of faith. We have been screwed and we know that we have been screwed. And we know that we are not trusting other people. And I think loss of trust is a central issue for this financial crisis and sadly nobody is trying to do anything about that. Human beings are incredibly forgiving, but nobody has really stood up and said, “I am really sorry. I made all of these terrible mistakes. I want this particular bank to start fresh and caring about people,” right? Nobody has admitted anything. So we as consumers feel that there are these other people on the other side who have behaved terribly, which is true, and that are smug about it, and that nothing is different. And why should we trust them? And we do not.

I don’t think it is a generational thing. I think there is a tremendous feeling of lack of control, agency, and helplessness. And the sad realization — this is one of the things that came out of financial crisis — is that it is much harder to start a new bank now. So young people are actually quite idealistic and I think people would have started new banks where they behaved very, very differently. But what happened is that it is really, really tough to open a new bank now. But I am still hopeful: I think that this anger and frustration just needs to be channeled in a better way.

I am not a religious person but the story from the Bible is that God made the people of Israel walk around the desert for 40 years until the old generation that worshipped the golden calf passed away. I do think that we need a new generation of bankers. I think you cannot take the old generation of bankers and rehabilitate them.

Recent history is not showing us that this is something we should hope for. But there is a real question of, How do we create a new generation of bankers that are going to think of themselves as the caretakers of society, rather than the rapists?

Click the play button below to listen to Chris’ interview with Dan Ariely (42m:54s):


Chris Martenson: Welcome to this Peak Prosperity podcast. I am your host, Chris Martenson. Traditionally economics assumes much. It assumes that resources from the natural world are a function of demand and capital. Perhaps most bizarrely, considering the evidence, it assumes that people are rational and make rational decisions based on cold logic and calculated self-interest. But are they really? And if not, what does it mean that the major core assumptions of the models that drive monetary and economic policy are irretrievably flawed? And beyond economics, speaking very widely here, what motivates people and even entire cultures to accept one set of beliefs while rejecting others even when cold hard facts would strongly encourage the adoption of new beliefs and associated behaviors?

Fortunately there is an entire new branch of inquiry that has been opened up that assumes nothing about how people make choices and decisions, and uses scientific inquiry and the resulting data to develop a view on what actually drives human behavior. And today, to help us explore these ideas, we have back on the program one of the leading researchers of behavioral economics. Dan Ariely is a professor of psychology and behavioral economics at Duke University, my alma mater, and is the founder of the Center for Advanced Hindsight. Dr. Ariely’s talks on TED have been watched nearly five million times. He is the author of Predictably Irrational, which I have recommended heartily before, and The Upside of Irrationality, both best sellers.

Dan publishes widely in leading scholarly journals in economics, psychology, and business. His work has been featured pretty much everywhere: New York Times, Wall Street Journal, Washington Post, Boston Globe, Scientific American, you name it. Dan, I am really excited to have you back on the program today.

Dan Ariely: I will try to keep you excited throughout and not just in the beginning.

Chris Martenson: Excellent. Well, as a starting point for this conversation I would like to talk about bubbles, specifically the idea that once upon a time a financial bubble happened, at most, maybe once a generation because the painful memories literally had to die away before the mistakes could be repeated. But in the US we went from a stock bubble in the ’90s, a housing bubble in the 2000s, and today I think we might have something of a faith bubble, if I can call it that, in the ability of the Fed to get things right this time even though there is nothing in the historical data to support that view, quite the opposite in fact. So what is it in the human psyche that allows selective amnesia to arise?

Dan Ariely: So a couple of things are actually interesting. So first of all the creation of bubbles turns out to be one of the easiest things to do in a lab setting. So you put people in the lab and you kind of create an experiment in which they all trade some fictitious product and the most common behavior that you observe are bubbles. Because if you think about it the natural inclination is to see what other people are doing and to try and follow other people. In psychology this is what is called “social proof.” It is about our herding instinct. It is about the fact that you see lots of people waiting in the line to a restaurant and you think to yourself this must be a great restaurant; let me stand in line as well.

Chris Martenson: Yes.

Dan Ariely: So it is almost instinctual that we look at the behavior of others and infer something about the value of the different options. And then of course it keeps on and on and on until there is not enough power to sustain it and then there is drop. And then you see the opposite result, which is people get very depressed and frightened when things go down and they sell at the worst possible time. So bubbles, sadly, are just a part of human nature. And it is all about the ability to see what other people are doing, right? The moment we can see what other people are doing we succumb to bubbles. And in this world today visibility is just much better. If you think about the internet, you think about amount of information out there, if you think about the news—so the temptation for bubbles is just much, much higher. So that is on one side.

On the other side the question is: What causes this amnesia? And I don’t think—of course lack of memory is part of it, but I think the other part of it is that when we live in a particular reality, we come up with stories that explain this reality. And these stories for our own sanity are not stories about randomness and they are not stories about bubbles. They are stories about this time it is real value. When somebody comes to our face and tells us something, we have a very hard time disbelieving it. Our initial instinct is to believe in what they are saying. And we are experiencing the reality that we are experiencing. And we have a sense that this time everything is going to be different. We have a feeling that this time whatever we are experiencing is much more real.

So there is this disassociation between what we know about history and the intensity and realism of our current experience. And because of that we just do not think that those are relevant cases.

Chris Martenson: So this is a case of herding then, and this is normal human behavior. I assume the Federal Reserve must be aware of this sort of material or do you think—does traditional economics completely ignore—it just sounds like a feedback loop and one that is pretty well understood, I guess, at this point. Is that correct?

