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Is War Part of a Wall Street Party?

"The consistent raising of nuclear tensions justifies continued economic reactions in order to keep Western economies stable and on track, which may include further justifications for continued monetary easing. International tensions also provide a rationale for a 'flight to safety' that reinforces the primacy of Western markets, in particular US bonds and equities. The up and down security posture of the West versus Russia (and China) can create alternatively a depression of 'animal spirits' and waves of euphoria that can lift markets. Finally, a fluid period of inter-state animosity can provide justifications for an eventual stock market crash that can usher the next phase of economic internationalism." Continue reading →

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Ludwig von Mises: Come Back to Gold

"In every instance of inflation or credit expansion there are two groups, that of the gainers and that of the losers. The creditors are the losers; it is their loss that is the profit of the debtors. But this is not all. The more fateful results of inflation derive from the fact that the rise in prices and wages which it causes occurs at different times and in different measure for various kinds of commodities and labor. Some classes of prices and wages rise more quickly and to a higher level than others. While inflation is under way, some people enjoy the benefit of higher prices on the goods and services they sell, while the prices of goods and services they buy have not yet risen at all or not to the same extent." Continue reading →

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Central Planning by Central Bankers

"The agency that controls monetary policy for the United States has an unlimited amount of money to buy support, compliance, or least silence within that segment of professionally trained economists that specializes in money and banking. The Federal Reserve gets to keep all the money that it wants for operations. It has to turn back over to the Treasury Department any money that is not used for operations, but it does not answer to Congress or the Treasury with respect to how it spends its money. This means that the Federal Reserve has essentially unlimited funds available to buy off those critics who might challenge Federal Reserve policy." Continue reading →

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Europe’s Pain is the World’s Gain

"Last week the ECB announced that it was cutting its headline lending rate to 0.15 percent and taking its deposit rate to negative 0.10 percent. That means banks must pay the ECB to hold their money, a move the ECB hopes will spur lending. It will also make $545 billion worth of inexpensive loans available to banks with the caveat that they lend more to the private sector. First tranche euro zone banks will be permitted to borrow up to 7% of the value of their corporate loans with additional tranches of funding [on the way]. While the goal of easing is to improve economic conditions at home, the money will ultimately flow to where it can find the greatest returns, as our own experience has shown." Continue reading →

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Niall Ferguson: Networks and Hierarchies

"The near-autarkic, commanding and controlling states that emerged from the Depression, World War II, and the early Cold War exist only as pale shadows of their former selves. Today, the combination of technological innovation and international economic integration has created entirely new forms of organization—vast, privately owned networks—that were scarcely dreamt of by Keynes and Kennan. Are these new networks really emancipating us from the tyranny of the hierarchical empire-states? Or will the hierarchies ultimately take over the networks as they did a century ago, in 1914, successfully subordinating them to the priorities of the national security state?" Continue reading →

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Falling Real Yields: A Buy Signal for Gold

"It’s not only Treasury yields that are falling; nominal interest rates are in free-fall around the world: German bunds yield just 1.4 percent and French government bond yields fell to 1.65 percent — the lowest level since 1746! Two of Europe’s most troubled PIIGS, Spain and Italy, also have witnessed record low bond yields of 2.6 percent and 2.76 percent, respectively. Yield spreads on emerging market Tdebt and junk bonds compared with Treasuries are likewise sinking toward new lows. his compression in nominal yields around the global has important implications for investors and could prove very bullish for certain asset classes. Case in point: Gold." Continue reading →

Continue ReadingFalling Real Yields: A Buy Signal for Gold

An Ever Deeper EU to Join the Wall Street Party?

"The central bankers have reason to inflate. The European experiment is precarious and economies around the world are teetering. Part of Mr. Andors's speech, no doubt, has to do with creating the possibility, rhetorically at least, that the EU, too, can join in the mass inflation building around the world. This no doubt seems the only way out for those who have engineered the current economic cul de sac. They will print and print until the danger is past and stock markets have traveled through the roof. Wealth is to be destroyed and pensioners bankrupted, but the system itself is to be perpetuated and expanded. It continues to be a cynical exercise in creating haves and have-nots." Continue reading →

Continue ReadingAn Ever Deeper EU to Join the Wall Street Party?

Bill Bonner: The Japanese Will Learn to Tango

"For nearly a quarter century, Japan’s diligent savers have funded its government deficits. Now, the savers are retiring. They need their money back. At the same time, Japan’s trade surplus is disappearing. Where will the money come to keep the lights on? Nowhere. Already, there are days when scarcely a single buyer steps up to buy Japanese bonds. The central bank of Japan takes up the slack. And as people get older (spending their savings rather than adding to them) and as the country’s current account surplus disappears (Japan is not the export powerhouse it once was), more slack appears. The Bank of Japan will come to the rescue, of course." Continue reading →

Continue ReadingBill Bonner: The Japanese Will Learn to Tango

Japan to keep printing money for years to come, so learn to enjoy it

"The authorities are about to funnel large sums into Japanese stocks openly and deliberately under the next phase of Abenomics, both by regulatory fiat and by purchasing the Nikkei index directly with printed money. Prime minister Shinzo Abe is unshackling the world's biggest stash of savings, the $1.3 trillion Government Pension Investment Fund (GPIF). Officials say the ceiling on equity holdings will rise from 12pc to around 20pc as soon as August, opening the way for a $100bn buying blitz. Mr Abe's move comes sooner than expected and amounts to a market shock, though nobody should be shocked anymore as he keeps doubling down on the world's most radical economic experiment." Continue reading →

Continue ReadingJapan to keep printing money for years to come, so learn to enjoy it

Will SoFi Take Sallie Mae’s Best Customers?

"After the financial crisis proved the government would spend tens of trillions of dollars to keep banks from going belly up, you would think that nothing will kill them. But now the ineffable forces of Stanford-branded reinvention are going after their customers. Do investors in publicly traded lenders need to get out before it’s too late? A case in point is student lending giant, SLM – formed as the Student Loan Marketing Association — which is in the cross-hairs of a San Francisco-based peer-to-peer lending powerhouse, Social Finance, Inc. (SoFi). As CEO Mike Cagney, a graduate of Stanford Business School, explained, SoFi is growing fast." Continue reading →

Continue ReadingWill SoFi Take Sallie Mae’s Best Customers?