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Scorpio

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what I find interesting is neg rates, and the potus desire to join that party,

is that really a way to exterminate some outstanding fiat?

print with one hand and push the delete button with the other?
 

Strawboss

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what I find interesting is neg rates, and the potus desire to join that party,

is that really a way to exterminate some outstanding fiat?

print with one hand and push the delete button with the other?
We are definitely living in bizzaro world...

Negative rates are a certainty...

And soon...
 

Uncle

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BB, we've been around each other for the best part of 20y and that quote hit home like a 4 pounder on a pigs head. I'm still part of the system, despite my best intentions for 20y.

At least yourself, TnAndy, hoarder and a few others, managed an out, somehow.

Golden Regards
Uncle
 

BarnacleBob

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BB, we've been around each other for the best part of 20y and that quote hit home like a 4 pounder on a pigs head. I'm still part of the system, despite my best intentions for 20y.

At least yourself, TnAndy, hoarder and a few others, managed an out, somehow.

Golden Regards
Uncle
@ Uncle, sadly there is no getting out in toto, there is however the ability to limit the amount of interaction & coercion that the system produces and seeks compliance with/to. Even living on the Indian lands, in outback Alaska or even on a boat, the system still stretches out to reach in some of the most complex, inordinate ways & means.... thats been the biggest surprise in our experience.

//BB
 

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7 Major Earth Changes Happening Right Now That Everyone Needs To Know About

Earth air temperatures are cooling because of low solar activity at the same time ocean temperatures are rising along with intense volcanic activity? Maybe the rising ocean temperature and high volcanic activity are caused by increasing sub surface temperatures and pressure? If this is all a consistent pattern, then a lot can go wrong this decade.

Snip:
Weather.jpg

https://www.zerohedge.com/geopoliti...happening-right-now-everyone-needs-know-about
 

Scorpio

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US Oil Consumption 20.46M bbl/d World Crude Oil Production 80.92M bbl/d

now look at those values,
we here in the US are using 25% of world supply daily

crazy big number from dept of energy,

logically doesn't make sense,
where all of the other 180 countries use the remaining 75%, while maintaining their standards of living,
be it Japan, Russia, Chin land, or zero land
 

solarion

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I've wondered about that myself before bear. I believe it's just propaganda...it doesn't even make any sense that the US could represent 4.25% of world population and consume 25% of the dino-fuel. America is populous and spread out, ...and even so it's not THAT large.

1579643268094.png
 

Bigjon

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monetary supply continues to plummet with the excessive fiat slushing thru the systems

View attachment 152152
Velocity of money is how many times a unit of currency is spent. Seems to me that would indicate more money spent less times. No?
 

solarion

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Vt = The Velocity of Money for All Transactions
nT = The Nominal Value of All Transactions
M = The Total Average Amount of Money in Circulation in the Economy

IOW It's generally expressed as a ratio of GDP to "money" supply. The variables are naturally made up propaganda, but even consistently made up propaganda can be charted and extremes noted.
 

Scorpio

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less fiat means more times turned over, ie greater velocity,
same dollar used time and time again,

with excess fiat, the fiat doesn't turn over as rapidly, and it depreciates
the more created, the less value it has at creation, and the faster it depreciates,

BB and I have spoken to this prior, about time and fiat, along with the fiat graveyard,
where it exists, but really isn't worth much as it is pretty well exhausted,

think of it like a fire,

you start a fire with some kindling, then you add some logs,
after a bit, you have one heckuva nice fire

yet that fire burns for a bit, then starts to taper off, and you have a choice, let your fire go out, or add some more logs to it

so you add some logs to it, and away it goes again, but sure as heck, you quit tending that fire and it will surely go out eventually

that is all they are doing, is tending their fire. The bigger the fire, the more tending it needs, the more fuel it needs.

we were speaking to used up fiat, depreciated fiat, those are the hot coals, then the embers, and finally the ash or completely spent.

then you state, what does that have to do with velocity? Well those big 'ole flames are your velocity, while the others are the collapsed velocity. The more time passes, the more spent 'fuel' their is, yet it is still used in the calc in the aggregate.

that is the fiat game in a nutshell
 

BarnacleBob

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I've wondered about that myself before bear. I believe it's just propaganda...it doesn't even make any sense that the US could represent 4.25% of world population and consume 25% of the dino-fuel. America is populous and spread out, ...and even so it's not THAT large.

View attachment 152271
Thats because the U.S. leads the world in plastics & petro-chemical manufacturing. In fact, in the U.S., gasoline, diesel & kerosene are by-products of the manufacture of plastics & petro-chemicals. Cars, trucks, jets, etc. are used to dispose of the by-products, as it would be unacceptable to dump the by-products into landfills, rivers or the ocean.... disposal via tail pipes & jet exhaust is much cleaner...

The refining process is using much more of a bbl these days... so much so, that it has affected the quality of the gasoline & diesel. Hence prolly the latest push towards electric vehicles is due to technical innovations at the refineries now using more of what was once considered by-product & waste.
 

Scorpio

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just went and looked up the us refining capacity,

and sure enough, max capacity is about 18.5M barrels/day

so we have less refining capacity then we supposedly use AND export daily,

at max capacity.............

uhhh yeah, sure
 

pitw

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BB, ya know I love your posts and all but, the bottom pic has Saskatchewan proud on it. LOL
 

Uglytruth

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less fiat means more times turned over, ie greater velocity,
same dollar used time and time again,

with excess fiat, the fiat doesn't turn over as rapidly, and it depreciates
the more created, the less value it has at creation, and the faster it depreciates,
I've been thinking about all these "rich people"..... sports stars, celebs, politicians with tens and hundreds of millions & billions. Not tied up in a business just sitting in "their" accounts. They live on much, much, much less that that every year and never seem to go away so always have money coming in. I think it was Garth Brooks that said he had enough money for his grandkids, grandkids, grandkids or something like that. So with all that money just sitting there it's velocity is near zero. Is it invested in the market and just sitting there inflating the numbers?
 