Dan Ariely: So behavior economists understand very much bubbles and we understand people’s belief about the world in all kinds of ways. By the way, one of the nicest experiments ever was about our need to find reason and logic and structure even in random things. So you show people patterns of clouds in the sky, right, and initially, immediately, somebody says “Oh this dog was chasing somebody here.” You show people shapes on computers and they immediately tell stories about it. You show people random fluctuation in the stock market and they immediately come up with a theory about what is really going on. We really have a very deep need to have a story that describes what it is that we are seeing.

And the stories that we like are stories about causal relationship. This is causing that. And like a lot of things in behavior economics, these things have good things and bad things. So think about how quickly we learn causal relationship. You turn a switch when you come to a room and you learn that it’s a causal relationship to the light coming up. So we are basically looking for those relationships everywhere around us. And the experiment I was referring to was an experiment in which they gave people a machine, a ball machine, that would basically they would press on all kinds of buttons and balls would come out at different speeds and different rates. And then they asked people to what extent have they figured out how to control the machine. What levels would get more balls out and less balls out and so on.

And people thought that they had quite good control aside from the fact that the ball machine was perfectly random. So we have a sense of that. And what kind of people do you think had the best understanding that in fact they did not have much control over the machine? These were depressed people. And the question that arised from this in psychology was whether depressed people are depressed because they understand that they do not have much control over the world, or is the lack of control causes them to be depressed? And we do not have an answer for that.

Chris Martenson: So we do not know cause or effect on that one?

Dan Ariely: No we do not. But if you go back and say, “Does the Fed understand all of these effects?” I do not think so. I do not think when they think about policy those are the things that are driving them. I think it is really very, very sad. But I think that when people think about the behavior of masses, even when people understand irrational behavior, they still go with the standard models way too frequently.

Chris Martenson: It is interesting this part about where the Fed is getting their decision from or even anybody in any policy position. I am thinking about your machine with the random balls coming out. I was really taken by a piece of work, a study in a book that came out, called The Origin of Wealth, by this guy Eric Beinhocker. And he very convincingly proved that the economy is a complex system. And because it is complex it inherently is unpredictable. And we cannot—all sorts of complex systems defy us, earthquake fault zones are complex systems. All we can do is sort of categorize what the risks are: If this fault has not given way, and it is supposed to give way, we might predict an earthquake would come sooner and it might be larger. But that is as close as we can get.

And so the critique he has of economics is that it is still based on the idea that it is a deterministic model: You pull lever A, you get result B. And so I can imagine the Fed, if they have flawed models and they are pulling on lever A and the balls come out randomly, sometimes unemployment does what it wants it to do. I can see them falling into the same trap as well, they are humans, right? So what do we do with this idea that if the world is essentially random in some important respects, what is it in your work that tells us how we might improve our ability to navigate in such a world?

Dan Ariely: Yes, so again you can think about these questions about the need for simple models, a little bit similar to the people who need to feel that they can predict the world. And I think economics in some sense, the reason that standard economics is so tempting is because it gives people the illusion that they understand the world, right? So here is a two-period, two-player model of how the world would react and you basically—it is an oversimplification, and you know it is an oversimplification, but you have a temptation to think of it as a model for the world because it gives you a sense that you understand the world.

And I think the challenge of really understanding stochastic, large scale, complex systems—it is not just about understanding them. It is also about being willing to give decision control to a model that we do not understand very well. And that is really the challenge. So imagine I gave you a big equation and I said this equation should predict how much money you should save for retirement, right? I mean, the question of how much money you should save for retirement is really, really very tough to figure out. Here is a model; we do not understand it exactly. It has been calibrated on lots of other people, and so on. Would you trust it, right? And it is very, very tough.

Again, in economic language, you see all these people on TV at the end of each day telling you what happened today in the stock market and telling you a story about why this is the rational thing to do. But of course they explain it to you backwards: What happened today. And we are just suckers for simple stories. And when the stories are not so simple it is very hard to believe them. And it is very hard to give them power over our decisions.

Chris Martenson: So let me talk about something that came up before that relates to that. You mentioned beliefs, this idea that we are all holding beliefs, and I know that I do. And when I do I have noticed something. My belief systems, they really are very good at adroitly selecting some data for inclusion, I will accept this piece of data I see but I will reject competing data that is unsupportive. This data selectivity, is this something that you see often and contest in the lab?

Dan Ariely: Yes, there is no question about it. We see it in the lab. We see it in life.

Chris Martenson: Yes.

Dan Ariely: It is really quite incredible. Now, there is a vicious cycle in which if you have a particular belief now, you can choose to listen to a news channel that would just give you the beliefs that you believe in, right? So, it would be one thing if we all listen to the same news show, all Americans with all particular opinions and then we had to rationalize our behavior and justify some decisions. But now the people who watch Fox News and the people who listen to NPR are very different people and they basically choose to get exposed only to their opinions, which actually makes the problem much, much higher.

For me this was the toughest, but more interesting case. Together with Mike Norton, we wrote a paper on trying to figure out what is the wealth inequality that Americans would like? So if you remember the philosopher John Rawls he basically had the very nice definition of a just society. And he said a just society is a society that if you knew everything about it you would be willing to enter it in a random place. And if you think about it is a very beautiful definition because it means if you are very rich you do not just think about your own state you think about all possible states. And if you are very poor you do not just think about where you are you think about all possible states.

