Category Archives: Currencies

P For Pandemic (Populist Rage), by Jim Quinn

Jim Quinn looks at disturbing scenarios of what’s to come in the future, and then even more disturbing scenarios. From Quinn at theburningplatform.com:

In Part One of this article I detailed the criminal enterprise that constitutes the leadership of this country. The facts are clear. We’ve been screwed over by those who were supposed to represent us. Now it is time to look in the mirror and decide whether we will continue to bow down before our keepers or step up and be accounted for in this coming fight.

Trayvon Martin Analysis: It's time for all Americans to look in ...

Corporate executives who recklessly loaded their companies with debt, while utilizing the proceeds to buy back their own stock, in order to boost their stock price and outrageous compensation packages, left their companies vulnerable to an entirely predictable downturn. After frittering trillions away on their overvalued stock, they now demand bailouts from the taxpayer, and their spineless captured congress lapdogs have obeyed their corporate masters. The 96 – 0 vote in the Senate is truly a disgusting example of the corporate fascist One Party system that reigns in the swamp. Corporate socialism is alive and well.

As this incomprehensible national shutdown extends into April, tens of thousands of small businesses will be forced to close their doors for good. Local restaurants, hair salons, delis, hardware stores, and thousands of other small businesses will be involuntarily shuttered for good.

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The Solvency Problem, by Doug Noland

Central banking—socialized credit—has blown up history’s biggest credit bubble, not capitalism. Now that the bubble is popping, its is crucial that the blame is correctly assigned. From Doug Noland at creditbubblebulletin.blogspot.com:

Being an analyst of Credit and Bubbles over the past few decades has come with its share of challenges. Greater challenges await. I expect to dedicate the rest of my life to defending Capitalism. One of the great tragedies from the failure of this multi-decade monetary experiment will be the loss of faith in free market Capitalism – along with our institutions more generally.

Somehow, we must convince younger generations that the culprit was unsound finance. And it’s absolutely fixable. Deeply flawed, experimental central banking was fundamental to dysfunctional markets and resulting deep financial and economic structural impairment. The Scourge of Inflationism. If we just start learning from mistakes, we can get this ship headed in the right direction.

Over the years, I’ve argued for “rules-based” central banking that would sharply limit the Federal Reserve’s role both in the markets and real economy. The flaw in “discretionary” central banking was identified generations ago: One mistake leads invariably to only bigger blunders.

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With Heroes Like This, Who Needs Villains? by Michael Maharrey

Who knew that conjuring fiat debt from thin air was a heroic act? From Michael Maharrey at schiffgold.com:

According to Owen Ullmann in an op-ed published by USA Today, there are some unsung “heroes” in the battle against the coronavirus pandemic – the brave and courageous bankers at the Federal Reserve.

I think Ulmann misspelled “villains.”

Ulmann writes that the Fed “has taken extraordinary steps to prevent the global economy from crashing into irreversible catastrophe as business around the world grinds to a virtual halt.”

This is like praising the arsonist for trying to put out the fire he set by throwing more gasoline on it.

The Fed certainly has taken extraordinary steps. Just a few days ago, it announced QE infinity. It committed to buy an “unlimited” amount of US Treasury bonds and mortgage-backed securities. It also announced a new program to buy corporate bonds for the first time ever.

In Ulmann’s Keynesian wonderland this is fantastic news.

The Fed can create unlimited amounts of dollars — that’s right, trillions, if required — to ensure that banks have enough funds to make emergency loans to businesses large and small.”

Yes indeed. Printing new money out of thin air so companies, governments and individuals already drowning in debt can borrow more money is the prescription for saving the economy! Free money for everybody!

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The journey to monetary gold and silver, by Alasdair Macleod

The coronavirus and the current financial crisis may not be all bad. They’ll probably be the death of fiat money. From Alasdair Macleod at goldmoney.com:

Markets are just beginning to latch on to the economic consequences of the coronavirus. Central banks are slashing interest rates and beginning to throw new money into the mix and governments are increasing deficit spending.

Few analysts have yet to understand the enormous consequences of the coronavirus for missed payments and accumulating current debt, which is and will rapidly drain liquidity from wholesale money markets. It is increasingly certain that the eurozone’s banking system will require rescuing from insolvency with knock-on consequences for the global monetary system. Concern over the consequences for the $640 trillion OTC notional derivative market, particularly for $26 trillion of fx swaps, is so far absent.

