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Edited by Alfred Adask
Friday, May 20, AD 2016
Between Friday, May 13AD 2016 and 
Friday, May 20, AD 2016, the bid prices for:

Gold fell  1.6 % from $1,272.80 to $1,251.90
Silver fell  3.4 % from $17.08 to $16.50
Platinum fell  2.8 % from $1,049 to $1,020
Palladium fell  6.4 % from $596 to $558
Crude Oil rose  2.8 % from $46.37 to $47.67

US Dollar Index rose  0.7 % from 94.62 to $95.31

DJIA fell  0.2 % from 17,535.32 to 17,500.94
NASDAQ rose  1.1 % from 4,717.68 to 4,769.56
NYSE rose  0.2 % from 10,228.00 to 10,250.50
S&P 500 rose  0.3 % from 2,046.61 to 2,052.32


"Only buy something that you'd be perfectly happy to hold
if the market shut down for 10 years." --Warren Buffett 

"If the markets shut down for 10 years, what investment would you dare to hold-- 
other than gold"? --Alfred Adask

Our Debt-Based Monetary System

by Alfred Adask
What follows is speculation.
I'm going to explore several premises and, using my version of "logic" to build on those premises.
I'm not claiming that my premises are necessarily true.  I'm not claiming that my "logic" is necessarily logical.
I am claiming that these premises and my "logic" lead to some hypothetical conclusions about our debt-based monetary system that are at least interesting and perhaps surprising.

Money & Banks

Throughout most of recorded history, whenever there was a monetary system, it was asset-based.  The "money" was some sort of tangible asset that had already been produced and/or already existed.  These assets weren't promises; they were facts like like bushels of wheat, buck skins, jugs of corn liquor, beads, iron ingots, heads of cattle, and gold or silver coins.  
Mankind's concept of money (an asset) evolved to the point where "money" was gold or silver and, unlike cattle or other forms of "money," was sufficiently "concentrated" to be easily stored, hidden, or stolen.  
Banks sprang up which would store and protect a depositor's wealth in the safety of a banker's strong box or vault.  Bankers weren't necessarily the smartest guys in town, but they were the biggest, meanest thugs that could be found.  If anyone wanted to steal your money from the banker's strong box, they'd have to first fight the banker-not an easy task.


Bank customers would deposit their gold or silver into the banker's strong box, and the banker would issue a paper certificate (a debt-instrument) which promised to repay the deposited gold (an asset) to the depositor whenever he presented the paper certificate (a debt-instrument) to the banker for redemption.
Depositors quickly learned that, instead of going to the bank to withdraw one ounce of gold to buy a new burro, the depositor could simply trade a paper certificate (debt instrument) denominated as worth one ounce of gold to the burro salesman. Then the burro salesman could redeem the paper debt-instrument by going to the bank to exchange the paper debt-instrument for an asset (one ounce of gold).
Discharging debts with paper debt-instruments was far more convenient than paying with gold.
Note that, in return for the burro, the burro salesman accepted  a paper debt-instrument rather than an asset (gold).  Also, the burro salesman accepted the inconvenience of having to walk to the banker, present the debt-instrument and receive an actual asset (one ounce of gold) as the actual payment for the burro.  
(Principle:  You're not "paid" when you receive a debt-instrument.  You're only paid when you trade a debt-instrument for some tangible good, service or other asset.)
But if, on his way to the banker to exchange his paper debt-instrument for an asset (gold), the burro salesman sees a stack of mud bricks for sale for one ounce of gold, he could purchase those bricks with the same debt-instrument he'd received from the guy who bought the burro.   Then, the brick salesman could spend the debt instrument with the local goat-herder to purchase four goats.  Pretty soon, the whole community could be trading their labor and property (assets) for paper debt-instruments.  Only rarely would anyone actually bring a paper-certificate/debt-instrument issued by the banker to the banker for redemption.

