Central Banks

     

 

 

Past the Point of No Return

Adventures in depravity are nearly always confronted with the unpleasant reality that stopping the degeneracy is much more difficult than starting it.  This realization, and the unsettling feeling that comes with it, usually surfaces just after passing the point of no return.  That’s when the cucumber has pickled over and the prospect of turning back is no longer an option.

 

Depravity and bedlam through the ages. The blue barge of perdition in the lower middle ferries the depraved and degenerate to their final destination, a small slice of which can be glimpsed above… [PT]

 

Read the rest of this entry »

     

 

 

Anecdotal Flags are Waved

 

“If a shoeshine boy can predict where this market is going to go, then it’s no place for a man with a lot of money to lose.”

– Joseph Kennedy

 

It is actually a true story as far as we know – Joseph Kennedy, by all accounts an extremely shrewd businessman and investor (despite the fact that he had graduated in economics*), really did get his shoes shined on Wall Street one fine morning, and the shoe-shine boy, one Pat Bologna, asked him if he wanted a few stock tips. Kennedy was amused and intrigued and encouraged him to go ahead. Bologna wrote a few ticker symbols on a piece of paper, and when Kennedy later that day compared the list to the ticker tape, he realized that all the stocks on Bologna’s list had made strong gains. This happened a few months before the crash of 1929.

 

Joseph Kennedy in 1914, at age 25 – at the time reportedly “the youngest ever bank president in the US”

Photo credit: John F. Kennedy Presidential Library and Museum, Boston.

 

Read the rest of this entry »

     

 

 

Lasting Debt

“Rule one: Never allow a crisis to go to waste,” said President Obama’s Chief of Staff Rahm Emanuel in November of 2008.  “They are opportunities to do big things.”

 

Rahm Emanuel looks happy. He should be – he is the mayor of Chicago, which is best described as crisis incarnate. Or maybe the proper term is perma-crisis? Anyway, it undoubtedly looks like a giant opportunity from his perspective, a gift that keeps on giving, so to speak. [PT]

Photo credit: Ashlee Rezin / Sun-Times

 

Read the rest of this entry »

     

 

 

Preventing the Last Crisis

Clear thinking and discerning rigor when it comes to the twisted state of present economic policy matters brings with it many physical ailments.  A permanent state of disbelief, for instance, manifests in dry eyes and droopy shoulders.  So, too, a curious skepticism produces etched forehead lines and nighttime bruxism.

 

The terrible scourge of bruxism and its potentially terrifying consequences. Curious skepticism can lead to the darnedest things, which is why Big Brother strongly recommends that citizens remain in a medication and cable TV-induced apathetic stupor. To make this happy outcome easier to achieve, stagnation in real wages was successfully introduced a number of moons ago; forced to work to exhaustion just to keep their heads above water, citizens tend to be more docile in their shrinking free time. [PT]

 

Read the rest of this entry »

     

 

 

Mathematical Certainties

Based on the simple reflection that arithmetic is more than just an abstraction, we offer a modest observation.  The social safety nets of industrialized economies, including the United States, have frayed at the edges.  Soon the safety net’s fabric will snap. This recognition is not an opinion.  Rather, it’s a matter of basic arithmetic.  The economy cannot sustain the government obligations that have been piled up upon it over the last 70 years.

 

Growing wrinkle coefficient… as the global population increasingly ages, the “pay-as-you-go” social security and pension Ponzi schemes of developed welfare states are inexorably careening toward insolvency. [PT]

 

Read the rest of this entry »

     

 

 

Flowing Toward the Great Depression

All remaining doubts concerning the place the U.S. economy and its tangled web of international credits and debts is headed were clarified this week. On Monday, Mark Yusko, CIO of Morgan Creek Capital Management, told CNBC that:

 

“…we’re flowing toward the path of 1928-29 when Hoover was president. Now Trump is president. Both were presidents with no experience who come in with a Congress that is all Republican, lots of big promises, lots of things that don’t happen and the fall is when people realize, ‘Wait, it hasn’t played out the way we thought.’ [By the fall], we’ll have a lot more evidence of declining growth. Growth has been slipping.”

