Central Banks

     

 

 

A Fragile System

 

Ronald StoeferleRonald Stoeferle, managing partner and investment manager at Incrementum AG, and probably best known to our readers as  co-author of the “In Gold We Trust” report, the most widely read gold report in the world

Photo credit: Elke Mayr / WB

 

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Duped and Distorted

DUBLIN – When you start thinking about what money is and how it works, you face isolation, shunning, and possible incarceration. The subject is so slippery – like a bead of mercury on a granite countertop – you become frustrated… and then… maniacal.

 

maniac-4What thinking about money can do to you

Illustration by Jhonen Vasquez

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Time the Taskmaster

DUBLIN – “Today’s money,” says economist George Gilder, “tries to cheat time. And you can’t do that.” It may not cheat time, but it cheats far easier marks – consumers, investors, and entrepreneurs.

 

12109143_10153644062379417_1863326510450484797_nTempus fugit – every action humans undertake has to take time into account. In the economy, interest rates serve as the signal and regulator of the inter-temporal structure of capital. In an unhampered free market economy, they tell entrepreneurs how large the  pool of available savings is, and whether consumers have become more or less future-oriented. The issuance of additional money from thin air can neither alter the size of the pool of real savings, nor can it alter actual consumer time preferences. But it can and does temporarily suppress interest rates and distort relative prices. This falsifies economic calculation and promotes the malinvestment of capital – which in turn sets the boom-bust cycle into motion.

Photo credit: fmh

 

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Counterfeit Dollar

BALTIMORE – when we left you yesterday, we were carrying out exploratory surgery on the Frankenstein-like modern money system. Here is where the going gets tough. So many ugly organs… so much revolting internal plumbing. But let us cut to the heart –  pull it out – and have a closer look.

 

heartOne heart, freshly pulled out. Mola Ram at your service!

Image credit: Paramount Pictures

 

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Asset Price Levitation

One of the more preposterous deeds of modern central banking involves creating digital monetary credits from nothing and then using the faux money to purchase stocks.  If you’re unfamiliar with this erudite form of monetary policy this may sound rather fantastical.  But, in certain economies, this is now standard operating procedure.

 

tokyo whaleThe “Tokyo Whale” Haruhiko Kuroda explains his asset purchase madness with a few neat little slides.

Photo credit: Stringer / Xinhua Press / Corbis

 

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Meaningless Noise

BALTIMORE – The Dow rose 250 points on Friday… putting it back near its all-time high. A “blow-out jobs report” was said to be the inspiration. Oh my… so many dots.. so little time.

 

united-monsters-talent-agency-invisible-man-greg-n1Excluding all the “invisible men”, the jobs report was great! Above one of the modern-day BLS desaparecidos having a smoke.  

Image credit: Greg Nicotero

 

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Faking It

 

Under a gold standard, the amount of credit that an economy can support is determined by the economy’s tangible assets, since every credit instrument is ultimately a claim on some tangible asset. […] The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit.

— Alan Greenspan, 1961

 

LA5H5981sc President George W. Bush presents the Presidential Medal of Freedom to Federal Reserve Chairman Alan GreenspanHe was in it for the power and the glory… Alan Greenspan gets presidential bling affixed to his neck by GW Bush, the English language mangler

Photo credit: Shealah Craighead

 

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Consequences of Central Bank Policies

The existing capital stock continues to be frittered away at the expense of savers and retirees.  Nonetheless, central bankers don’t give a doggone about it.  This, after all, is one consequence of roughly eight years of near zero interest rate policy.

 

devastationCentral planning superheros, leaving a wasteland behind…

Image credit: Steve Epting

 

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Low Interest Rate Persons

 

She is a low-interest-rate person. She has always been a low-interest-rate person. And I must be honest. I am a low-interest-rate person. If we raise interest rates, and if the dollar starts getting too strong, we’re going to have some very major problems.

— Donald Trump

 

TrumpoYellTwo low interest rate persons! The Trumpsumptive president (Donald the Tremendous) can be seen here indicating the approximate size of the interest rate that will still keep us out of “major problems”.

 

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Sliding Into Absurdity

BALTIMORE – Stock markets continued their rebound on Wednesday. The Dow rose 284 points… or just over 1.5%. London’s FTSE 100 Index was up 3.6%. And Europe’s equivalent of the Dow, the Euro Stoxx 50, was up 2.7%.

 

brexit-2No wonder the Dragon and his partners in crime flooded the EU banking system with “money” this past week…

 

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The Only Move for the Fed is Talking Down the Dollar

The Fed has no more maneuvers other than to jawbone the dollar lower. Because for a variety of reasons a strong dollar, in the current market environment, is akin to tighter monetary policy.

 

federal reserveThe Eccles Building

 

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Bezzle

BALTIMORE –  Barron’s, in a lather, says the market is facing the “Two Horsemen of the Apocalypse.” Huh?

 

Apocalypse_vasnetsovOnly two? There were four last time!

 

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