BarnacleBob

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FB_IMG_1579919435327.jpg
 

BarnacleBob

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JayDubya

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Gold vs cash in a crisis

https://aheadoftheherd.com/Newsletter/2019/Gold-vs-cash-in-a-crisis.htm

Mattress stuffers or bullion holders? Who fares better in a crisis? North American investors are divided between those who believe the decade-long stock market bull is going to keep running into the 2020s, and investors who, wary of something terrible happening, are hoarding cash and gold.

The hopeful and the fearful

The beacon hopeful investors are following is best symbolized by analysts at Bank of America Merrill Lynch, who describe current market conditions as “primed for Q1 2020 net asset melt-up”, based on continued monetary easing (central bank asset purchases, low interest rates) and a pending resolution to the trade war. A first-round trade agreement between the US and China was reached last Friday.

While roughly two in three investors polled in October said they see the global economy getting worse in 2020, in November a little more than half think the economy will improve next year.

Never mind that “melt-ups” typically happen at the end of asset bubbles and are usually followed by a significant stock-market correction. People planning to risk their money on equities next year are emboldened by strong stock market performances, as the Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite indices mount their latest concerted assault on all-time closing highs, powered by hope that the U.S. and China can forge a preliminary trade accord to resolve a prolonged battle over import duties, Yahoo Finance wrote in November.

Year to date, the three main stock market indexes have all posted impressive gains - as of Tuesday, the S&P had powered up 25%, the Dow was shown climbing 20%, and the Nasdaq had pushed a remarkable 29% higher than the start of the year.

Among wealthy investors however, a UBS survey published around the same time as the BoA prognosis found a much different temperament. The survey polling over 3,400 investors in 13 markets discovered these high-net-worth individuals are holding 25% of their portfolios in cash, much higher than the 5% normally recommended by UBS Global Wealth Management.

Some have liquidated up to half of their investment portfolios.

More alarming, 60% said they would think about increasing their cash holdings, and 79% said the economy is moving towards higher volatility. Clearly, these investors are reluctant to invest their hard-earned capital in equities, in case of an economic crisis they believe is coming.

While keeping one’s powder dry can be a good defensive move if things truly do take a turn for the worse, there are obvious risks, in the form of opportunity costs. Over time, cash-heavy investors will be paid next to nothing in interest. Cash hoarders will also take an immediate hit to their purchasing power should the US dollar fall.

Although the dollar has gained over the past five years due a number of reasons including low or negative interest rates (interest rates minus inflation) in other countries, and strong US stock market returns, that is far from the norm.

In the US there was an increase in inflation for every decade except the Depression when prices shrunk nearly 20%. The Bureau of Labor Statistics’ Consumer Price Index indicates that between 1860 and 2015, the dollar experienced 2.6% inflation every year, meaning that $1 in 1860 was equivalent to $27.80 in 2015. The dollar has lost 98.2% of its purchasing power since 1900, while gold has become almost 54 times more valuable.




Barron’s quotes Tim Courtney, chief investment officer of Exencial Wealth Advisors, saying “Over the last 40 years, the dollar has done more declining than appreciating. A combination of factors, including the recent Federal Reserve rate cut, a soaring U.S. budget deficit, and lower gains for U.S. stocks, could put the dollar back on its long-term path of decline.”

The US dollar index has seen a fair amount of volatility this year and no clear trend. The buck against a basket of currencies fell to a low of 95.22 in January, rose to a high of 99.38 high in September, and only gained 1% year to date.

Mattress stuffers

Even more interesting than hoarding cash, instead of buying stocks, is what nervous investors are doing with it. As central banks print up to $100 billion per month to smooth volatility and goose economic growth, an equivalent amount in hard currency and precious metals is “disappearing”.

According to the Wall Street Journal, Banks are issuing more notes than ever and yet they seem to be disappearing off the face of the earth. Central banks don’t know where they have gone, or why, and are playing detective, trying to crack the same mystery.

For example in Australia, the number of bank notes issued relative to the size of its economy is near the highest in 50 years. Yet only about a quarter of these notes is used in everyday transactions, up to 8% are used in the shadow economy to avoid taxes or make illegal payments, and as much as 10% may have been lost - an astonishing sum amounting to AUD$7.6 billion (USD$5.2 billion).

Much of the $1.7 trillion in US cash circulating in 2018 went offshore, where the dollars were either stashed in bank accounts or invested in hard assets like real estate and gold. In 2016, a Fed economist estimated about three-quarters of $100 bills worth $900 billion, left the country.

WSJ points to a couple of strange cases of cash hoarding, including construction workers on Australia’s Gold Coast digging up $140,000 in buried bill packages; and a man in Germany who sued a friend that inadvertently burned 500,000 euros he had hidden in a faulty boiler while on vacation.

Gold hoarders

Investors are also turning to gold as a safe bet against market uncertainty. The yellow metal is the ultimate store of value, proven to have held its worth over time - unlike paper or “fiat” currencies which are subject to inflationary pressures and over the years, lose their value.

In laying out the case for gold, Goldman Sachs recently noted that 2019 is looking to break another record for central bank gold purchases - an estimated 750 tons - beating the record 651 tons accumulated last year. According to the World Council, 2018’s central bank gold haul was 74% more than 2017 and the highest amount since the gold standard ended in 1971.

Here’s where it gets weird. Goldman also discovered, over the past three years, 1,200 tons of gold flows worth $57 billion that mysteriously disappeared from the official record. Check out the charts below, showing the correlation between unexplained gold flows and increased global uncertainty (Figure 17) and how the amount of physical gold has soared higher than gold ETF holdings (Figure 18).




Gold beats cash, stocks

That got me thinking, in the event of a major meltdown such as the financial crisis or the dot-com crash, which fares better, cash or gold?

According to Forbes contributor Olivier Garrett, it’s a no-brainer - gold. In the table below Garrett highlights 2002 and 2008, the years corresponding to the dot-com crash and the financial crisis. In those years, all asset classes except cash and Treasury bills bled red ink. Treasuries gained a respective 10.3% and 5.2%, while cash showed a more modest 1.6% and 1.4% uptick.

He therefore suggests investors worried about the next downturn should own both T-bills and cash. How did gold do in those recessionary years? The precious metal was up 24.7% in 2002 and 2.7% in 2008.

