Peter St. Onge

Peter St. Onge

Peter St. Onge is an assistant professor at Taiwan's Fengjia University College of Business. He blogs at Profits of Chaos.

Articles by Peter St. Onge

Javier Milei Ended a DC-Sized Deficit in…Nine Weeks

Argentina’s Javier Milei is racking up some solid wins, with the fiscal basket case seeing its first monthly budget surplus in 12 years.
Apparently, it took Milei just nine and a half weeks to balance a budget that was projected at 5% of GDP under the previous government. In US terms, he turned a 1.2 trillion-dollar annual deficit into a 400 billion surplus. In 9 and a half weeks.
How did he do it? Easy: he cut a host of central government agency budgets by 50% while slashing crony contracts and activist handouts.
For perspective, if you cut the entirety of Washington’s budget by 50%, you’d save a fast 3 trillion dollars and start paying off the national debt.
It turns out it can be done, and the world doesn’t collapse into chaos.

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Milei

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Javier Milei Ended a DC-Sized Deficit in…Nine Weeks

Argentina’s Javier Milei is racking up some solid wins, with the fiscal basket case seeing its first monthly budget surplus in 12 years.
Apparently, it took Milei just nine and a half weeks to balance a budget that was projected at 5% of GDP under the previous government. In US terms, he turned a 1.2 trillion-dollar annual deficit into a 400 billion surplus. In 9 and a half weeks.
How did he do it? Easy: he cut a host of central government agency budgets by 50% while slashing crony contracts and activist handouts.
For perspective, if you cut the entirety of Washington’s budget by 50%, you’d save a fast 3 trillion dollars and start paying off the national debt.
It turns out it can be done, and the world doesn’t collapse into chaos.

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Sovereign Debt is Eating the World

Sovereign debt is eating the world. Lining up a financial crash that could make 2008 look like a picnic.
How did we get here?
In short, governments and central banks deluded themselves into thinking that unlimited deficit spending financed by unlimited money printing won’t do what they’ve done for literally millennia — plunge the economy into stagflation.
They are, of course, wrong. And we’re seeing the catastrophe unfold before our eyes.
From Nixon to $33 Trillion in Debt
The story begins in the 1970s when Nixon broke the global gold standard, unleashing permanent deficits worldwide. But the latest chapter starts in 2008 when central banks bailed out the financial system by effectively printing trillions of dollars.
At the time, everybody knew that much printing would cause inflation,

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How Paper Money Turns Governments into Predators

Aside from stealing your life savings and launching depressions, one of the nastier features of paper money is what it does to governments.
In short, paper money transforms governments from parasites to predators. Once a government can print what it likes, it no longer needs taxes.
Meaning it no longer needs us.
We saw this in living color during the covid lockdowns. Just imagine a world without a central bank where, in the first days of the pandemic, some young bureaucrat proposed shutting down the entire economy. No worries, he’d say: the economy — and tax revenue — will shrink by half. But we can just lay off half of government workers.
He would have a very short career.
Instead, of course, they did have an in-house money printer. The Fed alone pumped out the $6 trillion it took to

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China Enters the Doom Loop

China’s authoritarian gerontocracy has built a Doom Loop with Chinese characteristics, with over half the economy now crashing.
Chinese exports are now plunging at the fastest pace since the covid lockdowns: Exports fell 14.5% on the year, driven by a 21% drop in exports to Europe and a 23% drop to the US.
Meanwhile, imports to China are also falling — 12.4% on the year — as shrinking manufacturing buys fewer inputs and households buy less.
In short, foreigners aren’t buying, and the Chinese aren’t spending either.

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This is all a problem for Chinese factories because they’re obscenely overbuilt thanks to cheap central bank money and government subsidies. To give a sense, the FT reported that

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Voters Hate CBDCs. Why Do Governments Keep Pushing Them?