Counterfeit paper debt-instruments

Bankers began to realize that they could issue paper debt-instruments that were "counterfeit" because they weren't issued in trade for an actual deposit of gold into the banker's strongbox.  There was no gold to "back" these counterfeit debt-instruments.
Bankers could still spend these counterfeit notes knowing that they'd almost never be redeemed by people coming to the bank to demand an asset (gold) in return for the counterfeit paper debt-instrument issued by the banker.  Soon, by using counterfeit paper debt-instruments, the banker began to buy up all of burros, all of the mud bricks and just about everything else-until he literally owned the whole community, purchased with nothing but paper debt-instruments with no intrinsic value (they weren't backed by gold or silver assets).

Rise of the Debt-Based Monetary System

Then, seeing that the people so seldom redeemed their paper debt-instruments for assets (gold or silver),  government and/or bankers (is there really a difference?) reduced and eventually eliminated the requirement that their "currency" (counterfeit debt-instruments) be backed by an assets (gold/silver).  In doing so, they established a monetary system based solely on debt-mere, intangible "promises to pay"-issued by the bankers and/or government.  
In these debt-based monetary systems, debt (a mere promise to someday pay with an asset) is treated as wealth-a payment and asset.
In theory, under this debt-is-wealth system, if I merely promised to pay you $1 million, you'd be suddenly wealthy.  Based on my mere promise to pay, you could become an "instant" millionaire.  Of course, in practice, you wouldn't accept my promise to pay $1 million, but you would usually accept the government's promise to pay $1 million.
Governments like debt-based monetary systems because they never have to actually pay (exchange some tangible product/asset like food or gold) for their debt-instruments-they need only promise to pay their debts.
Because promises (debts) can be easily created with the stroke of a pen, the debt-based monetary system allows government to "spin" currency (counterfeit debt-instruments) "out of thin air".  In a debt-based monetary system, to "make money," you don't need to make tangible "things" (which require real effort, investment and hard work to produce)-you need only make intangible promises to pay.  I love you, the check is in the mail, etc..  Promises-which usually turn out to be lies-are sufficient collateral for a debt-based monetary system.
When debt is deemed to be wealth, government creates more "wealth" by issuing more bonds (promises to pay) and going deeper into debt.

Fractional Reserve Banking

Fractional reserve banking is a sensible and necessary banking policy which allows banks to lend out some maximum percentage of its customers' total deposits while keeping some minimum "fraction" of the customers' deposits in the bank vault. 
For example, suppose customers had deposited $1 million into a bank and, by law, the maximum percentage the bank could lend out was 90% of those deposits ($900,000) and had to keep at least 10% ($100,000) in the vault just in case any of the depositors wanted to withdraw some of their funds or close their accounts.  In essence, banks could lend $9 out of every $10 deposited into the bank.  But, viewed from another perspective, banks could lend $9 for every $1 they held in their vaults
The difference between these two perspectives (lending 90% of whatever was deposited and lending $9 dollars for every dollar held in the bank vault) may not seem insignificant significant.  However, I suspect that this "other perspective" (that banks could lend $9 dollars for every dollar held in the vault) may be the key to understanding modern banking practices.  I'll soon show you why.

Bank Runs

Banks knew from long experience that, statistically, depositors would (almost) never seek to withdraw more than 10% of total deposits on the same day.  Thus, banks could safely loan 90% of deposits and collect enough interest on that those loans to allow the bank to profit and stay solvent.
In the unlikely event of an emergency that drove all of the depositors to want to suddenly withdraw all of their bank deposits, that would be a "panic" or "run on the bank".   As explained by George Bailey in It's a Wonderful Life, the bank couldn't pay all of the deposits to all of its depositors because 90% of their deposits were loaned out. 
If forced by depositors' demands to admit it was unable to redeem their deposits with assets, a bank might be forced to declare insolvency and be closed or sold off to the highest bidder.
Bank runs were dangerous but unlikely. 

