Pretense Of Knowledge

U.S. Homeownership Rate Falls to 20-Year Low

"The U.S. homeownership fell to its lowest level in 20 years at the end of 2014—levels last seen when national leaders embarked on a broad push to expand homeownership in the mid-1990s. Over the past year, President Barack Obama and other administration officials have voiced alarm that lending has gone from one extreme during the bubble—too loose —to the other—too tight—in the aftermath of the bust. Officials have walked a fine line in attempting to bar a return of the reckless products and practices that allowed the bubble to inflate 10 years ago while loosening some standards elsewhere to provide broader access to homeowners without perfect credit or big down payments." Continue reading →

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Fed rate-hike speculation lifts U.S. dollar to three-month high

"The dollar reached its highest in nearly three months against a basket of currencies on Monday on a rise in U.S. bond yields as traders built bets the Federal Reserve would raise interest rates later this year. A plummet in gold prices to five-year lows under $1,100 an ounce also increased the appeal of the greenback, the world's reserve currency. Last week, U.S. Fed Chair Janet Yellen testified before Congress, reiterating U.S. interest rates will go up later this year if the economy continues to expand. St. Louis Fed chief James Bullard told Fox Business network on Monday there was a higher than 50 percent chance the U.S. central bank will raise rates in September." Continue reading →

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Loads of Debt: A Global Ailment With Few Cures

"As central banks like the Federal Reserve and the European Central Bank have printed trillions of dollars and euros, markets in stocks and bonds, as well as other types of assets, have responded optimistically, sometimes reaching highs that were unthinkable seven years ago in the depths of the financial crisis. Central banks can make debt less expensive by pushing down interest rates. Crucially, though, they cannot slash debt levels to bring much quicker relief to borrowers. In fact, lower interest rates can persuade some borrowers to take on more debt. Many countries are now in a position where their governments and companies live in fear of an increase in interest rates." Continue reading →

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Bill Bonner: The Dumbest Investment Mistake You Can Make

"There could be a 15-day cooling off period… which could be extended by the Fed, in the interest of market stability. Economists don’t know what will work because no one can know what the future will bring. But we all know what won’t work: central financial planning. Likewise, investors can’t consistently choose good investments; because they don’t really know the future. All they can know is what isn’t true and, knowing that, avoid bad investments. That’s why investing is often called a 'loser’s game.' You don’t win by choosing winning investments; you win by not losing. You don’t win by pretending to know what is true; you win by knowing what is false." Continue reading →

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The Logical Conclusion of the Modern, Monetary Argument

"One of the most terrible things about the globalization of finance, money and industry is that it homogenizes booms and busts. There is literally nowhere to go. As economic centralization continues, these cycles will only worsen. These days in the West – and certainly in Washington – Republicans are sure they can mandate a technocratic interest-rate rule that will restrain the Fed from doing inordinate damage to the economy. Ironically, Democrats argue for more flexibility and less government interference regarding money. This would be admirable from a free-market standpoint except that they are arguing on behalf of a MONOPOLY facility. As usual, both parties get it wrong." Continue reading →

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The Fed Chairs Have a Habit of Hazing

"Paul Volcker took over as Chair of the Fed in August 1979. A recession officially began five months later. This was the worst recession since the Great Depression. In August 1987 Alan Greenspan took over the Fed. Two months later 'Black Monday' occurred on October 19, 1987, when the Dow dropped 22.6% that day alone–the worst one-day crash in history. In February 2006 Ben Bernanke became Fed chair. The worst recession since the Great Depression officially began in December 2007, and you may recall there was some trouble in the financial markets in September 2008… In January 2014 Janet Yellen became Fed chair." Continue reading →

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Fed Hawks Want Rate Hikes Soon

"A trio of inflation hawks at the Federal Reserve — Richard Fisher, Esther George and Charles Plosser — believe it's about time to take the punch bowl away. The three regional Fed bank presidents are on a mission to urge their colleagues to take a tougher monetary policy stance, CNNMoney reported. If they are successful, Americans would be hit with higher rates on mortgages, small business loans and credit cards, and many on Wall Street fear bonds and stocks would also suffer. But the Fed hawks believe the alternative to tighter policy could be high inflation and more dangerous asset bubbles." Continue reading →

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Bursting Switzerland’s bubble

"Last year, SNP chief Thomas Jordan requested a [buffer] to be introduced for Swiss banks, forcing them to hold an additional one percent of risk-weighted assets to stave off the potential dangers of the housing boom. Earlier this year, as worries about a bubble increased, the SNB instigated a number of policies to prevent any more dramatic rises. This included doubling the capital buffer requirement to two percent. However, despite a partial slowdown since January, Jordan told reporters in March that the work was not yet done. 'The pace has slowed, but we are far away from the soft landing we want. We don’t yet see the slowdown that we would like to see.'" Continue reading →

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Sweden’s deflated economy: Sub-zero conditions

"Sweden’s economy, which it oversees, grew three times faster than the euro zone’s in 2010 and dodged Europe’s double-dip recession in 2012-13. The Riksbank felt confident enough in recovery to start raising interest rates in 2010. The Riksbank worried that rising household borrowing and soaring house prices could lead to trouble down the road. It therefore opted to 'lean against the wind', in central bankers’ parlance, and deflate the credit boom before it burst catastrophically. It seems instead to have taken the air out of everything but exuberant markets. Unemployment in Sweden has held steady, while Swedish private-sector debt as a share of GDP is higher now than it was in 2010." Continue reading →

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When Zero’s Too High: Time preference versus central bankers

"Central banking has taken interest rate reduction to its absurd conclusion. If observers thought the ECB had run out of room by holding its deposit rate at zero, Mario Draghi proved he is creative, cutting the ECB’s deposit rate to minus 0.10 percent, making it the first major central bank to institute a negative rate. Can a central-bank edict force present goods to no longer have a premium over future goods? Armed with high-powered math and models dancing in their heads, modern central bankers believe they are only limited by their imaginations. More than half a decade of zero interest rates has not lifted anyone from poverty or created any jobs—it has simply caused more malinvestment." Continue reading →

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