Gold also beat stocks during the past two downturns. The chart below shows gold finishing the year ahead of the S&P 500 eight times since 2001. The only years that gold showed a negative return were 2012 and 2015 – corresponding to gold’s last bear market. In 2002, when gold gained 24.7%, the S&P 500 was down over 20%; its 2.7% gain in 2008 compares with the S&P’s awful -38%.

From early November 2008 to March 2009, the financial crisis market bottom, the S&P fell 30% while gold was up almost the same amount.

It’s common knowledge that gold zigs when the market zags. This has proven the case throughout history. The table below from GoldSilver blog depicts gold besting the S&P 500 in all but two of the S&P’s biggest declines since 1976. The metal’s only significant sell-off, 46% during the early 1980s, came just after its biggest bull market in modern history.




However it’s also important to recognize that gold doesn’t necessarily perform well at the beginning of financial crises. In the chart below from Sunshine Profits, during the most significant crises of the 20th century, in all cases gold declined initially. This pattern held true during the 1982 Latin American debt crisis, the Japanese stock market bubble burst in 1990, the Asian financial crisis of 1997, the 2000 dot-com bubble burst and the Lehman Brothers’ bankruptcy in 2008. The latter event resulted in a brief leg down for gold before its relentless climb to a record-setting $1,900 an ounce over the next four years.




Finally, Motley Fool contributor Reuben Gregg Brewer uses the financial crisis to demonstrate how gold and stocks behaved. It’s not a directly inverse correlation. Between December 1, 2007 and May 30, 2009, the S&P 500 crashed 37%, while gold rose 24%. However one has to take a long view to realize gold’s gains. Brewer notes that when the recession first hit, gold went up nearly 30%, but at one point it dropped 10%. That kind of volatility might scare off some investors. But sticking with it over the length of the recession would have been wise; “overall, gold held its own at at time when stocks just kept falling,” states Brewer.

And while gold and the stock market generally show an inverse correlation, the World Gold Council found that between 1987 and 2010, only when stock prices moved dramatically ie. two standard deviations from the norm, did their relationship to gold turn negative. It seems that for investors to jump into gold when all hell is breaking loose on the markets, it needs to be a major crisis.

Wondering how much gold you need to gold to make it through a financial crisis? Another interesting table from the same source is shown below. Based on $1,300/oz gold, someone with $3,000 of monthly expenses would need 45 oz to last them through a two-year crisis, and 90 oz if the crisis drags on for four years. Ninety ounces equates to roughly 90 Gold Eagle coins. (1 coin= 1.0909 troy ounces). A standard gold bar held by central banks weighs 400 troy ounces.




The coming debt crisis

During the dot-com crash, it was up-start, overvalued Internet companies that hit the skids. During the financial crisis the US real estate bubble burst, taking several American banks and a few overseas ones with it. Many are predicting the next asset bubble to pop will be unsustainable levels of debt.

The US national debt, that is, the amount of debt held by the federal government, recently surpassed $23 trillion, having jumped $1.3 trillion in the 12 months leading up to November. The gross national debt, driven by Congressional borrowing, rose 5.6% up to the third quarter, compared to the same period last year, against nominal GDP of just 3.7%. In other words, debt is outrunning economic growth.

Wolfstreet asks a good question:

If the growth of the federal debt outruns the economy during these fabulously good times, what will the debt do when the recession hits? When government tax receipts plunge and government expenditures for unemployment and the like soar? The federal debt will jump by $2.5 trillion or more in a 12-month period. That’s what it will do.

Worldwide, total debt including household, corporate and sovereign loans, during the first half of 2019 rose by $7.5 trillion to hit a record, $250 trillion, led by the US and China.




Encouraged by lower interest rates, governments went on a borrowing binge as they ramped up spending, adding $3 trillion to world debt in Q1 alone.

According to the World Bank, countries whose debt-to-GDP ratios are above 77% for long periods experience significant slowdowns in economic growth. Every percentage point above 77% knocks 1.7% off GDP, according to the study, via Investopedia. The United States’ current debt-to-GDP ratio is 106.5%.

According to its latest projections, the Congressional Budget Office says debt-to-GDP will reach 150% by 2047, well past the point where financial crises typically occur. The budget deficit is also likely to rise, nearly tripling from 2.9% of GDP to 9.8% in 2047.

This can't go on forever. It’s not a stretch to envision a scenario whereby the world’s reserve currency, the US dollar, collapses under the weight of unmanageable debt, triggered say, by a mass offloading of US Treasuries by foreign countries, that currently own about $6 trillion of US debt. This would cause the dollar to crash, and interest rates would go through the roof, choking consumer and business borrowing. Import prices would skyrocket too, the result of a low dollar, hitting consumers in the pocket book for everything not made in the USA. Business confidence would plummet, mass layoffs would occur, growth would stop, and the US would enter a recession.

All the countries that sold their Treasuries would then face a major slump in demand for their products from American consumers, their largest market. Eventually companies in these countries would begin to suffer, plus all other nations that trade with the US, like Canada and Mexico. Before long the recession in the US would spread like a cancer, to the rest of the world.

It isn’t just sovereign debt that is being constantly added to, as governments around the world spend beyond their means. It’s also corporations and individuals.

According to the IMF, nearly 40% of the corporate debt of major economies including the US, China, Japan, Germany, Britain, France, Italy and Spain is at risk of default in the event of another global economic downturn.

In China, corporate bond debt defaults this year have surged almost 10 times 2014 levels.

Meanwhile the average North American is going deeper and deeper in debt - their confidence to spend fueled by continued low interest rates.

Earlier this year consumer debt in the United States hit $4 trillion for the first time. Total credit card debt surpassed $1 trillion, with the average American holding a balance of $4,923. A credit card survey quoted by CNBC says more than one third of Americans, 86 million people, are afraid they’ll max out their credit card when making a large purchase, which most considered to be anything over $100. The interest rate on credit cards has risen from 15.11% in 2017 to a current average of 21.4%. That is despite the US Federal Reserve lowering interest rates three times since August.