The Mother of Invention

Fractional reserve banking was necessary since, if banks couldn't or wouldn't lend out any of its deposits, banks couldn't entice customers to deposit their assets into the bank to earn interest nor could banks prosper by charging interest on loans to borrowers.  Worse, without those deposited assets circulating as loans into the local economy, that economy would tend to wither.
Without fractional reserve banking (lending 90% of deposits and keeping a 10% "fraction" in the bank vault), banks would instead have to generate profits by charging fees (negative interest rates) on deposits.  I.e., if customers deposited $1 million into the bank, the bank would hold 100% of those deposits in the bank vault, but would be forced to deduct, say, 2% ($20,000) as an annual "deposit fee" on those deposits.
As I said, fractional reserve banking is reasonable and necessary-provided that it's applied only to the deposits made by the banks' depositors

Legalizing Debt as an Asset

Government/bankers passed laws that allowed fractional reserve banks to purchase government bonds (debt-instruments; mere promises to pay) and use those bonds as collateral ("assets") in their bank vaults.  That's when the "fun" began.
Let's suppose that a bank had collected $1 million in deposits from depositors.  The bank could lend 90% ($900,000) of that $1 million to borrowers.  If the bank charged 10% interest on those loans, it could profit by 10% of the $900,000 loaned = $90,000 per year based on the $1 million deposited by private customers.  
But again, note that, from a different perspective, it might be said that, under fractional reserve banking, banks can lend $9 for every $1 held as collateral in the bank vault.  From that perspective, by adding more collateral to its vault,  a bank could make more loans andcharge more interest, and generate higher profits.
For example, if banks purchased U.S. bonds and held them in their vaults as collateral, banks might be able lend up to 9 times the face value of the government bonds (debt-instruments).  Do you see the distinction? 
I.e., if ordinary depositors deposited $1 million into the bank, the bank could lend 90% of those deposits ($900,000) at say, 10% interest, and earn $90,000 in income. 
However, I suspect that if the bank itself purchased and deposited a $1 million U.S. bond into its vault, it could lend out 9 times the face value of that bond.  That would be $9 million in loans at 10% interest-which would equal $900,000 in bank income based on an original investment of a mere $1 million to buy the bond.
This policy wouldn't mean that banks could lend out 90% of the the total $1 million in deposited U.S. bonds.  It would mean that banks could lend up to 9 times of the face value of the U.S. bonds.
If this suspicion were correct and you were a banker, what would you rather do?  Lend $900,000 of bank depositors' deposits to earn $90,000?  Or lend $9 million based on your purchase of a $1 million U.S. bond and earn $900,000? 

Irresistible Incentive

This hypothetical 9X multiplier would provide an irresistible incentive for banks to purchase U.S. Bonds.  
For example, suppose a bank spent $1 million purchasing a $1 million U.S. bond.  Suppose that the bank could use that $1 million bond as collateral to lend another previously non-existent $9 million in the form of consumer loans to the public.  Suppose the bank could charge 10% interest on those $9 million in consumer loans.  That would allow the banks to potentially collect $900,000 in annual interest on an initial investment of $1 million used to purchase the government's bond.  That's a potential 90% annual rate of Return On Investment ("ROI") on the bank's purchase of government bonds!
If banks charged only 5% interest on its $9 million in consumer loans (derived from the $1 million U.S. bond), that would still result in a 45% annual ROI on the original $1 million expenditure!
Where can you hope to get a legal 45% annual return on your investments? 
That hypothetically-huge ROI under fractional reserve banking would provide an irresistible lure for banks to purchase government's intangible, intrinsically-worthless, promises to pay (a/k/a U.S. bonds).  That potential ROI would also guarantee that the U.S. government would (almost) always have creditors willing to purchase its "counterfeit" bonds that weren't backed by gold or silver assets.

The Real Source of Monetary Stimulation

Thanks to the 9X multiplier that hypothetically attaches to U.S. bonds, private banks-not the government, per se, or even the Federal Reserve-would be the primary source of new currency and economic "stimulation". 
The government and/or Federal Reserve would provide the "seed capital" by printing and selling a $1 million bond, but it would the private banks that "stimulated" the economy by issuing easy-credit to the public worth up to  9 times the face value of the $1 million bond held as legal collateral in the banks' vaults.
The local banks would be the greatest source of currency "spun out of thin air".