Governments worldwide are trying to replace cash with CBDCs, and people worldwide are starting to wake up, but we need a lot more.
A CBDC is a government-run crypto-token that replaces the national currency with a tracking ledger—a list of who owns what—that lets government surveil, control, and mandate every dollar you spend. 
They could prevent you from buying the wrong thing, whether raw milk or gas stoves, or self-defense. They could stop you from donating to the wrong person, as we saw with the Canadian Truckers. They could even force you to buy whatever a government bureaucrat tells you to. 
On top of the Soviet-style surveillance state, a CBDC is an existential threat to the banking system, to the US dollar and would give central planners push-button control over every element of

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Divide and Control: Central Bankers Blame the Victims

The Central bankers of the world, apparently losing confidence that they can fix the inflation they created, are turning to Plan B: blame the people. So we fight each other.
Last week the chief economist of the Bank of England, Huw Pill, said the quiet part out loud, that “British households and businesses need to accept they are poorer and stop seeking pay increases and pushing prices higher.”
Note inflation in the UK is currently running double-digits, with grocery prices up 19% year-on-year. So not getting a raise may mean cutting a meal.
Meanwhile, a poll from a major British insurer found 57% of small businesses in Britain are at risk of closure from rising prices.
So you plebes need to drop a meal and close your family business so we can keep stealing from you.

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What If the Dollar Falls?

The past few weeks, major countries have been moving away from the US dollar, raising doubts about the dollar’s long-dominant role in the world. Eight weeks ago, it was just pariah nations like Iran or Russia trying to de-dollarize. Now it’s Brazil, France, even Saudi Arabia—the lynchpin of the decades-long “petrodollar” arrangement.
If the dollar does lose its position as the global reserve currency, it will be catastrophic for the American economy. Catastrophic for the American people on whose backs 80 years of reserve status were built. And it will subject billions of foreigners, for whom the dollar has meant decades of being bullied, to history’s greatest bait and switch.
Dollar at Risk
In late March, Saudi Arabia announced it will price oil in Chinese yuan. Even CNN was worried, in a

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It Turns Out That Hundreds of Banks Are at Risk

It’s the weekend, but our fresh Financial Crisis does not sleep. And a recent study says we’ve only seen the tip of the iceberg.
The Washington Post yesterday wrote: “If banks were suddenly forced to liquidate their bond and loan portfolios, the losses would erase up to 91 percent of their combined capital cushion.” In other words, we were already right up against the edge.
The Post cites two studies that total unrealized losses in the system are between $1.7 trillion and $2 trillion. Total capital buffer in the US banking system: $2.2 trillion. That’s about a 10 percent to 20 percent buffer. And now running into a market crisis where bank stocks have declined by about a third in the past few weeks, and are now at a P/E ratio of 7.35.

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Critics Claim Bitcoin Is a Threat to the Environment. They’re Wrong.

One popular critique of bitcoin is energy cost per transaction. This doesn’t begin to capture bitcoin’s massive energy savings compared to fiat currency. Bitcoin’s cost per transaction is well known, and often critiqued; one article in Wired magazine called bitcoin “[a] big middle finger to earth’s climate.” This is because bitcoin’s security, redundancy, and architecture are more energy intensive than traditional payments relying on a single point of failure.

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The Fed Has Gone Nuts. And It Can Get Worse.

With its $700 billion bond-buying expansion in response to the COVID crisis, the Federal Reserve has thrust itself into the limelight. Like a sixteen-year-old with a credit card, the Fed is salivating over what money-printing powers it shall seize next. How is the prudent investor to respond?

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6b.) P: Mises.org 2015-01-10 08:00:00

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6b.) P: Mises.org 2014-12-03 17:48:40

The Economist recently opined that interest rates don’t affect investment. This claim is based on an empirical study that contradicts what we already know: that lower prices lead to more demand. In the end, the problem lies with the researches who fail to account for the behavior of central bankers, writes Peter St. Onge.This audio Mises Daily is narrated by Robert Hale.

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