 

A famous bad juju moment – the crash of 1929. Two of the annotations require a bit of elaboration. The so-called “Babson break” was a large down day on September 5 1929, two days after the market had peaked. Roger Babson was an entrepreneur (he inter alia invented the parking meter), an economic theorist and a famous skeptic who had already voiced doubts about the stock market bubble of the 1920s on numerous occasions before that day. This was the first time the market didn’t shrug his warnings off, and although it recovered most of the loss on the next trading day, it was the beginning of the end. “Fisher” refers to economist Irving Fisher, who famously announced “stocks have reached a permanent plateau” two weeks before the top. Fisher was a very wealthy man at the time, but lost the bulk of his fortune in the ensuing bear market. Although he couldn’t forecast his way out of a paper bag, his work has become the foundation of much of what is considered “orthodox” economic theory these days. His contemporaries Hayek and Mises, who like Babson warned of the coming crash, are shunned by the prevailing central planning paradigm. Hayek did so in the spring of 1929, when he said that there was no chance of a recovery in Europe unless interest rates decreased, which would require the collapse of the boom in the US; he added that this was very likely going to happen later that year. Mises was offered a well-remunerated post at Creditanstalt in the summer of 1929 and declined the offer. When asked why, he replied that he thought a great crash was coming soon and he didn’t want his name to be associated with it. Of course, Mises himself would probably point out that “prediction” is not a task of economic science. We just wanted to note in passing that these great economic theorists were also quite adept at sussing out what nearly everybody else missed at the time. Causal-realist economic theory does provide some advantages. [PT] – click to enlarge.

Read the rest of this entry »

     

 

 

Bent and Distorted

POITOU, FRANCE – This morning, we are wondering: How dumb is the Fed?

The question was prompted by this comment by former Fed insider Chris Whalen at The Institutional Risk Analyst blog.

 

They’re not the best map readers, that much is known for certain. [PT]

 

Read the rest of this entry »

     

 

 

Crackpot Schemes

POITOU, FRANCE – “Nothing really changes.” Sitting next to us at breakfast, a companion was reading an article written by the No. 2 man in France, Édouard Philippe, in Le Monde. The headline promised to tell us how the country was going to “deblock” itself.  But upon inspection, the proposals were the same old claptrap about favoring “green” energy… changing the tax code to reward one group and punish another…  and spending more money on various humbug initiatives.

 

Subsidized green energy scams are mainly creating eyesores – other than that, they add up to nothing but cronyism writ large. After the one of the biggest solar company bankruptcies ever happened in Spain, a detailed economic study found that for every subsidized renewable energy job the government “created” (at a cost of nearly $2 million per job!) 2.2 jobs were lost elsewhere. It is a good bet that the math isn’t much different elsewhere. To add insult to injury, there is precisely zero evidence that carbon emissions are reduced by even one iota due to these efforts. It is an apodictic certainty that no economy can possibly be “rescued” by the subsidization of this nonsense. There is a widespread belief in government circles that “economic growth” can somehow be conjured up by bureaucrats. That is a costly error that increasingly endangers the future of Western civilization. [PT]

 

Read the rest of this entry »

     

 

 

A Great Big Dud

Many of today’s economic troubles are due to a fantastic guess.  That the wealth effect of inflated asset prices would stimulate demand in the economy.

The premise, as we understand it, was that as stock portfolios bubbled up investors would feel better about their lot in life.  Some of them would feel so doggone good they’d go out and buy 72-inch flat screen televisions and brand-new electric cars with computerized dashboards on credit.

 

The Wilshire 5000 total market index vs. federal debt and real GDP (indexed, 1990=100) – mainly there is an ever wider gap between asset prices and the underlying economic output, and although federal debt has grown by leaps and bounds in the Bush-Obama era, it can’t hold a candle to asset price inflation either. If asset prices were an indication of how an economy is doing, we would have arrived in Utopia by now. Unfortunately that is not the case, as asset prices primarily reflect monetary inflation. Just consider the extreme example of Venezuela’s IBC General Index, which went from 40,000 to 120,000 points, while the economy contracted by 21% in real terms (officially, that is. If one were to apply private sector estimates of inflation, it would look a lot worse). It is certainly true that economic aggregates are benefiting from bubble conditions to some extent, but that is essentially phantom prosperity. If you burn all your furniture, your home will be warm – that this might be problematic only becomes glaringly obvious once all the furniture is gone, because then it will not only be cold, but there will be nothing left to sit on either. When the red line on this chart reverts to the mean (or the “other extreme”), there will be a lot of gnashing of teeth, as many of the mistakes made during the bubble era will be unmasked. [PT] – click to enlarge.

