Tag Archives: central bank policies

David Stockman on How Trump Could Really Make US Industry Competitive Again

Posted on January 5, 2020 | Leave a comment

Other than some minor regulatory relief, Trump’s policies have hurt more than helped the US economy. From David Stockman at internationalman.com:

International Man: Trump’s America First economic policy seemed to help him win the 2016 election. He promised to renegotiate America’s trade deals and bring jobs back to the United States.

As president, Trump has used tariffs and other protectionist measures to try to reduce the trade deficit.

What do you think of Trump’s trade policies and tariffs?

David Stockman: The trade policies are idiotic. They haven’t improved the trade deficit. And have caused other problems.

We got the numbers in now for 2018 and we had the largest trade deficit in history!

The first point is that his trade policies are not accomplishing anything. In fact, it’s thrown many sectors under the bus. Manufacturers that import components from China are now paying much higher prices because of the tariff charge.

Farmers have gotten thrown under the bus in a major way. The whole agricultural export system that was patiently developed over many, many years has essentially been destroyed through retaliation.

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Posted in Banking, Business, Debt, Economics, Economy, Foreign Policy, Geopolitics, Government, Politics, Trade

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How Long Will It Take For The US To Collapse? by Brandon Smith

Posted on January 4, 2020 | Leave a comment

Collapse can take an excruciatingly long time, but global collapse is well underway. From Brandon Smith at alt-market.com:

There are a multitude of false assumptions out there on what the collapse of a nation or “empire” looks like. Modern day Americans have never experienced this type of event, only peripheral crises and crashes. Thanks to Hollywood, many in the public are under the delusion that a collapse is an overnight affair. They think that such a thing is impossible in their lifetimes, and if it did happen, it would happen as it does in the movies – They would simply wake up one morning and find the world on fire. Historically speaking, this is not how it works. The collapse of an empire is a process, not an event.

This is not to say that there are not moments of shock and awe; there certainly are. As we witnessed during the Great Depression, or in 2008, the system can only be propped up artificially for so long before the bubble pops. In past instances of central bank intervention, the window for manipulation is around ten years between events, give or take a couple of years. For the average person, a decade might seem like a long time. For the banking elites behind the degradation of our society and economy, a decade is a blink of an eye.

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Posted in Banking, Civil Liberties, Collapse, Crime, Economy, Governments, Intelligence

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Corporate Debt Time Bomb, by Claudio Grass

Posted on December 27, 2019 | Leave a comment

Rising interest rates and rising credit downgrades pose twin threats to the corporate debt market. From Claudio Grass at lewrockwell.com:

While I have reportedly highlighted the many risks of the current monetary policy direction and the multiple distortions that it has created in the markets, in the economy, and even in society, one of the most pressing dangers of the unnaturally low rates and cheap money is the staggering accumulation of debt. Nowhere is this more obvious than in the ballooning corporate debt, especially in the US. It has been growing so rapidly and for so long, that many investors and analysts eventually got used to it, accepted it as a fact of life, and became desensitized to the immense risk it poses to the economy at large. Now, another crucial milestone has been reached and a red line has been crossed, that will hopefully force market participants to finally heed the many calls for caution and the clear warnings that have been falling on deaf ears for years.

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Posted in Banking, Business, Debt, Economy, Financial markets, Investing

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World Bank Warns “Wave Of Debt” Could Unleash Historic Crisis, Crush The Global Economy, by Tyler Durden

Posted on December 23, 2019 | 1 comment

Central banks are worried that the mountain of debt they helped create might collapse, leading to bad things. From Tyler Durden at zerohedge.com:

Something happens to the world’s “really smart people” when the topic of debt is discussed: they become blabbering idiots.

Consider that last month we reported that according to the Institute of International Finance, global debt has now hit $250 trillion and is expected to rise to a record $255 trillion at the end of 2019, up $12 trillion from $243 trillion at the end of 2018, and nearly $32,500 for each of the 7.7 billion people on planet. “With few signs of slowdown in the pace of debt accumulation, we estimate that global debt will surpass $255 trillion this year,” the IIF said in the report.

Separately, Bank of America recently calculated that since the collapse of Lehman, government debt has increased by $30tn, corporates debt by $25tn, household by $9tn, and financial debt by $2tn; And with central banks expected to support government debt, BofA warns that “the biggest recession risk is disorderly rise in credit spreads & corporate deleveraging.”

