Central Bankers More Dangerous than Madoff — Targeted Inflation Rate

The movie Catch Me If You Can was based on the life (and crimes) of Frank Abagnale.

He learned dressing for the part was critical to winning the confidence of his victims.

Abagnale used various guises — businessman, pilot, doctor — to convince people he was the real deal. It was a magic act…look at the right hand while the left hand reaches into your pocket.

Bernie Madoff knew keeping up appearances was crucial to the success of a good swindle. Fifth Avenue apartment. Holiday home in the Hamptons. Designer suits. Cuban cigars. Well-appointed offices.

The art of a good con is to be so convincing in your delivery, that no one questions the substance of what you are offering.

Anyone who dares challenge the premise of the con is dismissed with ‘they don’t understand how it works’.

When his long-running Ponzi scheme collapsed, Bernie Madoff was subjected to scorn, ridicule and public anger.

Justice was seen to be done when he received a prison sentence of 150 years.

In the wash-up of the scam, it appears Madoff’s ‘investors’ have recovered 80 cents in the dollar.

As reported by The Wall Street Journal on 14 April 2021:

…a court-appointed trustee learned the [Madoff] scheme had taken an estimated $17.5 billion of client money, of which more than $14 billion has been recouped and distributed to account holders at Mr. Madoff’s now-defunct investment firm.

HOODWINKED! Why Australia’s ‘miracle’ economy is a farce

Central Banks’ Con

When it comes to the con being run by central banks, the loss of US$3.5 billion is nothing more than a rounding error.

How much money has been effectively stolen from savers by central banks deliberately supressing interest rates at zero or below?

Based on a global savings pool of US$22 trillion, the orchestrated ‘theft’ can be measured in the hundreds of billions of dollars.

Suppressed rates have forced retirees to reach for yield — paying high prices for low-quality assets AND forced younger households to burden themselves with high six- and low seven-figure mortgages.

All this, we are told, is being done in the name of economic growth.

What a crock of s**t. But people are buying it.

Market and economic commentators lap up the central banker BS and then feed it back as gospel to a gullible public.

Take the recent ‘disappointing’ CPI here in Australia.

Oh, woe is us for not hitting the targeted inflation rate.

The commentary accompanying the latest inflation number included:

…it had been a disappointing start to the inflation recovery.

We need faster inflation, which is ironic given how many years (decades) we spent fighting high inflation…

Wages growth is key…

Please, I am imploring a mainstream or institutional economist to tell me how households paying higher prices is a wonderful and much desired outcome.

Please. Please. Please.

Targeted Inflation Rate

Here’s an edited extract from The Rum Rebellion issue dated 14 October 2020:

Would you like to pay more or less for rent, food, alcohol, childcare, electricity, medical services, education and motor vehicle expenses?

The obvious reply is…less. Preferably, much less.

Why would I even ask this patently dumb question?

Bear with me.

Here’s my next question, “is inflation good or bad for the economy?”

Most people respond with “good”.

Why?

Because everyone knows that inflation is good for the economy.

Who instilled this society-wide belief in the positive power of inflation? Those good folks who know all there is to know about the theory of economics.

Central banks — from the Fed, Bank of England, ECB, Bank of Japan and RBA — are all trying their hardest to create inflation…each one is committed to a targeted inflation rate of 2% or better.

If they say inflation is OK, then it must be OK.

But is it?

Inflation is calculated on an expenditure weighted basket of goodies…


Consumer Price Index

Source: RBA

[Click to open in a new window]

If you’re a believer in the “inflation is good” doctrine, then you should be “over the moon” when you receive a higher power bill…electricity costs are included under “Housing”.

Paying more for power is making a solid contribution to moving our CPI number higher.

Well done.

And, if you truly want to help the RBA meet its inflation target, then you can do your civic duty by demanding to pay even more for rent, cigarettes, alcohol, food, education and childcare.