So we asked tens of thousands of Americans to basically tell us what they think is the wealth distribution that they would be willing to join a society like this in a random place. And if you think about it the way we did it was, we asked people to imagine the top 20% of Americans, the next, the third, the fourth, the fifth bucket. And we said how much money—how much of the wealth do you want to be owned by each of these buckets? And that will create the Gini coefficient or the rate of inequality. And there were two main results that emerged. First of all, it turns out that Americans want a much more equitable society than what we have right now. But most interesting, there was no differences between Republicans and Democrats, almost no differences.

So for example, in one question we showed them a distribution of wealth that was slightly more equal than Sweden and a distribution of wealth based in the US, and 92% of Americans on average chose the Swedish distribution. But for Democrats it was 93%, for Republicans it was 91%. So, different but not that different. So we showed this result and we said basically, when you think about wealth and equality in abstract under the veil of ignorance, kind of Rawls’ definition, the reality is that all sides of politics seem to be very similar. We do not have that many differences. And we thought it is a great result basically showing that we are not as different as we think we are. And perhaps politicians are making us think we are more different than what we really are.

The amount of hate mail we got over this [laughter] piece of research was amazing. What happened was, I mean, there is lots of flavors of it. But the one that was the most interesting was a guy who told me that we have not calculated wealth correctly because the wealthy people, their wealth could be taken away by the government at any moment to pay for more social programs. So he basically said that we have not taken the liability of the wealthy people correctly into our model. And I saw lots of those things where people basically were trying very hard—rather than focusing on the result that we are actually much more similar than we think, people were just looking for all kinds of ways to discount the results. And I am perfectly happy with discounting the results. But the thing I was trying to tell these people, I said, even if we overestimated or underestimated by three times, by a factor of four, wouldn’t the results still suggest that we have a more inequitable society than what we want? And wouldn’t we still have the result that we are much more similar to each other than we think?

But I have not been able to convince them. So it was a very interesting, kind of personal case, about the power of desire to see reality in a certain way.

Chris Martenson: Well, it is fascinating because what you are describing is that there is a cultural narrative that we have, something about how we are a free and fair and just society and that when you ask people about that narrative in the abstract they come up with a set of results that are out of comportment with the actual reality of the world they live in. Is that not the definition of cognitive dissonance?

Dan Ariely: So, first of all, when we asked this question, of course the issue is—when we asked the question in the abstract, the question is: “Which answer is correct?” And I actually like the Rawls version of it because—think about tasting wine. When you taste wine you are influenced by the price, you are influenced by the label, you are influenced by your preconceived notions. But when you are doing the Rawls constraint and you say, what society would I like to join, in principle? All of a sudden you are not married to your own position. You are not thinking about your own particular issue and how much you want to pay taxes and do not want to pay taxes. So I think that the correct version is the abstract Rawls version. I think that when we vote on politics we should vote thinking about abstract, long-term ideas rather than what will happen next year.

Now in terms of cognitive dissonance, there are lots of versions of what people refer to as “cognitive dissonance.” But the general approach is a difference between a behavior and a belief. So Festinger’s original experiments—he would get people to the lab and he would get them to do something really boring for a long time. And some people he paid a lot and some people he paid very little. And then he asked them to recommend how much they enjoyed the task and would they recommend it to a friend and so on. Now the people who worked on this task and got paid a lot had no dissonance. They basically said, “This was a boring task. I got paid a lot, okay that is fine.” The people who did not get paid a lot, they got paid a dollar, they had a dissonance. They basically said, “Oh, I worked on this for a long time, I got paid very little, how does this work?”

And the way they resolved that, they could not have said to themselves, “Oh it must mean that I am stingy or something else.” They basically said, “It must been that I actually enjoyed that task more,” and then they recommended it more to others. So the idea is that when behavior is one way and our belief is another way, it is very hard to change our behavior. We remember what we did, so we change our belief to coincide with that. That is why, for example, it is really good to play hard to get in romantic adventures. Because somebody would say, “Oh I worked so hard to get this person. Why did I do that? It must mean I really love them.” Or another romantic example is why big weddings are actually useful. You could say to yourself, “Why did I spend so much money on this wedding? It must mean that I really love this person.”

So cognitive dissonance, this idea that we can get people to act and once we get them to act in a certain way we can get them to adjust their beliefs to fit with that, is a very important, powerful notion.

Chris Martenson: So I want to get back to that in just a minute because that is exactly where I wanted to go with this conversation. But right before then there is a step and it is this—and this is one of the most burning questions we have on our site, and it goes like this: Suppose that someone had some really important information. It has been vetted. It is data. It is as good as they can get. And they want to share this with friends, families, colleagues, maybe even strangers. But that information runs counter to the narrative or the belief structure that that person is holding individually or it runs counter to maybe the collective narrative. What can behavioral economics tell us about how to go about that process of sharing, knowing that the subtext of this is people find this to be an incredibly frustrating position to be in?

Dan Ariely: So this is really about my life as a teacher, right. [laughter] That is what I do all the time. And I will tell you what I do is, I start by showing people visual illusions. And visual illusions are something that people just get wrong, it is easy to show people that they are getting wrong this visual illusion. It is not threatening. It is clear that everybody is doing it and it just clear that it is something very basic about being human. So I start with that as a starting point and I basically said, “Let us agree that there are some things that we are all going to be wrong about. It is not about being smart. It is not about knowing anything. This is just how we function.” So that is kind of step one, and I try to get people prepared for that.