As incomes fail to keep up with spending, the difference financed by credit, the middle class is eroding - made worse by a drop in the number of middle-income jobs, through off-shoring and automation.

The share of adults living in middle-income households declined from 61% in 1971 to just 50% in 2015. Two-thirds of the 11% that were no longer middle class, migrated to upper-income levels, while a third became poorer.

And that gap continues to widen. The richest 400 Americans now control more wealth than the bottom 60% - it’s the greatest rich-poor divide since the 1920s.

A 2019 report by McKinsey Global Institute piles on more evidence of inequality getting worse. While the consulting firm notes the gap between developed and developing economies is shrinking, particularly with the rise of China and India, in many advanced economies, the trend is for the rich to pull away from the middling and the poor:

Yet politicians are oblivious to rising inequality and unsustainable debt. While Donald Trump touts the US economy as “the greatest of all time,” he is reportedly poised to sign a massive $1.4 trillion worth of government spending into law.

Here in Canada, Justin Trudeau’s Liberals were re-elected on a plan to double down on the nation’s deficit, which would peak at $27.4 billion next year - far exceeding the $14 billion deficit recorded in 2018-19.

The messages to the masses is obvious: it’s okay to spend beyond your means. In fact the US government prefers even lower interest rates and more quantitative easing, so it can go even deeper in debt, and companies can keep buying back more of their own stock in order to boost their earnings per share and the stock market keeps rolling right along.

Artificially low interest rates also hurt the average person; although unemployment is reduced, because companies borrow more and do more hiring, easier credit and low mortgage rates encourage over-spending and over-borrowing, sucking a lot of people into a debt trap from which it is hard to escape.

As one commentator aptly put it, “Essentially, the citizens become dreary rats on a treadmill while the government tells them they are winning the gold medal in the Olympics.”

Conclusion

The Plains Indians had an innovative way of hunting buffalo - find a very steep cliff and drive the poor, hapless creatures over it. This is quite a good analogy for the current, dangerously over-leveraged situation many developed economies find themselves in. Here the hunters are the governments and the buffalo running to their deaths are their gullible populations who have drunk the cool-aid of a consumptive lifestyle financed by endless debt.

The next bubble, the debt bubble, keeps building, fed by growing inequality, rapacious corporations who use tax breaks to buy back their own stock to artificially inflate their share prices, individuals who remain enslaved to the banks that reap enormous profits from them as they descend further into debt, and politicians who encourage the whole charade by cutting corporate tax rates, keeping interest rates near zero, and borrowing more through deficit financing to please the interest groups that keep them in power.

It’s no wonder that people have taken to hoarding gold - the only thing that matters when the shit hits the fan.
 

Scorpio

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totally nice
 

BarnacleBob

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Is there anyway we can get verifiable data on annual U.S. & global population growth from sources other than U.S. census & U.N., etc... an independent audit???
 

Uglytruth

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and companies can keep buying back more of their own stock in order to boost their earnings per share and the stock market keeps rolling right along.
I thought somewhere he would address the remaining boomers retiring for the next 10 - 15 years or so and pulling 401K & investment money OUT of the market and what trickery would be used to keep it afloat. Younger workers don't have enough to keep it afloat.
 

Zed

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what I find interesting is neg rates, and the potus desire to join that party,

is that really a way to exterminate some outstanding fiat?

print with one hand and push the delete button with the other?
The things is that a strong USD will break the global system and they know that, so if the EuroNutz go negative you will have to follow to some degree even though that move in itself will put pressure on the banks. IMO This is a balancing act until one shoe drops, then they will be freer to move in the countries best interest.
 

Uglytruth

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Can they all be sinking in unison as it's not as noticeable? Remember for "them" this is about global control not national control.
 

JayDubya

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Vast majority of Molson Coors employees in Denver are leaving the company, letter confirms

It's tough to just give up a job nowadays, although I'm not sure I'd want to move from Denver to Chicago either...
I'm going to speculate that maybe most of these people at or near retirement age


Nearly 90% of the employees who worked in the downtown Denver headquarters of Molson Coors Beverage Co. (NYSE: TAP) — 265 of roughly 300 people — will not be moving to the company’s remaining offices in Chicago and Milwaukee, according to a letter sent by company lawyers to the Denver Mayor Michael Hancock’s office earlier this month.

The letters, obtained by the Denver Business Journal through the Colorado Open Records Act, begin to paint a clearer picture of the employment shift produced because of Molson Coors’ decision to relocate its Denver headquarters to Chicago as part of a revitalization plan, even as it maintains and increases investment in the roughly 2,000-worker brewing facility it operates in Golden. The revitalization plan is meant to consolidate the company’s operations and save money, which will be put to development of new products needed to restart growth after years of production declines.

The Jan. 15 letter to Hancock’s office stated that while Molson Coors originally expected 300 Denver office workers to be terminated on Dec. 31, some impacted employees have secured jobs at other company locations. Instead, 67 workers left the organization on Dec. 31, and about 191 other workers will be let go over an extended period stretching from this month until July 2021 as employees are given time to close up the company’s books on Coors Brewing’s 146-year run of having a corporate presence in the Denver area.

Matthew Hargarten, Molson Coors senior director of corporate communications, emphasized in an interview Monday that the letter shows that nothing has changed in the company’s plans. Senior executives always intended to see how many roles would be moved from Denver to the Midwest — a number that is at least 35, based on the letter — and to invest significant amounts in the Golden facility to modernize it and allow it to roll out new products more quickly.

“We’ve been brewing our beers in Colorado for hundreds of years and will be brewing here for hundreds more,” Hargarten said. “In fact, we’re investing hundreds of millions of dollars to modernize our golden brewery and have more employees in Colorado than anywhere

Molson Coors attorneys Ellen Georgiadis and Sarah Miracle provided to Hancock’s office a schedule for the anticipated separation dates of employees who remain in Denver that indicates pockets of workers will leave their employment at different times. The biggest changes will occur on Jan. 31, Feb. 28, March 31 and June 30 — dates on which between 23 and 38 workers each will leave — but at least eight of employees are expected to continue working with the company into 2021 before all are terminated as of July 1 of next year.

