Category: Central BanksThe analysis published under this category are as follows.
Tuesday, February 03, 2015
Is Monetary Policy Too Complicated for Mainstream to Understand?
It is amazing how far Central Banks have been allowed to go with regard to policy tools and influence, and how extreme their policy measures have become since the financial crisis. No other form of governmental authority has been granted these types of unrestrained powers in any branch of government, not Congress, the Supreme Court, the President, or the Military for comparison`s sake in the United States.Read full article... Read full article...
Thursday, January 29, 2015
Over the last 100 years the Fed has had many mandates and policy changes in its pursuit of becoming the chief central economic planner for the United States. Not only has it pursued this utopian dream of planning the US economy and financing every boondoggle conceivable in the welfare/warfare state, it has become the manipulator of the premier world reserve currency.
As Fed Chairman Ben Bernanke explained to me, the once profoundly successful world currency – gold – was no longer money. This meant that he believed, and the world has accepted, the fiat dollar as the most important currency of the world, and the US has the privilege and responsibility for managing it. He might even believe, along with his Fed colleagues, both past and present, that the fiat dollar will replace gold for millennia to come. I remain unconvinced.Read full article... Read full article...
Wednesday, January 21, 2015
In today’s Outside the Box, good friend Ben Hunt informs us that we have entered the cult phase of the Golden Age of the Central Banker:
We pray for extraordinary monetary policy accommodation as a sign of our Central Bankers’ love, not because we think the policy will do much of anything to solve our real-world economic problems, but because their favor gives us confidence to stay in the market. I mean, does anyone really think that the problem with the Italian economy is that interest rates aren’t low enough? Gosh, if only ECB intervention could get the Italian 10-yr bond down to 1.75% from the current 1.85%, why then we’d be off to the races! Really? But God forbid that Mario Draghi doesn’t (finally) put his money where his mouth is and announce a trillion euro sovereign debt purchase plan. That would be a disaster, says Mr. Market. Why? Not because the absence of a debt purchase plan would be terrible for the real economy. That’s not a big deal one way or another. It would be a disaster because it would mean that the Central Bank gods are no longer responding to our prayers.Read full article... Read full article...
Tuesday, January 20, 2015
Originally, paper money was not regarded as money but merely as a representation of a commodity (namely, gold). Various paper certificates represented claims on gold stored with the banks. Holders of paper certificates could convert them into gold whenever they deemed necessary. Because people found it more convenient to use paper certificates to exchange for goods and services, these certificates came to be regarded as money.Read full article... Read full article...
Saturday, January 17, 2015
More and more it appears as if we are going to get some form of QE next week out of the ECB. The big question is the size and scope of the program that most expect to be announced.
There has been some discussion as to whether the ECB would buy various government bonds across the board or whether the actual Central Banks of the respective Euro zone nations would buy their own government bonds as the composition of the actual bond buying program.Read full article... Read full article...
Saturday, January 17, 2015
The Swiss have unleashed a pretty wild storm in financial markets. All sorts of companies and people today are licking their wounds, and quite a few will simply have to fold. It’s no exception to be so leveraged in foreign exchange wagers that a move of a few percent can wipe you out, let alone one of 30%. Leverage makes sure that right off the bat a whole bunch of foreign exchange brokers, including FXCM, the biggest, are literally dead in the water – FXCM stock fell 90% -.Read full article... Read full article...
Tuesday, December 23, 2014
With the utterance of one word, “patience” in reference to the Fed’s anticipated lift off date from its zero bound interest rate target, Janet Yellen sent the Dow Jones soaring over 700 points in two days. It is clearly evident that our central bank is finding endless excuses not to raise interest rates in an effort to keep the equity and bond bubble rolling along. But this entrenched addiction to free money has now set the economy up for a catastrophe. The Fed’s $3.7 trillion dollars in QE and six years of ZIRP have created massive economic imbalances. When interest rate normalization eventually occurs, it will lead to wide spread insolvency.Read full article... Read full article...
