Economics

Marc Faber: Not Even Gold Will Save You From What Is Coming

"When you print money, the money does not flow evenly into the economic system. It stays essentially in the financial service industry and among people that have access to these funds, mostly well-to-do people. It does not go to the worker. I just mentioned that it doesn't flow evenly into the system. So we are creating bubbles and bubbles and bubbles. This bubble will come to an end. My concern is that we are going to have a systemic crisis where it is going to be very difficult to hide. Even in gold, it will be difficult to hide." Continue reading →

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Cyprus and the Unraveling of Fractional-Reserve Banking

"The 'Cyprus deal' as it has been widely referred to in the media may mark the next to last act in the the slow motion collapse of fractional-reserve banking that began with the implosion of the savings-and-loan industry in the U.S. in the late 1980s. This trend continued with the currency crises in Russia, Mexico, East Asia, and Argentina in the 1990s in which fractional-reserve banking played a decisive role. Even more than the unprecedented financial crisis of 2008, however, recent events in Cyprus may have struck the mortal blow to fractional-reserve banking. For fractional-reserve banking can only exist for as long as the depositors have complete confidence." Continue reading →

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Student Loan Debt Growing, Along With Delinquency Rate

"Total student debt was the only type of household debt that continued to rise throughout the recent recession while most households were de-leveraging, and is now second only to mortgage debt. You’ve probably heard the 'trillion dollar' number in the news. I think the most worrying stat is the increasing rate of defaults. Actual delinquency rates are often understated because almost half of these loans are currently in deferment or in grace periods and therefore are not in the repayment cycle. Among loans that are actually subject to repayment, delinquency rates are over 30% overall and rising." Continue reading →

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Actuarial study: Obamacare law to bring double-digit percent increases to insurance premiums

"Medical claims costs — the biggest driver of health insurance premiums — will jump an average 32% for Americans' individual policies under the Affordable Care Act health care law, according to a study out Tuesday by the nation's leading group of financial risk analysts. While some states will see medical claims costs per person decline, the report prepared by the Society of Actuaries concluded that the overwhelming majority will see double-digit increases in their individual health insurance markets, where people purchase coverage directly from insurers. Much of the reason for the higher claims costs is that sicker people are expected to join the pool, the report said." Continue reading →

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What Happens After the Housing Bubble Reflates?

"This Forbes analysis is actually a fairly sophisticated analysis on how realtors decide whether houses are a good buy or not. The article concludes that houses may be cheap to buy given current conditions. Now, the larger question begins to percolate: Are houses cheap because of fundamental economic factors or for monetary reasons? After all, if central banks print lots of money – as they have been – then people are making more money. There will surely be a housing bubble given the rashness of central banking actions. Whether the dollar itself will survive upcoming monetary events is the larger – and even more serious – question." Continue reading →

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Rise of the Job Scarcity Meme

"What saps employment from an economy is monetary inflation and subsequent busts. Concentrate on reforming the banking system rather than worrying about machinery taking over. Robotics advances technology. The Luddite mentality that advances are destructive and job sapping should have been discarded a century ago. Of course, we notice the solution being advocated by people such as Martin Ford is redistributive. He wants government to get involved in subsidies that support displaced workers. Create a problem and then advocate for a government solution. The equation never seems to vary." Continue reading →

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‘Mr. Yen’ cautions on Japan’s ‘unsafe’ debt trajectory

"'A debt ratio of 245pc of GDP is not really safe, and it is not happening because we are investing,' said Takehiko Nakao, Japan's 'Mr Yen' or vice finance minister in charge of the exchange rate. Mr Nakao said the scope for further fiscal stimulus is running out and the country must restore public finances to a sustainable path by the middle of the decade. The comments touch on an acutely sensitive topic. A number of global hedge funds and banks have begun "shorting" Japan's debt, the world's biggest at $23 trillion. They are mostly taking positions through the credit default swap (CDS) market, betting that Japan will be the next big crisis theme." Continue reading →

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Thomas Sowell: Can It Happen Here?

"The U.S. government is very unlikely to just seize money wholesale from people's bank accounts, as is being done in Cyprus. But does that mean that your life savings are safe? No. If they do it slowly but steadily, they can take a big chunk of what you have sacrificed for years to save, before you are even aware, much less alarmed. That is in fact already happening. When officials of the Federal Reserve System speak in vague and lofty terms about 'quantitative easing,' what they are talking about is creating more money out of thin air, as the Federal Reserve is authorized to do -- and has been doing in recent years, to the tune of tens of billions of dollars a month." Continue reading →

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Federal Reserve Monetary Policy To Target Wealth Inequality?

"The gap between the wealthy and the rest of America is a hot-button issue in Washington-especially in the White House and Congress. Recently, the Federal Reserve has also taken a greater interest in the topic. And some analysts are asking whether financial inequality in the U.S. might soon become part of the Fed's decision-making process. In a recent research note, Credit Suisse research analysts Neal Soss and Dana Saporta wrote that 'the issue of growing income and wealth disparity in the U.S. is gaining stature among Federal Reserve officials and may become the next important macroeconomic variable for monetary policy.'" Continue reading →

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Cypriot Banking Crisis – A Turning Point for Your Portfolio?

"Most Americans would not be directly affected if North Dakota decided to seize citizens' money in order to pay its bills, but all Americans would be deeply disturbed by such an action. The principle of the matter couldn't be clearer; outright theft is wrong. But it'd probably be fear, not principle, that would have people heading for their banks in droves to withdraw cash as fast as possible. People not living in Europe should not kid themselves into thinking that this is just a European problem. With a fractional reserve banking system, it doesn't take a majority of bank depositors to decide to withdraw their cash to put their banks out of business." Continue reading →

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