Tag Archives: central bank policies

Robert Gore Said That? 10/10/18

On Septemeber 30, at Murphy, North Carolina, I addressed the Appalachian Network PATCON, a gathering of very bright people on the cutting edge of preparation for the coming catastrophe. The topic was: “How to Survive an Economic Collapse.”

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10 & 30-Year Yields Surge, Yield Curve “Steepens,” Stocks Drop, as Fed Talks Up Rate Hikes in 2019, by Wolf Richter

Interest rates are going up, which is generally not a good thing for heavily indebted economies. That would be most of them. From Wolf Richter at wolfstreet.com:

Ironically, after having lamented the flattening yield curve for a year, soothsayers now lament the steepening yield curve.

On Friday, capping a rough week in the US Treasury market, the 10-year yield closed at 3.23%, the highest since May 10, 2011, and stocks fell for the second day in a row. This is an unnerving experience for pampered equity investors who’ve come to take endless stock-price inflation for granted, who’d figured for years that interest rates would never rise, and as short-term interest rates began rising, figured that long-term interest rates would never rise – and now they’re rising too.

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The Global Distortions of Doom Part 1: Hyper-Indebted Zombie Corporations, by Charles Hugh Smith

Cheap credit keeps alive a lot of corporations who should be dead. From Charles Hugh Smith at oftwominds.com:

The defaults and currency crises in the periphery will then move into the core.
It’s funny how unintended consequences so rarely turn out to be good. The intended consequences of central banks’ unprecedented tsunami of stimulus (quantitative easing, super-low interest rates and easy credit / abundant liquidity) over the past decade were:
1. Save the banks by giving them credit-money at near-zero interest that they could loan out at higher rates. Savers were thrown under the bus by super-low rates (hope you like your $1 in interest on $1,000…) but hey, bankers contribute millions to politicos and savers don’t matter.
2. Bring demand forward by encouraging consumers to buy on credit now. Nothing like 0% financing to incentivize consumers to buy now rather than later. Since a mass-consumption economy depends on “growth,” consumers must be “nudged” to buy more now and do so with credit, since that sluices money to the banks.

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Doug Casey on the U.S. Economy

Doug Casey is sure what he calls “The Greater Depression” will resume; we’re only in the eye of the hurricane. From Casey at caseyresearch.com:

Justin’s note: The U.S. economy is booming.

According to the government, U.S. GDP (gross domestic product)—a broad measure of economic growth—rose by 4.2% year-over-year. That’s the highest mark in four years. U.S. wages are growing at the fastest rate in nine years. Unemployment is at its lowest level in 18 years. And jobless claims are at a 48-year low.

This is great news for everyday Americans. That’s obvious. The question is… how much longer can the U.S. economy fire on all cylinders?

So I got Doug Casey on the phone to get his take…


Justin: Doug, what are your thoughts on the economy? Is it as strong as the government says?

Doug: Well, to start, I must admit that no one is more surprised than I am that things are holding together as well as they are.

I was convinced that zero percent interest rates and QE 1, 2, 3, and 4—the response to the meltdown that started in 2007—would bring on a disaster sooner, not later. They’ve caused people to borrow more and save less, which is a formula for poverty. But, so far, the most obvious result has mainly been booming stock, bond, and property markets. The rich have gotten a lot richer, while the middle class has slipped down only slowly.

The last ten years are a classic example of how something can take much longer to happen than you expect. But once the inevitable gets underway, it’s going to happen much more quickly than you expect. Continue reading

Central Planning Failed in the USSR, but Central Banks Have Revived It, by Vitaliy Katsenelson

The fallacy that economies can be efficiently planned and guided by bureaucrats from above just won’t let go, even after such planning and guidance have repeatedly failed. From Vitaly Katsenelson at mises.org:

The Federal Reserve’s changing of the guard — the end of Janet Yellen’s tenure and the beginning of the Jerome Powell era — has me remembering what it was like to grow up in the former Soviet Union.

Back then, our local grocery store had two types of sugar: The cheap one was priced at 96 kopecks (Russian cents) a kilo and the expensive one at 104 kopecks. I vividly remember these prices because they didn’t change for a decade. The prices were not set by sugar supply and demand but were determined by a well-meaning bureaucrat (who may even have been an economist) a thousand miles away.

If all Russian housewives (and house-husbands) had decided to go on an apple-pie diet and started baking pies for breakfast, lunch, and dinner, sugar demand would have increased but the prices still would have been 96 and 104 kopecks. As a result, we would have had a shortage of sugar — a common occurrence in the Soviet era.

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After 10 Years of “Recovery,” What Are Central Banks So Afraid Of? by Charles Hugh Smith

If the global economy is so strong, why do central banks have to keep propping it up? From Charles Hugh Smith at oftwominds.com:

If the world’s economies still need central bank life support to survive, they aren’t healthy–they’re barely clinging to life.
The “recovery”/Bull Market is in its 10th year, and yet central banks are still tiptoeing around as if the tiniest misstep will cause the whole shebang to shatter: what are they so afraid of? The cognitive dissonance / crazy-making is off the charts:
On the one hand, central banks are still pursuing unprecedented stimulus via historically low interest rates, liquidity and easing the creation of credit on a vast scale. Some central banks continue to buy assets such as stocks and bonds to directly prop up the “market.” (If assets don’t actually trade freely, is it even a market?)

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10 Years Later, No Lessons Learned, by Jim Quinn

The too big to fails in 2008 are bigger, the debt pile is higher, and policymakers are at least as stupid, if not stupider. From Jim Quinn at theburningplatform.com:

“A variety of investors provided capital to financial companies, with which they made irresponsible loans and took excessive risks. These activities resulted in real losses, which have largely wiped out the shareholder equity of the companies. But behind that shareholder equity is bondholder money, and so much of it that neither depositors of the institution nor the public ever need to take a penny of losses. Citigroup, for example, has $2 trillion in assets, but also has $600 billion owed to its own bondholders. From an ethical perspective, the lenders who took the risk to finance the activities of these companies are the ones that should directly bear the cost of the losses.”John Hussman – May 2009

This month marks the 10th anniversary of the Wall Street/Fed/Treasury created financial disaster of 2008/2009. What should have happened was an orderly liquidation of the criminal Wall Street banks who committed the greatest control fraud in world history and the disposition of their good assets to non-criminal banks who did not recklessly leverage their assets by 30 to 1, while fraudulently issuing worthless loans to deadbeats and criminals. But we know that did not happen.

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