And then as step two, I do not talk to people about themselves because that would immediately increase their defense system, right?

Chris Martenson: Yes.

Dan Ariely: So talking about other people is always good. I have an amazing mother-in-law but if I did not I think that would be a good category to try. But you basically try to tell about other people. And another thing that I try and do is, I do not try to say that anything is definitive—which is always the case, right? We just have this big data. And I say, “Look, this is what we have right now; it is truly kind of an amazing data. And rather than trying to push it down, let us think, what if this was correct, what would it tell us?” So that is when they kind of – okay, so let us think about what does that mean, which changes people’s perspective, hopefully, from attacking to thinking about the implications. And then at the end, I tell people, “Look, if you saw a piece of data that contradicts your set of beliefs, I do not think you should abandon your set of beliefs immediately, right? No data should be used to change you completely.”

“But you should take it into account to some degree,” right? This is what we call “Bayesian Updating.” Think about it, right? So here is what you thought before, here is what you know now; what should you potentially do differently? And then finally I encourage people to do experiments. Because I think that once people understand data with their own hands, with their own clients, with their own workplace and so on, their belief changes quite dramatically. So in my case here is an effect, let us say it is the context effect where you add another very expensive item to a list and all of a sudden people buy something differently. I said, “Try it on your colleagues, try it on your customers, see what happens.” And the first time people do an experiment and see the results for themselves, it is a very different process.

Chris Martenson: So this is kind of a go-gently approach, right? So you start out with a visual thing, “Hey look, we are all subject to having—being human, which means we can interpret things in a variety of ways, some of which may be correct or not.” And then secondarily saying, “If this were the case, then what might the implication of this actually be?” Which sort of abstracts it a little bit, gets people to think about it. But fundamentally we are talking about belief structures and positions people might hold as defended fortifications that you are saying it would be better to be a sort of, come in gently, more like a spy than a battalion.

Dan Ariely: Yes and I think it is a combination of going gently and also trying to make it their own. So the moment that people kind of think about the data as their own, say, “Okay, here is a hypothesis, test it out,” those things are very hard to do about macroeconomics questions, right? Like levels of inequality and so on. But in my little world this is actually possible and relatively easy to do. So I think that it is a combination of go gently, try it for yourself, consider the possibility, and then kind of try to own that.

Chris Martenson: Yes. You really shifted my views a number of years ago when I was thinking about climate change and that climate change is a difficult motivating topic because it lacks some features. It lacks a face, or worse, the face that we might associate with it is staring at us in the mirror. It is abstract. It is distant. It is not near and immediate. That there are a variety of things around that story that would require transforming it out of just the strict statistical data into a more human accessible compelling sort of an argument. And what I am wondering then is to get back to this idea is, what are the best ways of motivating people towards taking new actions? That is the work I care about, but marketers would care about it the same or doctors. We could be talking about—we want to try and motivate somebody towards maybe weight loss or saving more money for retirement, reducing excessive consumption, whatever that new action is. What does behavioral economics tell us about the best ways of motivating people to new actions?

Dan Ariely: So a couple of things. First of all what you said about global warming is absolutely the case. In fact if you kind of search the whole globe for the one problem that would maximize human apathy you would come up with global warming, right? It is, as you said, it is long in the future, it will happen to other people first, we do not see it progressing, it does not have a face. And anything we would do is a drop in the bucket, right. And you could contrast it with, what happens when one guy gets on one plane with a small bomb in his shoe, right? It is clearly terrible, but since then we all take our shoes off every time we go on a flight, right? Clearly taking an action. Global warming, if you believe the science, is a much bigger risk than one person going on the plane with a small bomb in his shoe, but we do not react to it. It does not have the same emotional reaction.

And the issue there really is that, knowing, even the people who are environmentalists, right, so people who are environmentalists are trying to convince the non-environmentalists. But even the people who are environmentalists are not behaving that well. So the issue really is, and this is a deep problem, is that we think that we are motivated by goals and by high order aspirations, and so on. The reality is that we are not. And one of the saddest results I think ever in social science is a recent paper by John Lynch and his colleagues. And in this paper they looked at all the literature of financial education, financial literacy and tried to estimate how much can we hope that financial literacy would help people do better. So how much is knowing something about financial literacy can help people achieve better outcomes?

And the result is that the best we can hope for is an improvement of about 6%. And even that is lower for people from lower economic status, and it goes down over time. So in the history of mankind we have tried lots and lots of things. We have not yet been able to show any success on teaching about financial literacy and have that impact people. And the reason is actually quite easy to understand when you think about it. So here is a situation: You need to think about something, you need to learn about it, and then every time you walk in the street you have to think about that. Every time you buy coffee, every time you go to pay rent, every time you go to do something, you have to think about that piece of knowledge. Really, really hard to do, right? I mean, everybody knows that texting and driving is dangerous and stupid. Does it change our daily behavior? Not so much. You find lots of cases in which this general knowledge just does not penetrate your daily behavior.

So the notion from behavioral economics kind of boils down to this notion of choice architecture, which is the idea that our decisions are partly a function of what we know, they are partly a function of our preferences, but to a large degree they are a function of the environment in which we are in. If I came to your office every morning and layered your desk with donuts, fresh donuts, what are the odds that at the end of the year you would not weigh more? Right, very, very low. Now, no matter what you know about donuts and health and so on, this temptation every morning would just be too much. Now I am not saying you will eat all of them but you will eat enough to make your life worse off. So the question that we want to ask is, “What kind of world do we want to create?” Right? If you think that people are an outcome of the world that they are being given, the question is, “What world do we create?”