Tuesday, December 09, 2014
Shah Gilani writes: Remember when banks used to make it worth your while to deposit cash with them?
Heck, if you’re old enough you probably even remember such inducements as free toasters.
But in a reprehensible turn of events, now you – the depositor – are about to get toasted.Read full article... Read full article...
Wednesday, December 03, 2014
"Central banks have the power to create economic, political and social change. This is how they do it."
While I cringed at some of the early parts of the film and the mid-century American attitudes towards the Japanese, even if it was in the aftermath of a long and viciously fought war, I think this documentary provides some valuable insights into the evolution of the modern economy that is Japan. I direct your attention to the things that we are often saying about different peoples today.Read full article... Read full article...
Monday, December 01, 2014
Look for awhile at the China Cat Sunflower
Proud-walking jingle in the midnight sun
Copper-dome Bodhi drip a silver kimono
Like a crazy-quilt stargown
Through a dream night wind
Krazy Kat peeking through a lace bandana
Like a one-eyed Cheshire
Like a diamond-eye Jack
A leaf of all colors plays
A golden string fiddle
To a double-e waterfall over my back
Comic book colors on a violin river
Crying Leonardo words
From out a silk trombone
I rang a silent bell
Beneath a shower of pearls
In the eagle wing palace
Of the Queen Chinee
- Robert HunterRead full article... Read full article...
Wednesday, November 26, 2014
Suppose you bring a fur coat to a dry cleaner, and discover that the owner allowed his wife to wear it before cleaning it (which is also the subject of an episode from Seinfeld). Or, suppose you gave your car keys to a hotel valet and, when attempting to pick up the car later, were told your automobile was lent to teenagers who took it for a joy ride while you slept at the hotel. You would not be too happy, and for good reason. When you surrendered your clothes or your car keys it was a bailment. You retained ownership and gave the clothes or car keys for safekeeping. In no shape or form, did you surrender ownership of the items or lend out your property.Read full article... Read full article...
Saturday, November 22, 2014
The original idea behind a central bank is that medium and longer term monetary policy should not be allowed to be held hostage by a short-term prevailing political wind, that an incumbent politician and his/her party should not be permitted and/or enabled to manipulate a nation’s currency for political gain. A central bank was (and still is officially) supposed to be independent of politics, to be a buffer between a society’s long term interests and a politician’s short-term ones.Read full article... Read full article...
Monday, November 17, 2014
Peter St. Onge writes: In a recent paper cited last month in The Economist, a trio of economists ran a kitchen sink’s worth of correlations on investment numbers. Kothari et al. concluded that profit growth and stock price boost investment, but that interest rates have a negative effect. This claim runs counter to Austrian business cycle theory, so let’s have a look.Read full article... Read full article...
Wednesday, November 12, 2014
A Note From the Editorial Director: Alex Green's column yesterday struck a nerve. He decried "hard money types" as wrong in five different ways... and the comments at InvestmentU.com haven't stopped. Dr. Mark Skousen is our favorite hard money type - and, as chance would have it, he just returned from private meetings with none other than Alan Greenspan. Below is Mark's detailed account. - Andrew Snyder
"The Federal Reserve is not independent. I never said it was." - Alan GreenspanRead full article... Read full article...
Wednesday, November 05, 2014
“The significant problems that we have created cannot be solved at the level of thinking we were at when we created them.”
– Albert Einstein
“Generals are notorious for their tendency to ‘fight the last war’ – by using the strategies and tactics of the past to achieve victory in the present. Indeed, we all do this to some extent. Life's lessons are hard won, and we like to apply them – even when they don't apply. Sadly enough, fighting the last war is often a losing proposition. Conditions change. Objectives change. Strategies change. And you must change. If you don't, you lose.”
– Dr. G. Terry Madonna and Dr. Michael Young