Results 151–200 of 267 found.
Sock Puppet Kabuki; Nikkei Today Parallels Dot-Com Bust
The Japanese stereotype of excessive courtesy is being confirmed by the actions of prime minster Shinzo Abe who is giving the world a free and timely lesson on the dangers of overly accommodative monetary policy. Whether or not we benefit from the tutorial (Japan will surely not) depends on our ability to understand what is currently happening there.
Tapering the Taper Talk
As usual the Federal Reserve media reaction machine has fallen for a poorly executed head fake. It has been fooled by this move many times in the past and for its efforts it has tackled nothing but air. Yet right on cue, it took the bait once more. Somehow the takeaway from Wednesdays release of the June Fed statement and the Bernanke press conference is that the Central bank is likely to begin scaling back, or "tapering," its $85 billion per month quantitative easing program sometime later this year, and that the program may be completely wound down by the middle of next year.
The Gold Bull vs The Paper Tiger
Thats all, folks. One look at the headlines will tell you the gold bull market is officially over: the stock market is booming, a modest recovery of the US economy is underway, and the dollar is dominating the forex. Time to sell your bullion and get back into US stocks!
The Great Reflation
This week economists, investors and politicians were treated to some of the "best" home price data since the frothy days of 2006 when home loans were given out like cotton candy and condo flipping was a national pastime. The Case-Shiller 20 City Composite Home price index was up a startling 10.9% for the 12 month period ending in March. Prices in all 20 cities were up, with some (Las Vegas, Phoenix, and San Francisco) notching gains of more than 20%. Meanwhile the National Association of Realtors announced that April pending home sales volume reached the highest level in nearly three years.
The Biggest Loser Wins
While the worlds economies jockey one another for the lead in the currency devaluation derby, its worth considering the value of the prize they are seeking. They believe a weak currency opens the door to trade dominance, by allowing manufacturers to undercut foreign rivals, and to economic growth, by fighting deflation. On the other side of the coin, they believe a strong currency is an economic albatross that leads to stagnation. But the demonstrable effects of currency strength and weakness reveal the emptiness of their theory.
Symptoms Don't Lie
A good doctor will not simply make a diagnosis based on measurements. The symptoms and complaints expressed by the patient are at least as important in making a determination as the data provided by diagnostic tools. When the data says one thing and the symptoms continuously say another, it makes sense to question the reliability of the instruments. This would be particularly true if the instruments are furnished by a party with a stake in a favorable diagnosis, say an insurance company on the hook for treatment costs. The same holds true for the U.S. economy.
The Great Gold Redemption
The most puzzling part of the investment business is seeing how the vast and largely economically illiterate masses interpret any given piece of news. Take the recent gold selloff: many large players were motivated to sell by news that Cyprus will have to liquidate its gold stockpiles to pay off acute debt obligations. But just a moments reflection shows this reaction to be knee-jerk. The real story behind Cyprus deal has much more profound ramifications - and they are positive for gold.
Changing the Conversation
It has been estimated that if the government used the same methodology to measure inflation that it used during the 1980s, we would be currently dealing with official inflation that would be many times higher than todays official 1.5% rate. But now the government appears ready to distort the figures even further.
Japan Steps into the Void
In the years following the global financial crisis, economists and investors have gotten very comfortable with very high, and seemingly persistent, government debt. The nonchalance may be underpinned by the assumption that globally significant countries that can print their own currencies cant get trapped in a sovereign debt crisis. However, it now appears that Japan is preparing to put this confidence to the ultimate stress test.
Gold in the Crosshairs
In the opening years of the last decade, most mainstream investors sat on the sidelines while "tin hat" goldbugs rode the bull market from below $300 to just over $1,000 per ounce. But following the 2008 financial crisis, when gold held up better than stocks during the decline and made new record highs long before the Dow Jones fully recovered, Wall Street finally sat up and took notice.
The Stockman Backlash
This week, while economists should have been closely considering the implications of the actual bankruptcy of Stockton, California, they instead heaped scorn on the perceived ideological bankruptcy of David Stockman. In other words, Stockman trumped Stockton.
Cypriots In The Streets
The news of the month comes from the large Mediterranean island of Cyprus, where Keynesian economic planning left the economy facing complete bankruptcy. The result was an unprecedented step forward in the financial collapse of the West: direct forfeiture of bank deposits. Despite official protestations to the contrary, this fallout will spread to a bank near you.
Flying High on Borrowed Wings
After selling off an astounding 56% between October of 2007 and March 2009, the S&P 500 has staged a rally for the ages, surging 120% and recovering all of its lost ground too. This stunning turnaround certainly qualifies as one of the more memorable, and unusual, stock market rallies in history. The problem is that the rally has been underwritten by the Federal Reserves unconventional monetary policies But for some reason, this belief has not weakened the celebration.