 

Read the rest of this entry »

     

 

 

Popular Imagery of Money on the Move

For most financial commentators an important factor that either reinforces or weakens the effect of changes in the money supply on economic activity and prices is the “velocity of money”.

 

An image from an article on the intertubes that “explains” the velocity of money (one of the articles we came across started out as follows: “The economy runs smoothly only when there is enough money in circulation. How much is enough?”  The effect reading this has on us is not unlike that produced by the sound of fingernails scraping a chalkboard). We have found that many people find it extremely difficult to wrap their mind around the fact that the velocity concept actually doesn’t make sense, and that the matter has to be viewed from a different perspective. As an aside, we have noticed in discussions that even those who do eventually accept that a different conceptual approach is required, often insist on continuing to use the term because it “doesn’t matter what we call it”, or “to keep things simple” and similar excuses. It makes one feel like a priest trying to exorcise a particularly stubborn demon. [PT]

Illustration via supplychainbigairo.blogspot.com

 

Read the rest of this entry »

     

 

 

Crashing Unemployment

Dear Mr. Dudley, Your recent remarks in the wake of last week’s FOMC statement were notably unhelpful. In particular, your explanation that further rate hikes are needed to prevent crashing unemployment and rising inflation stunk of rotten eggs. Quite frankly, crashing unemployment is a construct that’s new to popular economic discourse, and a suspect one at that. Years ago, prior to the nirvana of globalization, the potential for wage inflation stemming from full employment was the main concern.

 


US unemployment rate vs. labor force participation rate. The employment situation may not be as all-around copacetic as the U3 unemployment rate seems to indicate… just a hunch.

 

Read the rest of this entry »

     

 

 

Frisky Fed Hike-o-Matic

We haven’t commented on central bank policy for a while, mainly because it threatened to become repetitive; there just didn’t seem anything new to say. Things have recently changed a bit though. A little over a week ago we received an email from Brian Dowd of Focus Economics, who asked if we would care to comment on the efforts by the Fed and the ECB to exit unconventional monetary policy and whether they could do so without triggering upheaval in the markets and the economy**, so we are taking this opportunity to do just that.

 

Outside view of a famous crime scene: the building where the central planners of the fiat money regime gather to “steer” the economy.

 

Read the rest of this entry »

Most read in the last 20 days:

