Looking Backwards …
LB #1
This week the BRICS summit will take place in Kazan, Russia. One of the main topics will be the alternative payments system to the US dollar. This from Gleb Bryanski at Reuters, “Central to that is the proposal for a new payments system based on a network of commercial banks linked to each other through the BRICS central banks, according to a document prepared by Russia’s finance ministry and central bank, distributed to journalists ahead of the summit.
The system would use blockchain technology to store and transfer digital tokens backed by national currencies. This, in turn, would then allow those currencies to be easily and securely exchanged, bypassing the need for dollar transactions.
Russia sees it as a way to resolve increasing problems in settling trade payments, even with friendly countries such as China, where local banks fear they could be hit by secondary sanctions by the United States.”
This is a very difficult undertaking. The US dollar is the world’s reserve currency which is no longer backed by anything. It used to be gold, but that went away in 1971. When the US froze Russia’s reserve assets and kicked them out of the Swift banking settlement system, it was supposed to isolate them and ruin their economy. Russia has just gone around that system and continued to export oil, for example, to China and India replacing Europe. That has been cumbersome regarding settlements so now they are working on optimizing their new processes. My concern is that IF and it is a big IF, the world gets this BRICS system put together that they might sanction the US. We will be the ones on the outside looking in. Regardless of whether or not that happens, reduced and restricted trade only leads to higher prices and is a clear reversal of the last half of the last century. Higher prices are here to stay.
LB #2
Try swiping your card in western North Carolina right now. There is nowhere to swipe. When there is no power there is no money. Have you seen the AI data centers being built and how much power they use? In a blackout, in a brown out, your money is out. This is when you need money the most and that is when it is not there. At least one country sees how that is a problem. This from Nick Corbishley at nakedcapitalism.com, “Recent trends and developments in Northern Europe suggest the shift away from cash and toward purely digital payment systems may have reached its limits — at least for now.
In a major U-turn in the Global War on Cash, the government and central bank of Norway, one of Europe’s most cashless economies, are seeking to slow or even reverse the mass abandonment of cash. Only 3% of Norwegians used cash in their latest purchase in a physical shop, according to a recent central bank survey.
In a bid to change that, a new amendment to Norway’s Financial Contracts Act came into force on October 1 that bolsters citizens’ rights to pay with cash in retail settings. The new legislation should sound the death knell for all the “we only accept cards” signs plastered on shop windows throughout the country, reports the Norwegian online newspaper Nettavisen.”
I simply avoid we only accept cards at every chance possible. Let’s say the restaurant that you are eating at doesn’t accept cash, but only accepts cards. Ok, well the average credit card cost for a restaurant is about 3%, it varies a bit depending on the volume and card type but let’s just say 3%. Do you know what the inflation rate is? 3%. That restaurant is going to pass that cost on to you in the meal price so if you are willing to use a card then I don’t want to hear anyone talking about how much they don’t like inflation. It is the same with ordering online or using a reservation tool. If some fancy restaurant that charges big money for little food brought out in 9 courses that looks like art wants to have an open table app that allows you to make a reservation, and they pass that cost on to you then as a percentage of the total price then you will hardly notice it. If you expect your local Mom and Pop restaurant to have the same service, then complain about the price increases then that is on you. I support these places all the time, and I choose not to support Visa or American Express. American Express bought Resy and now they have an even bigger footprint on your final bill. I pay cash and the restaurants keep the prices low. We both win and big Credit loses. That’s a win, win, win.
LB #3
We talked about Daron Acemoglu on Oct 6 with his views that AI will be a bust. Actually I think it is pronounced Acemoglu, but I digress. This week the Nobel prizes were awarded for Economics and the winners were Daron, Simon Johnson, pronounced Johnson, and James Robinson for their work on wealth inequality between nations. This from Jenni Reid at CNBC, “The academics have helped show why societies with “poor rule of law and institutions that exploit the population do not generate growth or change for the better,” the Nobel committee said, demonstrating the “importance of societal institutions for a country’s prosperity.”
Acemoglu and Johnson are professors at the Massachusetts Institute of Technology, while Robinson is director of the University of Chicago’s Pearson Institute for the Study and Resolution of Global Conflicts with a specialism in the economies of sub-Saharan Africa and Latin America. Acemoglu and Robinson wrote the popular 2012 book “Why Nations Fail: The Origins of Power, Prosperity, and Poverty,” which explores the roots of inequality and why some countries successfully gain wealth and influence.” That book is a wonderful presentation of how choices are so important and the long-term ramifications of those choices. If Ben Bernanke hadn’t won this same Nobel prize I’d have more confidence in this award.
Looking Forwards…
LF#1
A classic example of those national choices being important to the success of the country is Cuba. What is happening down there right now is stunning in the 21st century. This from Dave Sherman at Reuters, “Cuba’s national electrical grid first crashed around midday on Friday after the island’s largest power plant shut down. The grid collapsed again on Saturday morning, state-run media reported.
By early evening, authorities reported some progress restoring power before announcing the grid had once again collapsed.
“Tonight at 10:25 p.m. the total disconnection of the national electro-energetic system occurred again,” the Havana Electric company said on Telegram late on Saturday. A third grid collapse marks a major setback in the government’s efforts to quickly restore power to exhausted residents already suffering from severe food, medicine and fuel shortages.