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Posted in Banking, Business, Collapse, Currencies, Debt, Economics, Economy, Governments

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As the Fiscal Doomsday Machine Powers On – Impeach the Congress, Too! by David Stockman

Posted on December 21, 2019 | Leave a comment

If bringing one’s country to fiscal ruin were an impeachable offense, you’d have to impeach the entire city of Washington. From David Stockman at lewrockwell.com:

On December 16 the gross Federal debt breached a new level to $23.1 trillion, while the net debt after $401 billion of cash weighed in at $22.71 trillion. The latter monstrous figure is notable because on June 30, 2019 it stood at $21.76 trillion.

So what has happened in the last 167 days is a $948 billion increase in the Uncle Sam’s net debt, which amounts to a gain of $5.7 billionper day – including, as we like to say, weekends, holidays and snow days.

Worse still, not a single dollar of that gain got absorbed in government trust funds. The Treasury float held by the public actually rose by $953 billion.

So why in the world do the knuckleheads on bubblevision not understand where the spiking rates and ructions in the repo market came from?

The law of supply and demand is still operative, and the US Treasury is literally flooding the bond pits with new supply. Even at the bottom of the Great Recession, Uncle Sam did not drain $5.7 billion per day from the bond market.

But nary a soul down in the Imperial City has noticed this borrowing eruption at the tippy-top of the business cycle, which now teeters on borrowed time at a record 127 months of age. Instead, this very day the Congress is busily engaged in what is a fair approximation of abolishing the election process at the heart of American democracy.

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Posted in Banking, Business, Collapse, Debt, Financial markets, Government, Intelligence, Investigations, Taxes

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Skyrocketing Costs Will Pop All the Bubbles, by Charles Hugh Smith

Posted on December 20, 2019 | 1 comment

The rising costs that never seem to register in the CPI are for the biggest items in many Americans’ budgets, and their incomes keep falling further behind. From Charles Hugh Smith at oftwominds.com:

The reckoning is coming, and everyone who counted on “eternal growth of borrowing” to stave off the reckoning is in for a big surprise.

We’ve used a simple trick to keep the status quo from imploding for the past 11 years: borrow whatever it takes to keep paying the skyrocketing costs for housing, healthcare, college, childcare, government, permanent wars and so on.

The trick has worked because central banks pushed interest rates to zero,lowering the costs of borrowing more as costs continued spiraling higher.

But that trick has been used up. The next step–negative interest rates–has failed to spark the “growth” required to pay for insanely overpriced housing, healthcare, college, childcare, government, etc.

We’ve reached the end of the line on lowering interest rates as a way of borrowing more to keep our heads above water. We’ve reached the point where households and enterprises can’t even afford the principle payments, i.e. no interest at all.

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Posted in Banking, Business, Debt, Economics, Economy, Government, Labor, Money, Politics

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A “Market” That Needs $1 Trillion in Panic-Money-Printing by the Fed to Stave Off Implosion Is Not a Market, by Charles Hugh Smith

Posted on December 16, 2019 | 1 comment

The Fed cannot conjure buyers when everyone wants to sell. From Charles Hugh Smith at oftwominds.com:

It was all fun and games enriching the super-wealthy but now the karmic cost of the Fed’s manipulation and propaganda is about to come due.

A “market” that needs $1 trillion in panic-money-printing by the Fed to stave off a karmic-overdue implosion is not a market: a legitimate market enables price discovery. What is price discovery? The decisions and actions of buyers and sellers set the price of everything: assets, goods, services, risk and the price of borrowing money, i.e. interest rates and the availability of credit.

The U.S. has not had legitimate market in 12 years. What we call “the market” is a crude simulation that obscures the Federal Reserve’s Socialism for the Super-Wealthy: the vast majority of the income-producing assets are owned by the super-wealthy, and so all the Fed money-printing that’s been needed to inflate asset bubbles to new extremes only serves to further enrich the already-super-wealthy.

The apologists claim the bubbles must be inflated to “help” the average American, but that claim is absurdly specious. The majority of Americans “own” near-zero assets that earn income; at best they own rapidly-depreciating vehicles, a home that doesn’t generate any income and a life insurance policy that pays off only when they pass away.