  • 21st Century Shoe-Shine Boys
      Anecdotal Flags are Waved   "If a shoeshine boy can predict where this market is going to go, then it's no place for a man with a lot of money to lose." - Joseph Kennedy   It is actually a true story as far as we know – Joseph Kennedy, by all accounts an extremely shrewd businessman and investor (despite the fact that he had graduated in economics*), really did get his shoes shined on Wall Street one fine morning, and the shoe-shine boy, one Pat Bologna, asked him if...
  • Christopher Columbus and the Falsification of History
      Crazed Decision The Los Angeles City Council’s recent, crazed decision* to replace Christopher Columbus Day with one celebrating “indigenous peoples” can be traced to the falsification of history and denigration of European man which began in earnest in the 1960s throughout the educational establishment (from grade school through the universities), book publishing, and the print and electronic media.   Christopher Columbus at the Court of the Catholic Monarchs (a...
  • India: The Genie of Lawlessness is out of the Bottle
      Recapitulation (Part XVI, the Last) Since the announcement of demonetization of Indian currency on 8th November 2016, I have written a large number of articles. The issue is not so much that the Indian Prime Minister, Narendra Modi, is a tyrant and extremely simplistic in his thinking (which he is), or that demonetization and the new sales tax system were horribly ill-conceived (which they were). Time erases all tyrants from the map, and eventually from people’s...
  • The Forking Paradise - Precious Metals Supply and Demand Report
      Forking Incentives A month ago, we wrote about the bitcoin fork. We described the fork:   Picture a bank, the old-fashioned kind. Call it Acme (sorry, we watched too much Coyote and Road Runner growing up). A group of disgruntled employees leave. They take a copy of the book of accounts. They set up a new bank across the street, Wile E Bank. To win customers, they say if you had an account at Acme Bank, you now have an account at Wile, with the same balance!   BCH, son...
  • The Government Debt Paradox: Pick Your Poison
      Lasting Debt “Rule one: Never allow a crisis to go to waste,” said President Obama’s Chief of Staff Rahm Emanuel in November of 2008.  “They are opportunities to do big things.”   Rahm Emanuel looks happy. He should be – he is the mayor of Chicago, which is best described as crisis incarnate. Or maybe the proper term is perma-crisis? Anyway, it undoubtedly looks like a giant opportunity from his perspective, a gift that keeps on giving, so to speak. [PT] Photo...
  • The United States of Hubris
      Improving the World, One Death at a Time If anyone should have any questions about whether the United States of America is not the most aggressive, warlike, and terrorist nation on the face of the earth, its latest proposed action against the supposed rogue state of North Korea should allay any such doubts.   Throughout history, the problem with empires has always been the same: no matter how stable and invincible they appeared, eventually they ran into “imperial...
  • Long Term Statistics on AAPL
      Introductory Remarks by PT Below we present a recent article by the Mole discussing a number of technical statistics on the behavior of AAPL over time. Since the company has the largest market cap in the US stock market (~ USD 850 billion – a valuation that exceeds that of entire industries), it is the biggest component of capitalization-weighted big cap indexes and the ETFs based on them. It is also a component of the price-weighted DJIA. It is fair to say that the performance of...
  • Tragedy of the Speculations
      The Instability Problem Bitcoin is often promoted as the antidote to the madness of fiat irredeemable currencies. It is also promoted as their replacement. Bitcoin is promoted not only as money, but the future money, and our monetary future. In fact, it is not.   A tragedy... get the hankies out! :) [PT]   Why not? To answer, let us start with a look at the incentives offered by bitcoin. We saw a comment this week, which is apropos:   "Crypto is so...
  • To Hell In A Bucket
      No-one Cares... “No one really cares about the U.S. federal debt,” remarked a colleague and Economic Prism reader earlier in the week.  “You keep writing about it as if anyone gives a lick.” We could tell he was just warming up.  So, we settled back into our chair and made ourselves comfortable.   The federal debtberg, which no-one cares about (yet). We have added the most recent bar manually, as the charts published by the Fed will only be updated at the end of the...
  • Despite 24/7 Trading: Bitcoin Investors are Taking off for the Weekend on Friday Already
      Crypto-Statistics In the last issue of Seasonal Insights I have discussed how the S&P 500 Index performs on individual days of the week. In this issue I will show an analysis of the average cumulative annual returns of bitcoin on individual days of the week.   Bitcoin, daily. While this is beside the point, we note the crypto-currency (and other “alt coins” as well) has minor performance issues lately. The white line indicates important lateral support, but this looks to...
  • Precious Metals Supply and Demand
      Fundamental Developments There were big moves in the metals markets this week. The price of gold was up an additional $21 and that of silver $0.30. Will the dollar fall further?As always, we are interested in the fundamentals of supply and demand as measured by the basis. But first, here are the charts of the prices of gold and silver, and the gold-silver ratio.   Gold and silver prices in USD terms (as of last week Friday) - click to enlarge.   Next, this is a...
  • Precious Metals Supply and Demand
      Back to the Happy Place Amid a Falling Dollar The prices of the metals dropped this week, $24 and $0.38. This could be because the asset markets have returned to their happy, happy place where every day the stock market ticks up relentlessly.   Sometimes, happiness is fleeting... - click to enlarge.   The major currencies have been rising all year—we insist that this is a rise in these dollar derivatives, not a fall in the dollar—and this is a risk-on pattern....

Support Acting Man

j9TJzzN

Austrian Theory and Investment

Archive

350x200

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

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com