Confidence Lost

However, if private banks wouldn't lend to "consumers" because the economy was in shambles and the banks had lost confidence in the public's capacity to repay their debts, the debt-based monetary system could break down.  Without more lending (debt-creation), the debt-based monetary system would fail.
Similarly, if consumers wouldn't borrow from the private banks because the economy was in shambles and consumers had lost confidence in their own ability to repay additional debt, the debt-based monetary system would break down.  Without more borrowing (debt-creation), the debt-based monetary system would fail.
Consumers might also refuse to borrow if they lost confidence in government's ability to create more inflation that allows consumers to repay their debts with "cheaper" dollars.  I.e., low inflation rates-or worse, deflation-inhibits borrowing (debt-creation) and causes the debt-based monetary system to fail.
Most importantly, a debt-based monetary system will collapse if private banks lose confidence in the U.S. government's ability to repay its debts (U.S. bonds) and therefore stop buying government bonds.
For example, suppose the National Debt grew so large that everyone knew that government could never redeem its existing debt instruments (U.S. bonds).  Potential creditors would refuse to purchase more government bonds.  If private banks refused to purchase more government bonds, they wouldn't have more collateral to warrant lending 9 times the face value of new bonds to the public.  Without the "stimulation" of 9X lending, the economy could fail.

Helicopter Currency

I suspect that circa A.D. 2000-2007, banks issued "liars loans" because competent consumers were no longer borrowing enough to sustain the debt-based Ponzi scheme.  The "liar's loans" were intended to induce incompetent borrowers (those clearly incapable of repaying their debts) to borrow and create debt-instruments (mortgages). 
Why?  Because the mortgages could be bundled into mortgage-backed "securities" that could be sold to banks around the world to be used as collateral to lend up to 9 times their face value as consumer loans.
Once the Great Recession began in A.D. 2007-2008, private banks (burned by liars' loans?) refused to lend more to consumers and/or consumers (burned by home foreclosures?) refused to borrow more. 
Then, maybe . . . maybe . . . government countered by essentially giving trillions of free, "helicopter" dollars to major, "too-big-to-fail" banks. 
Why?  Because government expected those banks to lend those "free" trillions to consumers and thereby stimulate the economy. 
Unfortunately, the bankers just sat on their windfalls and either refused to lend free currency to consumers and/or consumers refused to borrow the "easy credit" from the bankers.
Result?  Without public confidence in the government's and/or public' ability to repay their debts, public confidence in the debt-based monetary system waned.  Without that essential confidence (as in "con-game"), government's ability to borrow new funds (go deeper into debt) and spend more currency into the economy was inhibited, leaving the economy stagnant and the "recovery" illusory.

No Balanced Budget Laws

If this line of conjecture is roughly correct, it explains why both major political parties refuse to pass balanced budget laws
I.e., if the budget had to be "balanced," government could spend only as much as it received in tax revenues.  Thus, under a balanced budget amendment, government couldn't borrow more funds and thereby create more debt instruments that are deemed to be "assets" and are the lifeblood of the debt-based monetary system.  With an exact balance between tax revenue and spending, government couldn't create more bonds for bankers to use as collateral in the 9X fractional reserve banking scheme that seems to "stimulate" the economy. 
Result?  The whole, debt-based monetary system would collapse.
Presuming that both major political parties know that a balanced budget amendment would kill the debt-based economy, it follows that neither party will truly support such amendment.

Big, Bigger Government

Similarly, this conjecture could explain why everyone in the Congress, Senate and White House believes in ever-bigger government programs.  Democrats want bigger programs for the poor.  Republicans want bigger programs for the military. Government grows like topsy. 
Why?  Because bigger programs mean bigger debts.  A constantly-growing government generates the increased debt that appears to be vital to sustain the debt-based economy.
Yes, Republicans still promise to be "fiscal conservatives," but they can't keep that promise.  In a debt-based monetary system, any attempt to significantly reduce government borrowing could collapse the economy.  So long as we have a debt-based monetary system, fiscal conservatism is the economic equivalent to a cup of hemlock.  Drink it and die. 
Implication?  Big government is the not merely the driving force behind a debt-based monetary system, big government is a principle consequence of a debt-based monetary system.
The moment we Americans gave up our gold- and silver-backed money, we guaranteed that our government would grow like a cancer until it consumed us all, destroyed our productivity, and collapsed our economy and perhaps, our nation.