Hargarten confirmed that workers who were in the Denver headquarters but are moving to Chicago or Milwaukee will have until July 1 to make the move, indicating the Denver office will remain occupied for months to come, even as CEO Gavin Hattersley gathers his executive team in Chicago moving forward.

Since the announcement of the headquarters relocation, Molson Coors has: doubled the production capacity of its Blue Moon brewpub in Denver; announced it will close its Irwindale, California, production plant by September; and acquired Atwater Brewery of Detroit. Hattersley has said he is focused on growing sales of above-premium beverages as the traditional lager and light lager categories that have marked the vast majority of Molson Coors production for many years have been losing share steadily to craft beer, spirits and alternative beverages like hard seltzer.

Denver Business Journal reporter Monica Venditu
 

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From Simon Black:

Fed official: “If there’s a recession, don’t worry”

Earlier this week I sent one of my team members to a banking conference here in Puerto Rico hosted by the Federal Reserve.

It might strike you as strange that the Fed would be holding an event in Puerto Rico, but it’s not that unusual.

Puerto Rico is a US territory and hence part of the US banking system. So just like the rest of the United States, banks in Puerto Rico (including my own) fall under the umbrella of the Federal Reserve.

The whole point of the event was to help showcase large-scale investments in Puerto Rico that local banks can help finance.

This is actually part of the Fed’s responsibility, something that comes from an old law from the 1970s called the Community Reinvestment Act.

There were definitely some compelling projects on display yesterday, and I’m particularly interested in a few solar power deals.

(You might recall some of my earlier comments on the pitiful electrical infrastructure in Puerto Rico… the island sorely needs investment in that sector, and the pro-forma numbers look quite lucrative.)

But aside from the investment projects, the really interesting part about the event was what the keynote speakers from the Federal Reserve had to say about the economy, and the Fed itself.

One very senior Fed official, for example, told the audience, “if there’s a recession, don’t worry,” because “the Fed is very powerful” and has all the tools it needs to support the economy.

My colleague was astonished at what had just been uttered, and texted me immediately.

I was dumbstruck. “Don’t worry…???” That’s a bold statement.

Former US Treasury Secretary Larry Summers summed it up recently when he wrote that “the United States is one recession away” from joining Europe and Japan in “monetary black hole economics. . . interest rates stuck at zero and no prospect of escape.”

And he’s right. In every single recession since the 1970s, the US Federal Reserve slashed interest rates by an average of 5%.

At this precise moment the Fed’s key benchmark interest rate is just 1.55%.

Do the math-- if the Fed reduces interest rates in the next recession by this average 5% cut, that would make interest rates NEGATIVE.

Summers calls this the “Black Hole,” because once the economy hits zero or negative rates, there is no escape.

More than 75 years ago, a prominent mid-20th century economist named Alvin Hansen wrote about this concept extensively.

He called it “secular stagnation”-- a prolonged period in which reasonable economic growth can only be achieved with unsustainable financial conditions (like ultra-low / negative interest rates).

One of the core theories in economics is that low interest rates tend to compel people and businesses tend to spend more money.

Low interest rates mean (in theory) that they can afford to borrow more money to buy cars, invest in factories, etc.

So in times of recession or slow growth, the Federal Reserve cuts interest rates to encourage more borrowing and more spending… which in turn generates more economic growth.

But as Alvin Hansen wrote, this theory has limits.

Eventually the lower rates stop achieving any meaningful economic growth, and the Fed has to cut rates even more to move the needle.

The US, Europe, and Japan are all in this position already.

In Europe, for example, interest rates are NEGATIVE. But the combined economies in the ‘eurozone’ grew by just 1.2%. That’s pitiful.

Rates in the US are positive, but still near all record lows. And yet US economic growth is barely 2%.

Back in the 1980s, the US economy routinely grew by 4% to 6% per year, even after adjusting for inflation. And that’s when interest rates were more than 9%.

Today interest rates are almost nothing. The economy should be growing like crazy. But it’s not.

Even the Fed chairman Jerome Powell admitted this to Congress in November: “The new normal now is lower interest rates, lower inflation, probably lower growth... all over the world.”

And when the Fed tried to raise interest rates to a paltry 2.5% last year, the US economy started to suffer, and the Fed was forced to cut rates back to 1.5%.

This is classic ‘secular stagnation,’ just like Alvin Hansen wrote about. These economies can’t manage any meaningful growth, even with rates at / near record lows.

And just a tiny increase in rates creates severe risk of recession.

Well, recession is coming no matter what.

Bloomberg (the news organization, not the guy) recently published some interesting data showing a clear connection between recession risk and low interest rates.

Low interest rates tend to cause extreme financial speculation. People borrow tons of money to buy homes they cannot afford (i.e. the 2008 housing bust), or throw ridiculous sums of money at cash-burning, loser investments (ahem, WeWork!).

Bloomberg points out that since 1985, every recession has been caused by these factors: low interest rates and excess financial speculation.

And these are exactly the conditions that we’re seeing right now in the Land of the Free.

Yet whenever that recession comes, the Fed’s only option is to make interest rates in the US negative, taking the economy deeper into this ‘secular stagnation’ black hole.

I appreciate the Fed official trying to put on a brave face yesterday when he told the audience not to worry.

But the reality is they’re simply not equipped to deal with what’s coming next.
 

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From Simon Black:

Fed official: “If there’s a recession, don’t worry”

Earlier this week I sent one of my team members to a banking conference here in Puerto Rico hosted by the Federal Reserve.

It might strike you as strange that the Fed would be holding an event in Puerto Rico, but it’s not that unusual.

Puerto Rico is a US territory and hence part of the US banking system. So just like the rest of the United States, banks in Puerto Rico (including my own) fall under the umbrella of the Federal Reserve.

The whole point of the event was to help showcase large-scale investments in Puerto Rico that local banks can help finance.

This is actually part of the Fed’s responsibility, something that comes from an old law from the 1970s called the Community Reinvestment Act.

There were definitely some compelling projects on display yesterday, and I’m particularly interested in a few solar power deals.

