Central Banks

     

 

 

A Very Odd Growth Spurt in the True Money Supply

The growth rates of various “Austrian” measures of the US money supply (such as TMS-2 and money AMS) have accelerated significantly in recent months.  That is quite surprising, as the Fed hasn’t been engaged in QE for quite some time and year-on-year growth in commercial bank credit has actually slowed down rather than accelerating of late. The only exception to this is mortgage lending growth – at least until recently. Growth in mortgage loans is still very slow though, especially compared to historical growth rates. It cannot really account for the recent surge in money supply growth either.

 

1-tms-2-and-total-loans-and-leases-y-y-changeYear-on-year growth rates of TMS-2 (11.19%, black line) and total loans and leases at commercial banks (7.7%, red line) as of October. In absolute terms money TMS-2 has soared by a staggering $840 billion since the beginning of the year – click to enlarge.

 

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A Strong First Half of the Year, Followed by Another Retreat

In early 2016 gold had a big bull run. The precious metal rose close to 25% this year, pushed higher in a summer rally that peaked on July 10th. Gold experienced a bumpy ride over the remainder of the summer though, as investors became increasingly concerned about a potential rate hike by the Federal Reserve. Uncertainty returned to gold market and has intensified further since then.

 

chart-1-gold-annotatedInitially, gold rallied sharply in 2016, but then retreated again in the second half as concerns over Fed rate hikes and the impact of Mr. Trump’s election victory have pushed bond yields and the US dollar up in the short term.

 

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A Major Crisis

Last week Jayant Bhandari related the story of the overnight ban of certain banknotes in India under cover of “stamping out corruption” (see Gold Price Skyrockets In India after Currency Ban Part 1 and Part 2 for the details).

 

banned-notesBanned 500 rupee banknotes

 

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Stumped by the Bust

In the slump of a cycle, businesses that were thriving begin to experience difficulties or go under. They do so not because of firm-specific entrepreneurial errors but rather in tandem with whole sectors of the economy. People who were wealthy yesterday have become poor today. Factories that were busy yesterday are shut down today, and workers are out of jobs.

 

closedWhat has caused the bust? The modern-day economic orthodoxy continues to be unable to provide a tenable and sound explanation for the business cycle phenomenon. Such an explanation does exist though.

Photo credit: Carl de Souza / AFP / Getty images

 

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$8 Trillion Transfer

RHINEBECK, New York – It is a beautiful autumnal day here in upstate New York. The trees are red, brown, and yellow. Squirrels hop across the lawn, collecting their nuts. Unseasonably warm the last few days, rain showers are moving in from across the Hudson, driven by a chilly wind.

 

1-ff-rateThe effective federal funds rate, or: the Fed sends savers a message… – click to enlarge.

 

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Is Stagflation a Potential Threat?

The Incrementum Fund held its quarterly advisory board meeting on October 3 (the transcript can be downloaded below). Our regular participants – the two fund managers Ronald Stoeferle and Mark Valek, advisory board members Jim Rickards, Frank Shostak and yours truly –  were joined by special guest Grant Williams this time. Many of our readers probably know Grant; he is the author of the bi-monthly newsletter “Things That Make You Go Hmmm…”, as well as one of the founders of Real Vision TV.

 

1-stagflationCharacteristics of stagflation: economic growth goes into reverse, but price inflation rises  anyway. This scenario was completely unexpected by the Keynesian consensus when it hit the economy in the 1970s. Keynesian theory ended up discredited for a while as a result. Not surprisingly though, as a theory that provides a “scientific” fig leaf for statism and interventionism, it has been resurrected since then. Today it once again is an important part of mainstream economic orthodoxy; the monetarist school has retained a certain degree of influence as well, but its policy prescriptions are just as misguided in our opinion.

 

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The Madness of QE

BALTIMORE – Like a house on fire, the election continues to draw a crowd of gawkers. We joined them for the final debate, warming our hands and hoping to see the whole damned place burn down.

 

glykonLike the ancient serpent deity Glycon (whom we have discussed previously), the candidates promised miracles galore:  they shall tell fortunes, help find fugitive slaves, detect thieves and robbers, cause the discovery of treasures, heal the sick, and raise the dead. It will be a glorious future!

 

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Shipping Decline

BALTIMORE – “It’s over!” Raúl Ilargi Meijer, a regular contributor to David Stockman’s Contra Corner newsletter, explains that the “entire model our societies have been based on for at least as long as we ourselves have lived is over!

 

1-defaults-by-regionGlobal corporate defaults are at the highest level since the peak of the financial crisis – click to enlarge.

 

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Gassy and Bloated

BALTIMORE – What a great time for an observer with a sense of mischief! This year’s presidential campaign is the most absurd and remarkable we have ever witnessed. After more than two centuries, Americans are finally getting the democracy they deserve – one that is grotesque… slimy… and immensely entertaining, albeit in the mud-wrasslin’ genre.

 

clinton-trump-debates-jpgThe mud-wrestlers – well, we did promise you in these pages it would be entertaining like never before, and we didn’t lie.

Photo via Alabama Today

 

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Inside Track

The stock market – where shares in profit-making companies are exchanged – went up again on Friday. Does this mean the outlook for making money is improving? Does this presage higher dividends for the stockholders? What, exactly, do investors expect?

 

the-deep-state-mike-lofgrenPartisan politics is for the most part a distraction, maintaining the illusion of choice for the public.

Illustration by Ana Vlajcevic

 

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Are Bank Woes a Good Reason to Buy Silver?

Last week, it was the Fed’s magic boosting up the price of silver. This week, the slow slide in the silver price resumed, going all week except during peak fear about the woes of Deutsche Bank.

 

dbDeutsche Bank HQ in Frankfurt – the bank is under assault from heavy regulatory fines

Photo credit: Vyborg

 

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Epic Fail

We were shocked to see in the Financial Times – yes, the “pink paper,” no less! – a sensible article on current central bank policies. Our heart raced. Our pulse sped up. A light sweat gathered on our forehead. What is going on? we wondered.

 

financial-slimesInternational Deep State mouthpiece Financial Times. When you tire of its statist exhortations you can always switch to reading Financial Slimes.

 

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THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

 
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