The Way of All Ponzi-Schemes

If our debt-based monetary system is truly based on the banks capacity to lend $9 for every $1 in U.S. bonds that they holds in their vaults, and the whole system depends on ever-increasing debt-then our monetary system is a Ponzi scheme no different from the one that got Bernie Madoff to spend the rest of his life in the slammer.
If our loss of prosperity and liberty is the consequence of big government, and big government is a consequence of a debt-based monetary system-then it follows that America cannot see a real recovery of our former economic prosperity or of our former liberties lost to big government-until we abandon our debt-based Ponzi scheme and return to an asset-based (gold and silver) monetary system. 
As long as we have a debt-based monetary system, government is no more able to fully repay the National Debt or voluntarily stop going deeper into debt than Bernie Madoff was able to repay his debts or stop selling more "promises to pay" to new customers. 
In a debt-based monetary system, debt (mere promises to pay) is government's most important-and only-product.  Those promises can't be kept.
Those who buy or rely on government debt (promises to pay) are investing their hopes and wealth in debt-instruments that, for the most part, won't ever be repaid and are not only intrinsically worthless but also dangerous to the point of self-destruction.
Doug Noland is not a financial advisor nor is he providing investment services. This blog (Credit Bubble Bulletin) does not provide investment advice and Doug Noland's comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity or any other financial instrument at any time.
Weekly Commentary: Unambiguous Signals Disregarded
May 20 - Bloomberg (Susanne Walker Barton): "Treasuries fell, heading for their biggest weekly drop since November, as Federal Reserve officials indicated they're considering a June interest-rate increase should economic data remain steady... A measure of volatility in the $13.4 trillion Treasury market rose Thursday to the highest level in more than a month. Investors were caught off guard by the hawkish tone of Fed communications, lulled into complacency amid signs of sluggish global economic growth."
I'll assume the FOMC would prefer to boost rates another 25 bps. They seek to at least appear on a path of "normalization," dissatisfied with the "one and done" tag. Perhaps they have also become more attentive to the risks associated with prolonged near-zero rates for banks, insurance companies, money funds and the financial industry more generally. Recent economic data would tend to support a more hawkish bent, with a firming of GDP and inflation trajectories. I'll stick with the theme that currently the key economic dynamic is neither growth or recession, but instead major imbalances and various boom and bust dynamics.
Members of the FOMC have voiced unease with market expectations having of late diverged from Fed thinking. The Fed expects a series of rate increases, yet the markets anticipate little movement on rates. The FOMC is "data dependent," and sees economic fundamentals supporting a move toward a somewhat more normalized rate environment. Markets, on the other hand, see global market fragility and a Federal Reserve held hostage by unstable securities markets (and a "risk off"-induced "tightening of financial conditions"). The markets' perspective is certainly supported by the Fed's repeated skittish responses to any evolving "risk off" dynamic.
I'll be surprised if the Fed boosts rates next month. And even after this week's price adjustment, the markets are still pricing only a 30% probability of a June rate hike. As analysts have pointed out, the Fed meets just days before the big "Brexit" vote in the UK. More important to my analysis, I expect heightened global market fragilities to manifest by June 15th.
The EM fragility theme gathers support by the week. Losing 1% Thursday, the MSCI Emerging Markets ETF (EEM) posted a fourth straight weekly decline (down 0.2%). EEM has now dropped 8.7% from April 19th trading highs, in the process giving back all the 2016 advance. Worse yet, bond investors are turning skittish, joining their equities and currencies cohorts.
From Reuters (Sujata Rao): "Emerging assets have taken a dive too and BAML said emerging debt funds had seen their first outflows in 13 weeks, shedding $38 million. Emerging equities lost a far bigger $1.6 billion - their third straight week of outflows."
May 20 - Bloomberg (Benjamin Bain): "Mexico's financial stability is hanging in the balance as the peso's tumble prompts a dangerous acceleration in outflows from the nation's bonds, according to BNP Paribas SA. A pullback by foreigners is particularly worrisome for authorities, who have often cited peso bond holdings by international investors as a sign of stability... The extra yield that investors demand to hold Mexican government peso debt rather than U.S. Treasuries has surged this month and the securities have lost 8.8% in dollar terms..."
Talk that "Mexico's financial stability is hanging in the balance" should be taken seriously. Mexico has been an EM investor/speculator darling. It's worth noting that Mexico's current account deficit jumped to 2.8% of GDP last year (up from 2014's 1.9%) to the largest ratio in 17 years. Mexico's external debt has doubled since 2013 (to $170bn), while the country's international reserve holdings were little changed ($178bn) over this same period. The Mexican economy is expected to grow only about 2% this year, pressured by low crude prices.