(You might recall some of my earlier comments on the pitiful electrical infrastructure in Puerto Rico… the island sorely needs investment in that sector, and the pro-forma numbers look quite lucrative.)

But aside from the investment projects, the really interesting part about the event was what the keynote speakers from the Federal Reserve had to say about the economy, and the Fed itself.

One very senior Fed official, for example, told the audience, “if there’s a recession, don’t worry,” because “the Fed is very powerful” and has all the tools it needs to support the economy.

My colleague was astonished at what had just been uttered, and texted me immediately.

I was dumbstruck. “Don’t worry…???” That’s a bold statement.

Former US Treasury Secretary Larry Summers summed it up recently when he wrote that “the United States is one recession away” from joining Europe and Japan in “monetary black hole economics. . . interest rates stuck at zero and no prospect of escape.”

And he’s right. In every single recession since the 1970s, the US Federal Reserve slashed interest rates by an average of 5%.

At this precise moment the Fed’s key benchmark interest rate is just 1.55%.

Do the math-- if the Fed reduces interest rates in the next recession by this average 5% cut, that would make interest rates NEGATIVE.

Summers calls this the “Black Hole,” because once the economy hits zero or negative rates, there is no escape.

More than 75 years ago, a prominent mid-20th century economist named Alvin Hansen wrote about this concept extensively.

He called it “secular stagnation”-- a prolonged period in which reasonable economic growth can only be achieved with unsustainable financial conditions (like ultra-low / negative interest rates).

One of the core theories in economics is that low interest rates tend to compel people and businesses tend to spend more money.

Low interest rates mean (in theory) that they can afford to borrow more money to buy cars, invest in factories, etc.

So in times of recession or slow growth, the Federal Reserve cuts interest rates to encourage more borrowing and more spending… which in turn generates more economic growth.

But as Alvin Hansen wrote, this theory has limits.

Eventually the lower rates stop achieving any meaningful economic growth, and the Fed has to cut rates even more to move the needle.

The US, Europe, and Japan are all in this position already.

In Europe, for example, interest rates are NEGATIVE. But the combined economies in the ‘eurozone’ grew by just 1.2%. That’s pitiful.

Rates in the US are positive, but still near all record lows. And yet US economic growth is barely 2%.

Back in the 1980s, the US economy routinely grew by 4% to 6% per year, even after adjusting for inflation. And that’s when interest rates were more than 9%.

Today interest rates are almost nothing. The economy should be growing like crazy. But it’s not.

Even the Fed chairman Jerome Powell admitted this to Congress in November: “The new normal now is lower interest rates, lower inflation, probably lower growth... all over the world.”

And when the Fed tried to raise interest rates to a paltry 2.5% last year, the US economy started to suffer, and the Fed was forced to cut rates back to 1.5%.

This is classic ‘secular stagnation,’ just like Alvin Hansen wrote about. These economies can’t manage any meaningful growth, even with rates at / near record lows.

And just a tiny increase in rates creates severe risk of recession.

Well, recession is coming no matter what.

Bloomberg (the news organization, not the guy) recently published some interesting data showing a clear connection between recession risk and low interest rates.

Low interest rates tend to cause extreme financial speculation. People borrow tons of money to buy homes they cannot afford (i.e. the 2008 housing bust), or throw ridiculous sums of money at cash-burning, loser investments (ahem, WeWork!).

Bloomberg points out that since 1985, every recession has been caused by these factors: low interest rates and excess financial speculation.

And these are exactly the conditions that we’re seeing right now in the Land of the Free.

Yet whenever that recession comes, the Fed’s only option is to make interest rates in the US negative, taking the economy deeper into this ‘secular stagnation’ black hole.

I appreciate the Fed official trying to put on a brave face yesterday when he told the audience not to worry.

But the reality is they’re simply not equipped to deal with what’s coming next.
All of this;

Back in the 1980s, the US economy routinely grew by 4% to 6% per year, even after adjusting for inflation. And that’s when interest rates were more than 9%.
is based upon reportedly accurate data. We dont even know if the numbers are real or even how the data is analyized, etc....

The old USSR lied about their economic data & GDP for 10 - 15 years before they collapsed. I highly suspect that politics has highly influenced the reported economic data, especially reported GDPin the U.S..
 

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All of this;



is based upon reportedly accurate data. We dont even know if the numbers are real or even how the data is analyized, etc....

The old USSR lied about their economic data & GDP for 10 - 15 years before they collapsed. I highly suspect that politics has highly influenced the reported economic data, especially reported GDPin the U.S..
yes and when the old USSR collapsed, the west had money to buy at a fire brand sale, wonder who is going to bail when the rest of capitalism goes kaput.
 

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“if there’s a recession, don’t worry,” because “the Fed is very powerful” and has all the tools it needs to support the economy.
a very large statement, if one considers that the repo market is still in flux from last late summer/fall

or that one day recently, the fed was shutdown on overnight operations and did not clear the books in a normal basis, ie credit card inputs from the collectors did not make it to the destination in a timely fashion.

then we could ask, who pays for these supposed 'tools'?

do some at the fed have the superman cape on, fully believing that there is no situation that cannot be 'handled'?
 

JayDubya

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How China’s Central Bank Distorts the Shanghai Gold Price

https://www.zerohedge.com/news/2020-01-30/how-chinas-central-bank-distorts-shanghai-gold-price


Written by Jan Nieuwenhuijs for Voima Insight.

This is the story of how the Chinese central bank manipulates premiums on gold traded over the Shanghai Gold Exchange.

Evidence suggests that since 2017 the Chinese central bank is artificially elevating premiums on gold traded at the Shanghai Gold Exchange (SGE) by roughly 0.5%.

A Reuters article from August 14, 2019, stating the Chinese central bank was blocking “300-500 tonnes” of gold from being imported into the Chinese domestic market, can be refuted by putting the gold premiums in Shanghai into context. According to my analysis, very little gold was blocked from being imported in 2019. Certainly not 300-500 tonnes.

In this article, I will analyze several gold premiums that can be measured in Shanghai, and discuss how the People’s Bank of China manipulates the benchmark (SGE premiums). In a follow-up article, I will analyze the alleged gold import obstructions in 2019.