In these days of social media advocacy, we can all do our bit for the RBA’s cause. Let’s start a campaign titled, “Consumers who want higher prices”.

Anyone want to sign up?

No.

Why not?

Isn’t inflation meant to be good for us?

 

The very idea that paying more is good for you is beyond stupid. Yet, this is what the public is peddled and accepts with barely a whimper.

The edicts from central bankers and their fawning followers are rarely, if ever, subjected to any scrutiny.

Why doesn’t a journalist ask the RBA Governor or mainstream economist ‘which items in the CPI basket do you want people to pay more for?’ Very simple question. Yet, never asked.

On what planet is paying less for goods and/or services deemed to be…a disappointing start?

It should be celebrated. Not lamented.

Oh, that’s right, if we get higher inflation, we’ll get wage growth.

Maybe. Maybe not.

What about all those retirees whose savings are being eroded by that higher inflation? What if they decide to spend less?

Or those forced into higher-risk assets lose money in market correction/crash and they also decide to spend less.

Spending restraint — as we saw during COVID-19 — is kryptonite to the ‘debt-funded economic growth model’ of academic economists.

But let’s say spending restraint does not materialise and we do get the longed-for wage growth.

Wages go up 3%…taxes take one-third to one-half of the wage rise. On a net (after tax) basis, if inflation is running at 2%, you’re no better off.

Can’t people see this is nothing more than an exercise in the dog chasing its own tail?

How does this nonsense pass as sound economic policy? But it does.

The real agenda behind the desire to create inflation is to devalue debt.

If, in time to come, a debt load of a few million dollars is seen as pocket change, then people will keep borrowing, which in turn, maintains the illusion of growth.

However, if inflation remains elusive, then the rate of society’s indebtedness slows down and the fraud is at risk of being exposed.

My loathing for central bankers and what their blatantly stupid, reckless and short-sighted policies have done in setting us up for decades of pain is palpable.

My loathing is shared by many people.

It’s partly why we see a move towards decentralised systems and forms of exchange. I’m not going to pretend to know much or advocate these moves. But I know some good minds who do. It involves the evolution of cryptocurrencies and the disruptive force of blockchain. It also involves gold. You can check out what they are saying right here.

One thing we both agree on is that the current system run by central banks and their cronies is a total sham.

And unlike Bernie, those who have been instrumental in this massive and calculated sham will not see the inside of a prison cell.

More’s the pity.

Regards,

Vern Gowdie Signature

Vern Gowdie,
Editor, The Rum Rebellion

Vern is also the Editor of The Gowdie Letter and The Gowdie Advisory — investment services designed to help everyday Australians avoid the financial pitfalls of a volatile economy and make informed decisions to grow their wealth for generations to come.


Vern has been involved in financial planning since 1986.

In 1999, Personal Investor magazine ranked Vern as one of Australia’s Top 50 financial planners.

His previous firm, Gowdie Financial Planning, was recognised in 2004, 2005, 2006 & 2007, by Independent Financial Adviser magazine as one of the top five financial planning firms in Australia.

In 2005, Vern commenced his writing career with the ‘Big Picture’ column for regional newspapers and was a commentator on financial matters for Prime Radio talkback.

In 2008, he sold his financial planning firm due to concerns about an impending economic downturn and the impact this would have on the investment industry.

In 2013, he joined Fat Tail Investment Research as editor of Gowdie Family Wealth. In 2015, his book The End of Australia sold over 20,000 copies and launched his second premium newsletter, The Gowdie Letter.

Vern has since published two other books, A Parents Gift of Knowledge, all about the passing of investing intelligence from father to daughter, and How Much Bull can Investors Bear, an expose on the investment industry’s smoke and mirrors.

His contrarian views often place him at odds with the financial planning profession today, but Vern’s sole motivation is to help investors like you to protect their own and their family’s wealth.

Vern is Founder and Chairman of The Gowdie Advisory and The Gowdie Letter advisory service.


The Rum Rebellion