The Mexican peso declined 1.0% this week, trading to the lowest level since February. The peso has dropped 7% against the dollar so far this month. Mexican stocks were hit 1.8% on Thursday. Mexico's 10-year bond yields were up 26 bps over the past month.
The South African rand, another fundamentally vulnerable EM currency, dropped 1.5% this week to a two-month low. The Russian ruble sank 2.1%. The Colombian peso fell 2.0% to a one-month low. Brazil's Bovespa equities index sank 3.7%. Turkish stocks were down another 1.9%.
When market attention returns to heavy debt loads and latent fragilities, Asia underperforms. The trading week saw Asian currencies under pressure almost across the board. The South Korean won fell 1.6% to a two-month low, while the Indonesian rupiah dropped 2.1% to a three-month low. Currencies in Malaysia, Indonesia, Thailand and Singapore were all down about 1%. China's yuan slipped 0.3% to a 10-week low versus the dollar.
India's rupee fell 1.0% to a three-month low, as Indian stocks declined 0.7%. Indian stocks now trade about 14% below 2015 highs. Many have viewed India as the new China: years of unlimited potential growth. And integral to the bull case has been hundreds of billions of potential infrastructure spending. With a new pro-reform and pro-business Prime Minister, the sky was to be India's limit.
But India's economic boom is increasingly vulnerable. The country runs a Current Account Deficit and is susceptible to any deterioration in international investor confidence. The banking sector is suspect. India is also suffering from drought and problematic food inflation. Reserve Bank of India Governor Raghuram Rajan has inspired global confidence, but he is now under attack from politicians who would prefer to scrap the central bank's inflation mandate.
May 20 - Bloomberg (Vrishti Beniwal and Bibhudatta Pradhan): "The Indian lawmaker leading a charge to oust central bank Governor Raghuram Rajan says he's backed by the 'overwhelming majority' of Prime Minister Narendra Modi's party, raising risks for investors in Asia's third-largest economy. Subramanian Swamy, a member of Modi's ruling Bharatiya Janata Party and a rival to Finance Minister Arun Jaitley, wrote a letter to the prime minister earlier this week calling for Rajan to either be fired or dismissed when his term ends in September."
In a world of endless QE, liquidity abundance and resulting investor confidence, India's massive financing needs appear manageable. But QE has not worked as global policymakers anticipated. The BOJ has printed a Trillion, yet a 25% decline from last year's highs has Japanese stocks benefiting little from unprecedented money printing. The situation in Europe is similar: European stock markets have little to show from the ECB's Trillion of new "money." And in both cases, consumer price inflation has proven impervious to an additional Trillion.
In the past, the inflationists would invariably claim that monetary stimulus was not working as prescribed only because it was not being employed in sufficient quantities. These days, only the fanatics refuse to accept that QE is not very effective - while coming with huge risks. And after betting the ranch on QE, there is today no consensus as to what to try next.
May 20 - Reuters (Leika Kihara and Stanley White): "A rift on fiscal policy and currencies has set the stage for G7 advanced economies to agree on a 'go-your-own-way' response to address risks hindering global economic growth at their finance leaders' gathering that kicked off on Friday. Japan backed away from its previous calls for coordinated fiscal action to jump-start global growth with Finance Minister Taro Aso saying on Friday that while some G7 countries can deploy more fiscal stimulus, others cannot 'due to their own situations.' That chimed with Washington's stance made clear by a senior U.S. Treasury official that there was no 'one-size-fits-all' for the right mix of monetary, fiscal and structural policies."
Friday from the Wall Street Journal: "U.S. and Japan Heading for Standoff on Yen Devaluation,"
and from Reuters: "Japan, U.S. remain at loggerheads over yen policy." What a far cry from Dr. Bernanke's "enrich-thy-neighbor" (as opposed to "beggar-thy-neighbor") that he previously used to describe the Bank of Japan's aggressive monetary stimulus and devaluation. The theory and experiment just didn't play out as expected. Proponents, however, persist with the "things are still a lot better than they would have been without QE." The much more important issue is how in the world are central banks to now extricate themselves from deeply flawed policies that have so destabilized global finance? Are this week's rising Treasury yields partially explained by renewed fears of EM central bank liquidations?
I believe historians (and many others) will look back at this period and struggle to comprehend how such Unambiguous Signals were Disregarded: Declining equities and commodities prices in the face of massive QE; out-of-control debt growth in China; EM financial and economic travails; competitive devaluations and wild currency market volatility; unfathomable global bond yields; sinking global bank stocks; hedge fund struggles in the face of aggressive monetary stimulus; U.S. political upheaval (deep divisions, Trump, Bernie, etc.); rising geopolitical pressure across the globe; and tensions between the U.S. and China heading to the boiling point. The VIX jumped to 17.6 Thursday afternoon, near a two-month high.
The Credit Bubble Bulletins are copyrighted. Doug's writings can be reproduced and retransmitted so long as a link to his blog is provided.  (see above link)