Introduction

Arbitraging differences in commodity prices geographically always enjoy friction. Energy and time are required to transport a commodity through space. The friction applies to a farmer moving crops from his farm to the market, or a bullion bank bringing bullion from London to Shanghai. A premium in the gold price at location A versus B arises from the physical friction. With digital assets, the friction is minimal, resulting in lower premiums between exchanges.

Since the inception of the Shanghai Gold Exchange (SGE) in 2002, China has been a net importer of gold. On average, there usually has been a premium at the SGE versus gold in London (gold located in London is usually used as the global benchmark.) But careful examination shows SGE premiums are manipulated since 2017.

Dissecting Gold Premiums in Shanghai

Starting in 2014, capital outflows from China caused the renminbi to weaken. In January 2014, it took ¥6.05 to buy $1; by October 2016 it took ¥6.73. The People’s Bank of China (PBoC) intervened by selling foreign exchange reserves to support the renminbi. To the extent China’s foreign exchange reserves were declining, we could gauge the scope of the interventions. From the height of $4 trillion worth of foreign exchange reserves in 2014, the PBoC had burned through nearly $1 trillion by October 2016.





Importing gold is a form of capital flight. Although recorded in the current account, renminbi is exchanged for an international currency: gold. Due to unwanted downward pressure on the renminbi, late 2016, the PBoC decided to restrict gold imports. As one would expect, the premium on gold trading at the SGE went up. In October 2016, SGE premiums briefly punched through 5%, and in December, they steadily increased to nearly 4%.





Early 2017, capital outflows from China stopped and the PBoC’s battle to defend the renminbi ended. China’s foreign exchange reserves stabilized at around $3 trillion. Gold import restrictions were a thing of the past, or so we were told. What actually happened is that the PBoC subtly kept manipulating SGE premiums.

The PBoC Manipulating SGE Premiums

As you might know, the Chinese domestic market—where gold is primarily traded on the SGE—is a shielded circuit. Only a few banks have a PBoC license to import gold, although for every shipment they need anew approval, and export is prohibited.

However, in 2014 the SGE launched a subsidiary exchange in the Shanghai Free Trade Zone (SFTZ), for the world to freely trade gold in renminbi. This subsidiary exchange is called the Shanghai International Gold Exchange (SGEI). The PBoC doesn’t restrict the import and export of gold at the SGEI in the SFTZ. The same rules that apply to gold coming from abroad, also apply to gold coming from the SFTZ.

As the PBoC has no say on the gold flows through the SFTZ, the free market sets the SGEI premium over London. By comparing the well-known “SGE premium over London” to the uncensored but less-known “SGEI premium over London,” there is a lot to be revealed.

The main contract traded at the SGEI (iAu99.99) isn’t ultra-liquid, but it will do. To reduce noise, in the next chart are 10-day moving averages (DMA) of three types of premiums:

– The “SGE Premium Over London” (black—the premium paid on gold in the Chinese domestic market over London spot).
– The “SGEI Premium Over London” (green—the premium payed on gold in the Shanghai Free Trade Zone over London spot).
– The “SGE Premium Over SGEI” (red—the premium payed on gold in the Chinese domestic market over gold located in the Shanghai Free Trade Zone).
Unfortunately, my data sheet stops at September 2019.

The premiums are loosely related through the formula:

“SGE Premium Over SGEI” (red) = “SGE Premium Over London” (black) – “SGEI Premium Over London” (green)

First, I would like to draw your attention to the green line (the uncensored “SGEI Premium Over London”). In late 2016, the green line started climbing for two reasons. One, as the gold price fell over that period, Chinese gold demand went up—this is a common dynamic in China. Two, capital outflows accelerated; the Chinese were desperate to move their money out. As mentioned previously, in response, the PBoC started restricting gold imports, causing the red line in the chart to climb. SGEI gold, although physically being in China mainland, was restricted from entering the domestic market (SGE territory).

What most gold analysts look at is the black line in the chart. The “SGE Premium Over London” is considered to be the benchmark. In December 2016, it nearly touched 4%. This makes sense, everybody concluded, because of the limitations to import gold into the domestic market. But, when capital outflows stopped in 2017, the green line fell to approximately zero, while the red line did not. Remarkable, as on any given day when the red line is not at zero, the PBoC is “restricting imports.”

To be clear, SGE and SGEI metal is in the same city. There shouldn’t have to be a difference in price. In the chart above, the red line reflects PBoC interference, and since 2017, it has been persistently above zero. Concluding, since 2017 the PBoC set in a new policy of soft but steady restrictions.

An interesting “detail” is that when I looked on the map where the SGEI vault is located, I saw it is just outside the SFTZ. Apparently, the SFTZ isn’t just about geography. There are bureaucratic solutions, as well. When I reached out to the SGE, they confirmed to me that gold traded on the SGE (main contract Au99.99) and SGEI (main contract iAu99.99) is stored in exactly the same vault owned by the Bank of Communications in Shanghai!

So, although there should be no costs involved in transferring SGEI gold into the domestic market (aside from lifting bars from one shelf to another in the same vault), early 2017 the PBoC decided to implement a barrier cost of roughly 0.5%.

The chart above is based on “end of day prices”, which are indicative but not all-inclusive. With great help from Nick Laird from Goldchartrus.com I was able to get the intraday spot prices, per second, from London, the SGE, and SGEI from March 2016 until March 2018. Have a look at the chart below. You can see the premiums are volatile because the prices of all contracts move around all day. Yet the 10-day moving average reveals a trend.





Before October 2016, the “SGE Premium Over SGEI” was around zero. A normal situation, as no restrictions by the PBoC means the price of a 1 Kg 9999 fine gold bar (Au99.99) has the same value as an identical 1 Kg 9999 fine gold bar (iAu99.99) located in the same vault. After the PBoC’s intervention to restrict imports late 2016, which at the time was widely discussed in the press, it seems they set a new floor at 0.5 % on SGE versus SGEI gold. The PBoC never stopped interfering after March 2017, as far as my data goes (and this hasn’t been mentioned in the press).