Continuing on our theme that the fates of the dollar and US Treasury values are closely bound, the extraordinary overvaluation of the bond market will translate into a collapse for both. This article charts how the collapse of the dollar and financial asset values is likely to progress and concludes that we are witnessing the end of the neo-Keynesian fiat currency fantasy, which will be done and dusted with surprising rapidity.

Only then will sound money, after varying time periods for different nations, return.

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Putin Unleashes Strategic Hell on the U.S., by Tom Luongo

Maybe demonizing Vladimir Putin, groundlessly blaming him for conspiracies to interfere in US politics, moving huge NATO forces to Eastern Europe’s border with Russia, abrogating long-standing arms control treaties, and trying to throw monkey wrenches into the Nord Stream 2 pipeline weren’t such good ideas after all. From Tom Luongo at tomluongo.me:

I am an avid board game player. I’m not much for the classics like chess or go, preferring the more modern ones. But, regardless, as a person who appreciates the delicate balance between strategy and tactics, I have to say I am impressed with Russian President Vladimir Putin’s sense of timing.

Because if there was ever a moment where Putin and Russia could inflict maximum pain on the United States via its Achilles’ heel, the financial markets and its unquenchable thirst for debt, it was this month just as the coronavirus was reaching its shores.

Like I said, I’m a huge game player and I especially love games where there is a delicate balance between player power that has to be maintained while it’s not one’s turn. Attacks have to be thwarted just enough to stop the person from advancing but not so much that they can’t help you defend on the next player’s turn.

All of that in the service of keeping the game alive until you find the perfect moment to punch through and achieve victory. Having watched Putin play this game for the past eight years, I firmly believe there is no one in a position of power today who has a firmer grasp of this than him.

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The Real Crisis Starts Now in Europe, by Tom Luongo

The coronavirus may be the undoing of the EU. From Tom Luongo at tomluongo.me:

I think it’s safe to say the new crisis just killed the Schengen Treaty. That ridiculous document which guaranteed freedom of movement across the European Union finally hit something it couldn’t bully, COVID-19.

Regardless of whether you believe the pandemic is real or not, the reaction to it is real and is having real consequence far beyond the latest print of the Dow Jones Industrial Average.

The lockdown of Italy isn’t a temporary thing. Oh, the suspension of free movement is temporary, but it portends something far bigger.

It’s the beginning of the real political balkanization that’s coming to the European Union over the next few years. Old enmities and prejudices have not been stamped out under the boot heel of oppressive legislation coming from a bunch of disconnected technocrats in Brussels.

They have only been suppressed.

Because when there are existential threats there’s no time or desire to virtue signal about how we’re all one big happy dysfunctional family.

For decades Germany refused to lighten up on its fiscal inflexibility believing, rightly, that it shouldn’t subsidize profligacy in places like Italy, Spain and Greece if it didn’t want to.

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The Fed’s Irresponsible Rate Cut Accelerated Panic, by Daniel Lacalle

Central banks can’t cure what ails the economy and financial markets and they’re just going to make things worse. From Daniel Lacalle at dlacalle.com:

The monumental mistake of the Federal Reserve cutting rates this week can only be understood in the context of the rising God’s complex of central planners. An overwhelming combination of ignorance and arrogance.

Less than a week ago, several members of the Federal Reserve board reminded – rightly so – that cutting rates would not have a significant impact in a supply shock like the current one. We must also remember that the Federal Reserve already cut rates in 2019 and inflated its balance sheet by 14% to almost all-time highs in recent months, completely reversing the virtually nonexistent prior normalization. Only a few days after making calls for prudence, the Fed launched an unnecessary and panic-inducing emergency rate cut and caused the opposite effect to what they desired. Instead of calming markets, the Federal Reserve 50 basis points cut sent a message of panic to market participants. If the jobs and manufacturing figures were better than expected, and the economy is solid with low unemployment, what message does the Fed transmit with an emergency cut? It tells market participants that the situation is much worse than it seems and that the Fed knows more than the rest of us about how dire everything can be.  A communication and policy mistake driven by an incorrect diagnosis: The idea that the market crash would be solved with easy monetary policy instead of understanding the impact on stocks and growth of an evident supply shock from the coronavirus epidemic.

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