How much emotional distress can any person withstand? Can it be helped by natural means such as; better nutrition, regular exercise and supplements? What can equip us to help reduce the stress and pain we are feeling and improve our coping mechanisms? Is the rich territory of pharmaceutical drugs helping us to manage our distress or adding to it? It is evident that there is a lack of empathy and desensitization to other people's suffering. Let's take a look at what could be causing it.
It is simply unrealistic to believe that mankind can live in what social workers, psychiatrists and liberals promote as a shame-free zone. This zone discourages a person from criticizing anyone, exchanging opinionated views, especially if they honor his/her conscious. Speaking the truth is also sacrificed due to how it can offend someone and bring about a hideous and costly lawsuit. A shame-free zone is really a censored zone and the equivalent to a muzzle on the mug of every person who stands against immoral behavior. The media calls it political correctness. Gone are the days when your parents or grandparents told you to dry your tears and suck-it-up, however they did it in a nice way saying; "sticks and stones can break my bones but names can never hurt me." Well, the grandparents who raised a family during WWII never dreamed that criticizing immoral behavior could produce the hurtful cost of loss of your home or business. It is scary what can change in a mere 70-years. But that's not all that's changed. Seventy years ago the OTC drug for pain was called aspirin. Today we have other drugs.
We're aware that there has been an explosion of drug abuse both in street drugs and prescription drugs. These very toxic and unsafe products are altering the minds of people producing behavior representative of mental illness.  Take for example amphetamines and cocaine (a.k.a. speed, uppers, Bennies, crack etc.), these drugs with frequent and consistent use bring on symptoms of; paranoia, hallucinations, erratic behavior, high blood pressure, insomnia, loss of appetite and fatigue. Overdosing can cause fever, convulsions and death. Amphetamines were introduced to the public in 1937 over-the-counter as a treatment for nasal congestion. Since 1937 the production of amphetamines has expanded and is one of the most abused drugs on the market. Obviously this is just the tip of the iceberg due to the barbiturate, stimulants, benzodiazepine depressants (anti-anxiety drugs).
What we have on our hands is a drug market that is affecting the judgment of human beings. According to a September 2010 report from Phys Organization (, which is a science and research service covering a wide range of topics. The report the anti-depressant drugs do more than remove the symptoms of feeling depressed. The drugs stimulate the serotonin in the brain to unnatural levels and influence the moral judgment of the patient (Source: Proceedings of the National Academy of Sciences). Researchers at the University of Cambridge Behavioral and Clinical Neuroscience Institute found that the antidepressants "...affect people's sense of right and wrong..." Molly Crockett, a researcher at the Institute, reported that their research showed that people who were empathic were severely affected by these drugs.
"Interestingly, the drug's (serotonin reuptake inhibitors SSRI's) effects were strongest in people who were naturally high in empathy." Molly Crockett, Behavioral and Clinical Neuroscience Institute
The researchers at Cambridge tested their suspicions on the most prescribed and distributed anti-depressants and anti-anxiety drugs (SSRI's). They measured the drugs affect on moral judgment by giving the participants "dilemmas" with positive outcomes (saving five lives) and unpleasant or harmful outcomes (killing an innocent person). Those on the drugs with the elevated serotonin judged the actions that saved lives as morally wrong. When decreasing the serotonin level to normal the participants were more aggressive against unfairness.  
