dangerous (2)

I have spent the past week or so doing research to write a blog on the dangers involved in the current government's spending policies and the effect they will have on each of us.  Then I received this email from The Sovereign Man, aka Simon Black.  I will still write that blog at a later date but Mr. Black has stated it so well and with a different approach than I am planning that I wanted to share his comments with you.  The following is the Email I received in toto:

By 1789, a lot of French people were starving. Their economy had long since deteriorated into a weak, pitiful shell. Decades of unsustainable spending had left the French treasury depleted. The currency was being rapidly debased. Food was scarce, and expensive.

Perhaps most famously, though, the French monarchy was dangerously out of touch with reality, historically enshrined with the quip, "Let them eat cake."

The Bourbon monarchy paid the price for it, eventually losing their heads in a 1793 execution.  But it took the French economy decades to finally recover.

Along the way, the government tried an experiment: issuing a form of paper money. It didn't matter to the French politicians that every previous experiment with paper money in history had been an absolute disaster.

As French Assemblyman M. Matrineau put it in 1790, "Paper money under a despotism is dangerous. It favors corruption. But in a nation constitutionally governed, which itself takes care in the emission of its notes [and] determines their number and use, that danger no longer exists."

Translation: This time is different. We're different. We're smarter. We won't suffer the same fate. TRUST US.

Within a few years, hyperinflation had taken hold in France. A measure of flour that sold for two francs in 1790 was selling for 225 francs by 1795. Everything soared. Carriage hires. Butter. Sugar. Everything.

Naturally, the French government decided to fix this problem by printing even more money, doubling the money supply from 7 to 14 billion units in a six-month period.

When these measures also failed, the French government imposed every control in the book-- price controls, capital controls, information controls, people controls. They confiscated lands, they filled the prisons, they waged genocide against their own people.

History shows there are always consequences to entrusting a paper money supply to a tiny handful of men. The French experiment is but one example. Our modern fiat experiment will be another.

Like the French, our politicians think this time is different. Our central bankers think they're smarter. And they want us to trust them. After all, what could go wrong?

Ben Bernanke, a man who has expanded the Federal Reserve balance sheet by nearly 300% during his tenure as central banker, just wrapped up Congressional testimony downplaying the risks of his own money printing:

"We do not see the potential costs of the increased risk-taking in some financial markets as outweighing the benefits of promoting a stronger economic recovery..."

It's also quite interesting that the Federal Reserve Chairman is discussing the 'stronger' economy, especially when by the government's own numbers, US GDP contracted in the 4th quarter of 2012. Meanwhile the price of everything from food to fuel keeps getting higher.

Simultaneously, politicians in the US are racing to avoid imminent 'sequestration' budget cuts. They've created a problem caused by excess spending, and their solution is to ensure they can keep spending.

The French were in the same boat in the 18th century. During the time of Louis XV, no one could imagine how French society could possibly function if they cut the welfare system or defense budget. So they kept spending... kept going into debt... and kept debasing the currency.

We know what happened next.

The US already must borrow money just to pay interest on the money they've already borrowed. The political elite is dangerously out of touch. This time is not different. Assuming otherwise is really dangerous.

Simon Black
Senior Editor, SovereignMan.com


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It can be a lot like watching the night sky for comets . . . . The New York Stock exchange has apparently ceased and desisted creation and emission of any more Hindenburg Omens for the time being . . . ah, shucks! If the rare but often portentous Hindenburg Omens are “up to snuff” expect a serious stock market drop by the day before Rajjpuut’s birthday (of course, they are purported to have “called market crashes as far as four months in the future –so who knows?) which means Friday, October 15, 2010. But hold on a minute, now, just like that, it’s cancelled, like some school day fire drill? Oh, hell, it’s just too confusing to be understood! For those of you who like to delve into such things deeply:



The Hindenburg Omen is a so-called “technical indicator” which occurs very infrequently but which has had more than routine success in calling market drops of 5% or better and even stock market crashes. Technical data has nothing to do with economic reality and the underlying fundamentals of individual companies or the entire market, but only with everyday stock market variations in prices and volume; and patterns of highs; lows; volatility changes; moving averages; etc. The precise HO triggers are moderately complicated and seem to indicate a stock market that’s lost its way, becomes undecided whether to climb or fall . . . (see the web link above) and finally surrenders to at least a mild downward paroxysm; our recent New York Stock Exchange HO history reads like this:

8/11/2010 Witnessed a “near HO” event.

8/12/2010 Triggered a “real Hindenburg Omen” a preliminary signal which means nothing yet . . . .

8/13/2010 Friday the 13th saw another “near HO” event.

8/19/2010 Saw another “near HO” event.

8/20/2010 Triggered the Hindenburg Omen confirmation necessary to indicate the pattern is “demanding extreme caution!”

8/24/2010 Triggered another Hindenburg Omen confirmation, but wait, the 10-week moving average of stocks has begun to fall so make that a “false-confirmation” shucky-ding-dong-darn!

8/25/2010 Triggered the 3rd HO confirmation, but wait, the 10-week moving average of stocks has begun to fall so make that a second “false-confirmation” gee-whilikers!

8/31/2010 Triggered the 4th HO Confirmation, but wait, the 10-week moving average of stocks has begun to fall so make that a third “false-confirmation” doggone it!

9/5/2010 through 9/16/2010 The McClellan Oscillator which had been negative for some time, turned positive which “negates” the validity of any possible new HO signals and “cancels out” the validity of all the August, 2010 signals???? It NEVER HAPPENED! Talk about a lot of hooey!

Well, so much for the Hindenburg Omen which now “officially never happened.” But now as everybody starting today finds out about this from official channels such as the Wall Street Journal expect a brief surge in prices and buyer confidence and, of course, that’s when Ol’ Rajjpuut (ever the contrarian) would say is the time to be most careful. But rather than the HO HO HO Hindenburg Omen, the next stock market crash, should it come, will have to get predicted by some other portents. Let's see the New York Stock Exchange was born May 17, 1792 under the buttonwood tree in NYC at 7:52 a.m. which means it's a Taurus (the bull! one might suppose that Leo the lion is as close as the signs get to being an actual bear!) Oh, forget it . . . . Good luck.

Ya’all live long, strong and ornery,


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