"'For my own part,' Ms. Yellen said, 'I did not see and did not appreciate what the risks were with securitization, the credit ratings agencies, the shadow banking system, the S.I.V.’s — I didn’t see any of that coming until it happened.' Her startled interviewers noted that almost none of the officials who testified had offered a similar acknowledgment of an almost universal failure." Continue reading →
"A chilly Arctic summer has left nearly a million more square miles of ocean covered with ice than at the same time last year – an increase of 60 per cent. The rebound from 2012’s record low comes six years after the BBC reported that global warming would leave the Arctic ice-free in summer by 2013. Some eminent scientists now believe the world is heading for a period of cooling that will not end until the middle of this century – a process that would expose computer forecasts of imminent catastrophic warming as dangerously misleading." Continue reading →
"We don’t share the common fantasy of central bankers: that they can know better than the market what interest rate, employment rate and inflation rate the country should have. We mention the three because the Fed sets short-term interest rates through its conventional monetary policy. And it tries to keep a lid on long-term Treasury yields through its 'unconventional' QE programs. And it does so, it claims, to adjust two other important rates: employment and inflation. Every candidate for the top post at the Fed – except us – believes it is his right and duty to do these things. Which means none should be allowed anywhere near the Fed." Continue reading →
"This statement was Big News. It was such Big News that the Wall Street Journal ran a story on it. Why? Because when a regional Federal Reserve Bank president says the obvious is Big News, it means that he is opposed to tapering. It means that he thinks the counterfeiting of a trillion dollars of digital money a year is for wimps. What should the rate of counterfeiting be? He did not say. They never say. Their lips are sealed. This is what is known at the Federal Reserve as transparency. Opaqueness is when an official says something incoherent, which everyone in the media knows is incoherent, and they dutifully report as meaningful." Continue reading →
"A stream of income – either from a stock or a bond – is a promise. The value of it depends on how much you trust the promisor and his money. That is the problem. As much as we like Ben Bernanke as a human being, we find grave fault in him as a god. Only a god could know more than the sum of all the knowledge held by all people who are active in the world economy. Only a god could select an interest rate better than the one they select for themselves. And only a god-awful economist could claim to do such a thing with a straight face. The galling thing is that he may be able to keep the whole shebang going for many years more." Continue reading →
"Several surveys have shown that most people believe they have above-average driving skills. In fact, 93% of student drivers think their driving skills are above average. The law of averages tells us that this can’t possibly be true. It reminds me of that survey that said 84% of Frenchmen think that they are above-average lovers. Wishful thinking. Such high self-regard with respect to personal competence is known as 'overconfidence bias.' People tend to overestimate or exaggerate their abilities. This bias is inherent in all of us. But it reaches an especially high level of intensity in one central banker." Continue reading →
"As anyone in the actual position of hiring more staff knows, it is not a lack of cheap credit that makes adding workers unattractive, it is the lack of opportunities to increase profit margins by adding more workers. If the economic boom of the mid-1980s proves anything, it is that the cost of credit can be very high but that in itself does not restrain real growth. What restrains growth is not interest rates, it is opportunities to profitably expand operations. What the Fed cannot dare admit is that in a crony-capitalist, globalized, State/cartel-dominated economy, there are few profitable opportunities, regardless of the cost of credit." Continue reading →
"David Rosenberg, the veteran Wall Street economist and bearish strategist at Gluskin Sheff, gave an intense presentation on Friday at John Mauldin's Strategic Investment Conference. Titled 'Bernanke: The Wizard Of Potemkin,' this presentation offers a sobering look at the anemic U.S. economy, the labor market mess, and the Federal Reserve's controversial efforts to get everything back on track. Before you can even think about getting bullish, you must consider the eye-opening charts from Rosenberg's presentation." Continue reading →
"I knew Yellen in grad school and have encountered Summers in person, and I agree fully with these characterizations. But the Economist’s editorialist misses entirely the bizarre, indeed grotesque, context of this discussion. The Fed is the world’s most powerful government economic planning organization and its decisions affect the lives and prosperity of millions, if not billions. All this will hinge on the personality of one person? How about a system in which authority is decentralized, power is limited, and nobody cares who calls himself 'Fed Chair'?" Continue reading →
"Keynes' initial foray into investing led to a smash up. He lost everything he had unwisely borrowed and had to be bailed out by his parents. He did not do well in the 1920′s. He was taken unawares by the the 1929 Crash and also by the 1937 rout. In both instances, he came perilously close to being wiped out again because of very concentrated holdings and continuing use of leverage. In short, Keynes was a speculator, at the same time that he criticized speculators and the 'casino' atmosphere of the market. The article does disclose Keynes’s very large gold mining stock position in the 1930′s but fails to note the irony of this holding or his private praise of gold as a portfolio diversifier." Continue reading →