While prescription and illegal drugs can strip you of empathy some street drugs can enhance empathy. In the 1980's a drug distributor in Los Angeles California had a side business selling chemical compounds and one was MDMA (methyleneDioxyAmphetamine). This drug floods the human brain with serotonin and the person feels a rush of euphoria and enhances empathy.  The distributor of this drug started selling it to partygoers and gave it the name "Ecstasy" because he felt few knew what empathy meant. The drugs' popularity peaked in 2000. Psychiatrists experimented with these compounds in the 1970's because it encouraged feelings and behaviors of friendliness and sociability and they were looking for a drug to deal with post traumatic stress disorders. However the side effects of memory impairment, reduced permanent sensitivity to serotonin and other cognitive problems prohibited it from prescription use. Another unwanted side effect is it elevates "trust" and people using the drug could put themselves in dangerous situations not being able to accurately read people who could be threatening. This is what research described as "cognitive empathy disruption." There was a decrease in the person's ability to discern sensitive cues and it turned their natural survival instinct of fear nearly off. The drug may make them happy and less anxious but it also blinded them to risks in the environment.
In a recent study at Ohio State University research shows that the common pain reliever - acetaminophen, can reduce the person's ability to feel empathy. Test subjects who took the drug (often found in Tylenol products) were then exposed to information about the suffering of others. They experienced less empathy than those who did not take the drug. Their findings were published in the May 2016 Social Cognitive and Affective Neuroscience journal. An additional study that appeared in the Psychological Science journal stated that acetaminophen can dull a person's ability to feel positive emotions and diminish our emotional responsive behavior.  According to Health Canada, nearly 23% of the population (52 million Americans) is taking these drugs at any given time to relieve pain. According to Consumer Healthcare Products Association, acetaminophen is found in over 600 different OTC products.
"We don't know why acetaminophen is having these effects, but is it concerning." Baldwin Way, Professor Wexner Medical Center Institute for Behavioral Medicine Research, Ohio State University
In 2004, research in the Social Cognitive Science journal state that the region of the brain that houses pain receptors also is where we experience empathy for others. We feel the other person's pain. So, it makes sense that when you shut off pain you significantly diminish feelings of empathy. Likewise with trust and fear; if you enhance feelings of trust you diminish feelings of fear. Researchers are now looking to see if there are similar effects using another common pain reliever- ibuprofen.
"...the actions of forced drugging, lying to patients about science, misrepresentations of data, stigmatizing use of pseudoscientific labels, and corrupt collusion between academic psychiatrists and the pharmaceutical industry are huge problems. People with positions of power over others have a very real, legal potential to do harm to individuals who pass under their care. Oppression is real, violent and damaging." Matthew Cohen, Social Entrepreneur & Healing Artist
The implication that OTC pain relievers diminish moral judgment is a serious issue. How many of these drugs may have contributed to instances of domestic violence or any violent event is a question.  What are the effects if someone takes Tylenol with anti-depressants or anti-anxiety medications? Take note if you have a tendency to sympathize with others and then take certain drugs, you can experience a shift away from your natural character and personality.
Not only do the OTC pain relievers cause empathy issues they also are known to be destructive to your vital organs, such as the kidneys. Always do your homework on any medications prescribed to you and do the same regarding the OTC products.  I personally use herbs for pain, anxiety, depression, insomnia and for other health issues. Herbs are packed full of nutrition to help balance the system and therefore strengthens the system. Nutrition does not create dependency like toxic drugs do. Drug dependency makes you a hostage and often with pain medications they produce a "rebound effect" where they stop working and you have pain worse than when you started. Call Apothecary Herbs for their herbal Pain or Extra Strength Pain formula, Valerian root (anxiety), Emotional Stress formula (depression), Bowel Cleanse & Body Foundation Food (removes toxins that cause cellular stress, pain and depression) and they have several headache formulas. Call now to order or for a free product catalog 866-229-3663, where your healthcare options just became endless. Money saving coupons on their website.
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