To be clear, the manipulation of the “SGE Premium Over SGEI” is, of course, translated in the “SGE Premium Over London” (which carries the extra 0.5 % as well). I have only used SGEI premiums to be able to reveal how the “SGE Premium” benchmark is distorted. In the chart below, you can see that since 2017 the “SGE Premium Over London 10 DMA” (based on the per-second interval data) has a base of 0.5 %, plus what supply and demand forces in the Chinese domestic market add.




One reason the PBoC could be manipulating SGE premiums is to let the gold importing banks make an extra profit. Another could be national pride; to make the Chinese gold market look stronger. Either way, what most analysts look at is “SGE Premiums Over London,” and these are artificially set.

This information is important for traders of the new Shanghai gold futures contracts listed at the largest futures exchange globally, CME Group. These contracts are financially settled based on the “Shanghai Gold Benchmark Price,” which is generated by spot auctions held at the SGE through the Au99.99 contract.

In an article from CME on the new futures contract they state (December 2, 2019):


The newly listed Shanghai Gold futures on COMEX allow market participants to have seamless access to the domestic Chinese gold price and hedge any outright price exposure to the Chinese market or to the price difference between the price in Shanghai and the international gold market.​

Traders that are continuously exposed to price differences between London, New York, and Shanghai might be interested in the details exposed above.

To be continued.
 

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Some American homeowners are making a big retirement mistake, survey finds

https://www.yahoo.com/money/home-to-fund-retirement-165957826.html

Some Americans are pinning their retirement hopes on their homes, betting that housing appreciation will continue and compensate for their lack of savings.

But experts warn that adults shouldn’t bank on houses as their only retirement investment – even if real estate appreciation continues.

One in 4 U.S. homeowners plan to use their home to fund their retirement, according to a recent survey from Unison, a home co-investing firm. Of those, 1 in 6 said their home represents half or more of their retirement nest egg.

“If someone thinks their home is going to fund 100% of retirement, that’s a little scary, but I’m not surprised,” said James Ciprich, advisor at Regent Atlantic Capital, a financial planning firm. “We have a retirement savings crisis.”


One in 4 U.S. homeowners plan to use their home to fund their retirement, according to recent survey from Unison, a home co-investing firm.
(Photo: REUTERS/Jessica Rinaldi)

Rosy outlook on home values
Home values in the U.S. have increased by almost 59% since bottoming out in February 2012, according to the most recent estimates from the S&P/Case-Shiller index. That’s helping to convince 70% of American homeowners that their home will be worth more by the time they retire, according to the survey.

More than a third estimate their home’s value will increase by 10% or more; a quarter expect at least a 25% gain; and 1 in 12 believe their home’s worth will jump 50% or more.

“Home prices are increasing faster than wages,” said Rayan Rafay, chief operating and financial officer at Unison. “And therefore people look to wealth in their homes as a result.”

But home prices don’t always go up.

From mid-2006 to the beginning of 2012, housing values dropped 27% nationally, according to Case-Shiller, with many markets experiencing steeper losses. That could spell trouble for those relying on their homes for retirement. Almost 2 in 5 say a similar 25% drop in home values would delay their retirement.

Meager retirement savings
Another reason Americans are depending on their homes for their golden years is because they lack savings in their retirement accounts.

According to a study by the Economic Policy Institute, the mean retirement account amount of workers in their 50s has stagnated over the last decade, compared with previous generations. The median retirement account savings in 2016 hovered just around $21,000.

Ideally, you should have saved up to eight times your starting salary for retirement by the time you near 60, according to Fidelity.


The median amount of retirement savings for those approaching retirement is $21,000, according to the Economic Policy Institute. Credit: EPI

“The trends are still troubling on how ill-prepared people are for [retirement],” said Rich Ramassini, senior vice president of sales strategy and performance at PNC. “People struggle to manage multiple financial priorities, such as student loan debt.”

How your home fits into retirement
It’s important to diversify your retirement fund rather than relying solely on your home.

Doing so can create a problem because “your home is not immediately liquid,” said Dan Slagle, founding partner at Fyooz Financial Planning. “The proceeds may be locked up for months depending on the state of the housing market.”

Your home should not be more than 20% to 30% of your total net worth, Slagle said, with the rest coming from your savings and investments.

"People purchase their home with the idea that it is a great investment vehicle," he said. "A home should not be purchased solely because it is likely to appreciate in value."

Dhara is a writer for Yahoo Finance. Follow her on Twitter @dsinghx.
 

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"When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it."


Frédéric Bastiat
 

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"The essence of Government is power; and power, lodged as it must be in human hands, will ever be liable to abuse."
James Madison
 

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JD

wtf gives with us?

men in the past, spoken of it, warned us repeatedly of it,

and yet we rush headlong towards more slavery,

good grief man I just don't get it
 

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The deliberations of the Constitutional Convention of 1787 were held in strict secrecy. Consequently, anxious citizens gathered outside Independence Hall when the proceedings ended in order to learn what had been produced behind closed doors. The answer was provided immediately. A Mrs. Powel of Philadelphia asked Benjamin Franklin, "Well, Doctor, what have we got, a republic or a monarchy?" With no hesitation whatsoever, Franklin responded, "A republic, if you can keep it."

This exchange was recorded by Constitution signer James McHenry in a diary entry that was later reproduced in the 1906 American Historical Review. Yet in more recent years, Franklin has occassionally been misquoted as having said, "A democracy, if you can keep it." The NRA's Charleton Heston quoted Franklin this way, for example, in a CBS 60 Minutes interview with Mike Wallace that was aired on December 20, 1998.
This misquote is a serious one, since the difference between a democracy and a republic is not merely a question of semantics but is fundamental. The word "republic" comes from the Latin res publica — which means simply "the public thing(s)," or more simply "the law(s)." "Democracy," on the other hand, is derived from the Greek words demos and kratein, which translates to "the people to rule." Democracy, therefore, has always been synonymous with majority rule.
 

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If there is anything to this planned parenthood, Ukraine, selling favors, etc kickback scheme........................

“When the people find that they can vote themselves money that will herald the end of the republic.”

― Benjamin Franklin
 
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