And the world right now is all about tempting us to do things that are in the world’s short interest and not in our long term interest. So Dunkin’ Donuts, what are they trying to optimize? They want you to buy another donut today. It is not about your health in thirty years from now. What is Facebook trying to optimize? For you to check Facebook one more time today, not your productivity thirty years from now. What are banks trying to get you to do? Use your credit card a couple of more times today. If you think about it, we are in a world where all of the other players are determining our environment, and all of the other players want us to do something now that is good for them. And, what are the forces that are focusing on long term? You would hope it would be the government, but with elections every two years that is very hard to imagine. You would hope it would be your significant other and your family members, and maybe that is the case, maybe religion to some degree, if we had preventative health that might be it as well.

But really our environment is one that just wants to take, take, take from us all the time and we have to fight with this ongoing temptation in a very, very tough way.

Chris Martenson: Well, this idea of choice architecture then, one of the more vexing aspects of our current environment for a lot of people at my site and elsewhere obviously is the choice architecture that our leaders both monetary and fiscal have set up around this whole banking disaster. So what you are talking about, if you put those donuts on my desk top, that is my personal hazard. But this idea of moral hazard that exists when bad decisions get bailed out, when individual losses at the big banks get spread across a larger society, that creates an environment that is very different for the bankers than for everybody else—I will put myself in the “everybody else” bucket. I look at that and I get demotivated by it because I say, “These are people, they behaved badly, they did not suffer any consequences for their actions. In fact I am the one who is going to shoulder this at some point either now or in the future with a dilution of money. And there seems to be no corrective behavior.”

The environment—people respond very quickly to incentives, don’t they? And if they do, how do you read everything that has transpired in, sort of, the macro lack of—in the macro environment — lack of, what shall I call it, accountability or any sort of responses?

Dan Ariely: So, in very general brushstrokes I think that most bankers are in fact inherently decent people. We just put them in situation in which their conflict of interest is tremendously high and their social norms are incredibly dysfunctional, right? When you hear bankers talking about their customers as Muppets, for example.

Chris Martenson: Right.

Dan Ariely: So, they forget who they are serving, right? That they are basically—they are hired by the rest of us to do a particular job. And so they forget this. And then they have terrible conflicts of interest. So, I wrote a lot about conflicts of interest. It is a topic that I worry a lot about. But imagine again this rationalization story that we talked about throughout this discussion. Imagine that I give you a world in which if you can adopt a particular perspective on life you could get $5 Million as a bonus. Wouldn’t you start believing that world? And then everybody around you is doing the same thing and you have some justification for it by talking about the financial market theory and so on. All of a sudden you could see how you could take good people and you could put them in this distorted way, in the same way that we talked about how global warming is probably the perfect storm for inaction, I think Wall Street is the perfect storm for allowing people to rationalize their own selfish motivations as if they are serving other people.

And so I think that is terrible on that side and it is really, really terrible because we have not done anything to change the way we pay bankers. And we have not changed anything in terms of the code of ethics and morality. On the consumer side I think the issue that you describe is absolutely correct. I think there is a tremendous loss of faith. So we have been screwed and we know that we have been screwed. And we know that we are not trusting other people. And I think loss of trust is a central issue for this financial crisis and sadly nobody is trying to do anything about that. Human beings are incredibly forgiving, but nobody has really stood up and said, “I am really sorry. I made all of these terrible mistakes. I want this particular bank to start fresh and caring about people,” right? Nobody has admitted anything. So we as consumers feel that there are these other people on the other side who have behaved terribly, which is true, and that are smug about it, and that nothing is different. And why should we trust them? And we do not.

And it has been really sad because lots of people have basically taken their money out of the market. They are putting it aside. And now they will never be able to retire. And I saw some report on this yesterday that shows that young people do not want to put money in the stock market.

Chris Martenson: Well, I talk with a lot of young people, millennials and whatnot, and the conversation for those who are really paying attention, it comes down to this idea that occupy Wall Street was sort of a signature moment for some of them. And they felt the way that the system responded to them was to take relatively peaceful, in fact entirely peaceful people in most respects, and surround them with the arms of the state. I mean, I was at Zuccotti Park and it was absolutely surrounded with the latest DHS hardware. There was obvious weird cameras going on all over the place. There were riot police literally ringing the entire place. So their sense of agency, that sense of control that you found lacking in the global warming story, I think the young people feel that loss of—they feel they do not have a voice and they do not have a way of remedying that lack of voice.

And so that sense of—that is maybe the opposite of conflict of interest or related topic is that sense of, How do we feel that we have a sense of control or a narrative that has us as part of the storyline? That is something, when I talk with young people, they are not just opting out of the stock market. Many of them are opting out of much of what they see around them. And maybe that is a typical generational thing to happen. I do not know.

Dan Ariely: I do not think it is a generational thing. I think there is a tremendous feeling of lack of control, agency, and helplessness. And the sad realization, and this is one of the things that came out of financial crisis, is that it is much harder to start a new bank now. So young people are actually quite idealistic and I think people would have started new banks where they behaved very, very differently. But what happened is that it is really, really tough to open now a new bank. So that is making it less likely. But I am still hopeful. I think that this anger and frustration just need to be channeled in a better way. And I think that eventually there will be some—I am not a religious person but the story from the Bible is that God made the people of Israel walk around the desert for 40 years until the old generation that worshipped the golden calf passed away. I do think that we need a new generation of bankers. I think you cannot take the old generation of bankers and rehabilitate them.