The Stimulus Trap
For years we have been warned by Keynesian economists to fear the so-called "liquidity trap," an economic cul-de-sac that can suck down an economy like a tar pit swallowing a mastodon. They argue that economies grow because banks lend and consumers spend. But a "liquidity trap," they argue, convinces consumers not to consume and businesses not to borrow. The resulting combination of slack demand and falling prices creates a pernicious cycle that cannot be overcome by the ordinary forces that create growth, like savings or investment.
Cyprus Lifts the Curtain
This week financial analysts, economists, politicians, and bank depositors from around the world were outraged that European leaders, more specifically the Germans, currently calling many of the shots in Brussels and Frankfurt, could be so politically reckless, economically ignorant, and emotionally callous as to violate the sanctity of bank deposits in order to fund a bailout of Cyprus.
The Fed's Tightening Pipe Dream
Testifying before the US Senate this past Tuesday, Fed Chairman Ben Bernanke made an extraordinary claim about its bloated balance sheet: "We could exit without ever selling by letting it run off." What Bernanke means here is that the Fed could simply hold its Treasuries and agency bonds until they mature, at which point the government would then be forced to pay the Fed back the principal amount. Through this process, the Fed's unprecedented and inflationary position will be gradually and placidly unwound.
The Pound Gets Pounded
As the global currency war intensifies, the majority of attention has been paid to the 17% fall of the Japanese yen against the U.S. dollar over the past few months. The implosion has given cover to the sad performance of another once mighty currency: the British pound sterling. But in many ways the travails of the pound is far more instructive to those pondering the fate of the U.S. currency.
Messing with the Bull
With the announcement this week of its massive $5 billion lawsuit against ratings agency Standard & Poor's, the Federal Government took a bold step to squelch any remaining independence of thought or action in the financial services industry. Given the circumstances and timing of the suit, can there be any doubt that S&P is paying the price for the August 2011 removal of its AAA rating on U.S. Treasury debt?
The Bernanke Shock
The financial world was shocked this month by a demand from Germany's Bundesbank to repatriate a large portion of its gold reserves held abroad. By 2020, Germany wants 50% of its total gold reserves back in Frankfurt - including 300 tons from the Federal Reserve. The Bundesbank's announcement comes just three months after the Fed refused to submit to an audit of its holdings on Germany's behalf. One cannot help but wonder if the refusal triggered the demand.
The Biggest Loser
For the past few generations Switzerland has enjoyed some of the strongest economic fundamentals in the world. The country boasts a high savings rate, low taxes, strong exports, low debt-to-GDP, balanced government budgets, and prior to a few years ago one of the most responsible monetary policies in the world. These attributes made the Swiss franc one of the world's "safe haven" currencies. But in today's global economy, no good deed goes unpunished.
The Trillion Dollar Trick
The birth, and the apparent death, of the trillion dollar platinum coin idea may one day be recalled as a mere footnote in the current debt crisis drama. The ultimate rejection of the idea (which was to use a loophole in commemorative coinage law to mint a platinum coin of any denomination) by both the President and the Federal Reserve seems to offer some relief that our economic policy is not being run by out-of-touch academics and irresponsible congressmen. In reality, our government has been creating more than one trillion dollars out of thin air every year for the past five.
Inflation Propaganda Exposed
Economists who hold the popular view that expanding the money supply will provide the best medicine for our ailing economy dismiss the inflationary concerns of monetary hawks, like me, by pointing to the supposedly low inflation that has occurred during the current period of rampant Fed activism.
Treasury's Last Pillar Crumbles
With the return of Shinzo Abe and his Liberal Democratic Party to power in Japan, the market for US Treasuries may be losing its last external pillar of support. Re-elected on September 26th, Abe has quickly set a course for limitless inflation, saying Japan must "free itself from deflation and the strong yen." This is significant to the global economy as Japan is the largest foreign power left with a strong appetite for US Treasuries. If this demand falters, the Fed may be the only remaining buyer of new Treasury issuance.
Congress Avoids the Cliff by Selling Us Down the River
With the possible exception of the New York Times' editorial board (and the cast of The Jersey Shore), everyone on the planet understood that the United States Government needs to cut spending, increase taxes, or both. Instead, after months of political posturing and hand wringing, the Federal Government has just delivered the exact opposite, a deal that increases spending and decreases taxes. The move lays bare the emptiness of budget legislation, which can be dismantled far easier than it can be constructed.
No Way Out
By upping the ante once again in its gamble to revive the lethargic economy through monetary action, the Federal Reserve's Open Market Committee is now compelling the rest of us to buy into a game that we may not be able to afford. At his press conference this week, Fed Chairman Bernanke explained how the easiest policy stance in Fed history has just gotten that much easier. First it gave us zero interest rates, then QEs I and II, Operation Twist, and finally "unlimited" QE3.
