A US$92 Billion Scam - Vivek Kaul's Diary
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A US$92 Billion Scam

Jan 13, 2017

39

Two days ago, a major US bank handed $92 billion over to the US government. It was all "profit" from its operations. How did it make so much, and why did it have to give the money to the state?

Because it's a central bank with the right to create money out of thin air, that's why! The $92 billion was income generated on the Federal Reserve's portfolio of US government bonds. It bought vast numbers of these bonds by expanding its balance sheet and printing money. The government then paid interest on those bonds. That interest is the Federal Reserve's return. That return is then passed back to the government as an important source of income.

To be clear, this is the state creating money from nothing... to lend to itself... to then pay interest on... and then use that interest as another source of revenue. That's Deep State financial policy.

And it serves as a reminder: never forget just how warped the financial system and the very nature of money itself have become. The entire system is built on a lie: that you or I (or a business) needs to work to earn money, but the state doesn't. It has the right to manipulate the money supply to achieve its own ends. But we may all suffer the consequences of that mismanagement!

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Give up your car and save $3,000

On Tuesday Eoin Treacy and I published 2017's first issue of Frontier Tech Investor. This month's recommendation? A hugely disruptive new technology that's going to go mainstream in 2017.

In fact, Eoin has already given up his car!

  • In recent weeks I've been thinking hard about the future of my car and my wife's. In fact, not just our cars... all cars. I think we're on the verge of a step change. And it means opportunity for us as tech investors.

    I'll start with my own personal reasons. When my car started playing up about three weeks ago we started talking about how much we really use our cars. I did the maths and we could easily save money by simply using Uber to go anywhere locally and by renting a car for road trips.

    That's not the biggest benefit though. Saving $3,000 a year would pay for a good many fencing and tennis classes for my family. But it's the time and responsibility saved that really has me intrigued by the idea of doing away with our cars altogether.

    There's nothing like living it, so we decided to ditch our cars on 20 December. We are three weeks into the experiment right now. Google and Amazon both offer delivery services from our favourite supermarkets, and even though we much prefer picking fruit ourselves we have taken to having just about everything else delivered.

    I've allowed myself a glass of wine with dinner while out at restaurants since I don't have to worry about driving home. Uber is certainly benefiting, since before three weeks ago I had never used it. I haven't waited more than two minutes for a car, which I am guessing is a factor of my location and the number of drivers plying their trade around here. Chalk that down to the benefits of living in the technology capital of the world.

The very fact that it is already possible to do this - give up your car and save money, while still having the convenience of on-demand transportation - shows you just how ripe the market is for disruption.

Keep in mind two things, though. Eoin lives in California, the epicentre of the technology world. He also lives in an urban area. Those two factors mean you'd expect the infrastructure involved in going carless (in the ownership sense) to be more fully developed than anywhere else on the planet.

But as they say the future is here, it's just not evenly distributed. What's true in urban California now will be true in urban Britain before long. Rural areas will follow after that. Which all adds up to an opportunity. The time to move on driverless cars is now.

Want to do that? The best way is to take a trial of Frontier Tech Investor and get Eoin's latest pick. You can do that without listening to a long sales pitch by following this link.

Foxtons share price drops 10% in a morning - what does that mean for property?

Yesterday morning estate agent Foxtons' share price dropped 10% off the back of poor sales figures for London property. Sales in the final quarter of 2016 were 40% lower than last year.

How does that fit into Akhil Patel's "Grand Equation" theory? If we're going to see another ten years of rising prices - as the theory suggests - then how can we reconcile that with short-term, seemingly-bearish news like that?

I've asked Akhil to explain. Expect a note from him in an upcoming issue of Capital & Conflict. Reserve judgement until then!

"A total political witch hunt"

Did Russia compile sensitive and potentially damaging information on Donald Trump in order to manipulate him?

That's the story that broke yesterday. It's unsubstantiated. Though the US government has confirmed that the information, whether true or not, has been presented to Trump.

Trump responded via Twitter (how else) and in ALL CAPITALS. He called the story: "FAKE NEWS - A TOTAL POLITICAL WITCH HUNT".

The story gets murkier and murkier. There's a strong chance this is a complete hoax - that the alleged "sensitive information" was made up. Much of the media has reported it as if it is fact. It's either the start of the end for Donald, or the final nail in the coffin for the mainstream news.

What's clear is Trump is coming to power against a backdrop of cyber espionage bordering on cyber warfare. Whether these attacks are from Russia, China, North Korea or are effectively "false flag" (the US Deep State attacking Trump under the guise of a foreign actor) isn't the point. I'll explain how I think that's going to play out this year in tomorrow's letter. Stay tuned!

Please note: This article was first published in Capital and Conflict on January 12, 2016.

Nick O'Connor is a writer and editor at Moneyweek. He is also the publisher of Exponential Investor.

Disclaimer: The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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