Recent history is not showing us that this is something we should hope for. But there is a real question of,How do we create a new generation of bankers that are going to be—think of themselves as the caretakers of society rather than the rapists.

Chris Martenson: Yes. And it is that idea of bringing that idealism and having that coalesce into a vision that people can believe in. You have seen the studies. Most—a large majority of people, I think 68% last study I saw, or poll, said that the country is on the wrong track. And so, to have a sense of what the right track is you need a leadership that is willing to articulate what is clearly a new and different vision. Not just the bankers are lacking that. It seems to be lacking at a number of levels. But I think it is out of that vacuum that, obviously, that people will step into those roles and start to articulate a vision. And so maybe that is the interregnum we are in is, we are kind of between visions. We have the ’50s and ’60s that sort of morphed into ’80s and ’90s and now we are sort of wondering what comes next, and by my judgment I do not see a good articulation of that yet.

So with that, I really want to thank you for your time and most importantly your work. I think your work is just fantastic. It has changed how I think about the world. And it is just fantastic. So Dan, how can people follow your work more closely if they are inspired?

Dan Ariely: So, I have a website. It is DanAriely.com. D-A-N-A-R-I-E-L-Y. And actually, in the middle of March, we are starting a free online course on behavioral economics.

Chris Martenson: Great!

Dan Ariely: This would be on the website called Coursera, coursera.org. And our website is called A Beginner’s Guide to Irrational Behavior. I will also post information on my website. But it is going to be a time consuming class. So, every week there will be video lectures and discussion groups and some readings. But if people want to, kind of, delve a bit more seriously about behavior economics that is, I think, one good way to do it.

Chris Martenson: Oh that will be fantastic. I am sure we will have people signing up for that. We will put links right below this podcast so people can follow all of that nice and easily. And I am looking forward to it. So again Dan, thank you so much for your time.

Dan Ariely: My pleasure, and nice talking to you again and looking forward to next time.

Chris Martenson: Fantastic.

Government Lays Groundwork To Confiscate Your 401k and IRA: “This Is Happening”

Government Lays Groundwork To Confiscate Your 401k and IRA: “This Is Happening”.

Mac Slavo
February 13th, 2014


This morning Reuters obtained a leaked proposal disclosing that European Union officials are looking for new and innovative ways to fund their immense debt levels. As noted by Zero Hedge, they’re no longer turning exclusively to central bankers to simply print more money as needed. Because last year’s bank bail-in forcing the confiscation of funds from average depositors in Cyprus worked so well, EU regulators and bankers have determined that they’ll use a similar method to fund their future endeavors.

In a nutshell, and in Reuters’ own words, “the savings of the European Union’s 500 million citizens could be used to fund long-term investments to boost the economy and help plug the gap left by banks since the financial crisis, an EU document says.”

The solution? “The Commission will ask the bloc’s insurance watchdog in the second half of this year for advice on a possible draft law “to mobilize more personal pension savings for long-term financing”, the document said.”

Mobilize, once again, is a more palatable word than, say, confiscate.

This is what happens when governments run out of money.

But if you think this is limited to just Europe, then consider the words of President Barack Obama in his recent State of the Union address.

For all intents and purposes, a similar groundwork is being laid right here in America.

They’ve already taken over the health care industry… why not nationalize our retirement savings while they’re at it?

(Reprinted with permission from Sovereign Man. You can read the full analysis here.)

This is basically the offer that the President of the United States floated last night.

And like an unctuously overgeled used car salesman, he actually pitched Americans on loaning their retirement savings to the US government with a straight face, guaranteeing “a decent return with no risk of losing what you put in. . .”

This is his new “MyRA” program. And the aim is simple– dupe unwitting Americans to plow their retirement savings into the US government’s shrinking coffers.

We’ve been talking about this for years. I have personally written since 2009 that the US government would one day push US citizens into the ‘safety and security’ of US Treasuries.

Back in 2009, almost everyone else thought I was nuts for even suggesting something so sacrilegious about the US government and financial system.

But the day has arrived. And POTUS stated almost VERBATIM what I have been writing for years.

The government is flat broke.Even by their own assessment, the US government’s “net worth” is NEGATIVE 16 trillion. That’s as of the end of 2012 (the 2013 numbers aren’t out yet). But the trend is actually worsening.

In 2009, the government’s net worth was negative $11.45 trillion. By 2010, it had dropped to minus $13.47 trillion. By 2011, minus $14.78 trillion. And by 2012, minus $16.1 trillion.

Here’s the thing: according to the IRS, there is well over $5 trillion in US individual retirement accounts. For a government as bankrupt as Uncle Sam is, $5 trillion is irresistible.

They need that money. They need YOUR money. And this MyRA program is the critical first step to corralling your hard earned retirement funds.

At our event here in Chile last year, Jim Rogers nailed this right on the head when he and Ron Paul told our audience that the government would try to take your retirement funds:

I don’t know how much more clear I can be: this is happening. This is exactly what bankrupt governments do. And it’s time to give serious, serious consideration to shipping your retirement funds overseas before they take yours.

As former Congressman Ron Paul notes, the government will stop at nothing.

