Economics

Ron Paul: Federal Reserve Steals From the Poor and Gives to the Rich

"As recently as five years ago, it would have been unheard of for a Wall Street insider and former Fed official to speak so bluntly about how the Fed acts as a reverse Robin Hood. But a quick glance at the latest unemployment numbers shows that QE is not benefiting the average American. It is increasingly obvious that the Fed's post-2008 policies of bailouts, money printing, and bond buying benefited the big banks and the politically-connected investment firms. It would be a mistake to think that QE is the first time the Fed's policies have benefited the well-to-do at the expense of the average American. The Fed's polices have always benefited crony capitalists and big spending politicians." Continue reading →

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Jeffrey Tucker: Has the Fed Met Its Match?

"'It is hard to imagine a world,' says the unimaginative study, 'where the main currency is based on an extremely complex code understood only by a few and controlled by even fewer, without accountability, arbitration, or recourse.' Blink, blink. This is the Fed talking here. Talk about complex. When the Fed governor speaks in Congress, he (soon she) speaks in such a blithering array of econ-babble that no one dare respond, for fear of seeming ignorant. It’s like the first day of an Intro to Physics class. The professor asks if there are questions, and everyone sits in terror. In a half-century of this nonsense, only Ron Paul ever really dared to ask serious questions of the Fed." Continue reading →

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Bill Bonner: Is QE Broken?

"Forget about tapering off. Instead, think of tapering on. How about this as a possibility? With no more ginned-up earnings from ultra-low interest expenses… no boost to top-line revenues from rising consumer spending… and no pricing power – corporate America’s earnings begin to fall. QE or no QE, stock prices fall. The Fed panics. It will be confronted with dropping asset prices and disinflationary (possibly deflationary) consumer prices. It will have to find a way to modify QE so that it does put dollars directly into the economy. Second, this new push – if it comes – may well send stocks soaring again. There’s nothing like free money to make investors happy. Third, the entire project is doomed." Continue reading →

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ObamaLoans Up by Almost 3 to 1

"The official goal of the Health Care and Education Reconciliation Act was to make college more affordable. How? By making loans to students. The effect has been to lure millions of students into long-term debt for the purchase of liberal arts degrees that do not lead to high-income jobs. ObamaLoans took loan-making decisions away from banks and placed this into the hands of federal employees at the Department of Education — bureaucrats with job tenure. The amount of student debt owed to the U.S. government in 2009 was $120 billion. Today, it is $675 billion. In July 2010, ObamaCare was passed. That’s when the loans began to multiply." Continue reading →

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Inflation Has Not Cured Iceland’s Economic Woes

"Both countries still have problems. Iceland’s monetary controls are notably stifling needed investment, while Ireland is left with a large debt from bailing out its banks, and this is stalling growth. One thing is clear though — the effects of monetary policy are stark and the proclaimed benefits of Iceland’s inflationary policy were counteracted by the price inflation that ensued. Don’t let a good crisis go to waste; learn something from it. As the tale of these two countries demonstrates, inflating one’s currency may give the appearance of recovery, but the truth is somewhat less rosy." Continue reading →

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Bill Bonner: Repeat After Me – Economics Is NOT a Science

"The problem is you don’t know anything. You don’t know if an economy really is like water. You don’t know where sea level is. For all you know, you’re high in the Alps. And you don’t know whether the fuel you’re using adds to the fire… or subtracts from it. QE, for example, may help heat up the economy. Or it may not. No one knows for sure. And get this. All those little molecules, you know – those individuals in the great economic pool? As soon as they catch on to what you’re doing, they will change their behavior. That’s the big difference between water and people. Water does the same thing no matter what you say or what you think. People don’t." Continue reading →

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Bill Bonner: Apocalypse Later!

"Corporations can’t continue to borrow so much money at such low rates. But everyone is perfectly happy to postpone that apocalypse too. Stock market investors are no dopes either. They know this Fed-driven bull market must come to an end sometime. By many different measures – P/Es… swollen margin accounts… enterprise-value-to-revenue ratios… investor sentiment – the stock market is already in the danger zone. What will happen? Either the Fed will begin to taper – probably causing a crash. Or investors will get tired of investing real money in a phony trend. Either way, when the apocalypse comes… it will be later." Continue reading →

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Bill Bonner: A Barbarous Fed…

"Barbaric people used force and violence to get what they wanted; civilized transactions are based on mutual consent and cooperation. We know that the economy of the Soviet Union, driven by brute force, was a disaster. How do you think the economy of the US – heavily persuaded by the padded force of the Yellen-led Fed – will fare? Is today’s Fed a modern, civilized institution? Or an archaic throw-back to the past? And what about the dollar itself? Is it a form of modern money… or a barbarous relic, depending on the police power of the state to give it value?" Continue reading →

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Bill Bonner: The Fed Was Right…

"Corporate earnings rose. But behind that story lurked another sordid tale. Since the March 2009 low, nearly two-thirds of the rise in operating earnings for S&P 500 companies has come from neither higher sales nor increased productivity. Instead, it has come from lower interest expenses on corporate debt. Corporate America is a debtor. It benefits from lower interest rates, while savers lose. Second, as the so-called “risk free” return on bonds falls, future earnings streams from stocks look more attractive on a relative basis. Third, by evaporating the yields off bonds, the Fed has forced investors to 'reach for yield' elsewhere. An obvious place to look is stocks." Continue reading →

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