Mish Shedlock Exposed
In January 2009, just as the "Peter Schiff was Right" YouTube video that catalogued my previously derided predictions about a coming financial collapse was racking up views and attracting mainstream attention, a blogger and investment advisor named Mike Shedlock (aka "Mish") saw an opportunity to make an unethical grab at my current and prospective clients by breaking the nascent wave.
Ditching Before the Fiscal Clif
Turn on the TV and this is what you'll hear: The US budget is heading for a fiscal cliff. If a deal isn't reaching in Congress by the end of this year, a combination of automatic tax hikes and budget cuts will sink America into economic depression. There is no escape. Of course, my readers know that the fiscal cliff is merely an example of the piper having to be paid. The problem isn't the bill, but that we ran it up so high in the first place.
Patriotic Millionaires Unmasked
Despite the breathless post-election "think pieces" that have drawn sweeping and deeply considered conclusions about the political drift of the country, at its core President Obama's re-election is easy to understand. He essentially promised millions of middle and working class voters that if he were to be re-elected, they would receive benefits paid for by the rich.While most people would assume that the wealthy would chafe at such a heavy burden, some affluent individuals have apparently organized spontaneously to express their willingness to help the country.
Extend and Pretend
Now that President Obama has been re-elected, the media is finally free to focus on something besides the clueless undecided voters in Ohio, Florida, and Colorado. The brightest and shiniest object that has attracted its attention is the "fiscal cliff" that we are expected to drive over at the end of the year unless Congress and the President can agree to turn the wheel or apply the brakes.
Extend and Pretend
Going over the fiscal cliff is not the problem, it is part of the solution. Our leaders should construct a cliff that is actually large enough to restore fiscal balance before a real disaster occurs. That disaster will take the form of a dollar and/or sovereign debt crisis that will make this fiscal cliff look like an ant hill.
Lessons from Black Monday
25 years ago, on another Monday in late October, the financial world seemed to disintegrate in a heartbeat. Though the 205 point drop in the Dow last Friday (the technical anniversary of the '87 Crash) was somewhat reminiscent of its 108-point drop on Friday, October 16, 1987, the real action in '87 was on the Monday that followed. And while this Monday is not nearly as black, it is important that we use the opportunity to recall the circumstances that nearly sent the stock market into cardiac arrest.
Inflation: Washington is Blind to Main Street's Biggest Concern
Journalists, politicians and economists all seem to agree that the biggest economic issue currently worrying voters is unemployment. It follows then that most believe that the deciding factor in the presidential race will be the ability of each candidate to convince the public that his policies will create jobs. It seems that everyone got this memo...except the voters.
Riding Into The Sunset or a Brick Wall?
A month ago, I presented the case for why Fed Chairman Bernanke would have strong motivation to launch another round of quantitative easing (QE) before the election. In short, it would save him his job. Now, I didn't predict with certainty that he would do so - only the few men at the FOMC knew that for sure - but it seemed likely. Shortly thereafter, Bernanke not only announced more stimulus, but promised to keep it flowing to the tune of an additional $40 billion a month until conditions improve.
The Fed Plays All Its Cards
There never really could be much doubt that the current experiment in competitive global currency debasement would end in anything less than a total war. There was always a chance that one or more of the principal players would snap out of it, change course and save their citizenry from a never ending cycle of devaluation. But developments since September 13, when the U.S. Federal Reserve finally laid all its cards on the table and went "all in" on permanent quantitative easing, indicate that the brainwashing is widely established and will be difficult to break.
The Fed will try to conjure a recovery on the backs of currency debasement. It will not stop or alter from this course. If the economy fails to respond to the drugs, Bernanke will simply up the dosage. In fact, he is so convinced we will remain dependent on quantitative easing that he explicitly said he won't turn off the spigots even if things noticeably improve. In other words, the dollar is screwed.
As the Euro Tumbles, Spaniards Look to Gold
The unremitting deterioration of the eurozone's sovereign debt landscape continues to fuel uncertainties about the longevity of the euro as a strong currency. Such uncertainties are not only leading to capital flight from the EMU's periphery to the core and destabilizing markets worldwide, but they are also beginning to frighten southern European savers into seeking refuge outside their 10-year-old currency.
The Fed's Campaign
This past Friday, as Fed Chairman Ben Bernanke delivered his annual address from Jackson Hole - the State of the Dollar, if you will - I couldn't help but hear it as an incumbent's campaign speech. While Wall Street was hoping for some concrete announcement, what we got was a mushy appraisal of the Fed's handling of the financial crisis so far and a suggestion that more 'help' is on the way.