“They’ll use force and they’ll use intimidation and they’ll use guns, because you can’t challenge the State and you can’t challenge the State’s so-called right to control the money,” warns Paul. “It’s already indicated that they will confiscate funds and they will [confiscate] pension funds.”

This didn’t just happen over night. The move to make this reality has been going on for quite some time. The first time it was mentioned publicly in any official capacity was at a 2010 Congressional hearing:

Democrats in the Senate on Thursday held a recess hearing covering a taxpayer bailout of union pensions and a plan to seize private 401(k) plans to more “fairly” distribute taxpayer-funded pensions to everyone.

Sen. Tom Harkin (D-Iowa), Chairman of the Health, Education, Labor and Pensions (HELP) Committee heard from hand-picked witnesses advocating the infamous “Guaranteed Retirement Account” (GRA) authored by Theresa Guilarducci.

In a nutshell, under the GRA system government would seize private 401(k) accounts, setting up an additional 5% mandatory payroll tax to dole out a “fair” pension to everyone using that confiscated money coupled with the mandated contributions.  This would, of course, be a sister government ponzi scheme working in tandem with Social Security, the primary purpose being to give big government politicians additional taxpayer funds to raid to pay for their out-of-control spending.

You’d think that such an idea would be immediately dismissed by the American public, but it has only gained steam since, as evidenced by a 2012 hearing held at the U.S. Labor Department:

The hearing, held in the Labor Department’s main auditorium, was monitored by NSC staff and featured a line up of left-wing activists including one representative of the AFL-CIO who advocated for more government regulation over private retirement accounts and even the establishment of government-sponsored annuities that would take the place of 401k plans.

“This hearing was set up to explore why Americans are not saving as much for their retirement as they could,” explains National Seniors Council National Director Robert Crone, “However, it is clear that this is the first step towards a government takeover. It feels just like the beginning of the debate over health care and we all know how that ended up.

Such “reforms” would effectively end private retirement accounts in America, Crone warns.

A few years ago the government of the United States of America nationalized nearly 1/6th of our economy when they took over the health care system with forced mandates. In the process they essentially took control of $1.6 trillion in yearly industry revenues.

But that’s nothing compared to private savings. The total amount of retirement assets in America, including 401k, IRA and savings accounts is around $21 trillion. With our national debt coincidentally approaching the same, the government sees big money and potentially a way out of our country’s fiscal disaster.

This will start voluntarily with the MyRA and other state-sponsored programs. But when not enough Americans are making it their patriotic duty to turn over their funds to their government, they’ll mandate compliance with the stroke of a pen just as they did with thePatient Affordable Care Act.

And just like Obamacare it will be enforced by the barrel of a gun. Failure to comply will mean confiscation without recourse and prison time.

All they need now is a trigger.

And that trigger will likely come in the form of another stock market collapse. Wipe out Americans’ in a stock market crash and scare the heck out of them with more economic bad news, and millions of our countrymen will be all too willing to hand it over to Uncle Sam. Panic is a powerful motivator and what better way to get people on board than by threatening them with squalor and destitution in their old age if they don’t go along with it?

Government officials have been actively working to make this a reality for years. The Europeans are doing the same.

You can put your head in the sand or cover your ears and pretend this is not happening, but that won’t change the outcome.

They will take everything they can get their hands on.

Paper Gold Ain’t as Good as the Real Thing | Casey Research

Paper Gold Ain’t as Good as the Real Thing | Casey Research.

Doug French, Contributing Editor
February 12, 2014 10:37am
For the first time ever, the majority of Americans are scared of their own federal government. A Pew Research poll found that 53% of Americans think the government threatens their personal rights and freedoms.

Americans aren’t wild about the government’s currency either. Instead of holding dollars and other financial assets, investors are storing wealth in art, wine, and antique cars. The Economist reported in November, “This buying binge… is growing distrust of financial assets.”

But while the big money is setting art market records and pumping up high-end real estate prices, the distrust-in-government script has not pushed the suspicious into the barbarous relic. The lowly dollar has soared versus gold since September 2011.

Every central banker on earth has sworn an oath to Keynesian money creation, yet the yellow metal has retraced nearly $700 from its $1,895 high. The only limits to fiat money creation are the imagination of central bankers and the willingness of commercial bankers to lend. That being the case, the main culprit for gold’s lackluster performance over the past two years is something else, Tocqueville Asset Management Portfolio Manager and Senior Managing Director John Hathaway explained in his brilliant report “Let’s Get Physical.

Hathaway points out that the wind is clearly in the face of gold production. It currently costs as much or more to produce an ounce than you can sell it for. Mining gold is expensive; gone are the days of fishing large nuggets from California or Alaska streams. Millions of tonnes of ore must be moved and processed for just tiny bits of metal, and few large deposits have been found in recent years.

“Production post-2015 seems set to decline and perhaps sharply,” says Hathaway.

Satoshi Nakamoto created a kind of digital gold in 2009 that, too, is limited in supply. No more than 21 million bitcoins will be “mined,” and there are currently fewer than 12 million in existence. Satoshi made the cyber version of gold easy to mine in the early going. But like the gold mining business, mining bitcoins becomes ever more difficult. Today, you need a souped-up supercomputer to solve the equations that verify bitcoin transactions—which is the process that creates the cyber currency.