Reuters reporters witnessed two small protests overnight, one in Marianao and the other in the Cuatro Caminos area of Havana. Various videos of protests elsewhere in the capital began to crop up on social media late on Saturday, though Reuters was not able to verify their authenticity.
Internet traffic dropped off sharply in Cuba on Saturday, according to data from internet monitoring group NetBlocks, as vast power outages made it all but impossible for most island residents to charge phones and get online.”
Cuba has made poor choices since Fidel Castro took over in 1959. What was an extension of Florida and a very first world country has slid back into the dark ages, literally. The country is dark for hours at a time. Think about what this means when the electricity doesn’t work. No internet, no credit card networks, no online reservations networks (ok, I had to throw that in there), no mobile phones, no Bitcoin, no light, no heat, and no air conditioning. Cuba has become a Bygone Relic, but it isn’t a good one. Bad decisions have doomed them. Don’t let bad decisions doom you.
LF#2
On October 9th we discussed the floods and why I didn’t want my tax dollars to go to rebuilding homes and businesses in areas where the flooding has happened over and over and over again. On October 12, economist Peter Schiff posted this on his website Schiff Gold, “Even worse is the fact that federal intervention has made natural disasters more destructive. By subsidizing insurance in disaster-prone regions and crowding out local aid, organizations like FEMA ultimately make people more vulnerable to disasters:
“In fact, because now everybody expects the federal government to take care of every emergency, nobody is prepared. It would be much more efficient if we allowed local governments to pay for their own disasters and prepare for them. But we’ve created this huge moral hazard—that’s the real disaster. It’s the moral hazard created by FEMA. Now, natural disasters collectively cost a lot more because we’ve outsourced everything to the federal government, which even subsidizes people to build in flood zones.”
Imagine a world where FEMA doesn’t come in and rebuild on the taxpayer dime. There would be very little in the way of repeat disasters. That is how it is supposed to be. Learn from your mistakes people or, and this is a very important or, pay for it yourself and I won’t say a word. If you want to live in a location that is your home for x amount of generations and you have roots there and you love the hills of Tennessee or the sandy beaches of Florida and you want to use your money and your labor, energy, and hard work which is what money should represent anyway, to rebuild then go right ahead. Peter Schiff sums it up best, “ In times of disaster, federal policy should mirror the actions of the last admirable Democratic president:
“Grover Cleveland was the last great Democratic president. When there was a drought in Texas and Congress appropriated around $10,000 to help the drought-stricken farmers, he vetoed the bill. … He said, ‘I could lay my finger on no section of the Constitution that authorizes this spending.’ So he vetoed it. He said, ‘Look, I feel badly for the farmers, and I want to help them, but as president, I can’t use taxpayer money to help them.’” Amen.
LF#3
On Bygone Relics last week, we discussed the military coup that took place in the US and how the military is now calling the shots regarding tactical policy and diplomacy. We also noted how Secretary of Defense Lloyd Austin was now seemingly running this country. We have also watched how the Gaza humanitarian disaster has worsened as Israel has cut off aid leaving the Palestinians to be reduced to hunger, thirst, and the bare living essentials. Well after the coup this policy seems to have changed. This from ZeroHedge, “Secretary of State Antony Blinken and Secretary of Defense Lloyd Austin this week issued a letter to the Israeli government telling it to take “urgent and sustained action” to reverse course on the spiraling humanitarian situation in Gaza or risking seeing select US military assistance cut off. The US has reportedly given Israel 30 days to demonstrate progress… The allegations come after several NGOs and rights groups have allege that Israel has blocked vital aid from getting into the Gaza Strip, including aid sent from the US.”
What was the result of this sternly worded letter? Also from ZeroHedge, “The letter, issued by US Secretary of State Antony Blinken and Secretary of Defense Lloyd Austin is being widely considered the ‘strongest’ written warning by the US thus far… Israel on Wednesday has announced that fifty trucks loaded with supplies have entered northern Gaza—much of which was supplied by Jordan. A statement from the Israeli Defense Ministry agency overseeing the supplies said that “50 trucks carrying humanitarian aid — including food, water, medical supplies and shelter equipment provided by Jordan — were transferred today to northern Gaza through the Allenby Bridge Crossing and the Erez West Crossing as part of our commitment to deliver humanitarian aid to Gaza.” Wow! That’s all I can say. Lloyd Austin’s new administration seems to be getting this done in a timely manner. I guess when the other side knows a) you’re not bluffing or b)you actually want them to do what you are telling them and not using hollow words, that things get done quite quickly when your country’s regional supremacy and very survival suckles on the teat of the US military. Mr. Austin keep up the good work. I find it increasingly ironic that Israel of all places needs to be told that you can’t keep people in confined spaces and withhold food and water. Nobody wants to see women and children dying of malnutrition.
Sincerely Yours,
C Thomas Printer
The Dow Jones finished trading …at 43,275.
The 10-year Treasury bond is at …at 4.083%
The price of Brent Crude is … at $73.06 per barrel.
The price of gold is … at $2,736/oz.
The price of silver is … at $33.92/oz.
I leave you with this from the information superhighway, what do you call a happy cowboy, a jolly rancher.
Thank you for listening today and you can find all of our articles and more on our website cthomasprinter.com.