The Gold Standard Gets Another Look
As Republicans convene in Tampa to nominate Mitt Romney and hammer out their party platform, one of the planks that could attract the most attention is the Party's official position on the gold standard. As it is now being considered, the platform stops short of recommending a return to the gold standard, but does advocate a commission to consider the possibility.
Republicans Hope, but Don't Change
While I appreciate that Ryan has the courage to take a position at the vanguard of his party in the campaign for fiscal responsibility, the modesty of his plan is just the latest reminder of how utterly divorced from reality Washington politicians remain. Like all of his brethren, Ryan is pinning his budget battling plans on the pain free "grow your way out of it plan." But as long the government consumes so much of the nation's productivity, the conditions to create that growth will never occur. Hope is not a strategy.
The Not So Super Hero
The past week provided clear lessons not just in how central bankers have a limited ability to positively influence the economy but also how they are limited in their capacity to deliver the shortsighted policy actions that investors currently crave. The developments should provide new reasons for investors and economy watchers to abandon their faith in central bankers as super heroes capable of saving the economy.
Priced for Collapse
Where is the gold price today? If you're like many Americans, you have no idea whether it went up, down, or sideways. Fortunately, I know my readers to be more informed - you likely know that after falling from almost $1900, gold has been trapped around $1600 since early May. But you may still be curious why despite continued money-printing and abysmal US economic reports, gold hasn't been able to hit new highs.
Justice Roberts is Right: The Plan Won't Work
Now that the Supreme Court has given its narrow blessing to the Affordable Care Act, the big question is whether it will deliver the benefits that its proponents promise. Unfortunately, as it is now constructed, the plan will backfire causing fewer healthy people to buy insurance, raise premiums for those who do, destroy employment opportunities, cripple the health insurance industry, and weaken the economy.
The Real Fiscal Cliff
The media is now fixated on an apparently new feature dominating the economic landscape: a "fiscal cliff" from which the United States will fall in January 2013. They see the danger arising from the simultaneous implementation of the $2 trillion in automatic spending cuts (spread over 10 years) agreed to in last year's debt ceiling vote and the expiration of the Bush era tax cuts.
In the wake of my last commentary on the horrendous Supreme Court decision upholding Obama's health care plan, several people have pointed out that I erred in saying that the income tax is a "direct tax." While it is technically correct that the Court ultimately declared it to be an excise, not a direct tax, it is important to understand how it arrived at that opinion and why the decision has no practical relevance to the way the tax has been enforced.
Legal Gimmickry Rescues Obama
Despite the celebrations among Democrats, yesterday a majority of Supreme Court justices ruled that the Constitution does not allow the government to force Americans to buy health insurance. However in providing the swing vote to uphold the Affordable Care Act (aka Obamacare) Chief Justice John Roberts broke with the four other justices who shared that view by declaring that the methods chosen to get individuals to buy insurance were not penalties but taxes.
Trickle Up Economics
The political left wing has long tried to cast doubt on the fairness, and even the efficacy, of free market capitalism by branding it as a "trickle down" system. This epithet is meant to show how the middle and lower classes are dependent on scraps of wealth that happen to fall from the buffet table of the rich. This characterization of an unfair and inefficient system has helped them demonize policies that lower taxes (if they also extend to the wealthy) and reduce regulation on business.
Out of Order
I was invited to testify about the Federal Housing Administration's (FHA) policy in the apartment lending market. Although this was a fairly narrow issue, I told the congressmen the same thing I did last year when I was invited by a different subcommittee to testify about job creation: government programs don't solve problems, they just create new ones. While I thank the Committee for inviting me, I believe the congressmen may have gotten more than they bargained for.
Damn the Torpedoes
Given what most economists now know, few would actively argue that Greece's entrance into the Eurozone back in 2001 was a good idea. Much has been written about how the fundamental misfit between Greece's economy and currency gave birth to a deeply flawed system that was destined to run off the rails.xThe same "damn the torpedoes" mentality dominates economic thinking with respect to the U.S. economy as well.
Economic Reality Bites
Many people became convinced that data releases earlier this year indicated that "recovery" in the U.S. was imminent. But as I have been saying for months, this evidence would ultimately be shown to be as reliable as sightings of Bigfoot. Lots of people claim to say they have seen it, some even produce plaster footprints, but in the end all we have is a guy in an ape suit. The economic recovery, that has been discussed so loudly and often in recent months, will be shown to be similarly mythical.
The Real Crash
I first came to national attention back in 2008 and 2009 when the housing and credit markets imploded. I became known as the guy that other market "experts" laughed at when I warned of trouble brewing in the seemingly indestructible American economy. After the wheels ground to a halt in mid-2008, people noticed that my bookCrash Proof, originally released in early 2007, read like a detailed preview of many of the events that eventually unfolded.
Results 151–200 of 267 found.