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The Japanization of the European Union, by Jesús Huerta de Soto

Posted on December 13, 2019 | 3 comments

It’s worthwhile reading every single word of this very long article, especially if you have any interest in economics (some people do). From Jesús Huerta de Soto at mises.org:

[Opening lecture at the Twelfth Conference on Austrian Economics organized by the Juan de Mariana Institute and the Universidad Rey Juan Carlos, May 14–15, 2019.]

Introduction

The topic of my lecture today is the Japanization of the European Union. I would like to start with an observation Hayek makes in his Pure Theory of Capital. (Incidentally, through Union Editorial, we have just published an impeccable Spanish edition, and I recommend it to all of you.) According to Hayek, the “best test of a good economist” is understanding the principle that “demand for commodities is not demand for labor.” This means that it is an error to think, as many do, that a mere increase in the demand for consumer goods gives rise to an increase in employment. Whoever holds this belief fails to understand the most basic principles of capital theory, which explain why it is not so: growth in the demand for consumer goods is always at the expense of saving and the demand for investment goods, and since most employment lies in the investment stages furthest from consumption, a simple increase in immediate consumption always occurs at the expense of employment devoted to investment and thus net employment.

I would add to this my own test of a good economist: the Professor Huerta de Soto test. According to my criteria, the best test to determine whether we are dealing with a good economist (and I do not mean to detract from Hayek’s test) is whether or not the person understands why it is a grave error to believe the injection and manipulation of money can bring about economic prosperity. In other words, the best test of a good economist according to Professor Huerta de Soto is understanding why the injection and manipulation of money are never the way toward sustainable economic prosperity.

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Posted in Banking, Business, Capitalism, Debt, Economics, Economy, Financial markets, Investing, Money

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Why “This Sucker Is Going Down”, by Charles Hugh Smith

Posted on December 11, 2019 | 2 comments

SLL agrees with Charles Hugh Smith that no amount of free money and central bank machinations will save the global financial and economic systems once they start to fail. From Smith at oftwominds.com:

Once the contagion starts spreading, loose money won’t put the fires out.

As the nation’s political and economic leaders struggled to contain the 2008 financial meltdown, President George W. Bush famously summed the situation up: “If money doesn’t loosen up, this sucker will go down.”

Eleven years into the loose money recovery, this sucker is finally going downfor reasons that have little to do with tight money and everything to do with the inconvenient fact that none of the structural problems have been addressed, much less actually fixed.

We live in a bizarre world dominated by magical-thinking, a world in which the Federal Reserve creating more dollars out of thin air is supposedly the solution to everything, while all the knotty structural problems–unsupportable pensions and entitlements, unsustainable dependence on debt to fund everything from infrastructure to a new iPhone, a sickcare system that is bankrupting the nation, a higher education system that is looting an entire generation for diplomas with marginal market value, a runaway National Security State that burns trillions on unwinnable wars and lies about it–are left untouched because they’re, well, difficult, and it’s so much easier to say that looser money will solve everything.

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Posted in Banking, Business, Collapse, Currencies, Debt, Economics, Economy, Financial markets, Governments

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The Destruction of Civilization – Implications of Extreme Monetary Interventions, by Claudio Grass

Posted on December 11, 2019 | 1 comment

Take interest rates to zero or negative, and you’ve rendered time worthless, at least in a monetary sense. That threatens one of the foundations of civilization. From Claudio Grass at lewrockewell.com:

When I was asked to write an article about the impact of negative interest rates and negative yielding bonds, I thought this is a chance to look at the topic from a broader perspective. There have been lots of articles speculating about the possible implications and focusing on their impact in the short run, but it’s not very often that an analysis looks a bit further into the future, trying to connect money and its effect on society itself.

Qui bono?

Let us begin with a basic question, that lies at the heart of this issue: Who profits from a loan that is guaranteed to pay back less than the amount borrowed? Obviously, it is the borrower and not the lender, which in our case is the government and those closely connected to it. Negative rates and negative yielding bonds, by definition favor the debtors and punish the savers. In addition, these policies are an affront to basic economic principles and to common sense too. They contradict all logical ideas about how money works and they have no basis and no precedent in any organic economic system. Thus, now, in addition to the hidden tax that is inflation, we also have another mechanism that redistributes wealth from the average citizen to those at the top of the pyramid.

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Posted in Banking, Capitalism, Civil Liberties, Collapse, Debt, Economics, Economy, Governments, Money

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