The value of this cyber-dollar alternative has exploded versus the government’s currency, rising from less than $25 per bitcoin in May 2011 to nearly $1,000 recently. One reason is surely its portability. Business is conducted globally today, in contrast to the ancient world where most everyone lived their lives inside a 25-mile radius. Thus, carrying bitcoins weightlessly in your phone is preferable to hauling around Krugerrands.

No Paper Bitcoins

But while being the portable new kid on the currency block may account for some of Bitcoin’s popularity, it doesn’t explain why Bitcoin has soared while gold has declined at the same time.

Hathaway puts his finger on the difference between the price action of the ancient versus the modern. “The Bitcoin-gold incongruity is explained by the fact that financial engineers have not yet discovered a way to collateralize bitcoins for leveraged trades,” he writes. “There is (as yet) no Bitcoin futures exchange, no Bitcoin derivatives, no Bitcoin hypothecation or rehypothecation.”

So, anyone wanting to speculate in Bitcoin has to actually buy some of the very limited supply of the cyber currency, which pushes up its price.

In contrast, the shinier but less-than-cyber currency, gold, has a mature and extensive financial infrastructure that inflates its supply—on paper—exponentially. The man from Tocqueville quotes gold expert Jeff Christian of the CPM Group who wrote in 2000 that “an ounce of gold is now involved in half a dozen transactions.” And while “the physical volume has not changed, the turnover has multiplied.”

The general process begins when a gold producer mines and processes the gold. Then the refiners sell it to bullion banks, primarily in London. Some is sold to jewelers and mints.

“The physical gold that remains in London as unallocated bars is the foundation for leveraged paper-gold trades. This chain of events is perfectly ordinary and in keeping with time-honored custom,” explains Hathaway.

He estimates the equivalent of 9,000 metric tons of gold is traded daily, while only 2,800 metric tons is mined annually.

Gold is loaned, leased, hypothecated, and rehypothecated, over and over. That’s the reason, for instance, why it will take so much time for the Germans to repatriate their 700 tonnes of gold currently stored in New York and Paris. While a couple of planes could haul the entire stash to Germany in no time, only 37 tonnes have been delivered a year after the request. The 700 tonnes are scheduled to be delivered by 2020. However, it appears there is not enough free and unencumbered physical gold to meet even that generous schedule. The Germans have been told they can come look at their gold, they just can’t have it yet.

Leveraging Up in London

The City of London provides a loose regulatory environment for the mega-banks to leverage up. Jon Corzine used London rules to rehypothecate customer deposits for MF Global to make a $6.2 billion Eurozone repo bet. MF’s customer agreements allowed for such a thing.

After MF’s collapse, Christopher Elias wrote in Thomson Reuters, “Like Wall Street cocaine, leveraging amplifies the ups and downs of an investment; increasing the returns but also amplifying the costs. With MF Global’s leverage reaching 40 to 1 by the time of its collapse, it didn’t need a Eurozone default to trigger its downfall—all it needed was for these amplified costs to outstrip its asset base.”

Hathaway’s work makes a solid case that the gold market is every bit as leveraged as MF Global, that it’s a mountain of paper transactions teetering on a comparatively tiny bit of physical gold.

“Unlike the physical gold market,” writes Hathaway, “which is not amenable to absorbing large capital flows, the paper market, through nearly infinite rehypothecation, is ideal for hyperactive trading activity, especially in conjunction with related bets on FX, equity indices, and interest rates.”

This hyper-leveraging is reminiscent of America’s housing debt boom of the last decade. Wall Street securitization cleared the way for mortgages to be bought, sold, and transferred electronically. As long as home prices were rising and homeowners were making payments, everything was copasetic. However, once buyers quit paying, the scramble to determine which lenders encumbered which homes led to market chaos. In many states, the backlog of foreclosures still has not cleared.

The failure of a handful of counterparties in the paper-gold market would be many times worse. In many cases, five to ten or more lenders claim ownership of the same physical gold. Gold markets would seize up for months, if not years, during bankruptcy proceedings, effectively removing millions of ounces from the market. It would take the mining industry decades to replace that supply.

Further, Hathaway believes that increased regulation “could lead, among other things, to tighter standards for collateral, rules on rehypothecation, etc. This could well lead to a scramble for physical.” And if regulators don’t tighten up these arrangements, the ETFs, LBMA, and Comex may do it themselves for the sake of customer trust.

What Hathaway calls the “murky pool” of unallocated London gold has supported paper-gold trading way beyond the amount of physical gold available. This pool is drying up and is setting up the mother of all short squeezes.

In that scenario, people with gold ETFs and other paper claims to gold will be devastated, warns Hathaway. They’ll receive “polite and apologetic letters from intermediaries offering to settle in cash at prices well below the physical market.”

It won’t be inflation that drives up the gold price but the unwinding of massive amounts of leverage.

Americans are right to fear their government, but they should fear their financial system as well. Governments have always rendered their paper currencies worthless. Paper entitling you to gold may give you more comfort than fiat dollars.

However, in a panic, paper gold won’t cut it. You’ll want to hold the real thing.

There’s one form of paper gold, though, you should take a closer look at right now: junior mining stocks. These are the small-cap companies exploring for new gold deposits, and the ones that make great discoveries are historically being richly rewarded… as are their shareholders.

However, even the best junior mining companies—those with top managements, proven world-class gold deposits, and cash in the bank—have been dragged down with the overall gold market and are now on sale at cheaper-than-dirt prices. Watch eight investment gurus and resource pros tell you how to become an “Upturn Millionaire” taking advantage of this anomaly in the market—click here.

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